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Apple To Release New Products; Fashion of Wearable Technology Examined; Home Depot Suffers Hacking of Customer Credit Card Information
Aired September 13, 2014 - 14:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN HOST: Apple disrupted music with the iPod, it revolutionized communication with thy iPhone. Are fashion and credit cards next? I'm Christine Romans. This is CNN MONEY.
New iPhones, a smart watch, maybe a credit card killer, are any of the game changers? The rich are getting richer, and the rest of us are buying cat food. I'll explain. And from geek to chic, why technology is the star of New York Fashion Week.
But right now, the top five money stories of the week, and this week it was all about Apple, one of the most ambitious product launches in the company's history. Two new iPhones that are bigger, rounder, and faster, a mobile gaming system that could disrupt the way we buy, and finally a smart watch that does more what any other smart watch on the market today. But is it truly revolutionary? Our CNN MONEY panel is here, Samuel Burke, Cristina Alesci, and Paul La Monica join us today.
Sam, people have been talking about the smart watch for two years, two years. Now it's here. Is this device the device that will push wearables to mainstream?
SAMUEL BURKE, CNN TECH BUSINESS CORRESPONDENT: Just like in a relationship with somebody, sometimes it's the things you don't say that speak the loudest, and Apple had some glaring omissions at this big event that they still have not answered, mainly the battery time for the watch. They said how long the battery on the iPhone 6 and 6+ lasts, but they did not say about the watch. And I was left wondering one in three people abandoned wearable tech after just six months of buying it, and one of the reasons is because of the battery. So I was left wondering about that.
Also, they did not talk about the fingerprint technology they used to pay for on your phone. On the watch it does not have that fingerprint, so if somebody grabs my watch, which is $349, are they going to be able buy whatever they want and go on a shopping spree?
ROMANS: I feel it's a little redundant. Already people run with their phones, already clothing is being made to stash your phone. This is -- is it redundant?
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: It could be redundant in some respects. With regards to the battery issue, they've got some time to work it out because the product does even not come out until 2015. It's not even going to be ready for the holidays. And then with regards to the payment process, the hope has got to be if someone swipes your watch, you are OK unless they get your phone too, because they are linked together. But I think that when you look at that demo about how easy it is going to be to pay for things, if they can live up to the promise, this is a big potential problem for potential eBay. Their stock fells as it concerns PayPal. And Apple definitely has an impressive list of retailers already signed up, big banks.
ROMANS: Chase already said on the day of the launch, hey, we really you'll get Apple Pay. They got the partners.
CRISTINA ALESCI, CNN MONEY BUSINESS CORRESPONDENT: We don't know how they'll respond to Apple Pay and the watch, but we do know already that there's a tremendous response for the new phones, right? The site crashed because people are trying to preorder the phone.
One this is very clear. You mentioned, is Apple revolutionary? Well, is that really the focus of the company? I think that actually Apple is concerned about holding on to the premium customer. They're more concerned about making that customer happy and more fearful they were falling behind because they lacked the larger screen that a lot of premium customers wanted. Now they are delivering on that. That could be a huge --
LA MONICA: Finally.
ALESCI: -- deal for Apple.
LA MONICA: They might be able to steal some Android customers here possibly.
ROMANS: Are their products going to have fat margins? If you have a premium customer you definitely want the fat margin.
ALESCI: To your point, their top of the line phone now is $100 more than their last top of the line phone. It has a bigger screen, but it just shows you they are not going after the price sensitive customer.
ROMANS: All right, certainly a lot of interest on Apple this week. We'll watch to see how it plays out.
It could be a record next week, the biggest initial public offering of all time, talking about Alibaba. It's a Chinese e-commerce company, Baghdad a mix of Amazon, eBay, and PayPal, the Chinese version, and it could raise a whopping $24 billion. That would top Visa's IPO in 2008. It would crush Facebook in 2012. Cristina, Alibaba's customers and operations are in China. It's not exactly a household name in the U.S. What is it and why should we care? It's a huge IPO.
ALESCI: It is a massive IPO. But to your point, it's a cocktail of all of those companies that you mentioned, plus a couple of chasers, right? They've got a mapping app. They are getting into social media. They are even trying to get people to buy mutual funds on their platform. So it's much more than what we traditionally think of here in the U.S. like Amazon and PayPal. Why is it important to U.S. -- the U.S.? Well, it's basically because you might end up with a piece of this company inside of your investment fund, and you don't even know it.
BURKE: But my big question, though, you talk about here in the U.S., have you purchased something from Alibaba?
ALESCI: Absolutely not.
BURKE: Have you?
LA MONICA: Nope.
