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Rating the Economy Halfway Through the Year; Kirk Eichenwald Discusses New Book; David Neeleman Not a Typical CEO; Christopher Noxon Interview
Aired July 09, 2006 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDY SERWER, MANAGING EDITOR, "FORTUNE" MAGAZINE: Welcome to IN THE MONEY. I'm Andy Serwer, Jack Cafferty has the day off.
Coming up on today's program, boom, bust and all the stuff in between. Halfway into the year the economy is already giving us a hard time. Find out which issues count most for the second half.
Plus beyond the law. The buzz says Ken Lay's death will change the last chapter of the Enron case. We'll look at what's up.
And child's play for grown-ups. More and more adults are acting like kids and spending the money to make it happen. We'll speak with the author of "Rejuvenate."
Joining me today a couple on IN THE MONEY veterans, Jennifer Westhoven and Allen Wastler. Well guys as if we needed reminding more signs that war and terror are all around us. The anniversary of the bombing in London, the North Korean missile test and then on Friday a scare in New York City about plotting a bombing of the tunnels. How are the markets handling all this stuff?
ALLEN WASTLER, MANAGING EDITOR, CNNMONEY.COM: Well it seems to me that they've been fairly eh, so what, you know, sort of shrugging it off. I think the price of oil probably affected it more than did all these news events. It is sort of like geopolitical risk just seems to be priced in.
JENNIFER WESTHOVEN, "HEADLINE NEWS" CORRESPONDENT: It's a reminder that we haven't seen anything here. This plot we're that we hearing about, the Holland Tunnel. They also thought it was going to flood lower Manhattan. These are not the smartest guys that we are talking about here, so I think you can see why the stock market is more concerned about things like interest rates. Yes, North Korea for sure, but some of these home things not rattling the market. North Korea makes you worry about oil.
SERWER: That is right and the tunnel guys not exactly industrial engineers as you're suggesting. I think it is interesting to the Asian markets close to the North Korean situation, obviously not so rattled. In 1998 the North Korean's also set off missiles. The Japanese market went down more than it did now, suggesting that as you say, Allan, getting used to it factoring it in. WASTLER: Also the missiles didn't work. Hey, we fired it. And it didn't work. So the markets are like come back when you got something that works a little bit.
SERWER: Then we'll work.
Well let's hope we don't get too much more in even event.
Financial markets, took investors for a wild ride in the first half of 2006. The Federal Reserve continued to raise interest rates. The once hot housing market has shown signs of cooling off a bit and oil prices have reached record highs. Here to review the first six months of the year and take a look at what's in store for the rest of the 2006 is Diane Swonk, chief economist at Mesirow Financial. Diane welcome back to the program.
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: My pleasure.
SERWER: So where are we? You seem to suggest the economy is an in a state of transition. From what to what?
SWONK: We tend to see turbulence when we hit a turning point, and the turning we are hitting is we are hitting an economic slowdown, a sort of mid cycle economic slowdown, not just a mid year economic slowdown, the good news is that that slow down should eventually put the Fed on the side lines, give them a bit of a summer brick, alleviate concerns of inflation and set the stage for a stronger second half of the expansion.
That's the good news; the bad news is that we have to go through the slowdown at all.
WESTHOVEN: Diane can we take a little bit about that slowdown? How low do you expect GDP to get in terms of growth? Are the markets going to feel fairly comfortable even if it stays in the growth zone but it gets quiet for a while?
SWONK: I think what we're going see is the U.S. economy slip certainly below potential growth in the second quarter as a payback to the first quarter, we already have much of that data in. But as we get to the rest of the year, we are talking about slightly below trend growth, what that means in a non-economic since is that we should see the unemployment rate creep up a bit. That's bad news for consumers. Although consumers have been playing atlas out there, it is time for businesses to pick up the slack on this expansion.
We're talking about an expansion that is falling into the hands of businesses at a time when they have record cash on their balance sheets and exports are picking up. Our foreign trading partners are finally starting to help us out a bit. So it should be good news for financial markets even though we could see some belt tightening in consumer wallets.
