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Investors Look for Answers on Global Markets; Scramble for New Oil Clean-up Method; Wall Street Reform: The Small Print
Aired May 21, 2010 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: You want to wait until we get Ali?
ALI VELSHI, CNN ANCHOR: Don't go. I'm enjoying this conversation.
HARRIS: Are you, Ali?
VELSHI: I'm having a good time.
MYERS: Come on, Ali.
VELSHI: The only extra thing I could ask, is if you would stay a few more minutes, Chad. I'm going to Atlantic City this weekend. I didn't tell you, so I haven't got a weather report for Atlantic City yet.
You, sir, have a fantastic weekend.
HARRIS: You, as well.
VELSHI: Great to see you. Tony Harris, and starting his weekend up. Chad's going to mess up my weekend, I bet you.
All right. I'm Ali Velshi. I'm here with you for the next two hours, today and every weekday. I want to take every important topic that we cover a step further. I'm going to try and give you a level of detail that will help you put your world into context, and hopefully -- hopefully, you'll come away with something you didn't have before.
Let's get started. Here's what I've got on the rundown.
Stocks fluctuating as the markets try and find out what their direction is supposed to be. You may be trying to find one, too, at least some answers about your 401(k), your retirement. We've got them. We'll dispel some market myths, as well.
Plus, every day we are learning something new and more disturbing about the scope of the Gulf oil spill. We're going to take worst-case scenarios and best-case solutions, and I'm going to use this, a gallon milk jug, to put this disaster into perspective for you. Stay with me on that one.
Also, it's the first living things whose parents are a computer and some chemicals. I'm talking about a manmade cell. This is huge news. It's not Frankenstein, but it could change the way you get your medicine, your food, and your fuel.
Let's get to the big story, though, that we've been following all week, and that is the markets. Boy, we are really getting concern about what is going on in Europe. Another massive sell-off yesterday in the markets, in fact, yesterday's markets were worse than that day that we had that flash crash a couple of weeks ago.
I'm joined now by Christine Romans and by Richard Quest. They're both with me to talk about how serious this issue is. I've also invited those of you who are with me on Facebook to tell me what you want to know about what's going on in this -- this crash. We've gathered some questions, and we want to help you understand what's happening in this environment.
So, I want to take you to Christine Romans first. She's in New York. And she has been following this very closely.
Christine, last night, very rough markets. Asian markets overnight started off very badly. Looks a little bit better now.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: It does. And the market is holding its own here, although I will say there's an awful lot of volume, Ali, and it's a decisive bias toward buying. You have -- you have four stocks for every one stock that's down here. You have most of the Dow 30, the stocks that make up the Dow Jones Industrial Average, are higher, and the Dow is up 65 points or something here.
Why is that remarkable? Because yesterday the Dow was down 376 points and it was -- I'm sure you'll agree with me -- like one of those bad old days of February and March of 2009.
VELSHI: Sure.
ROMANS: I mean, all of those signals were coming together, and it felt as though -- it honestly, felt as though the world was coming unglued. You've got all these fears about Europe. You've got all these fears about will Europe's problems continue to hurt the euro and make the dollar very expensive and hurt U.S. manufacturers and U.S. exports to a very important part of the world, Europe, and how will that all feed into an economic recovery here? And over -- overseas, you know?
So, are we headed for the double dip? It's not an ice cream cone.
VELSHI: Yes.
ROMANS: It's not something nice and sweet.
VELSHI: Serious.
ROMANS: A double dip is not good. And so that's what folks are really worried about. VELSHI: All right.
ROMANS: We just talked to Nouriel Roubini --
VELSHI: Yes.
ROMANS: -- the famous Doctor -- Dr. Doom. And he says that this is not just a correction; this is the beginning. The correction is 10 percent. He thinks there's going to be more.
VELSHI: All right. Listen, before we go to Richard, take a look at what happened to European markets. It looked very dramatic overnight, but in fact, they came out with something of a recovery in London, just 0.2 of a percentage point lower.
Let's take a look at Frankfort -- at Paris, down half a percentage point. Frankfurt was 0.8 of a percentage point. Tokyo, which by the way, closes earlier, obviously, when things were looking a little rougher overnight, down 2.5 percent. Hong Kong was closed for a holiday.
Let's bring Richard Quest in. And Richard and Christine, I want to ask you. Christine, you introduced it. You asked, could this -- this European problem cause a double-dip recession?
I'm going to put that to you, Richard. What are you hearing? Could we -- could we be in for another leg of this recession after we thought we're coming up because of what's going on in Europe?
RICHARD QUEST, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Absolutely. There is -- I mean, whether or not it happens is another question, but is there the real risk of what's happening in Europe becoming a double dip recession? No question about it.
And one of the reasons is because European economic growth at the moment is anemic. There are very high structural budget deficits. There are going to be have to be budget cuts and higher taxes, all at a time when the European economic situation isn't perhaps strong enough to take it.
Now, whether or not it tips it actually back into technical recession is the big question. But, Ali, you know, the market is worried. The market is worried about sovereign risk, sovereign debt. And particularly, of course, what happens to growth as these taxes start to go up again.