BURKE: And you guys are smart shoppers. I tried to do it the other day. It was all Chinese to me, literally. So much of the site is not even translated into English yet. And when you finally get to the one that's in English, it's very difficult to buy something. Not that great.
ROMANS: Jack Ma, it's a name we can all say.
LA MONICA: You have to trust Jack Ma. It looks like investors are going to.
ROMANS: Excellent. Radio Shack, the opposite of Alibaba is Radio Shack, getting radio whacked. The electronics retailer burning through cash, burning through cash, actively seeking a financial lifeline. A bankruptcy filing could be in its future. Losses more than doubled in the latest quarter, the stock has fallen below $1 a share. Paul, years ago "The Onion" lampoon the company with this headline, "Even CEO can't figure out how Radio Shack is still in business." That was 2007. Is Radio Shack doomed to remain a punch line?
LA MONICA: Sadly, I think so.
ROMANS: And you got one.
LA MONICA: We have joked often if you have the name "Radio" in your corporate name that's probably not a good sign in 2014. Shack is not much better unless you're Shake Shack, and ironically that burger joint might be looking to go public. Radio Shack, they know that they are dated age stale and made fun of it in a Super Bowl commercial this year, which you now wonder, should they have spent the cash for that pricey ad Super Bowl ad? Even if they get financing in the short term, they need customers and strategy.
ALESCI: They need to shut down this massive break and mortar --
ROMANS: They're all in malls. A lot of them are in malls which are not getting the traffic they used to. It's a location issue, it's a customer issue. It's a financing issue now.
ALESCI: It's definitely a financing issue. But it seems like there are investors and lenders out there that are willing to back this company ironically, because you got to scratch your head here. How much room does this company really have?
BURKE: But where are people going to go to try their product and return it?
BURKE: That's what people use Radio Shack, where you buy something on Amazon, and while you're waiting for it to arrive at your doorstep, you go to Radio Shack, try it out. When it comes from Amazon, then you go and return it. That's the truth.
ROMANS: Sadly, that's so true. How do you fix that broken business model? We'll have to see.
All right, Atlantic City, speaking of a broken business model, in trouble. The company that runs the Trump Taj Mahal filing for bankruptcy this week. It will close in November. Another casino owned by the group is closing later this month. Donald Trump built those casinos but says now they only license his name. We saw Revel close last week, Showboat closed in late August. Cristina, is Atlantic City, is it done as a gambling destination?
ALESCI: It's pretty much been a failure. In 2006 you're talking about revenue of about $5 billion. It's half of that now. And it probably declined further from here.
What happened was they knew -- New Jersey knew that neighboring states were going to legalize gambling. They did not get in front of it fast enough to transform it into an entertainment hub or a convention hub. Think about how close it is to the city. You could have easily gotten a lot of convention business.
ROMANS: It has all the ingredients and it couldn't capitalize.
LA MONICA: They only have one casino that's arguably cool there, and that's the Borgata. That's the most Vegas like destination.
ALESCI: To your point about the cool factor, right, a part of this is a marketing campaign. You've got casinos in Vegas saying it's just the right amount of wrong, as in a marketing slogan, right. And then you got do AC, "DO AC"? Come on. What does that mean?
ROMANS: What's it mean to Trump. Is this a hit to Trump?
BURKE: Once again he's running away from his name. Like you mentioned, he does not actually have a major business stake, just about give percent of stock in these companies. But once again he's running away from Trump, his own name.
ROMANS: I know, I think --
LA MONICA: If you're watching, make a profitable New Jersey.
ROMANS: There you go. It's a challenge from Paul La Monica.
Meantime, this story really got my attention this week. The rich get richer and it's cat food for everyone else. The top three percent of American households control 54 percent of the nation's wealth. Think of that for a second. At the same time, less than 14 percent of U.S. families own any individual stocks. In this country, more families own cats than stocks. Cat ownership is at 30 percent. No wonder why there's a huge wealth gap in America.
BURKE: This is the story my generation, though. I'm 28, and so many of us, our parents' portfolios got hit during the great recession, and so we're afraid to put our money in stocks, which I think is so sad because we're the one using the tech products and we know it will be profitable. I saw the ads on Facebook. I said they will make a ton of money. They have ads everywhere in Facebook. So it's a real missed opportunity for my generation.
ROMANS: It's not one or the other. It's not a cat or stocks. I'm saying, buy what you know. Research some cat sort of companies. You know? I don't know. Purina?
LA MONICA: Or dogs.
ROMANS: Pet insurance, lots of way to invest on the cat boom. All right, thanks, guys.
Coming up, wearable technology's fashion problem, Apple's watch grabbed headlines this week, but is anyone actually going to wear this stuff? The intersection between fashion and tech is next.
