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Wi-Fi Internet; U.S. Tax Dollars for Gaza?
Aired August 13, 2005 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNNHN ANCHOR: The U.S. military says troops have seized 15 gallons of various chemicals in Iraq. A statement says the material came from suspected insurgent chemical labs and storage facilities. The military says it hasn't determined what the chemicals are or whether they pose a danger to the troops.
In Wyoming, one person is unaccounted for today after a tornado hit the mining town of Wright. Two residents are confirmed dead. The storm hit with little notice last night and tore through a trailer park. Up to 100 homes were damaged or destroyed.
I'm Fredricka Whitfield at the CNN Center in Atlanta. More news at the bottom of the hour. IN THE MONEY begins right now.
JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Well, welcome to the program. I'm Jack Cafferty.
Coming up on today's edition of IN THE MONEY, the price of peace. Your tax dollars are part of the plan to end conflict in Gaza. Find out how the greenbacks got a one-way ticket to the Middle East. I should say some more of your greenbacks. We've pouring money in that thing over there like you dump it down an open manhole.
Also ahead, the bull without the buzz. The numbers say we're in a bull market. Where's all the hoopla? We'll look at why this rally feels more like a slump.
And cock-a-doodle-don't. The new energy bill tinkers with Daylight Savings, and the rooster isn't the only one who is going to be confused. See if the payoff really is as big as the White House thinks. Here's a hint -- it's not.
Joining me today a couple of IN THE MONEY veterans -- CNN correspondent Susan Lisovicz, "Fortune" Magazine Editor-at-large Andy Serwer.
The price of oil is a phenomenon all unto itself. How high up is a barrel of crude? Sixty-six dollars as of Friday, I think.
SUSAN LISCOVICZ, CNN ANCHOR, IN THE MONEY: Getting close to $67.
ANDY SERWER, "FORTUNE" MAGAZINE AND CNN ANCHOR, IN THE MONEY: I'm still trying to get over cock-a-doodle-don't.
CAFFERTY: Stop it.
SERWER: Let's talk about this oil situation with regard to a couple industries, though. I mean you look at sort of a tale of two businesses. Cars, so far I haven't seen any impact. In fact auto sales have been going like gangbusters, has not affected driving patterns yet.
LISCOVICZ: But SUVs, of course --
SERWER: But SUVs sales were OK in June and July, actually.
CAFFERTY: Because of those big discounts.
SERWER: They're giving the cars away. People haven't stopped driving that much. On the other hand, the airline business is just getting kicked in the gut. Delta says they're going to pay a billion dollars more in fuel this year as opposed to 2004 -- a billion dollars more. And that is crippling. I think you are going to see some more of those guys file Chapter 11.
LISCOVICZ: Right. And Delta is so close to begin with. But you know it is interesting, because when you talk to the American Petroleum Institute, they will say it's not as bad as the oil shock of the '80s. You have to be at $80 a barrel and -- adjusted for today's dollars -- and $3 a gallon. We're real close on the gasoline and we are moving in that direction for the oil.
But the differences are profound, right? Because in '80s, there was a war. Iran and Iraq. This time, it's demand. It is really demand.
CAFFERTY: It is not all demand, though. We have that whack job in Iran who opened the nuclear plant this is week. And he says if anybody in the West starts to screw around trying to stop us from developing our nuclear power plants, we will not only shut off the supple of oil that we produce -- and they are the third biggest producer in OPEC -- but I even read something about they were saber rattling about closing the Straits of Hormuz. There has got to be a pretty good size risk premium in the price of a barrel of oil based solely on that hardliner that is now running Iran.
LISCOVICZ: And the Middle East is big producing area. It is always a volatile area. The fact is that at some point it is going to kick in, it is going to hurt the economy. And then you will have consumption go down, but for the wrong reasons.
SERWER: And then that guy in Venezuela, Chavez. He is saber rattling, as well. Which is kind of Interesting if you read the stuff that he is saying.
CAFFERTY: What's up with that?
SERWER: He says if the United States invaded Venezuela, they would be in big trouble. I have a news flash. We have no intention.
LISCOVICZ: Although, gasoline is about 12 cents a gallon there.
SERWER: And they are a huge exporter of oil to U.S.
CAFFERTY: We are not exactly getting anything done in Iraq. Maybe we should pick on somebody like Venezuela, see if we can succeed.
LISCOVICZ: It is a lot closer.
CAFFERTY: Next week, Israel will pull all of its troops and about 8,000 settlers out of the Gaza Strip. This is historic stuff. The settlers in Gaza are being offered incentives to move. But the government will remove them if it is necessary by force. Here's where you come in, the United States. Is helping to pick up the tab for this little reorganization. Israel's going to also move military bases out of Gaza.
