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The Dow is Up; Thousands of Flights Canceled Due to Weather; Martha Steward in Court; UFO Over New York City; Interview with Governor Scott Walker; More Crises on the Way

Aired March 5, 2013 - 11:00   ET



ASHLEIGH BANFIELD, ANCHOR, "CNN NEWSROOM": Hello, everyone. Nice to have you with me. I'm Ashleigh Banfield and we just love to show you things that you've never seen before, so feast your eyes on this.

The Dow Jones Industrials at never before seen heights. A strong open pushing the Dow far above its previous record that was set just before the bottom fell out in the recession.

And our Alison Kosik has been watching at the New York Stock Exchange, probably a pretty excited place, if I had to guess.

I'm also joined by chief business correspondent Ali Velshi.

Alison, let me start with you. Since none of us really feels like the economy is as exciting as the Dow, why exactly is the Dow as exciting as it is?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: And that is really the money question.

You know what, Ashleigh? You sit and you ask just about any trader on this floor right now and they'll tell you this rally is really being driven by the Federal Reserve.

What the Fed is doing is it's buying up $85 billion worth of treasuries and mortgage-backed securities every single month and what that's doing is it's pushing interest rates lower and it's making stocks the more positive investment for people. It's really the only game in town for many who are looking to make money.

So, you do see that disconnect, especially when you look at how 12 million Americans continue to be out of work.

But at the same time, we have come quite a ways because the last time we were at levels even close to this, it was more than five years ago and, since then, the recession has gone, unemployment has spiked and it's gone down a bit, our U.S. debt has been downgraded.

But interestingly enough, it's not just the Dow reaching these record levels. It's also the S&P 500. We are watching that level.

And, although the S&P 500 doesn't always get the bells and whistles of the headlines, Ashleigh, it is the index that really our 401(k)s track, so it could be the bigger deal when the S&P, if it does in fact, reach its record level which is 1,565. Right now, it's at 1,540.


BANFIELD: Since you mentioned it, I'm going to bring up the NASDAQ, as well.

Ali, can you jump in on this?


BANFIELD: If stocks and the market is the only game in towns as you like to mention it, "TINA," "there is no alternative" -- that's why people are dumping all their cash into stocks -- then why is the NASDAQ still so far off of its record?

VELSHI: Well, I -- you know, let me put to you this way, and Alison mentioned -- let me get my collar straight here. I look like a mess.

Alison mentioned the S&P 500 not being at a record, but if you invested in the market on March 9th of 2009, which was the bottom -- that was, you know, the worst of the recession -- you'd have made more money in the S&P 500 than you would actually have done so in the Dow.

So, at some point, you shouldn't be entirely invested in these indices. You should be invested in mutual funds some of which track the S&P 500, or the Dow, or the NASDAQ.

But then, you know, when you diversify properly, you've got things in some sectors. You've got some small-cap companies, you've got some companies that are in other places in the world and you've got some precious metals.

So, you know, your investment won't track these things exactly. The Dow is just 30 companies, but here's the thing. Whether it's the Dow or the S&P 500, these companies make most of their money outside of the United States.

That's part of why they don't track our economy the way they would have 100 years ago where it was all about the U.S. economy and the U.S. was, by far, bigger than all other economies combined.

These days you've got Europe that's as big as the United States. You've got Asia that's growing. So, that's part of it.

The market looks ahead. The Dow -- the economy, as we stand, doesn't look as good as the market does.

But it is "TINA," as we discussed this weekend, "there is no alternative" at the moment to getting good returns for your investments.

BANFIELD: Wish the jobs market was as good as the stock market.

VELSHI: Right.

BANFIELD: Alison, Ali, thank you. Keep your eyes on that. Let us know how the day finishes out.

So, there is another major winter storm that's pounding the upper Midwest right now, and it is heading east, folks.

Chicago aviation authorities reporting nearly 1,000 flights have been canceled, apparently, 770 of them are at O'Hare and then another 215 of them are at Midway.