WASTLER: Diane, everybody expects the Fed to hike at that their meeting. Is that going to be to far? Is the Fed going too far? SWONK: You know, I just got back from a trip across the ocean to Milan where 25 economists from almost as many countries and the greatest concern is that this Fed is now more bent on overshooting and then giving back if necessary than undershooting. They're more likely to slow the economy unnecessarily. I don't think they need to tighten one more time. I think they could take a pause and take a break this summer.
You know, one more quarter point is going to make or break this expansion. The good news is that we've got Don Cohen as vice chairman and we could see a very Greenspan-esque reversal of the Fed if they do go to far. That is our sort safety hatch. Is that this Fed is more than willing to reverse course and ease again because frankly inflation isn't enough of a threat to risk a recession.
SERWER: Twenty five economists in Milan, Diane, I hope you didn't tear up the town too much over there.
SWONK: It's a great way to meet, let me tell you.
SERWER: Nice work if you can get it. Let me ask you about inflation. How concerned are you at this point? You see obviously an energy crises, health care is always there. Is this a real problem spot for you?
SWONK: Well, certainly today's employment data that we saw this weeks was a little bit disturbing in the run-up in wages. I actually welcome the increase in wages for two reasons, one is workers have been extremely productive and not been paid for that productivity. So I don't see that as overly inflationary. So any inflation we do see I actually see as transitory. The Fed actually sees it that way as well.
Is that we're working through earlier oil price increases. They are coming through any one who has traveled or tried to fly knows the headaches of that, but has also paid higher airfares. But at the end of the day, I think we're going to make it through this inflation squeeze. The key issue is oil prices but we are getting to that tipping point where of course oil price are becoming self-correcting and that they are dampening demand.
When you start to get above $3 a gallon nationally, which is what we are looking towards the summer now on gasoline, that just not good news for demand but it does mean that consumers pulling back will also dampen inflationary pressures elsewhere in the economy.
WESTHOVEN: When you look at those gas prices and inflationary pressures that is something that Ben Bernanke has been looking at closely, talking about it. How much do you think, you just said you were worried that the Fed might pull the trigger too much, might go a little bit to far? How much of that do you think is part of Ben Bernanke needing to establish some credibility with the market, needing to get some consistency out there and trying to set up the notion that he's going to be tough on inflation.
SWONK: Well you hit the nail on the head, Jennifer. I think if we had not seen the challenge to Bernanke. He sailed into office with no turmoil what so ever; it was almost the smoothest Fed transition in Fed chairman we'd ever seen. Now he has been challenged. The sense is that he's guilty until proven innocent.
And in that vein, he is more likely to overshoot and among Fed governors and central bankers the world over, the sense is you would rather overshoot and not get behind the curve on inflation because the lags in easing are much shorter and you can always give back what you took away.
With that said, I think we have to keep in mind inflation is not high enough that this Fed wants to risk a recession. So they would be very quickly taking back some of that tightening if the economy looked like it was weakening too much over the summer.
WASTLER: Diane one of the other big economic drivers over the past years is the housing market. Now it's showing signs of cooling down. Do we need to worry about that in the big picture?
SWONK: Well certainly if you live in some of the hottest and overpriced markets, the markets that had the most speculative investment you might worry a bit but only if you're the last one in to buy. Markets like San Diego, Las Vegas, parts of Florida, certainly saw some major overheating in recent years, but again, remember, 35 percent of all homeowners actually own their homes outright.
And even with all the equity extraction we saw from homes in recent years, we still outpaced that extraction with increased equity value so we have a little cushion where we could even suffer. I'm not predicting this but we could even suffer a national decline in housing prices without fundamentally derailing the U.S. consumer across the board.
With that said, clearly equity extraction the restructuring of mortgages, what we saw in recent years it was supporting spending is not there. Jobs growth has to be there and those wage gains have to keep coming for the consumer to feel comfort in the face of these higher energy prices.
WESTHOVEN: Well Diane thank you very much and certainly if we do see some kind of decline in housing prices, I'm sure we'll have you back on to help us look at that when it happens. Thanks.
SWONK: Let's hope it doesn't.
WESTHOVEN: When we come back, that's E as in extraordinary. The death of Enron founder Ken Lay put a twist in the case this week. Find out what that could mean for the way it plays out.