VELSHI: And when you talk about sovereign, you're not talking about commercial; you're talking about countries.
Let me ask you this, Christine. This looks like a market that has been abandoned by long-term investors, by people who, you know, the people who invest in your mutual funds, who buy companies that they really like. This looks like a market dominated by traders.
ROMANS: Yes. VELSHI: So, take it back to our audience, the small investor, the one who's got a 401(k) or an IRA or a 403b. Should they be selling? Should they be sitting on their hands? What are people telling them?
ROMANS: You know, look, I mean, if you need the money in the next year or two, you're going to need that money, and it's in the stock market, are you nuts?
I mean, we've come off of this crazy, crazy 18 months. If you -- if you need the money right away, you shouldn't be gambling in the stock market. It's what we all talk about, risk capital. But what are you -- what do you have that you can invest for the future and what's your time horizon?
There are plenty of people who say that, if you are buying in the market consistently through your 401(k) or through your retirement plan that you're getting all kinds of different prices for things, and in the end it will average out.
But if you are -- if you are close to retirement and you're watching these markets, and you're saying, "I can't take this volatility," and I'm telling you, there are just as many people who say, "We need more to go. Stocks need to be cheaper" as those people who say, "Wow, this is a buying opportunity that I've been waiting for after a whole year going up." So...
VELSHI: What do you think, Richard?
QUEST: You know, the old buy on the dips. Buy on the dip. I mean, let's face it: this is a roller coaster. You need nerves of steel and other parts of steel, as well, if you're going to buy on these dips.
The truth -- yes, we've got competing ideas, Christine. You could say buy on the dips, but I'll counter you that one with "sell in May, go away."
We've got this -- we've got this economic scenario that is so uncertain. The patient is undergoing or is recovering from major cancer surgery, brain tumors, a leg amputated, and has got a nasty bout of pneumonia. Now, in that scenario, this patient is still just about on life support. You don't want to be tinkering around too much with the medication.
ROMANS: But, look, Ali, I wanted to say one thing.
VELSHI: Yes.
ROMANS: The most important thing for people right now is their house and their job, right?
VELSHI: Yes, right.
ROMANS: We've already had a big hit. We're still at, what, 25 percent you've lost in your 401(k) and most likely still, even with the last great year that we've had.
VELSHI: Well, just -- on that point, while you're saying that, I want to put up that chart that goes all the way back to 2007...
ROMANS: Yes.
VELSHI: ... to show what's happened to the Dow. Your 401(k) if it's balanced like that will look like that. Carry on your thought.
ROMANS: We've been talking all -- about Europe and Europe and Europe, but I mean, I want to talk about what's happening in this country. I mean, Europe really matters for us, but here's why. Because it's the backdrop of an American recovery that includes one in ten people with a mortgage can't pay their bills on time, and almost 10 percent of the labor market is out of work. And a record number of people have been out of work for six months or longer.
So, there's so many things to be concerned about still...
VELSHI: Yes.
ROMANS: ... and I think that's -- that's what's happening in this market. Anybody who -- people don't want to take risks, because they're just so worried about what could happen next.
VELSHI: Richard?
QUEST: Let's think of this as a woolly sweater. Right? Think of the global economy as a woolly sweater. Now, Christine is one arm in the United States. I'm the other one here in the United Kingdom. You've got Asia, which is the back. Now, any one of us can get snagged on a nail or a piece of wood and pull the thing apart.
And that's exactly what's happening at the moment. You're seeing Europe with these debt worries, which frankly, shouldn't necessarily create problems in the United States. But U.S. banks have bought this debt. They owe money.
And what we're in real danger of seeing -- and it is a real danger. Whether it happens or not, I'm not going to speculate. But we are in danger of seeing this lack of confidence that A can pay the bills to B to pay the bills to C, and then you end up with credit crunch two...
VELSHI: Yes.
QUEST: ... and credit crunch redux.
VELSHI: Well, you've outdone yourself, my friend: the economy, the global economy as a wooly sweater with Christine as a sleeve and you as a sleeve. I'm going to leave it at that for now. Great to see both of you.
Christine Romans is at the New York Stock Exchange with a handle on trading here in the United States. Richard is in London. And you can watch him on "Quest Means Business." Thanks to both of you. I suspect we'll be talking about this an awful lot.
Listen, there's that big story. There's another big story that we keep on following, and that is that oil spill in the Gulf of Mexico.
BP has already pumped 700,000 gallons of oil dispersant into the sea. Oil dispersant to disperse the oil. But now the EPA says that that's too toxic, and the solution could be sitting on a dock somewhere. We're going to find out what the holdup is when we come back.
(COMMERCIAL BREAK)
VELSHI: It's day 32 since the explosion on the Deepwater Horizon rig in the Gulf of Mexico. Take a look at these live shots that we're getting from under the sea.
This is the oil coming out. This is a live Web cam from BP. They were persuaded to -- to give access to everything that's coming out. BP says it is siphoning more than 200,000 gallons a day through a tube, but anybody can see from the company's live Web cam that that's just going into the ocean. That's not the part that's going into the tube.