ROMANS: Handbags that display tweets, bracelets that charge your phone, bangles that light up when you get a text. These are some of the latest fashions hitting the runway in New York. Alison Kosik takes us to where tech meets fashion.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Fashion Week is no longer about the fashion.
Can you make the bag say hello to me?
RYAN GENZ, FOUNDER, CUTECIRCUIT: Yes.
KOSIK: The idea? Take wearable technology from geek to chic.
GENZ: We have an app on the phone currently connected with this, and you can choose any pattern you want.
FRANCESCA ROSELLA, FOUNDER, CUTECIRCUIT: This is the notification bracelet. You can set it to certain contacts, is vibrate a little bit when it's on your wrist that certain people are calling so you know it's your mom, husband, or babysitter. And this one is the charger.
AYSE ILDENIZ, VP NEW DEVICES INTEL: There is a USB connected right here, which you can do your charging. We designed it to be a communication accessory so in other words, your e-mails, SMSs, and your social feeds.
KOSIK: Meanwhile from the runway, other designers are showing off what they got. Bags, bracelets, even connected rings.
LOGAN MUNRO, CO-FOUNDER, RINGLY: Actually customize which notifications you want through, you want Facebook on there, or Uber, you can turn those off and on if you have the ring.
KOSIK: So if I only want my boss to contact me when I'm out for a drink in the middle of the workday, I can just do that?
KOSIK: Oh, it's vibrating.
And 19 million wearable tech pieces will be shipped this year. In four years that's expected to surge to nearly 112 million and become a $20 billion industry.
REBECCA MINKOFF, DESIGNER AND FOUNDER, REBECCA MINKOFF: The customers seamlessly transition between fashion and technology.
UIR MINKOFF, CEO, REBECCA MINKOFF: We just started dreaming of things that we thought that she would need and incorporate into her life. Some of the things we found, they always run out of charge. So that kind of was, like, hey, can we incorporate that into a bracelet?
KOSIK: But some say this market is young.
RACHEL ARTHUR, SENIOR EDITOR, WGSN: I would say it's virgin in one point, in terms of the development of design, but it's a massive step forward compared to the very clunky technological developments had from the past.
KOSIK: But does it still have a ways to go?
ARTHUR: I believe so, personally.
ARTHUR: How do I put this politely? You can still very much see that they are a piece of technology.
KOSIK: Another hurdle, will people wear it? This is a solar powered dress that will actually charges your phone.
UNIDENTIFIED FEMALE: I would stand out in this. Get the right shoes with it, I'd just be ready to go.
KOSIK: Would you wear it?
UNIDENTIFIED FEMALE: No.
KOSIK: Why not? It charges your phone.
UNIDENTIFIED FEMALE: So will my charger. UNIDENTIFIED FEMALE: It looks cool. It's kind of boxy.
KOSIK: But designers are confident.
ROSELLA: We're bringing this digital aspect to fashion, and it is going into the future.
MINKOFF: We're going to see fashion and technology fused in ways we can't even imagine.
ILDENIZ: Markets will certainly be big.
KOSIK: The key, make fashion first.
UNIDENTIFIED MALE: These beautify the tech, tech enabled the beauty. We chose to start with really the beauty side.
ROMANS: Alison Kosik, joins me now. Does this dress make me look like a solar panel?
KOSIK: Actually, yes.
ROMANS: Apple this week may be a game changer with the Apple watch. That's the biggest name, the biggest new piece of technology in the wearable field.
KOSIK: And you're right, that's exactly what one analyst told me, that this Apple Watch could really be a game changer because it not only opens up the thought of wearable technology to a small group but to the masses as well. But it also faces a hurdle, how to make it functional and fashionable as well? One fashionista telling me this Apple watch isn't sexy feminine. It's still really masculine. But one analyst telling me, look, this Apple watch will be the bestselling watch of 2015, yet he also told me he will not be buying it for his wife any time soon.
ROMANS: All right, Alison Kosik, great reporting, thank you, Alison.
Coming up, the new iPhones are sleek, the Apple watch, as we told you, it's cool, but Apple Pay could finally change how you spend your money. But is it safe? That's next.
ROMANS: Is it time to cut up your credit cards? Most millennials do even not have them, and 63 percent of young Americans don't own a single credit card. Prepaid debit cards are more their style. But forget plastic of any kind. Apple wants you to leave the wallet at home and pay for everything with your iPhone6. The big question, is it safe? Jose Pagliery takes a look.
JOSE PAGLIERY, CNN MONEY CYBER-SECURITY CORRESPONDENT: Since when is your wallet getting thinner a good thing? Welcome to the future brought to you by Apple.
