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American Morning
Joe Paterno Fired; Perry Implosion; Early Snowfall in Iowa; U.S. Markets Tumble; Paterno Fired, Students Riot; Eurozone Crisis Rocks Global Markets; Anger And Shame At Penn State; Ashes Of U.S. Soldiers Dumped In Landfill; NBA Talks Resume Today
Aired November 10, 2011 - 05:59 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: Penn State news riot tipping a news van and clashing the cops after the university fires its legendary football coach.
CHRISTINE ROMANS, CNN ANCHOR: Our nation's war dead literally discarded like trash. A shocking admission from the air force this morning.
(BEGIN VIDEO CLIP)
GOV. RICK PERRY (R), PRESIDENTIAL CANDIDATE: Commerce, education and the -- what's the third one there? Let's see.
(END VIDEO CLIP)
CAROL COSTELLO, CNN ANCHOR: Rick Perry stumbling and fumbling on stage again. The governor himself saying I stepped in it, man, on this AMERICAN MORNING.
VELSHI: Good morning. It is Thursday, November 10th. Welcome to AMERICAN MORNING. If you went to sleep early last night or really at all, everything is different this morning.
ROMANS: Yes, it really is. Up first, crash of the titan, you know, Penn State football coach Joe Paterno out now after 46 years as the head man in happy valley.
Paterno was fired along with the university president over a child sex scandal involving Paterno's former assistant Jerry Sandusky.
The decision came just hours after Paterno said he would finish out the season and then retire. Instead Penn State's Board of Trustees brought the hammer down.
(BEGIN VIDEO CLIP)
JOHN P. SURMA, VICE CHAIRMAN, PENN STATE BOARD OF TRUSTEES: The past several days have been absolutely terrible for the entire Penn State community. But the outrage that we feel is nothing compared to the physical and psychological suffering that allegedly took place.
Effective immediately, Dr. Spannier is no longer president of the university. In addition, Joe Paterno is no longer the head football coach effective immediately.
(END VIDEO CLIP)
ROMANS: Penn State students spill flood the streets to protest the decision. Chanting "we want Joe back" and things got ugly. Students tipped over a news van and police used tear gas to disperse the crowd.
We have two reports from State College, Pennsylvania, this morning. CNN's Jason Carroll and Sarah Hoyer, both there. Let's start with Jason first. Good morning, Jason.
JASON CARROLL, CNN NATIONAL CORRESPONDENT: Good morning to you, Christine. Unbelievable to see what happened out here last night. The board basically saying that they had come to a point where the university needed a change and they hoped students would understand.
Well, Christine, obviously hundreds of students did not understand. They took to the streets last night right out here in front of old main, downtown. Taking their anger out on the media and flipping a news van and throwing rocks at one of our live trucks last night, vandalizing another news van.
Police had to issue dispersal order to try to make the crowd go back and calm down. Basically, many of the students saying the reason why they took their anger out at the media is they feel as though the media did not treat Joe Paterno fairly in news reports.
They felt as though more of the attention should have been focused on Jerry Sandusky. You know, in speaking to many of the students, they basically are saying they feel as though Joe should available to stay and go out the way he wanted to go out.
Listen to what some of the students said last night.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: They are going after the wrong guy. The justice system --
UNIDENTIFIED FEMALE: We're pretty much making a stand because we are in support of our school and in support of Joe Pa. We think it is absolutely ridiculous that he got fired over this sort of situation.
UNIDENTIFIED FEMALE: I think some people are making a mistake of putting Joe Pa in front of the actual situation.
UNIDENTIFIED MALE: Tears actually, wiped them off now. Second I heard it tears were in my eyes. He has done so much for our university.
UNIDENTIFIED MALE: We're here to get Joe pa for the last home game, let him play his last game. It's that simple.
(END VIDEO CLIP)
CARROLL: Spanier released statement last night about his removal saying my heartfelt sympathies go out to all of those who may have been victimized. I would never hesitate to report a crime if I had any suspicion that one had been committed, of course, Spanier replaced by Rod Ericson who was the executive VP here at Penn State.
Christine, you know what is so ironic about all this, you know about Joe Paterno's legacy. This is a coach who basically tried to turn athletes into ideal students. This reaction that we saw out here is the exact opposite of what Joe Paterno would have wanted.