Let me just give you a sense of it, 32 days in, what this looks like. I'm going to choose a -- Ally (ph), thank you. I'm going to use a gallon milk jug to give you a sense of it.
There's a worst-case scenario and a best-case scenario, because nobody can exactly tell us exactly how much oil is flowing out. Now, the worst-case scenario is that there are 130 million gallons of oil that have been spewed into the ocean. That would be enough gallons of milk, gallon jugs, to stretch from New York to Buenos Aires, Argentina, and all the way back. That's the worst-case scenario.
The best-case scenario, according to the government, is a different story altogether. And that is that there are 5.25 million gallons that would stretch from -- that would be about New York to Washington, D.C., and back if you laid these things next to each other.
The other thing is we've got oil washing up now. We've seen sort of evidence of animals being affected, but we actually have oil washing up onto shore. Grand Isle, Louisiana, there's oil there. There are other parts of Louisiana where we're actually seeing actual oil washing up onshore.
Now, one of the things that BP has been doing to mitigate this has been putting a dispersant into the ocean. It's called Corexit, and the Environmental Protection Agency, the EPA, has now said that that is not going to work. That is -- that it's too toxic. And the reason they say that is because there's been a whole lot of -- of sea life that they've found that has come up and been found dead. So, they have switched over. They've been told to use something called Sea Brat 4, and I've got the company -- the president of the company who makes that with me. John Sheffield is the president. He's joining me from Houston. He's the president of Alabaster Corporation.
John, thanks for being with us. This is dispersant. This is something that is meant to go in and break up crude oil, which is a heavy substance. It smells. It's a toxic substance itself. The stuff that you use to break it up, how is it different from the other stuff?
JOHN SHEFFIELD, PRESIDENT, ALABASTER CORPORATION: Well, our product was designed to be an environmentally-friendly alternative to the classic dispersants.
You know, dispersant is -- it's a description of actions performed by the chemicals. And the question is, what the ingredients are, the percentages of the ingredients.
Ours was designed to be a microbial product or used in conjunction with bioremediation as a technology, an alternative technology, so it's basically a more natural way of dealing with it.
VELSHI: Is it as effective? Does it do the same job?
SHEFFIELD: If it's done correctly. If you know how to make bioremediation work, it's accelerated bioremediation, then yes, it's very effective.
VELSHI: Give me the -- the simple terms of how you make bioremediation work.
SHEFFIELD: You have microbes -- four leading microbes that are basically made in a laboratory. They're grown in a laboratory. And these are microbes that have a preference for eating hydrocarbons. And you mix those with a special biodegradable soap, essentially.
VELSHI: Right.
SHEFFIELD: It's -- the formula's complicated to make it work, but that's pretty much how you do it.
VELSHI: And -- and what happens? Tell me a bit about the process here. Because they were using this other -- using this other dispersant.
SHEFFIELD: Correct.
VELSHI: And then they've been told to switch to yours. Have they started? Have they got it? Is it ready? Is in the ocean yet?
SHEFFIELD: We have an order but none of it has been used in the ocean yet. We had a purchase order. And there's been some kind of delay with shipping, essentially. But we're able to make the volumes required, I'm sure. VELSHI: And so it's -- you mean, you've delivered this?
SHEFFIELD: No, it hasn't been delivered. Two trucks with approximately 5,000 gallons each, my understanding is they're in Louisiana on hold. And we've got approximately 100,000 gallons ready to go right now as soon as it can be picked up.
VELSHI: And do you have any information as to why it hasn't been picked up?
SHEFFIELD: No accurate information.
VELSHI: Yes.
SHEFFIELD: And I really don't have an accurate answer on that. It's been frustrating. Apparently, just there's so many different committees and so many different companies involved with the command center, and it's just taking a while for them to sort it all out.
VELSHI: But have you been told that they're going to use your product, that you need to be producing this stuff and have it available?
SHEFFIELD: To an extent, it was my understanding. Otherwise we wouldn't have -- we wouldn't have purchased this volume of product so far. I mean, we had a purchase order, so that was my understanding, was that they had found it was less toxic, and we're ready to start using it.
VELSHI: All right. Good to talk to you, John. Thank you for letting us know what's going on. We'll keep up to speed. Let us know when it gets picked up or it starts getting used.
SHEFFIELD: Yes, certainly.
VELSHI: We'd like to be able to follow along and see how it goes.
John Sheffield is the president of Alabaster Corporation, joining me from Houston.
All right. Straight ahead, your own financial regulator. The Wall Street reform bill aims to give you one. I'm going to show you the fine print. I'm going to break down what this financial regulation means to you when we come back.
(COMMERCIAL BREAK)
VELSHI: The financial reform bill, the biggest reform to -- to the financial industry since the Great Depression.
Now, here's the thing. It passed the House of Representatives in December. It passed the Senate last night. The bills are a little bit different, so they have to be reconciled, and then the president will sign it. There are some differences in it. Listen, you're going to hear about this a lot. What you're going to hear from some people is that they agree that there should be financial reform, but they feel that some of the elements of this financial reform bill won't actually solve the problem that got us into this financial crisis that we were in. So, I want to just give you some graphic ideas of what the criticisms are.