The whole thing is going to cost about $2 billion. Supporters say it's worth it for the United States to help in order to move along the peace process. But critics are not happy about shelling out additional taxpayer money in the Middle East.
Joining us now from Washington to talk about those costs, and whether they're worth it, is David "Mac" who is the director of the project on the Middle East peace process at the Washington Institute for Near East Studies. David Makovsky, nice to have you with us.
DAVID MAKOVSKY, WASHINGTON INSTITUTE FOR NEAR EAST STUDIES: Good to be with you.
CAFFERTY: So why is the American taxpayer picking up the tab on this thing? Don't we pour a whole bunch of money into that part of the world specifically in aid to Israel every year as it is?
MAKOVSKY: First of all, the aid that's gone on has gone to Israel and the Egypt together, and it's been found out to be cheaper to invest in peace than in war. Most of the military aid that's gone to Israel and Egypt, frankly, is money for American workers with the defense industries that are given jobs in the United States. That money stays in the United States. And, it's an investment in peace. And there hasn't been a war now in many years thankfully.
CAFFERTY: I understand. But why are we picking up the tab? Why don't the Israelis pay for the withdrawal? They're the ones trying to develop a peaceful society in which to live. Why can't they pay the tab themselves?
MAKOVSKY: They're paying $2 billion. It is a third of all their healthcare costs and all of their education -- what they spend for all their citizens. For them, of a small country, $2 billion is a lot of money.
But I agree with you. It shouldn't just be on the United States. It should also be the countries in the region that should be of assistance because we are also trying to help the Palestinian Authority and achieve this objective of a two-state solution. The G-8 just announced a major initiative to the PA.
Unfortunately the Arab oil states -- you mentioned the price of oil before -- have kicked in very little. And there should be some public efforts to say, hey, how about helping your Arab brothers here develop this two-state solution? Most of the money is coming from Europe and is also coming from the U.S. Very little, unfortunately, is coming from the Arab states.
LISCOVICZ: That is so ironic, isn't it? Because here's really one of the most optimistic things we have seen in a long time. Decades even. And, the U.S. keeps not only providing billions of dollars in aid to Israel, but also to Egypt, which is a neighbor.
MAKOVSKY: That's right. Well, Egypt has been the most important Arab state and they were running intrastate wars with Israel for over 30 years. At a certain point, the United States said, well why don't we see if we can help you put -- support your military and get you out of the war business.
And the fact is, it's worked. Ever since the United States has gotten involved, the wars have stopped. It turns out that the U.S. when it came to paying for wars were paying much more money than it was in paying for peace. So I think you can make a fair argument that it's been a good investment.
The key is the U.S. should not be the only player. It has been good that the Europeans are now kicking in this money. It was just announced at the G-8 Summit how much they're putting in.
But the missing link here, unfortunately, has been the Arab oil states who have gotten this great windfall and they are not putting any money into this project.
SERWER: Let me ask you David, jumping in here. How optimistic are you right now about the peace process? Is the evacuation of the settlers a meaningful step?
MAKOVSKY: I think it's critical. This is shattering a taboo. For the first time since 1967, Israel will be taking out the settlers. It is kind of like Nixon and China, given that Sharon was always considered the patriot of the settlement movement and now he is the guy who has turned on them and he will, by doing this movement in my opinion, will facilitate further moves if indeed Gaza's more peaceful.
And that is the $64,000 question. Will, by Israel leaving, the rockets stop falling? The suicide bombers stop coming? If that happens, I think that this will be a critical precedent. Almost 40 percent of all Palestinians live in Gaza. This will be a huge boost for a central American foreign policy objective, which is a two-state solution. This is a critical first step.
CAFFERTY: Give us an idea of the size of the operation we are talking about here. It's scheduled to begin on Wednesday. How long is it going to take? And what's involved?
MAKOVSKY: Right. OK. Well on Monday, already, the Israeli army and the police, there is 55,000 people involved this operation. They are knocking on doors of the settlers saying if you don't leave in 48 hours we are going to have to evacuate you. Israel has allowed four weeks for this to happen. I talked to an Israeli cabinet minister yesterday who said he hopes it can be done even in two weeks.
There could be some bloodshed on the ground. The settlers feel a sense of betrayal by Sharon. They said this is politically misguided. It won't bring peace. Hamas has sworn Israel's destruction, this is utter folly. And Sharon has been, you know, threatened with assassination and yet he is moving forward anyway. And I think if you look at the polling data, most Israelis are with Sharon taking this critical step. But I think everyone has to brace themselves that there could be violence here.
CAFFERTY: All right. We are going to have to see how it plays out. But needless to say if it can be accomplished, we will have maybe taken a giant step forward.