Plus, staying aloft Jet Blue took off strong but it has been having a rougher ride lately. We'll hear from the CEO.
And two pieces are better than one; the bikini turns a big 6-0 this week. Find out how the little suit changed the fashion business forever.
WESTHOVEN: The only thing weirder than the timing of Ken Lay's death this week was the speculation it touched off. The former Enron CEO died of heart disease soon after his fraud conviction and before he was sentenced. And that triggered a flood of conspiracy theories including some about the CIA.
But forgetting the way out stuff for a minute, there's also some on the level debate about what Lay's death means to the Enron case. So for more about that let's talk to Kirk Eichenwald, he is a "New York Times" investigative reporter and an author of a book about Enron called "Conspiracy of Fools." A true story. Welcome to the program Kirk .
KIRK EICHENWALD, AUTHOR, "CONSPIRACY OF FOOLS": Thanks for having me.
WESTHOVEN: First I wanted to say we were looking at some clips this week where Ken Lay was talking on Larry King a few years ago and he was saying something he wanted to do was to take the time to bring back his good name. What happens now legally to first to his good name or to his name at all and also to his family?
EICHENWALD: Well, legally, his name is reputation. I think his reputation is set by things other than the law. Legally though, it's as if this case never happened. His conviction is not going to be a matter of record. It in fact it's as if he was never indicted.
There cannot be any forfeiture pursuit by the Federal government because there is no conviction. Then when you proceed down to the civil litigation against him, there's been all sorts of debate about whether that can continue against the estate.
It's an irrelevant point because Lay's estate has secured creditors. Now the government could get ahead of the line but people suing in civil court can't. He has about -- his estate had about $9.5 million of assets, about $9.5 million of liabilities. It's gone.
Nobody is going to get a dime out of the estate. All that's left then are the life insurance proceeds, which go to the family. I believe about $10 million. Which goes to the family. Doesn't pass threw the estate. So nobody can attach it. So the end of the day is it's as if the Enron scandal didn't happen.
WASTLER: Kurt, let's talk a little bit about, Ken Lay's death all of a sudden, all these conspiracy theories, just I've heard the CIA did it because he had something on President Bush. Or he did it so his family could get the insurance. And in no small part probably like headlines like this from the "New York Post."
SERWER: That was an outrageous of rages situation.
EICHENWALD: What did the "New York Post" say, I never saw it?
WASTLER: They said before they put Cheeto Lay (ph) in the coffin; make sure he's in it. What about these parting with Elvis theories?
EICHENWALD: We have had what I think is a shameful national exercise where people have grafted truthfully a lot of political issues onto a criminal case. I've been writing about corporate fraud for 20 years, I am a very strong advocate of punishing people who engage in white-collar crime. White-collar crime is significant.
This case didn't have anything to do with President Bush. This case didn't have anything to do with Washington. This was a case about a company that was mismanaged horribly in ways that are almost beyond belief that went out of control and that ultimately had a number of executives who committed crimes.
Whether or not Ken Lay committed crimes was truthfully almost irrelevant to the story. I mean people who the most intense about Ken Lay going to jail, there has not been a single time where I've asked one of those people what was he charged with, that they've answered it correctly.
So they care so much about it but not enough to learn what's going on in the case. So in the end, whether or not Lay lied in the final 12 weeks of Enron's existence, which is what he was charged with, there was no denying, there was no argument about what he said. It was a question of did he know it was untrue. Whether he knew those statements were untrue or not is irrelevant going forward. If he did, lock him up, if he didn't don't lock him up, he's dead. OK, fine.
What did we learn here? What is Ken Lay's legacy? He and Jeff Skilling wanted to change Corporate America, they have. Not in ways they hoped to do. They have because their mismanagement and their incompetence at running this company demonstrated some horrific problems in corporate governance, problems that we have been addressing for five years.
SERWER: Well Kurt, then how should we remember Ken Lay? How will you remember him? I mean what can we draw from his life and his business career?