So, let's say you've got a house here, OK? And you've got a leak. You've got a big leak there. So you call the plumber. Well, it turns out the plumber comes to your house and fixes all sorts of things. There he is. He's on the roof, fixing the antenna. He fixes all sorts of things that actually were broken and -- and needed to be fixed or were going to go wrong with you, but there's still some water leaking out there.
The bottom line is, the thing that caused the water to leak may not have been entirely fixed. We'll get to that in a minute.
Let me first tell you what is in this financial reform bill, what -- what it's going to look like.
First of all they're going to look at something called systemic risk, this "too big to fail" business, businesses whose failure could actually bring down the entire economy. There's going to be a council established -- that's those guys sitting around -- led by the treasury secretary, to be able to respond to and remedy emerging risks to the entire financial system, not just to one company or one bank.
Number 2, as it concerns markets, large hedge funds -- those are meant to be hedges -- they look a little more like trees than hedges. But large hedge funds are actually going to start to be regulated. Not a whole lot of regulation. They'll just have to sign up. But the SEC is going to be able to look into hedge funds that have either more than $100 million or $150 million in assets.
There are still going to be a lot of trading in derivatives, but companies that sell things like mortgage derivatives, if they resell mortgages, they're going to be cause -- they're going to be made to hang onto a piece of it. They're going to have to have some skin in the game. And guess what? If you're selling something you actually have to invest in, you may treat it differently.
Also, you've heard all about what Goldman Sachs is alleged to have done. Well, companies are going to have to be a little more transparent about the underlying quality of what it is they're selling.
When it comes to banks, banks that are over $50 billion in assets will have to have a bankruptcy plan, in essence, a liquidation plan of their own, and they're not going to be able to use as much of their own capital or their customers' deposits to make risky or speculative trades.
And, finally, the credit rating agencies -- and I'm not talking about the ones that give your credit score, but the big ones that rate these fancy financial instruments or big Wall Street firms, they're also going to have to show their rating methods to the SEC.
Again, I wouldn't call this major regulation of the rating industries, and that's what some of the criticism is, but it's a beginning.
Now, listen, the one thing that's going to concern many of you the most is how it affects the consumer. And there are sweeping, grand changes with respect to consumer protection.
I want to go back to New York. Christine Romans has been following that very closely. She joins me now with what this means to the consumer -- Christine.
ROMANS: Right, because so many things, like the Systemic Council of Regulators, like, how is that going to touch my money?
VELSHI: Right.
ROMANS: I mean, I can see in the big grand scheme of things how it would save my taxpayer money, but what are the things you're going to be able to touch and feel?
Well, Ali, this consumer watchdog, this regulator, you know, the mission and its goals have to be hammered out once the legislation is passed. It will be a year, maybe two years before you touch some of these changes. But here's what you're going to see.
You're going to see simpler paperwork. The mortgage that you sign may be 18 months from today. Could look vastly different than the mortgage you signed last year. It will be simpler. There will be no -- no hidden, you know, small print. There will be no hidden fees, and there will be a regulator or watchdog to make sure that you know what kinds of fees you're paying and they're not hidden.
Prepayment penalties. Some of the senators and in the House, too, they're really interested in this. They want to end those prepayment penalties. If you -- if you had a subprime mortgage and you paid off or you refinanced in three to five years or whatever, you could end up paying huge penalties for that. They're going to get rid of that.
There could be new regulations of debit cards.
VELSHI: Yes.
ROMANS: We've already seen the Fed moving in this way. We've already seen the banks, actually, starting to do this themselves. But how much you're charged to use your debit card, that could change, as well.
And you're going to be able to get a free credit score with your free credit report if you're denied credit, or if you get a lower interest rate because of your credit.
Right now at AnnualCreditReport.com, you can get your free credit history and your credit report, but it doesn't contain the score. Senators want you to be able to get the score, too, Ali.
VELSHI: I would love it if it just went further and you could just get your credit score, because it's yours and it's your information, not even if you -- in this case it's if you were denied something, right? Denied employment, denied credit on the basis of your credit score.
ROMANS: Right.
VELSHI: Then under this law, you'll be able to get it.
But you can't just get it. I kind of think it's -- that's information. And it would be cool to be able to have information on you, kind of like your medical records and your driving record.
ROMANS: But, you know, the other thing about the credit score is a lot of people obsess about this credit score. And they find it because maybe they've applied for a home equity line of credit...
VELSHI: Yes.
ROMANS: ... and then they find out what their credit score is, and they're all upset, because it's 755 and they wanted 760, because that's the best number. You know, what are you going to do with that information? What you're going to do with that information is you're going to pay your bills on time, right? And you're going to not run up your credit card every month past 30 percent of what your credit limit is.
VELSHI: Right. But a lot of people find errors. Right? The first time you find out there's an error or somebody has been using your credit is when you apply for something. That's why I like it, because people can sit there and say, "That's not me."