David Makovsky, director of the project on the Middle East peace process, Washington Institute for Near East Studies. David, thanks for being with us. I appreciate it.
MAKOVSKY: My pleasure.
CAFFERTY: When we come back on IN THE MONEY, no bull. Or is it? On paper, we have been in a bull market for a couple of years now. See why the guys on Wall Street aren't lighting cigars with $100 bills though just yet.
And a blast from the past. Carl Icahn made his name as corporate raider in the 80's, find out how he plans to strap a bottle rocket to Time Warner share price and we wish him god speed with that, by the way.
And running on airline time. It is not just you. More planes really are late these days. Find out why one expert says the airlines aren't going to do anything about it.
CAFFERTY: Just in case your portfolio failed to notice, we are in a bull market right now. What's more, we've been in one since 2002. But something's missing -- the verve that usually comes with a bull run. That get rich quick thing that makes the Wall Street traders act like frat boys having a big party on dad's dime. These days you have to look at real estate to get that kind of vibe.
To help us understand how long that is going to last, we're joined now by Robert Shiller. He is a professor of economics at Yale University, and the author of a best selling book "Irrational Exuberance." Bob, nice to see you. Thanks for being with us.
ROBERT SHILLER, ECONOMICS PROFESSOR, YALE UNIVERSITY: Hi.
CAFFERTY: So what is the missing magic potion in this bull run besides the fact that if you look at stock prices, they've just about managed to crawl back to where they were before the Internet bubble burst?
SHILLER: Well, ultimately, the level of the market is determined by what people are willing to pay -- willingness to come up with the money to buy stocks. And that was very extraordinary in the late 1990s. Now, it's, you know, it is just not fun as it used to be. Ultimately --
CAFFERTY: No, it's not.
SHILLER: The feelings they have. And they're not positive -- not so positive.
SERWER: The underpinnings of the market right now, Bob, as they say on Wall Street, not particularly strong. We have record deficits. I think more importantly, a very uncertain world political situation. Wouldn't that serve to weigh on the market such that we wouldn't really have a bull market where we would be making new highs, particularly on NASDAQ for instance?
SHILLER: Well that is certainly a factor. Unfortunately the market is driven by many factors. You know, after 9/11,we thought the stock market might be down for a long time but you know, it came up after that. And so, I think that a lot of it is driven by very simple feelings that it's kind of just feedback from the past price increases. And we are such -- on such a roll in real estate that it is distracting attention from the stock market right now.
LISCOVICZ: And that's been fun, right? Real estate has been where the action is. People really get excited these record low mortgage rates, redecorating, refix the whole thing. But that is starting to deflate, the mortgage applications going down for several weeks. The inventory increasing in some of the hottest markets. Do you see the end in sight right now?
SHILLER: Well, you know, all of these booms or bubbles are -- they have their own internal dynamics and they will come to an end eventually, because you can't maintain enthusiasm for rising prices forever. But the difference about real estate is that historically, they have been very gradual. The endings of booms have been gradual. So what happens is not a sudden crash, but first a leveling out, or rates of increase go down and maybe hit zero. And then the big question is when they go negative. That is not likely to happen for a couple of years or -- if historical experience is a guide.
SERWER: Bob, let me ask you about investor psychology a little bit. This is always a really difficult subject because you always want to buy stocks at the wrong time, and sell them at the wrong time. You want to buy stocks during the bubble when it feels really good. Everyone was scared to death of going into the market in September of 2001. It would have been a good time to buy.
How do you help yourself, protect yourself, from these sort of feelings that can stir you the wrong way?
SHILLER: Well, the conventional answer is diversify. And there are many different kinds of investment categories. That's the basic lesson. Not be too much in stocks, as many people are tempted to do.
But beyond that, I think that there's one could also lean against the market, and when the market appears high, down-weight your allocations towards -- of stocks.
The problem right now is that all of the major investment categories are high. The stock market appears high by price range ratio. And so does the real estate market. And so does the bond market so right now. We are kind of in a difficult situation overall for the main categories.
LISCOVICZ: I mean it is interesting though, Professor, because two of the three main averages that investors look to for guidance are down year to date. If you are looking to diversify, though I guess, everybody would agree on oil. Oil, any kind of oil company, blue chip oil company might be a good bet, given what we're seeing.
I'm curious with the record prices we seem to see day after day, at what point do you think it's going to hurt corporate profits and the economy?
SHILLER: Incidentally, oil stocks have been historically very good investments. This is something that Jeremy Segueal pointed out in his latest book. It is a tried and true solid industry that has done very well. Right now, we seem to be in a spectacular oil price boom and when it will end is very unpredictable. So I think these stocks are rather risky right now.