EICHENWALD: He's -- that is very, very easy for people to miss the forest. That corporate executives need to be very, very careful. From his life and career, he is somebody who had a history; he's a philanthropic guy. He did a lot of good for Houston. He did enjoy the trappings of success, he did enjoy walking around as the big man the politicians wanted to speak with and in the end, he wasn't paying enough attention to the events going on within he is own company.
More important, when presented with ideas that were simply ludicrous on their face such as allowing the chief financial officer to set up a fund that would do business with Enron and waiving the conflict of interest rules to allow for that to happen, a decision that actually destroyed the company, when faced with those kinds of decisions, Lay and company looked at it and said aren't we bright, aren't we creative, when in fact they were simply putting a gun to their head and pulling the trigger?
So in the end, there's a very, very thin line in Corporate America between creative and ridiculous. And businessmen have to be aware that they can make decisions that are horrific by being overconfident.
WASTLER: Well, Kurt let's hope that Corporate America now recognizes that line a little bit better.
EICHENWALD: Maybe not.
WASTLER: Many thanks in an inverse way to Ken Lay. Thanks for joining us Kurt.
EICHENWALD: Thanks for having me.
WASTLER: Kurt Eichenwald of the "New York Times."
Now it time for this weeks look ahead. We have a couple economic reports of interest coming out next week. Consumer credit for the month of May will be released on Monday. It's a measure of monthly consumer debt. On Friday, the Department of Labor will report U.S. import and export price indexes. These track trade trends.
Also on Friday, retail sales numbers for the month of June and Wall Street watches those pretty closely. You can of course get more information on all these reports as they come out on CNNMONEY.com.
Now coming up after the break, betting the house, New Jersey's budget fight shut down Atlantic City's casinos this week. Find out how that played out for gaming company stocks.
And also ahead, old enough to know better. We'll look at why so many of today's adults want to spend big on kid's stuff.
And sweet revenge. We'll tell you how two soft drink rivals teamed up to stop an alleged theft of company secrets.
SERWER: Talk about a standoff, you know something is wrong when politicians can't even agree enough to keep the state's casinos open, but that's what happened in New Jersey for a couple of days this week when a budget standoff forced state parks, beaches and even the revenue generating Atlantic City casinos to shut down. A budget deal was reached on Thursday, but not before investors sold off some publicly traded casino companies, which makes them the focus of this weeks "Street Talk."
I guess it is -- those are the three that had the most exposure in A.C., they took a hit but there's a whole bunch of other casino companies and generally, they've done pretty well. It's not an area that investors generally consider, but hey. It works, it work, right?
WASTLER: They've been kind of snake bait lately. Besides this New Jersey situation, also the hurricanes in the Gulf Coast area were also a lot of casino operations that sort of took out a little bite out of their revenues. And now they are looking at a slowing down economy, if the economy is going to slow down, are you going to play the slot machine that often?
WESTHOVEN: Taking a look at the economy overall, Atlantic City has been coming up, it's doing better. It used to be really compared to Las Vegas nothing. But they're doing a better job, they are building this, luxury trains so more people can get down there. They're trying to get some lux and some bling back. So I think it's kind of interesting to see Atlantic City come back. It seems like a temporary situation.
SERWER: It's interesting. And you got these companies like Harrah's, which is the blue chip one, Las Vegas Sands which is the big one. You have also got MGM and Trump. I looked at them over the past five years versus the overall stock market. They kicked the heck out of the stock market did much better than the average stock in the S&P 500, but you have to wonder, speaking of (INAUDIBLE) a little bit. Is the consumer tapped out plus you've got so much more competition with Indian gaming in almost every single state.
SERWER: So the environment for the leisure dollar has never been stiffer, but you know, people have been saying that about these companies year after year and they continue to outperform. Everyone always says oh Las Vegas is tapped out and continues to grow. So hard to know whether this is the end of the road here for these guys.
WESTHOVEN: Rooms are so expensive in Atlantic City. Way more than Vegas. It drives me crazy. It's the only reason I don't go.
SERWER: What's a gal to do, go to Atlantic City and see if you can get some rooms there or go to Vegas. I think she's looking for a ride to Vegas.
WESTHOVEN: I just want those prices down. What there's not enough competition there if the room price is that high?