ROMANS: But -- but you get that already for free every year with your AnnualCreditReport.com.
VELSHI: That's a good point.
ROMANS: You know, cleaning that up is already on there.
Another thing a lot of people are saying: you need your credit score, because your perspective employer can see it. No, your perspective employer can see what you see, which is your credit history.
VELSHI: Right.
ROMANS: Which is years of how you've handled all your bills. They can't necessarily see your credit score either. So I think more information is great.
VELSHI: Yes.
ROMANS: I also think that people -- I think we kind of obsess about that credit score, Ali. VELSHI: All right. But more -- more information is great. We agree on that.
ROMANS: Yes.
VELSHI: And thinner packages that you have to deal with for your mortgage is great.
Christine Romans, you and I will be on this a lot. And by the way, we're going to talk about it extensively this weekend and all sorts of other major, major issues. What a week it's been for "YOUR $$$$$." So you watch "YOUR $$$$$," Saturdays at 1 p.m. Eastern, Sundays at 3 p.m. Eastern, right here on CNN.
Let me bring you up to speed with some of the top stories that we're following here at CNN.
Take a look at the Dow. It is up. There was a lot of worries that it was going to be another rough day. Right now -- and by the way, it's only 1:30. The market closes at 4 Eastern. Up 51 points. Christine is there in case things start to get a little crazy.
Investors are a bit wary after the market dipped into correction territory yesterday. Lots of people are worried about financial problems in Europe. We'll talk to you a little later about what a correction is.
In Afghanistan, new details on that Wednesday insurgent attack on Bagram, the main U.S. Air Force base. Now the U.S. military is confirming that the attackers were dressed in U.S. Army-style uniforms. U.S. troops went after the attackers with air and ground fire and killed 16 of them.
A deadly rush-hour accident on the New Jersey Turnpike after three trucks collided. One driver died. Another was injured. Eight thousand gallons of kerosene spilled from one of the trucks. About 26 miles of the highway has been closed for several hours.
All right, when we get back, we're going to talk about that loop current, the current that could take the oil spill in the Gulf of Mexico around Florida and up the East Coast. Chad's been watching that very carefully.
He's also got a forecast for some weather across the country. The Coast Guard has some keen insight into the effects of this loop current and what it's going to do. We'll be back with that in a minute.
(COMMERCIAL BREAK)
VELSHI: Hello, Chad.
MYERS: Hello, Aliwood (ph).
VELSHI: What's going on?
MYERS: It's Friday.
VELSHI: Yes. The weather doesn't stop because the weekend is coming.
MYERS: And neither does the current...
VELSHI: Yes.
MYERS: ... and the winds and all that kind of stuff. People say, you know, "What are you talking about? It hasn't really -- the weather hasn't been all that severe." Clearly you're talking about the loop current.
We have been talking about it, and you just mentioned it, about this one, even the Coast Guard called it the elephant trunk...
VELSHI: Right.
MYERS: ... of oil that may have broken off from the main oil slick.
VELSHI: That's pretty obvious. Yes. OK.
MYERS: Well, Coast Guard couldn't see it yesterday. Here's what they had to say.
(BEGIN VIDEO CLIP)
CAPT. STEVEN POULIN, U.S. COAST GUARD: I know that there has been some discussion about the loop current. I'm not a scientific expert, but what I can tell you is that when we had an overflight yesterday from our scientific support coordinator, they flew down to where we anticipated the loop current would be. And all he could find were some patchy segments of sheen that did not extend very far out past where the location of the heavy oil was. Really no trail, or elephant trunk, as it's been called extending down into the loop current.
I know it remains a concern. We're continuing to track that and model it. But I think it's fair to say that if there is any oil that is caught in the loop current, it's going to be severely weathered and perhaps just tar balls by the time it reaches any shoreline. And certainly, what we've seen in the loop current to this point, those minor portions of sheen, will be weathered by the time they ever get to shore.
(END VIDEO CLIP)
VELSHI: He sounds very optimistic.
MYERS: Yes. So we didn't make this up.
VELSHI: Right.
MYERS: This is what they gave us on Tuesday, that there was this little thing hanging down there. It now seems to be gone, which is great. It evaporates --
VELSHI: Or disperses.
MYERS: It disperses or becomes tar balls and maybe even some of it sinks to the ground when it gets other stuff in it, especially like rocks and sand in it so it can get deeper and deeper.
VELSHI: That's good news.
MYERS: That's great news. That's essentially gone.
That means all of this concern of getting down into Florida and ruining the -- I talked to NOAA yesterday -- and ruining the coral reefs down there, there's no concern. There's no alarm at this point in time, but the alarm -- I'll open it back up again -- the alarm is the wind has been blowing in this direction for so long that now literally the entire southeast Louisiana coastline --
VELSHI: We've seen the pictures.
MYERS: And the Grand Isle beach is now closed, it's closed for the weekend, so don't even try it. The oil is going this way --
VELSHI: yes.
MYERS: -- affecting Louisiana, not going this way towards Florida.