So, I'm sorry if you're watching me at the airport. I think you're going to be sitting around for a while.

Our CNN meteorologist Jennifer Delgado caught a flight, got a jacket and she's tracking the snow for us.



UNIDENTIFIED MALE: Last week was practice. This is the real deal.

DELGADO: Another winter storm is gearing up in dumping tons of snow from the Dakotas to the East Coast.

This is North Dakota. A foot of snow fell on parts of that state.

The roads there?

UNIDENTIFIED MALE: Yeah, they're a little icy. You can't tell, but they're icy.

DELGADO: Minnesota is seeing round two of a one-two punch. Some areas there could also get a foot of snow.

It's already caused plenty of wrecks. Just look at this. You can follow the tracks from the road all the way down to where the car ended up, overturned.

Air travelers are caught in the middle of it. Hundreds of flights have already been canceled for today.

This man had the right idea when he left last night.

JIM COURTNEY, PASSENGER: Getting out ahead of the weather, we're going to fly out to San Diego and beat the snow.

DELGADO: It's been a relatively mild winter so far in Chicago, but that will change today.


DELGADO: And that's right, Ashleigh. It's already changing, you see, and the snow coming down is only get heavier as we go through the afternoon. By the evening commute, it will be a mess out there for people driving home from work. We're expecting six-to-eight inches of snowfall.

Now, let's talk more about the forecast. As we head over to our radar, if you notice for the Midwest, we are talking more snow out there, and it's going to be building up.

You can see on our graphic here, we're talking for areas like Minneapolis as well as over to regions including Indiana, four-to- eight inches. In some locations, possibly 10 inches of snowfall.

As we track the storm for you, we take it through this evening. It's going to be moving into Indiana as well as into western parts of Ohio.

Yes, it's going to be moving and it's going to cause troubles all along the central Apps. Big snow is going to be setting up for the east. We're talking the Mid-Atlantic region, right along the mountains. We're talking more than a foot of snow.

But it gets tricky when you get into Washington, D.C., Ashleigh. I know everybody wants to know, what is Washington, D.C., going to get?

Well, they're going to be right on the rain/snow line. We have a real tight gradient just there, so some locations we are talking the potential of eight inches of snow for the D.C. Metro area.

The western region is certainly going to get more snow than the east, and that's because of the effect of the water. It's going to be warmer over towards the east.

So, we still have to track this system. We're also talking about very strong winds. Even here, we're going to see wind gusts up to 30- miles-per-hour. That, of course, is causing the travel delays at O'Hare where thousands of cancellations between that and Midway.

And when that moves over toward the east, Ashleigh ...

BANFIELD: Look out.

DELGADO: ... a lot of people are going to be watching you in the airport.

BANFIELD: Yep. And you know what? That groundhog was lying.

Jennifer Delgado, thank you from Chicago. Appreciate it.

DELGADO: I know. He was. I don't trust him.

BANFIELD: More comings and goings in Vatican City, but still no date for the all-important conclave to choose a brand-new pope.

A Vatican spokesman says that five of the voting cardinals haven't even arrived yet.

One sign of progress? The Sistine Chapel where the conclave will take place has now been closed to visitors. To Asia now, North Korea threatening to scrap the 1953 armistice that ended the Korean War if the U.S. and South Korea continue joint military exercises.

The North is also citing a U.S. move to impose new sanctions in response to North Korea's recent nuclear test, well, at least, the United Nations sanctions, anyway.

Officials in Venezuela say that President Hugo Chavez is fighting a new severe infection and is breathing with greater difficulty today, and his overall condition remains, quote, "very delicate."

Chavez returned home from Cuba last month where he'd been receiving treatment for an unspecified form of cancer.

Macy's loves Martha. Then Penney's woos Martha. And Macy's sues Martha. Yes, it's Martha, Martha, Martha, and she is on the witness stand, likely today. Millions of pennies and dollars at stake.

We are "On the Case" after this.


BANFIELD: Martha Stewart means business, big business for Macy's, which has sold her wares since 2007 and potential business for JCPenney, which is kind of desperate to sell something, anything that customers want.