SERWER: There is some competition with casinos up in Connecticut that's for sure with the new Indian casinos up there.
Coming up on IN THE MONEY, the captain has turned on seat belt sign. Jet Blue had a spectacular takeoff but the ride has been bumpy lately. Find out if the CEO thinks his company can rise above the turbulence.
Also ahead, the plays are the thing. So much for the days when toys for grown ups meant sports cars and powerboats. We'll find out about trend towards playtime for adults.
And hardball in the soft drink business. See how two competitors put their differences aside to protect one company's secrets.
SERWER: Launching the airline may be one of the most daunting moves in the business world. Remember People's Express? Independence Air or even the Donald's own Trump Airlines? David Neeleman almost made it seem easy with JetBlue booking passengers and profits with a mix of low fares and live TV.
But it has been a rough ride the last two quarters, JetBlue lost money for the very first time. This has Neeleman taking a more hands- on approach in his return to profitability campaign.
SERWER (voice-over): David Neeleman looks like a CEO. David Neeleman talks like a CEO.
DAVID NEELEMAN, CEO, JETBLUE AIRWAYS: Ladies and gentlemen, I just wanted to introduce myself. I'm David Neeleman.
SERWER: Yet the founder and CEO of JetBlue Airlines doesn't quite act like a typical CEO he helps clean his airplanes, he hands out snacks, he carries luggage, a very literal version of the hands-on manager all in the quest to get his airline back in the black.
Neeleman has worked in the airline business for over 22 years, including launching a regional airline that was purchased by Southwest, yet the entrepreneur didn't last long there he was fired after only five months because he didn't fit into the corporate culture.
Neeleman says he thanks his lucky stars that Southwest didn't see a need for him. Because out of that setback came JetBlue. Borrowing a page from the Southwest playbook, JetBlue began with only one type of plane to keep costs down and offered low fares on once expensive routes. But it differed from Southwest with things like assigned seats. And one big thing really made JetBlue stand out from its competition, live TV.
NEELEMAN: I wanted something in the seat back pocket but I wanted something where people could get off and say wow, I was entertained the whole time. One of our vice-presidents came to me said hey there's a new company that will have live TV on airplanes. And the minute I heard that, I said that's it, that's what we want to do. The TVs were a differentiator. They were. It was something no other airline had.
SERWER: JetBlue has grown to serve 39 cities and posted profits quarter after quarter for the first time years but recently has run into some turbulence like others in the industry.
NEELEMAN: As we got to the and of last year we had these big spikes in oil prices. We didn't adjust well to the higher oil price. We were kind of running our business as if oil prices were still low, we were still charging the same low fares so we lost money in the fourth quarter, we lost money in this first quarter, we said that's it. We have to make some radical changes.
SERWER: So JetBlue cut back on some routes, raised prices on others and started selling some of its older planes. Neeleman expects these changes should have them turning a profit going forward. Despite the cutbacks, JetBlue continues to expand into new markets, like Portland, Maine where Neeleman recently traveled to promote JetBlue to local business leaders.
NEELEMAN: We're committed to making sure that the journey is as good as the destination.
SERWER: What Neeleman is promoting is his idea of JetBlue not as an airline but as a customer service company.
NEELEMAN: What I try to teach here is let's just be the best. If we can just continue to dazzle our customers everyday that makes up for a lot of mistakes and it makes up for a lot high fuel prices.
SERWER: Well despite some of the company's recent troubles, Neeleman seems to have the whole dazzling the consumer thing down pat. In a study released by JD Power and Associates last week, U.S. travelers ranked JetBlue as their favorite low-cost airline.
There's lots more to come here on IN THE MONEY. Up next, back off junior, adults are doing more stuff once reserved for kids like playing video games. We'll look at why so many grown-ups want to turn back that clock.
And the teensy-weensy article of clothing that covered the world. The bikini is celebrating a birthday. We'll look at this bold innovation.
WASTLER: Have improving technology, rising student debt and difficulty finding a first job conspired to create a culture of modern day Peter Pans in America? Our next guest thinks so. He's a self confessed man-child himself. Christopher Noxon author of "Rejuvenile" kickball, cartoons, cupcakes and the reinvention of the American grown-up joins us now. Chris welcome.