VELSHI: All right, we'll keep on tracking that for you. We've got the live web cam pictures we'll show you again as well.
MYERS: I've gotten a lot of questions, where is all the oil going that they're pumping?
VELSHI: Yes, where is it going?
MYERS: We'll talk about it at 2:00.
VELSHI: All right. Very good. That's what we'll do.
All right. By the way, there's a new deal with Iran on their nuclear program. That should be great news. Why is the secretary of state calling for new sanctions on Iran? We've got the story behind this one when we come back.
(COMMERCIAL BREAK)
VELSHI: Okay. A new deal with Iran. Tehran says it will ship out its low-grade enriched uranium for processing, but it's complicated. On Tuesday, Iran, Brazil, and Turkey announced the deal. They said it should finally end the standoff over Iran's nuclear program. Turkey's foreign minister called it a great success.
About eight hours later, Secretary of State Hillary Clinton, announced new sanctions against Iran. So, what is going on? Let's go to Ivan Watson. He's our man on the story, he's been following it as it played out all week. He joins us now from Istanbul. Ivan, what does this even mean, that they'll ship out their uranium?
IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: Well, this is a deal basically for Iran, a goodwill gesture, let's say, for Iran to send about 1,200 kilograms of low-enriched uranium, 3.5 percent enriched uranium, to bring it here to Turkey and store it, up to a year. And in that time that some Western countries with better technological know-how, that they would then provide 120 kilograms of higher enriched, 20 percent uranium, and that the swap would take place here in Turkey.
And the Turks and the Brazilians were -- they had a bit of a surprise diplomatic success on Monday when the president and the prime minister of these two countries, they traveled to Tehran. They stood with Iranian president, Mahmoud Ahmadinejad, held their hands up high and said, look, we've made this historic agreement.
The problem is, Ali, is that Western governments made a similar agreement with Iran last October. Calling for the same amounts of uranium -- enriched uranium -- to be exchanged, and then Iran agreed to it and then backed out of the deal. Now it seems that Washington and the permanent members of the U.N. Security Council, they're not really interested in this deal now six months later. Now they want to go ahead and press for sanctions.
VELSHI: It can't be a surprise to anybody, though, with the entire world interested in trying to work something out with Iran that -- that a sort of a side deal, you know, wasn't going to be taken all that seriously. I mean, where do we stand right now? Because last -- we're following it -- the U.S. is preparing, Western nations are preparing sanctions against Iran. Was it a stalling technique on Iran's part?
WATSON: That's not entirely clear. I think there has been surprise.
The problem here is this has really ruffled fathers among the Turks and the Brazilians, who are very frustrated that that they went to all this work and did these marathon negotiations. And the Turkis foreign minister said he was constantly on the phone with U.S. Secretary of State, Hillary Clinton, and with the national security adviser, James Joyce, trying to get their approval for this to move forward. In a press conference on Tuesday morning that I attended, I mean, he was positively gloating, so happy that this had come together.
He said that he had met several of the -- the requirements that the Americans had asked for, notably for Iran to hand over all of this low-enriched uranium in one fell swoop. And to do it very soon, and Iran, in principle, agreed to start this process within a month.
But then just a few hours later, after this very rejoicing press conference from the Turkish foreign minister, U.S. secretary of state, Hillary Clinton, announced, no, we're going to go ahead with sanctions. Take a listen of this sound that you get from the Turkish diplomat and then from the American diplomat.
(BEGIN VIDEO CLIP)
AHMET DAVUTOGLU, TURKISH FOREIGN MINISTER: Together with Iran, we achieved a great success, showing that there is room for diplomacy in any case.
HILLARY CLINTON, U.S. SECRETARY OF STATE: The international community, on behalf of a strong sanctions resolution that will, in our view, send an unmistakable message about what is expected from Iran.
(END VIDEO CLIP)
WATSON: I talked to a Western diplomat who is dealing with Iranian affairs. He predicts that the sanctions package will be brought for a vote before the U.N. Security Council as early as June. The question now, will Brazil and Turkey vote against it?
VELSHI: All right, we'll stay on the topic. Ivan, thanks very much. Ivan Watson, in Istanbul, Turkey, following very closely what's going in Tehran.
OK. Back here in the United States. The Pennsylvania attorney general tells Twitter hand over some names. If you've got a Twitter account or been on any kind of social media, you need to hear this story. It's straight ahead.
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VELSHI: All right. In Pennsylvania, the state attorney general, Tom Corbett, is demanding that Twitter reveal the identity of two of its users. The two users in question have tweeted a bunch of criticism against Corbett, who's also running for governor. But Corbett said it has nothing to do with any of that, but with an ongoing corruption probe.
According to the subpoena, Twitter is being ordered to provide any and all subscriber information of the person or persons behind these accounts. But the legal counsel for Twitter issued a statement saying, "We do not disclose user information except in limited circumstances. We notify a user if we believe we're allowed by law when we receive any requests for information that we may be required to comply with. This policy is designed for maximum transparency and gives users an opportunity to object."