But Macy's says, we had her first. And, now, all three of these parties are in a New York courtroom.

CNN's Christine Romans says the Penney deal was a recipe for trouble.


CHRISTINE ROMANS: It's been eight years since Martha Stewart left prison, serving five months for lying about a stock sale.

Good-bye, rap sheet. Hello, cotton sheets. A deal with Macy's helped her company rebuild.

PAMELA DANZIGER, PRESIDENT, UNITY MARKETING: Macy's was really important in giving her a leg up and, you know, giving her a helping hand.

MICHAEL KUPINSKI, DIRECTOR OF RESEARCH, NOBLE FINANCIAL CAPITAL MARKETS: Macy's obviously recognized the brand and the value of the brand, the quality of the merchandise.

ROMANS: Now, Stewart is back in court. Macy's is suing her company over a deal with JCPenney.

Her defense? A contract loophole. Quote, "The Macy's contract is written to allow Martha Stewart Living Omnimedia to sell a broad range of products at JCPenney with no restrictions whatsoever in a store inside JCPenney." But brand experts say the suit is trouble.

DANZIGER: She was married to Macy's, but she went off and had an affair, I mean, and got in bed with a direct competitor, with JCPenney's. And I think it just shows really bad form.

ROMANS: Stewart's company, struggling, losing $56 million in 2012. It shuttered magazines and laid off workers.

The shares are beaten down and, last year, the Hallmark Channel canceled "The Martha Stewart Show."

These aren't exactly salad days for doyenne of domesticity, but neither was the insider trading case.

MARTHA STEWART, BUSINESSWOMAN: I want to focus on my salad.

ROMANS: Now, she wants to focus on retail. Twenty-nine percent of her company's revenue comes from merchandise last year.

You can find her wares at Home Depot, PetSmart, even Staples, and if she prevails, JCPenney.

KUPINSKI: I suspect that the court is going to allow JCPenney a certain number of products that are going to go into their stores, whether they're branded by Martha Stewart are or not branded by Martha Stewart.

ROMANS: But at what cost?

DANZIGER: I don't think anybody, any other business, is going to want to get involved with her in the future. I think she's really hurt her brand and hurt herself.

ROMANS: Very messy business dealings for the woman who pedals perfection.


BANFIELD: And Christine Romans joins me live now from the Manhattan courthouse.

Christine, I've always been a huge admirer of your journalism, but now you actually scored a quick conversation with Martha Stewart herself?

Come on. What did she say to you?

ROMANS: That's right. Well, look, they were taking a real quick break while the judge handled a motion in a different case, so they were taking a break after about an hour of Martha Stewart's testimony.

And she came off the stand and came right over to me and we started chatting about the tedium of contract law and the tedium of going through that particular contract for the past hour as we had been.

And I asked her how she felt, I mean, how she felt about her testimony, how she felt about how things were going, and she said, I feel good. I feel good.

But we know there's a lot longer to go in the testimony today. They were just getting up to the beginning of her Macy's contract and her early talks and designs with JCPenney, so, clearly there's a lot more to go through here.

And it is a contract dispute at its core, of course, Ashleigh, but when you throw in the celebrity of Martha Stewart and two household name brands, it's a little sexier than just a contract dispute.

BANFIELD: So, here's where I want your business acumen to kick in.

She's a non-executive chairman, she is not a CEO, and there is a big difference in how much clout and minutia you deal with every day.

So, I want you to just, if you can, quickly, separate those two out for me and tell me why Martha on the stand means anything if she's a non-executive.

ROMANS: Because she is the one who is making deals with Terry Lungren from Macy's. She is the one who is making deals with Ron Johnson, the new CEO of JCPenny. The e-mails and telephone calls they have been talking about on the stand for the past week have been about Martha's interaction with these CEOs. It's the three CEOs who are talking about their business dealing altogether.