What will oil do to the economy? Well you know oil prices are shooting up. Historically that has been a problem for the economy. It hasn't seemed to have had much bite yet, but I think it's a real concern.
CAFFERTY: When you say oil stocks are risky at this point, let me ask you to explain that a little bit. We have got certain risk premium built into the price of oil based on geopolitical uncertainty. It is a finite resource. We are going to run out of it one day. The demand continues to grow in places like China and other developing countries. Consumption doesn't decline at all in the United States it seems.
Why wouldn't you buy oil based on the -- those kinds of things? Why wouldn't you make a bet on the fact that oil's only going to become more expensive?
SHILLER: Well, that's what people are doing. We have to kind of judge the market. There appears to be a lot of increasing optimism about the future price of oil. But as you said, we'll run out. On the other hand, there's alternative energy sources that over the long term are going to be developed and are going to come in and take the place of oil.
And, so it's -- really what's driving the oil market is substantially, it's psychology. It is the emphasis on the kind of stories, which are rather short-run stories, that you're describing that have been placed in the current market. And I think that the oil price increases have helped to encourage those stories. And so, that market is psychological like all other markets. That's the question, when it gets high; it is also going to be volatile.
SERWER: Right. OK, Bob Schiller a professor of economics at Yale University and author of, of course, "Irrational Exuberance." Thanks for coming on the program, Bob.
SHILLER: My pleasure.
SERWER: Coming up after the break, come on, baby. Papa needs a new pair of shoes. Carl Icahn is out to light a fire under Time Warner's share price. See if the gang around here ought to be cackling with glee about where our stock options are headed. Maybe.
Also ahead, runway roulette. Remember that quaint, old-fashioned notion that your flight should be on time? Find out where that went and what it would take to get it back.
And, McSavings? Daylight Savings Time is getting stretched and that might get you out of your kitchen and into a fast food joint. See who stands to lose and gain from this new arrangement.
LISCOVICZ: Now let's take a look at the week's top stories in our "Money Minute."
Alan Greenspan and company hiked short-term rates another quarter point Tuesday and promised to keep the policy in place for now. Wall Street was expecting the hike thanks to several recent economic reports that showed the economy still strong.
A federal judge sentenced former WorldCom Chief Financial Officer Scott Sullivan to five years in prison. Sullivan was sentenced for his role in the company's $11 billion fraud and eventual bankruptcy. Investigators saw Sullivan as the mastermind in the case, but he agreed to testify against former WorldCom CEO Bernie Ebbers in return for leniency. Ebbers, you may recall, was sentenced to 25 years in prison last month.
And thieves tunneled under a bank in Brazil and made off with about $68 million. Police have arrested two suspects in the case, and have recovered $500,000.
SERWER: Way to go.
LISCOVICZ: Check the beaches.
CAFFERTY: More work to do.
SERWER: All right. "Seventeen Going on Nowhere" isn't just the title of an old after-school special. It was also the best way to describe Time Warner's stock price. But thanks to corporate raider Carl Icahn that may be changing. Time Warner shares broke the $18 mark this week, following reports that Icahn was upping his stake in the company. Those same reports say Icahn is hoping to force Time Warner to sell off some of its assets in a bid to raise the overall share price.
Here, here. Time Warner is the parent company of CNN, and it's also our "Stock of the Week". You know, this is a little bit mysterious, you guys. Because he is apparently trying to force the company to do what it's already looking to do, which is number one spin off the cable company. It is going to do that. Number two for instance, try to sell AOL. It is trying to do that.
So I'm not really sure what his end game is here except maybe to make a few bucks. He said the break-up value of the company reportedly is not that much higher than where the stock is now, in the low to mid-20s. So what's Carl up to?
LISCOVICZ: He is another frustrated Time Warner shareholder.
SERWER: Join the group.
LISCOVICZ: He has 5 million shares, I believe, of Time Warner and you know he is working with hedge funds from what I understand. But he is also now allying himself with Ted Turner, who is perhaps the most frustrated Time Warner shareholder.
CAFFERTY: Let's remember that when Ted Turner was involved in the company, the stock price was around $90 a share.
LISCOVICZ: Oh, that.
CAFFERTY: That might explain some of Ted's frustration. My question is this. I read that Icahn estimated the break-up price of Time Warner at around $27 a share. Now the stock has been holding pretty steady around $17. That is s pretty substantial premium if Icahn is right.
My question is, if Carl Icahn can figure out how to make this stock worth $27 a share, why can't the people who are paid to run this company figure it out and get the share price up to where we can make a couple of dollars?
SERWER: Well it is unclear whether he can actually do that, Jack. And you know the problem right now with this company is that all of the businesses are out of favor except for one. I'll tell you which one in a second. Movies, movie business stopped. Publishing, ad sales are soft. And cable is out of favor because of the satellites. Now the one business that they are in that is in favor, is Internet. But we have AOL, which is the -- it's not exactly Yahoo or Google, let's just put it that way.