Now, the victims in this case? If it turns out it's an attempt by a public official to silence his critics, the victims could be millions of people who use social media as their way to express their opinions and feelings without fear of retribution. Could your boss use what you write about the company when it comes time for your review? We're walking a very, very fine line in cases like this, and we have to be sure not to set the wrong precedent. At the same time, anonymous postings without any responsibility is also something we have to take seriously.
All right. A living cell powered by a manmade DNA. It's been called a turning point in the relationship between man and nature. And we're putting this new kind of life under the microscope.
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VELSHI: All right. Every day we bring you "The Big 'I'," that's a big idea that could change the way we do things in life.
Now, this isn't Frankenstein, but there has been a major step toward the creation of artificial life. For the first time, scientists have created a colony of cells entirely operated by manmade DNA. Now, this could have huge implications. We're going to take a look at those in just a moment.
But let me just show you how scientists at the J. Craig Venter Institute pulled this off. It starts with the assembly. The team began by putting together strands of DNA, little, little tiny strands of DNA. They actually put it together -- it the longest strand of DNA they'd ever put together in a loop.
Some of you may know more about this than I do.
They used a brand-new technique to join a million units of DNA together. Longest strain of synthesized DNA ever assembled. They took the loop and put it into an empty bacteria cell. You can see that in the second picture. It looks like a Smartie at the end.
They're basically -- the idea there it's like installing a new operating system our computer, right? So, that cell was kind of an empty shell, they put this loop of DNA into it. And guess what happened? Look at this third shot over here, it started replicating itself. The manmade DNA proved to be so accurate that it took over the cell and replicated itself to form a bacterial colony.
Now, this process didn't just happen. It took about 15 years and cost $40 million to successfully create this one colony. Let's not forget how just tiny the bacterial cells are, they are way smaller than a grain of salt. Take a look at this, OK? That's a coffee bean. Let's push in. You've got a grain of rice over there. You have a sesame seed. Behind that, you have a grain of salt.
Christina, let's push in even further on this. Beyond the grain of salt, you've got an amoebae. Beyond that, you've got a paramecium. That blue one in the back, that's a human egg. Gets even smaller than that. A skin cell, see the pink one? That's a skin cell. Push even further than that, the red one is a red blood cell. Then you've got an X chromosome, and I think we're coming up to how small this thing is.
We've got an E. Coli -- no, it goes, even further than that, right? Is that where we are? No, it's further. Push even further to show you how small it is. Remember, the first one was a coffee bean. We keep on pushing things even further.
And, all right, it's -- so smaller than what you can see there. That's E. Coli on the bottom right of the screen and it's even smaller than that. That's the cell that has been created. Why would you spend $40 million, by the way, to create manmade DNA for something so small? Well, J. Craig Venter is a genome pioneer, and he said it's about understanding life. Listen to him.
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J. CRAIG VENTER, FOUNDER/PRESIDENT, J. CRAIG VENTER INSTITUTE: This is the first time we've had a life form whose genetic code was made chemically. It tells us about the dynamic nature of life, that it changes second to second, you put in new information. It evolves, transforms into something else. You take the way DNA, you take your DNA or my DNA, we're dead very quickly. You can't have life without the genetic code and you change the genetic code, you can change the life form very rapidly, so it teaches us a lot about fundamental nature of life.
(END VIDEO CLIP)
VELSHI: Now, beyond scientific curiosity, Venter said this kind of technology could eventually create biofuels, it could help design new vaccines, for instance. It could even help make more food.
There are some potential pitfalls, though. Let's discuss some of them. This is a letter that President Obama wrote to his bioethics commission in which he says, quote, "This development raises prospects of important benefits such as the ability to accelerate vaccine development. At the same time, it raises genuine concerns, and so we must consider carefully the implications of this research, and some environmental groups are warning about unforeseen consequences."
I haven't quite gotten to what those are yet, but we'll look into them.
I want to take you somewhere else now. The other day I told you about creators of the world's largest airship. They're joining us live after the break to talk about the implications that this could have on the military and disaster relief, just on your life. Stay with us.
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VELSHI: All right. So, what you're looking at there, we'll show it to you again. What you were looking at happened a couple days ago. We told you about it on this show. This is the inflation of the world's largest airship. It takes a long time, by the way, so we sped up the video.
Look at that. That is incredible. I don't know if you think much about airships. You see them. You see them above sporting events. You see them in the sky. But I don't think of them beyond that. I've been in one.
But I have two guys that can tell us about the particular one behind us. Michael Lawson, sitting next to me, is the president of E- Green Technologies. Allen Judd is the chief pilot of E-Green Technologies. Let me start with you, Michael. What's the big deal? This -- what's special about this?
MICHAEL LAWSON, PRESIDENT, E-GREEN TECHNOLOGIES: First of all, it's big.
VELSHI: It is. It's the biggest one in the world, right?
LAWSON: It is the large one in the world. It's 580,000 cubic feet. And it will float at altitudes of 15,000 to 20,000 feet. Which is very unique, because there's no other airship in the world that can cmoplement that.
VELSHI: Meaning they typically fly lower than that?
LAWSON: Yes. 3,000, 4,000, 5,000 feet.