What you've seen this morning is you've seen the Macy's -- will I would say a pretty tenacious Macy's attorney who has been talking about what the expectations and essence was of the contract with Macy's and whether she was going behind Macy's back. There was a really interesting moment, too, I'll tell you where the Macy's attorney said is somebody going to buy an eight quart enamel cast iron Martha Stewart casserole at one side of the mall and walk to the other side and buy the same product? And she said they could. They might have two houses. They might have two kitchens. So it was a very interesting moment where all the reporters in the court kind of looked at each other and began typing furiously. You'll see that line in every news story about this trial.

BANFIELD: I would buy both just because I love her stuff. I'm crazy like that. And you have great job today. A fun and unique and arcane story to cover. So Christine Romans thank you.

ROMANS: And the Dow is at highs. So what a crazy day, right?

BANFIELD: Great day to be in Manhattan. Thank you.

A UFO, another reason to be in Manhattan, or at least New York, a UFO spotted over New York City. Go figure. The pilot says he knows what it was, but has no idea where it came from. We'll tell you all about it in just a moment.


BANFIELD: The FAA is checking out a pretty frightening report from JFK from yesterday about a drone right in the middle of a flight path. An incoming Al Italia flight radioed the tower about an unidentified unmanned aircraft in a place where it really shouldn't have been. Last hour aviation expert Miles O'Brien told me that even innocent gadgets can cause serious trouble.


MILES O'BRIEN, AVIATION ANALYST: You don't want your airliner coming in conflict or colliding with a drone really of any size even a small radio controlled helicopter that you can buy at the store if it was ingested into the engine could cause that engine to shut down or perhaps worse.


BANFIELD: In this case the passenger jet that reported this did land safely and two other planes that were in the same air space around the same time said they didn't see the drone at all, but the investigation is ongoing.

This is the first full week of the $85 billion in forced spending cuts. You can feel it? Battle between the president and the Republicans certainly doesn't seem to show much of a sign of letting up anytime soon. In fact just a short while ago, the House leadership sounded off and the next looming crisis, the possibility of a government shutdown later on this month. Here now for you is the House Speaker John Boehner sounding somewhat conciliatory.


REP. JOHN BOEHNER, (R ) SPEAKER OF THE HOUSE: Spending is the problem here in Washington and our goal is to cut spending. Not to shut the government down. The president agreed last week that that should be our goal. And I'm hopeful that this continuing resolution will find easy passage both in the House and the Senate.


BANFIELD: Joining us now is chief national correspondent John King and Wisconsin Governor Scott Walker. John, let me begin with you. I led into the House speaker's sound bite by suggesting it was somewhat conciliatory. Do the Democrats see it the same way?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, listen, the speaker has laid down the line that he won't raise taxes as part of any deal to end the sequester, and guess what, the Republicans are also not prepared to, Ashleigh, to raise taxes. It's part of what they call the continuing resolution. Part of this dysfunction is governing by a gimmick and Band-Aid The sequester was a gimmick. These continuing resolutions are a Band-Aid. It's been 16 years since Washington passed a budget the way it's supposed to. I'm guessing the governor would like to have that flexibility on occasion. Governors don't get that.

So in the continuing resolution, the Republicans are working on one in the House, a bipartisan group working on one in the Senate. It's conceivable that they could send to the president in the matter of a couple of weeks, something that funds the government through the end of the fiscal year. That deals with some of the flexibility necessary in the sequester. But the Republicans in both chambers say they're not going to take away those cuts. And so the question is they are moving forward in a CR, the continuing resolution, in a relatively positive way right now. But there's plenty of opportunity as we've seen in the past for this to go off the tracks.

BANFIELD: Thank you for that, because this doesn't seem as intransigent as I'm saying last week's argument which was absolutely -- the line has been in the sand on for a long time on those spending cuts and here we are at the CR, the continuing resolution, careening instead of actually getting a budget, we're just getting the Band- Aids. Is there a sticking point at all, anywhere in actually achieving a continuing resolution at this point?