CHRISTOPHER NOXON, AUTHOR, "REJUVENILE": Glad to be here.
WASTLER: So explain it, what's this whole rejuvenile thing.
NOXON: Well a rejuvenile, the working definition is anyone who has tastes or mindsets that are traditionally associated with people younger than themselves. I am talking about CEOs who champion the value of play in the workplace and dads who dress like skate rats and people who buy cars and consumer electronics that are marketed to people half their age. It's anyone who basically cultivates some child-like or childish part of themselves and wants to hang on to that into adulthood.
WESTHOVEN: What is wrong with being an adult or maturity or responsibility?
NOXON: Nothing is wrong with being an adult. But the question is whether or not you can still hang on to some part of yourself that isn't. You know, there's a lot about traditional adulthood that I think doesn't do people many favors. It can be very constricting and over serious and sort of habitual. And a lot of people that I talk in the book say that they kind of hang on to this stuff as a way to keep themselves open and free and flexible.
SERWER: Chris, you get into this yourself? I mean you eat cupcakes, play dodge ball, and go skateboarding. You do some of that stuff? I mean can you take this too far?
NOXON: Oh absolutely. I'm not a big dodge ball guy. That's a pretty scary game actually. I like kickball myself. I meet my wife playing kickball. But you can absolutely go too far. There's a broad range of people that I'm describing in this book and I make a very strong distinction between sort of childish and child-like.
Like the Michael Jackson flameout is on one side and then you have your Albert Einstein kind of innovator on the other. We're living in an age now when those sort of age norms that have persisted for so long have broken down and I think people are finding that there's sorts of reservoirs of creativity that can be had by going back.
WASTLER: OK Chris. This is IN THE MONEY. So tell us who is making the money off this new segment of the population?
NOXON: A lot of companies have been slow to kind of recognize and capture this market. Some of the ones that are doing it the best are Apple, you know their product design and their marketing has been really smartly sort of geared towards what I call toyification. You know, creating consumer electronics and technology that's much more toy-like than it is sort of tool-like.
You think about cell phones which were originally marketed as these kind of essential tools of responsibility and safety and you know, now of course they come with pop song ring tones and games and gadgets and all around us, automotive design, WV has been fantastic at sort of making their cars much more sort of polka dot like and playful. That kind of understanding of the psycho graphic of the market really can benefit companies.
WESTHOVEN: I understand all the good things that can come out of this but I just can't help but wonder what is the fallout when have you a whole generation of people who are embracing being children in some ways. There was just a study that says there are a lot more Americans now who don't have any friends than a few years ago, than 20 or 30 years ago. Is this something that happens when you stay in the basement watching video games?
NOXON: Well it's really important to point out here that's the common sort of stereotype of the rejuvenile, which is this guy, you know the 40-year-old virgin who is too busy playing with action figures to get his life together. But you go out and talk to these people, most of them, myself included have high stress jobs, strong family relationships, mortgages, minivans, the whole adult deal and yet we're still not willing to give up things that we love. I mean you know cupcakes or kickball or cartoons or whatever it is. You can have both is I guess the essential message here.
SERWER: What about kids? What do kids think of people running around, grown ups, dads, moms, running around in short pants kicking balls around growing weird hair-dos, don't they miss something here?
NOXON: I mean I have three kids myself. And part of the reason that I wrote this book was I found myself sort of spending time with them in ways that my own father found pretty ridiculous. I like to stack Lego's and hang out and do princess tea parties with my daughter. I'm probably revealing too much.
SERWER: That's all right, keep going.
NOXON: But I do think that and you know I think it's natural for parents to really worry and you know quite legitimately about being too much of a friend and not enough of a parent. But I do think also that you know if you have a kind of foundation of fun with a kid, if you sort of have that mutual relationship with your child, when it does come time to lay down the law and kind of impart a lesson, you get a lot more respect. I find that with my kids and I find that with a lot of the play along parents in the book.
Is that they have this foundation of trust and respect and mutual enjoyment and when it comes time to be the parent, they're better at it.
WASTLER: Well, Chris, it's an interesting concept. I'm glad you came on the show to share it with us.