VELSHI: OK. Substantially higher than the average.
LAWSON: Correct.
VELSHI: OK.
LAWSON: So, at lower altitudes, it can be that advertising venue airship, but it's also a cargo airship that can handle about 15,000 to 18,000 pounds of payload. So as we it up in altitude, it actually becomes an inflatable satellite, so to speak. At 15,000 to 20,000 feet, we can do the surveillance capability. That communication --
VELSHI: Because of the payload. You can put stuff in there and it's high up and so the applications for this could be --?
LAWSON: Anywhere from looking at the oil spill and monitoring that situation to being a communication hubfor emerging markets in Africa.
VELSHI: Oh! Because it can actually be a communication --
LAWSON: Correct.
VELSHI: You can have a --
LAWSON: It is an inflatable satellite.
VELSHI: Huh.
LAWSON: So, we're kind of changing the connotation from calling it a blimp to an inflatable satellite. Low altitudes it can handle the payload of 15,000 pounds to 18,000. Our larger version, which will be ready next year, is 326 feet long and it can carry a pay load of 50 tons.
VELSHI: Wow.
Allen, you're the captain. You're the chief pilot. How -- I -- we see these blimps and you see them over sporting events, and they're low enough so you can see the advertising on them.
ALAN JUDD, CHIEF PILOT, E-GREEN TECHNOLOGIES: Absolutely.
VELSHI: When you get to 15,000 or 20,000 feet, it operates differently. You got different winds up there. You've got different pressures.
JUDD: Yes. The airship will operate pretty much the same, it's just that you're a whole lot higher. And you'll be working a lot with instruments to maintain your position. And if you're in visual conditions, it's really just the same as being down low.
VELSHI: It's not -- I mean, you don't get buffeted around a lot more.
JUDD: Obviously, as in any aircraft, you operate within its capabilities.
VELSHI: Yes.
JUDD: If you see some bad weather, you'd put your airplane in the hangar, and if in this case, you keep on the mooring mast until everything's ready to go again.
VELSHI: That's the thing that keeps it attached on the ground.
Let's talk a little bit -- are you in airspace of other planes at that point?
JUDD: Yes. We would be carrying a transponder and be visual to them. And we'd be speaking to air traffic control, so everybody would know where we are and we would probably have the same equipment on our ship to be able to see them go by.
LAWSON: Well, as a DoD application, it's an unmanned version of that.
VELSHI: Oh, is that right?
LAWSON: Either manned or unmanned. Built that way.
VELSHI: OK. Let's just say for purposes of watching over the oil spill. That's important, to see where there's going. What does it achieve that we don't achieve through NASA satellites or fly-overs with fixed-wing aircraft?
LAWSON: Excellent question. We are designed to stand still, so in other words we are really perching and looking down like a satellite but at a much lower cost.
VELSHI: I see.
LAWSON: And you have real-time data coming through the up links and down links, and you can back call it off a satellite as well. So, from an oil spill standpoint, it's the type of measuring devices on board is take that technology on a satellite and put it on something that is only 20,000 feet.
VELSHI: Right.
JUDD: The resolution increases.
LAWSON: Correct. And as we move the technology forward, our end game is to be above the Jet Stream where you are truly become satellite. It's like taking a picture from seeing Georgia, Florida, and Alabama in your very large -- you're in a cell tower, at about 68,000 feet. So, that's where you get into your emerging markets like Africa.
VELSHI: Right.
LAWSON: We can't afford --
VELSHI: Installation costs are lower because you got this thing.
Alan, there's a market for the airships to take people around for sightseeing tours. That's not what you use this for. But is it largely the same thing?
JUDD: It is a blimp. It's built very much like the old rigid airships where they had the metal structure.
VELSHI: Right.
JUDD: Except here with today's new materials, we're able to do it with the Kevlar and the Dynema (ph) fabrics that are as strong as steel but flexible. So, it gives us a lot more capability, a lot lighter. And that's what helps us to get altitude. We're able to carry a small amount of helium, so that as we go up, it has a whole lot of room inside the air envelope to expand into.
See, the typical blimps are all with helium through this small air bladder. We're in the other direction. We have a large inflated machine with individual cells that are able to expand into the airspace and be able to give us the extra heights.
VELSHI: All right, we look forward to how they are deployed. When is this going to get deployed?
LAWSON: Late summer.
VELSHI: And you have somebody using it?
JUDD: Oh, yes. NASA. NASA actually is the first payload out of Langley research.
VELSHI: Very good. All right. Well, we look forward to watching it. Thank you, guys.
JUDD AND LAWSON: Thank you.
VELSHI: Congratulations, Mike Lawson and Alan Judd with E-Green Technologies. All right. Let's take a quick look at the Dow. How are we doing now? It's up 78 points. Wow, that's a big relief compared to what we were worried about what it was going to do today. Overnight, we had rough markets in Asia. And started off the morning rough in Europe.
When we come back, we'll talk more about what you're supposed to do with your 401(k) or your IRA, how you should be looking at these markets and what action you should take. When we come back.
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