KING: I would say it's the trust deficit. This is about trying to get a budget, trying to get deficit reduction, budget deficit reduction. But it's the trust deficit, so they keep going from mini crisis, to mini crisis, to bigger crisis, back to mini crisis because they don't trust each other to cut a big deal and to pass a real budget.

Now, Ashleigh, it's possible if they get this continuing resolution and they fund the government through September, maybe then there's the breathing space to take a little break, maybe go to a beach, get away from each other and then come back and say can we actually talk about the big stuff which would mean deeper spending cuts, including entitlements. And the president will come back to revenues. He'll want tax increases as part of that. There is a chance the CR would be a circuit breaker. However every day that passes gets us closer to 2014. Democrats think they have an outside chance of getting the House of Representatives back. So the capital "P" politics kicks in to every one of these conversations, which is sadly how we got here to begin with.

BANFIELD: Governor walker, let me get to you jump in on this. The intransigence on both parties has been deplorable according to most Americans who are asked and who know about this. At the same time, the Republicans are taking it on the chin a whole lot more than the Democrats are. And when you have the House speaker saying over and over and over again, you know, revenue increases are not on the table, period, I've heard you say otherwise. I've heard you say and I think in a Bloomberg interview maybe down the road. How do you feel about the House speaker's position, do you agree or disagree?

GOV. SCOTT WALKER, (R ) WISCONSIN: I certainly think it's a problem right now. What I mentioned on Bloomberg was the concern I had is the economy is just slowly starting to recover, the last thing we need to do is take more money out of the private sector and put it in the hands of the government. That's certainly my concern. I don't want to see a slowing down or even a reversal of the economic recovery. But last Monday I and most every other governor in America was at the White House and one of the suggestions I raised to the President of the United States was that if he didn't like it, I think most of us agree, the arbitrary nature of the sequester cuts, the perfect alternative is for him to do what most governors have done over the last two years, and that is bring his cabinet in, put together a responsible list of reductions, and provide it as an alternative. And I think both House Republicans as well as members of the Senate would go along with that if they were a viable alternative to sequester cuts.

But just saying we'll change things and suddenly ask for higher taxes as well as maybe cuts in the future, I don't think it's must have to get past the sequester deal. And remember, it's not just what happened last Friday. There's another part of the sequester that happens at the end of this month on the 27th. And for most of us, we'd like to on get past that on a reasonable basis.

BANFIELD: You know, governor, John said there is somewhat of a luxury for a governor who doesn't have the luxury, rather, of careening from debt Band-Aid to debt Band-Aid, but at the same time I can't imagine that you would want to be a part of the House and Senate and the gridlock. John's laughing. Add to that, John.

KING: Governors can't do this, they have to balance their budget every year. And people have always talked about I'm not endorsing any proposal, but it's one of the reasons some people want a balanced budget amendment in Washington, others say go to two year budgeting at least so once you get it done you get some breathing space. I do think it's been 16 years since Washington passed a budget according to the rules. So it's not just president and this Republican House. I would say because of that trust deficit and because of the constant campaigning for the next election, they've taken the dysfunction to new lows.

BANFIELD: And governor, last word on that. Trust deficit. Is this the biggest problem right now facing Washington?

WALKER: No doubt John is exactly right. You had the sequester, but before that, you had the fiscal cliff, you have all these in some ways manufactured, or self manufactured crises out there, that Congress punts things down the road, they kick the can to use several metaphors there, but they don't really solve things. In our state, we took a $3.6 billion budget deficit and turned it into a nearly half a billion dollar surplus. We're not alone. Plenty of other governors, including some in both parties did that over the last two years. I think most of us would wish people in Washington would step up and lead. That's what leaders do in times of crisis. Lead. And get us back on track.

BANFIELD: I think every one of us wishes that. Governor Walker, thank you for taking the time to be with us, hope it's not our last chance to speak. John King, always a pleasure, my friend, thank you.

Coming up next, I want to take you into a courtroom where a woman is fighting for her life. You know her by now. Jodi Arias, whose name is now almost synonymous with sex, lies and murder. Find out what she's saying now.