NOXON: Thanks so much for having me.
WASTLER: Take care. Chris Noxon he is the author of "Rejuvenile," kickball, cartoons, cupcakes and the reinvention of the American grown-up.
Now President Bush wasn't the only one celebrating a 60th birthday this week. Arguably one of the most important business innovations of our time turned the big 60 this week as well. The bikini.
Senior correspondent Jim Bittermann reports in this week's "Brainstorm."
UNIDENTIFIED MALE: Three, two, one.
JIM BITTERMANN, CNN CORRESPONDENT (voice over): They named if for an A-bomb site because it was the bikini was meant to be explosive and it was. So explosive no model was daring enough to wear the first one. Designers had to turn to a nude dancer. The author of the bikini's definitive history says, when it comes to bathing suits, southern exposure makes all the difference.
KELLY KILLOREN BENSIMON, AUTHOR, "THE BIKINI": The difference between the two-piece and the bikinis is that the bikini exposes the naval, which is the zone of contention. When you start exposing skin in 1946, that's scandalous.
BITTERMANN: Not everyone would agree. Miami's Bunny Yeager saw a bikini and thought it was just right for her and became one of the first women in America to wear one.
BUNNY YEAGER: I was so proud of being on the front page of the newspaper. I showed it to my mother, she said how could you do that! You're nude!
BITTERMANN: But Yeager later became a bikini designer and her photographer says she was just keeping with the times.
YEAGER: It was because at the end of World War II, everybody was changing their lives, everybody was so happy to be through with the fighting and the war and they were starting over.
BITTERMANN: And suddenly navels were out in force, and there were great bikini moments in films. Brigitte Bardot demonstrating the bikini really refers to the bottom, not the top. Bond girl Ursula Andress displaying her right to be bare and armed. Former Mouseketeer Annette Funicello, forbidden for years by Walt Disney to be seen in a bikini, finally got the chance to wear a one in that cinema classic, "How to Stuff a Wild Bikini."
Of course these days, along the string thong beaches of the French Riviera, those traditional bikinis look a bit passe. Still, bikini designers who have found ways to stretch 35 square inches or less of cloth into an entire industry, also have discovered that less is not always more.
MAIRIE HELENE VIDRON, DIRECTOR, MANUEL CANOVAS: What makes it sexy is that probably you would like to know a bit more on what isn't shown.
BITTERMANN: The swimming pool, where the bikini and its daring model were first exposed 60 years ago, has now fallen on hard times, but the world's smallest bathing suit, as it was believed to be back then, lives on, thanks in part to those who wear it and those who appreciate it being worn.
Jim Bittermann, CNN, Paris.
WASTLER: Coming up next on IN THE MONEY, mixed drinks. Stick around and we will tell you about two soft drinks rivals who got together to put some alleged thieves on ice.
It's time to hear from you as we read some of your e-mails from the past week. Send us an e-mail right now. We are at INTHEMONEY@CNN.com.
SERWER: If someone offered you a secret that could help bring down your most bitter rival, would you take it? Don't answer that question. Some Pepsi executives recently faced a similar scenario. Alan has the details and the super "Fun Site of the Week." What up with that Allan?
WASTLER: Well PepsiCo gets the corporate good sport award of the week. We salute you, Pepsi. Because what happened was Pepsi gets a phone call or a message saying this is Dirk.
WESTHOVEN: They must get these crazy calls.
WASTLER: I got secrets from the Coca-Cola Company. You want the secrets, right? So Pepsi went to Coke and said you got this guy saying he's going to sell your secrets. So Coke called the FBI and the FBI set up a whole sting operation. Paid him $10,000 secret upped it a little bit more. Just when they were going to for the big kahuna where Dirk and company would give the secret formula to a new drink that was coming along, bang, they bust them. They wanted $1.5 million.
Turns out it was the administrative assistant to one of their top executives, they got video of her rifling through the files and taking a sample of the drink and then giving it two cohorts to sort of try work the whole scheme.
WESTHOVEN: Did you see at one point in the sting, they had a Girl Scout cookie box stuffed with $30,000 worth of cash.
SERWER: I mean there are cameras everywhere. I mean there are cameras here.