SERWER: You know -- I don't know what he is able to do with it.
LISCOVICZ: And the company was forced -- about a half a billion dollars to settle, you know, settle charges of improper accounting related to the FCC and DOJ about America Online.
So, you know, it hasn't been a great performer, either, even if it's a best performing business right now, though -- Time Warner has.
SERWER: And it's unclear whether Ted Turner is really going to join up with Carl Icahn at this point, too.
LISCOVICZ: He's making a lot of noise, though. And this is a person who can make noise and the stock moves on it.
CAFFERTY: Interesting -- be an interesting pairing.
SERWER: Him and his buffalo in there.
CAFFERTY: Ted and Carl.
SERWER: And the buffalo.
All right. Coming up, your time, their money. Airlines are running late and it's all about saving a buck. See if it's just a glitch or the new take on business as usual.
Also ahead, one more thing to mess up the flight schedule. Your clock's getting stuck in summer as they extend Daylight Savings. See what that means for airlines and the rest of American business and the rest of us.
And fashion at your fingertips, check out our "Fun Site of the Week" where you can try on clothes with a few clicks of the old mouse.
WHITFIELD: Hello. I'm Fredricka Whitfield at the CNN Center in Atlanta. Here are the headlines "Now in the News".
The U.S. military says it has uncovered an abandoned chemical storage site in the Mosul area. But it says it doesn't know if the chemicals were intended to be used as weapons. More than 1,500 gallons of chemicals were reportedly found, along with production and storage facilities.
Tropical Storm Irene is expected to strengthen into a hurricane today. However, its current path suggests it will miss the U.S. The National Hurricane Center predicts the storm will turn away from the nation's East Coast sometime tomorrow.
And Cuban leader Fidel Castro is celebrating his 79th birthday today. He is the world's longest ruling head of state. Castro has been in power for 47 years.
I'll have all the day's news at the top of the hour. Now back to more of IN THE MONEY.
LISCOVICZ: If you're planning on flying any time soon, here's a tip. Bring a nice, fat book. It will help during those long, long hours in the departure lounge. The "New York Times" says so far this year, delays in U.S. airline departures are the worst in five years.
To help us understand what's up and what's down on the runway, we're joined by Christopher Mayer. He is a professor at Columbia University Graduate School of Business and he has been studying airline schedules and delays for the National Science Foundation. Welcome.
CHRISTOPHER MAYER, COLUMBIA BUSINESS SCHOOL: Hi, Susan.
LISCOVICZ: Hi. My last flight was weather delayed and that is really, really, really why I couldn't get to work on Monday. No kidding. That's -- the scheduling is part of the problem, right? Airlines know that there are thunderstorms in the summer, that there are snowstorms in the winter, and that there's some times when things get really backed up.
MAYER: Yes. It's a little bit odd to have airlines constantly pointing to other factors, which are often foreseeable, in thinking about delays. They know that La Guardia is a congested airport. They know that O'Hare is congested airport. And those are things that one should take account, and certainly the airlines should take into account when they set their schedules.
SERWER: Chris, let me ask you a question, though. Isn't the government partially at fault here? I mean I remember reading that O'Hare at one point, they were letting 100 planes come in and out of there in an hour. I mean it cannot be done. And then they cut it back to something more realistic like 85, which is still -- cannot be done.
MAYER: So I agree with you that the government has allowed airlines to schedule flights that are uneconomical or that are impossible for the airport to handle. The difficulty is how do the airlines respond to that? If you're going to work and you know that the highway is congested, you have to allow more time to travel.
And, what the airlines have to do in response to what the government has done is to allow more time in their schedules to account for the congestion, which they know they're going to encounter when they enter these troubled airports.
CAFFERTY: Why don't they do that?
MAYER: I think it comes down to economics at the end of the day. If the airlines allow more time in the schedules it means that they had to schedule fewer flights and that costs them money. Of course, the flip side of that is that what they're doing now is not telling passengers that they're going to be delayed when in fact the passengers really are going to be delayed, so that's a bit of a deception.
LISCOVICZ: You know, one of the ironies is that the big boys are the worst abusers, right? It is that whole hub and spokes system where you see the worst delays.
Southwest Airlines, which one of the genius things about Southwest was it, went into the second tier airports, like for instance, on Long Island, which is still in the New York City metro area; Providence, Rhode Island; and Dallas. And they have not been as affected?