UNIDENTIFIED MALE: That is so cool!
PAGLIERY: The new iPhone6 has something called Apple Pay, which lets you store and use your credit cards just by scanning your phone with technology that sends your payment to your phone to the register, it's call the NFC. That stands for Near Field Communication. And it's basically an antenna inside your phone that delivers short encrypted radio waves with your payment data. It's been around for a while. It's used on Google Wallet, PayPal, and a few other services. But is it safe?
Well, it turns out that it's a lot safer than the credit cards used today, and it's harder to steal data with NFC. For one thing, your phone does not give out your credit card number, but it actually creates a one-time use code that gets approved by the bank for every transaction. And that CVV code on the back of the credit card, that changes with every transaction too. So even if hackers hack their way into a store and grab this payment data, it's useless to them because each code can only be used once.
Plus, even if someone steals your phone, you can actually wipe all the credit cards off of it remotely. You can't do that with a wallet. Use the wallet, you have to call the bank for each and every card to cancel that card. While it's difficult for celebrities like Kate Upton and Jennifer Lawrence to put trust in Apple right now, as it turns out, Apple Pay and NFC are much safer ways to pay than plastic.
ROMANS: Another reminder this week of how unsafe our current payment system is. Home Depot confirmed a widespread hack. Investigative journalist Brian Krebs broke the story when a huge batch of stolen credit and debit card data turned up in the cybercrime underground. As many as 60 million cards could have been compromised. Krebs also discovered the target hack from last year, that hack hit 40 million cards. I asked him, if you shopped at Home Depot this summer is your information for sale on the dark web?
BRIAN KREBS, INVESTIGATIVE JOURNALIST: If it's not yet, it will be soon. I think there's a very good likelihood of that, yes.
ROMANS: Should the company have known? And maybe this is a judgment call, should the company have known given that every month this year, basically, we have had a huge hack. Aren't they monitoring the dark web like you are?
KREBS: Well, so, yes, I mean, it's difficult to say what they should and shouldn't have known. There are -- I don't know that the companies are monitoring the dark web. Certainly law enforcement, the banks are, but, certainly, a lot of people are going to be asking the question, you know, what, if anything, did Home Depot learn from this Target breach since pretty much everything is almost exactly like the Target breach from the malicious software used to the site that these stores ended up for sale on, even to the reporter who tells the world about it.
ROMANS: Do you think Americans are just so tired of hearing about these hacks that they are losing the outrage?
KREBS: I think there's a little bit of that for sure, and I think that's a fair criticism. Unfortunately, it doesn't change the reality on the ground for these companies, be they retailers or Fortune 100 companies. The fact is that if the discussion about security, about the stuff that matters, about the things that impact the company's bottom line when they are exposed, if that discussion isn't being driven from the top down, from the board level, you know, the companies are going to eventually have one of these problems.
ROMANS: More to come on this, no question.
All right, coming up, Princeton, Harvard, and Yale may be the best schools in the country, but their grads don't make you the most money. The colleges that will make you the most money when you graduate and the little thing they all have in common, next.
ROMANS: You guessed it, the Ivy League has the best schools in the country. Once again Princeton is at the top of "U.S. News and World Report's" annual rankings, followed by Harvard, then Yale. That's where the elite go, but for everyone else, here's another ranking to consider, the colleges with the highest paid graduates. A new report from "Pay Scale" finds Harvey Mudd grads earn the highest salaries in the country. They start right out of college $75,000 a year. They make about $133,000 midcareer. Also in the top five, the U.S. Naval Academy, MIT, Colgate, Stanford.
Colleges with the highest earning grads have something very important in common. They grant a large number of STEM degrees, science, technology, engineering, and math. And 86 percent of Harvey Mudd's bachelor degrees are in STEM. It's 54 percent at the Naval Academy, no surprise, 79 percent at MIT.
You know, but a four year degree is not for everyone. That's why Pay Scale also looked at two year colleges and their earnings potential. How does $70,000 sound? That's roughly how much people with associate degrees from these schools make by the time they're in the middle of their career. And these are all public schools. In general, Pay Scale found that graduates of two year public college made more money than those that attended private two year programs.
You don't have to rack up a ton of debt at a private career college. You don't have to breathe the rarefied air of one of the Ivys. Be smart about where you go, be smart about what you study, and your investment in higher education will pay off. Thanks for watching CNN MONEY. We're here every Saturday at 2:30 p.m.
Eastern. So set your DVR please. And check us out 24/7 on CNNMoney.com. If you are planning for retirement, I have a check list, a check list you can't afford to miss. Check it out. Have a great weekend.