WASTLER: It's silly and a lame attempt. But what was comforting about it, was because Coke and Pepsi, you put those two guys into a room, they'll just go at each other.
WESTHOVEN: That's famous.
WASTLER: But in this case, Pepsi said you do what's fair and right, Coke, you got a problem, you might want to fix it.
SERWER: That is it. What about the "Fun Site?"
SERWER: You're going to love this. If you want to check it out, go to the show page on INTHEMONEY@CNN.com because you might want to do this. What superhero are you?
WESTHOVEN: It's a fun quiz.
WASTLER: I, to quote Black Sabbath, I am Ironman. That is me all over.
SERWER: Don't mess with the Wastler. WASTLER: Jen, what were you?
WESTHOVEN: I was almost Spiderman. But Supergirl.
WASTLER: Of course. Naturally.
WESTHOVEN: Where is the picture of Supergirl? She was so hot on that Web site.
WASTLER: She was hot.
WESTHOVEN: That was a smoke picture.
WASTLER: And Andy?
SERWER: I think I was some sort of speedy guy, right? Flash.
WASTLER: You were the Flash.
SERWER: Don't even try to keep up. What was that? Flirtatious?
WASTLER: You are definitely flirtatious.
WESTHOVEN: Athletic and flirtatious.
SERWER: I'll take that.
WESTHOVEN: All right. Baby boomer Jerry Thompson worked in heavy construction for 30 years when he sold his business and retired, he had the chance to go after something he was really passionate about, working with wild horses. He doesn't make a lot of money doing it, but he thinks he's helping a rare breed of horse get some respect. Valerie Morris has that story.
VALERIE MORRIS, CNN CORRESPONDENT (voice over): Retirement has been quite a change for 58-year-old Jerry Thompson. After selling his 16 employee construction company, he now breeds and trains rare Kiger Mustangs in Oregon.
JERRY THOMPSON, HORSE TRAINER & BREEDER: I got interested in horses when is my father retired, he bought some thoroughbred racehorses and so they kind of got seeded in the inside of my soul. I could never let go of it.
MORRIS: Thompson readies Kiger Mustangs for races and shows. He bought his first one in 1998 and now owns about 30. The allure, he says, is their rich ancestry.
THOMPSON: It's an unbelievable romance story. At one time the genes of these horses in Spain were considered more valuable than gold. They're just a rare horse that managed to somehow survive 400 years in the wilderness. It's a privilege to me and other people to be able to help this horse re-establish itself as an outstanding breed that can compete in a number of venues. When I first retired, I didn't anticipate that I would have such a passion for life like I have now.
MORRIS: Valerie Morris, CNN, New York.
WESTHOVEN: Next week on our "Life after Work," a retired undercover investigator for the New York State Liquor authority has turned his hobby shooting pool into a full-time job. We'll tell you how next week.
There's more IN THE MONEY coming up. Stick around.
SERWER: Now it's time to read your answers to our question about whether Warren Buffett's huge gift to charity is inspiring you to be more generous.
Dan in California wrote, "I'm an inspired that people like Buffett and Gates aren't only giving billions to charity, they're also speaking out against repealing the estate tax. They realize estate taxes help us avoid a permanent aristocracy that also creates a permanent underclass."
Tine in Georgia wrote, "Buffett's donation doesn't inspire me, but the sorry state of Social Services in my home state of Georgia does. If I don't give more, I will see more and more of my neighbors lives hurt."
Abbey in New York wrote, "If I had billions like Warren Buffett I'd be inspired. It seems to me that Buffett smartly realized that giving away your money is hard, so he's going to let Gates do the giving away for him."
Now for next weeks email question of the week, "Why do you think Americans are using more gas even though prices are so much higher than last year?" Send your answers to INTHEMONEY@CNN.com and you should also visit our show page at CNN.com/inthemoney that is where you will find the address for our "Fun Site of the Week."
Thanks for joining us for this edition of IN THE MONEY. Thanks to "Headline News" correspondent Jennifer Westhoven, and CNNMONEY.com managing editor Allen Wastler. We will see you back here next week Saturday at 1:00, Sunday at 3:00. See you then.
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