MAYER: Southwest hasn't been affected because they don't have as much congestion to face. That's absolutely right. The flip side is that the tradeoff that Southwest has is they don't get very much business travelers. And if you want to serve business markets, you have to operate in the key airports in the country like Boston, La Guardia, like O'Hare, like LAX. I mean -- they do operate at LAX. But those key airports are really important and Southwest avoids them and so they don't have delays. On the other hand, nobody is going to go down to Providence or out to Long Island to take a business trip from New York to Boston.
SERWER: Chris, this thing is such a mess. Maybe they should put Leslie Nielsen in charge of it, and see if he can straighten it out. Let me ask you though. I don't know if you were following this story about British Airways and Heathrow and at the end of this past week and just incredibly bollixed up that as, 70,000 passengers stranded. Isn't a certain amount of this indelible, though? Because it is such a tightly configured matrix. So if one plane is out, the crew can't get there and throws the system off.
MAYER: It is true that this is a very tightly configured system, and it is enormously complicated to work out. But that doesn't mean that the airlines can't do it. They have a whole lot of smart people and very sophisticated people who set their schedules. And, the schedules are set taking into account a lot of factors, which they know.
And as a result, they're still making choices. And this isn't -- they can't just say it's a system; it is sort of everything else because at the end of the day they choose their schedules and they could allow more time.
You know, you have a lot of flights that operate, you know, that are 15 minutes or more late 60 percent of the time and it's hard to blame the system one way or another for that.
CAFFERTY: But until things business-wise get a little bit better for the major airlines, my guess is it's not realistic to expect they are going to drop everything and sit down and say, all right, how do we improve our image by typing up our on time performance?
And the other part of my comment is what's the big deal? If you fly into New York or Chicago or Los Angeles, it is going to be tougher to get in and out than if you fly into Des Moines, Iowa. Just like a car on the Los Angeles Freeway, it is going to take you longer to get to downtown L.A. from the suburbs than if you drive into downtown Des Moines from west Des Moines. That is just the nature of the beast. To a certain extent, isn't this a lot of whining over something that kind of goes with the territory?
MAYER: So my claim is it doesn't have to go with the territory. The classic example of this for a long time has been the New York- Boston shuttle which operates at two of the most congested airports. But nonetheless, the shuttle has an excellent on-time record because the plane is always waiting there ready to go.
Now, you might say that, gee, the downturn in business travel is going to make it harder. I agree with you. But I will say that this is exactly the same pattern we saw in 2000, when the economy was quite strong and when there was also excess demand for air travel. Ao I think pointing to the airlines' troubles is not a complete explanation for what's going on.
The second thing is, given the financial trouble they're in, why not tell people the truth? Why not be accurate about what your schedules are? If you know the plane is not going to arrive until 8:30, why schedule it at 7:45?
LISCOVICZ: Truth? Yeah. Something about that. Yeah really. In a service industry, no less. The best tip I heard in the meantime is just to fly early because as the day goes on, the delays certainly add up.
Christopher Mayer, from the Columbia Business School, thanks for joining us and commiserating with us.
MAYER: I fly enough that I suffer your pain.
LISCOVICZ: Oh, we know.
Up next on IN THE MONEY, making hay while the sun shines. If you think Daylight Savings helps farmers, farmers it is time to get your clock fixed. We'll look at how extending summer hours will hit U.S. business.
And Wi-Fi on the down low. Stealing a wireless hookup might be more than sneaky. Allen Wastler from MONEY.com will tell us about that.
SERWER: President Bush signed a new energy bill this week that will extend Daylight Savings Time by four weeks starting in 2007. Sounds like a good idea in theory. But in practice? Well, that's a different story according to my next guest.
Michael Downing is the author of "Spring Forward: The Annual Madness of Daylight Savings Time." He is also a lecturer at Tufts University.
Michael, welcome to the program. So, come on. What's wrong with Daylight Savings Time?
MICHAEL DOWNING, AUTHOR, "SPRING FORWARD:" Well, as a spending plan, there's probably not much wrong with it. But as an attempt to try to save energy, which is the rumor under which we received it again, it is a total bust. For 100 years, Congress has been trying to sell us the idea that shifting clock time will save us fossil fuel, and they have yet to turn up a savings.
LISCOVICZ: Come on. Those barbecue grill manufacturers and sports equipment companies, they really get a big bonus out of extra Daylight Savings time, right? Are they the only winners?
DOWNING: Well, they're the big winners. You know in 1986 when we got a month of extra Daylight Savings, barbecue manufacturers told us it was worth $150 million a year. The golf industry figured it was worth $200 to $400 million a year. So they're the big winners.
The big losers this time, as always happens when we meddle with the clocks are the transportation industries, in particular the airlines, who are really going to be looking at a tremendous cost disservice to them because this throws us now three weeks out of sync with European clocks. And airlines are telling us it is going to cost them $150 million a year.
CAFFERTY: What about the potential Y2K type situation that could develop with computers? There's a potential difficulty there, too, isn't there?
DOWNING: There's a real, you know, it is an absolute difficulty. Here's the deal. The only real utility of clock time is synchronicity and predictability. And now we are in a position where we have clocks in all of our computers and a lot of our electronic devices which are preprogrammed to spring forward on a particular day. Congress has changed that. But the manufacturers, of course are now either going to have to send us all software or are going to have to just try to sell us new computers.
CAFFERTY: Well maybe that is part of the rationale for doing this. Maybe the old guys at Dell and stuff have been lobbying Congress for this bill based exactly on that.
SERWER: Yeah. It could be. I mean, synchronicity and predictability, it is all about that.
Hey, let me ask you Michael, you are saying that politicians are misguided here and that we are not really going to save any money on energy. So why are they doing this? Are they just misguided or do they have another nefarious motive?
DOWNING: Well, you know, it is a good question. Since they know it's not going to save us energy, it seems clear one of the reasons to try to sell us this policy is because it doesn't bear any direct cost to their constituencies. That's why Congress loves this as a conservation policy. Nobody has to make a sacrifice. And since they also get at the same time to please the retail lobbies, it looks like a pretty sweet deal from the point of view of a lawmaker.
LISCOVICZ: Yeah. But I mean, I think that lots of school moms would say that there is a sacrifice because when you take your kids to school in the darkness, that's problematic.
You already mentioned about transportation, that there may be more accidents in the morning. But in terms of conservation, because obviously, this is one of the reasons why this was enacted theoretically, doesn't it conserve some energy because it cuts down on those peak periods in the evening when the demand is so high?
DOWNING: Well, listen. This was the theory from the very beginning -- that we were sleeping through sunrise, wasting the natural resource and if we shifted our clocks, instead of sleeping through that hour in the morning, if they gave us that hour in the afternoon, we would turn on our lights later. This has been so persistent that Richard Nixon famously tried it during the OPEC oil embargo in 1974. He put us on year-round daylight living. And just as you say, school children were out on dark trafficy streets. The country went wild, the plan had to be scaled back.
The Department of Transportation did a really thorough study of that attempt by Nixon to save daylight during the wintertime months, which is what we're doing now in March and November. And here's the deal. They said, really specifically -- and I might say optimistically -- that we might be able to save as much as 100,000 barrels a day of oil.
Now, Congress tells us we're saving 100,000 barrels of oil a day. But the truth is we don't use oil to produce electricity. We use nuclear and we use coal. And so, the fact is, there's no saving to pick up.
One more -- go ahead.
CAFFERTY: No. That's all right. I was going to ask you. You want to save 100,000 barrels a day. How much oil would we save if they had included something like fuel efficiency standards in the energy bill for the cars and truck that is we all drive?
Forty percent of the oil in this country goes into people's gas tanks. There is virtually nothing in this energy bill that addresses the use of gasoline or the mileage that our cars get and in fact a recent report indicated that the fuel efficiency of automobiles in the United States was better in the 1980s than it is now. So I mean, who are these guys trying to play games with besides us poor taxpayers?
DOWNING: Well, here's what is in the energy bill about gasoline -- Daylight Savings. What Congress is not saying is that the one thing that petroleum industry has known since 1920 is that Daylight Savings actually increases gasoline consumption.
CAFFERTY: Thank you.
DOWNING: Here's the deal. People go out in the evening. And when Americans go out in the evenings, they get into the cars. Daylight Savings increases driving, it will increase fuel consumption.
LISCOVICZ: It's so depressing. Michael Downing, author of "Spring Forward: The Annual Madness of Daylight Savings." The farmers, transportation workers, school children, all not looking forward to this in a few years. Thanks again for joining us.
DOWNING: My pleasure.
LISCOVICZ: Just ahead on IN THE MONEY, dressing up a sales pitch. Get a look at how one retailer did it when we hear from Allen Wastler of MONEY.com. And if you have a beef with ads that don't look like ads, or you just want to sound off, put in it an e-mail. The address INTHEMONEY@CNN.com.
(COMMERCIAL BREAK) CAFFERTY: High speed Internet access is getting cheaper all the time but then, hey, nothing beats the old five-finger discount, you know what I mean? Now while some people think hijacking Internet service is OK, our Web master Allen Wastler is not among them and that is the focus of this week's "Inside Out."
ALLEN WASTLER, MONEY.COM: Well Jack, let me explain this to you. Wi-Fi. All right Jack. That is where you take your computer, and it is not hooked up by a wire to the Internet. OK?
CAFFERTY: I know.
WASTLER: You are handling that. OK. If you set up your network in your home, so that your laptops can go wirelessly, it is kind of convenient. But what if your neighbor next door also has a Wi-Fi assisted laptop? They can tap in on yours.
LISCOVICZ: Piggy back.
WASTLER: Piggy back. Now Jupiter Research says about 14 percent of the Wi-Fi enabled computers out there are piggy backing, are doing this for free. And it's a growing phenomenon. Of course, I always discount the surveys as being low because, you know, the survey taker -- everybody who is breaking rules, raise your hands.
You know it is not going to work. But it is a growing thing. So the people are beginning to look at the legality of it. Is it all right illegal or not? There's a law on the federal books that says well you are not allowed to access somebody's network. But that is really aimed at hackers. It is a murky area for people who are just sliding through.
CAFFERTY: Not amounting to like theft of service?
WASTLER: Well a lot of people are arguing, hey, you left your access open. It is like leaving a $5 bill on the sidewalk.
SERWER: Like if someone's sprinkler from the neighbor's yard starts watering your grass. Well -- what's wrong with that?
WASTLER: It happens. So this is a growing controversy. Now I'm saying now in all this discussion nobody's remembering, wait a minute. What about the bandwidth provider, the one who is, OK, I'm charging you. Somebody else is freeloading on you, but it is still affecting the bandwidth. And you know, it is always the companies that get trampled in these things. And they are providing a service and, yeah --
LISCOVICZ: Are you being paid by the Wi-Fi industry?
WASTLER: No. I'm just under cost, money to provide the stuff. If you're using it, you should pay money. Now, of course --
LISCOVICZ: You what?
WASTLER: Internet freaks out there is like, no man. The waves are free. It's got to be free. It is not a utility. OK? You have to pay. You use it. You pay. Very simple.
CAFFERTY: Were you ever an Eagle Scout or anything like that?
What's the "Fun Site of the Week?"
WASTLER: OK. Speaking of big corporate things, corporations like to get attention on the Internet. And virtuals are the new way of doing it. You remember I showed you a Burger King serving chicken. Gap has a new one right now called WatchMeChange.com. You go into your virtual room and you can pick the body type you want to watch.
LISCOVICZ: Let's watch that one.
CAFFERTY: How about this one?
WASTLER: Skin tone, you can change body size. You can adjust things like hair and eyebrows. Some other various anatomical parts. And of course this is where Gap comes in to choose the clothes to wear.
LISCOVICZ: Jack doesn't like that part.
WASTLER: Then you get a little strip tease once you assemble the whole thing. That's the payoff. You get to watch in the marvelous Gap colors.
WASTLER: Folks this is, PG-13.
CAFFERTY: I'm not sure how to react to this.
SERWER: Jack this would be good for the situation --
WASTLER: You're not sure how to react to it.
CAFFERTY: We may have to get a copy of this show for Wolf Blitzer.
SERWER: I think Wolf would like this. I think he would.
WASTLER: There you go.
SERWER: That was cute.
WASTLER: Now it is not just women models on this. You can also get guys, too. It's --
CAFFERTY: Well, all right.
WASTLER: Equal opportunity.
CAFFERTY: Fine. Thank you, Allen.
LISCOVICZ: Good to know. CAFFERTY: Coming up next on IN THE MONEY. It is time to hear from you as we read some of your e-mails from the past week. You can send us an e-mail right now we are at INTHEMONEY@CNN.com.
CAFFERTY: It is time now to read your answers to our question of the week about whether you're addicted to foreign made goods.
Jay in Montana wrote this, "Yes, I am. The foreign made stuff I buy lasts longer than the American made items. This is especially true with cameras, TV's and cars. I think most foreign workers take more pride in their jobs."
Joe wrote, "It's not me who is addicted to foreign goods, it's the greedy American corporations who are addicted to cheap foreign labor and tax environmental laws. Then they try to brainwash us into thinking it's consumer greed that's to blame and that 'globalism' is a good thing."
Lynn wrote this, "I was buying cheaper goods at Wal-Mart for years, until I learned how this hurts our economy. Now I pay more at smaller local stores, but it is worth it. How I spend my money is just as important, if not more important, than how I vote."
Next week's e-mail question is as follows, boys and girls. Is expanding Daylight Savings Time a good idea or not? Here's a hint from Professor Jack. It sucks. Send your answers to INTHEMONEY@ CNN.com. And you should also visit the show page at MONEY.COM/INTHEMONEY, which is where you find the address of our "Fun Site of the Week."
We thank you for joining us for this edition of IN THE MONEY. My thanks to CNN correspondent Susan Lisovicz, "Fortune" magazine Editor- at-large Andy Serwer and MONEY.com Managing Editor Allen Wastler.
Join us next week Saturday at 1:00 and Sunday at 3:00. In the meantime enjoy the rest of your weekend.
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