ROMANS: Were there any students rioting for support of the victims?
CARROLL: Not that -- you know, that's what is really getting lost in all of this. Because when you talk to many of the students, not just last night, but out here throughout the earlier this week, that seems to be getting lost in this argument because there seems to be so much passion surrounding Joe Paterno.
It does not mean that some of that's students don't care for the victims. But there's so much passion surrounding this man, so many of these kids grew up with Joe Paterno. He is a legacy here, as you know. That's where all of the passion seems to be directed to at least for now.
ROMANS: All right. Jason Carroll. Thanks so much, Jason.
COSTELLO: After the board announced its decision, Paterno spoke briefly to supporters gathered outside of his home. Those supporters, of course were students.
CNN's Sarah Hoye has that part of the story. She joins us live from State College. So Sarah, you talked to those students -- actually you witnessed Joe Paterno coming outside and saying those few words to students. What did he say?
SARAH HOYE, CNN CORRESPONDENT: Well, like Jason was just saying, one side of campus things were quite unruly. However, in front of Joe Paterno's house, things were calm and things were sombre. Things were very quiet.
He also came outside and spoke to those students and I think we have some sound for that. Let's take a listen to what he said.
(BEGIN VIDEO CLIP)
JOE PATERNO, FORMER PENN STATE HEAD FOOTBALL COACH: Get a good night's sleep. Study. All right, we still have things to do. I'm out of it maybe now. We'll go from there. One thing. Thanks and pray a little bit for those victims.
(END VIDEO CLIP) HOYE: And also Joe Paterno did release a statement after that board's decision came down. I will read it to you here. He said, I am disappointed with the board of trustee's decision, but I have to accept it.
A tragedy occurred and we have to have the patience to let the legal process proceed. I appreciate the outpouring of support. I want to emphasize that everyone should remain calm and please respect the university, its property and all that we value.
To all of our fans and supporters, my family and I will be forever in your debt. You can get a sense there as to how personal it was not only to Joe and his wife as well as for his supporters.
COSTELLO: Yes. It's just -- you know, Joe Paterno obviously is trying to quiet things down on the university. But you can't forget there is an interesting article a "New York Times" this morning where this graduate assistant, all those years ago, went to Joe Paterno and told him what was happening in the shower, in the locker room, with Sandusky.
And according to this article, McCurry did not mince words. He told Joe Paterno in detail what happened, Sandusky was allegedly raping a 10-year-old boy. So, you know -- the university couldn't escape that alleged fact. I will put it that way.
And that's probably why the university decided to fire him. Also, you have to suspect that lawsuits are going to be filed against the university. And I don't see how they could allow Joe Paterno to coach in that last game.
HOYE: As you have --
COSTELLO: Go ahead, Sarah.
HOYE: As you do have, you know -- what we are seeing here is he did say he would resign and he wanted to last throughout the rest of the season. This was the board's decision. It appears as though they wanted to move quickly and swiftly and come down decisively.
As you know the other day his press conference was canceled. The university kind of came in and hunkered down and they are doing what they want to do and feel it is in the best interest for them to do.
COSTELLO: Sarah Hoye reporting live for us this morning. Thank you.
VELSHI: In other story you may have missed. Turning to politics now where one of the other Republican candidates for president knocked Herman Cain out of the headlines at least for a moment.
Texas Governor Rick Perry's bid for the White House is on shaky ground this morning after his deer in the headlights moment at the Republican presidential debate last tonight. Jim Acosta watched it all unfold. He joins us live from Rochester, Michigan.
Jim, this morning, there's not a whole lot of talk about the substance of the debate, but a whole lot of talk about Rick Perry and his debating skills.
JIM ACOSTA, CNN POLITICAL CORRESPONDENT: That's right, Ali. Rick Perry is going on all the morning talk shows today to do some damage control after what happened last night.
And as you mentioned, you know, Herman Cain was really the story of the race for several days. He was being dogged by accusations of sexual harassment. But all of that turned on a dime last night when Governor Perry may have suffered perhaps the most embarrassing moment of his political career.
He could not remember one of his own talking points of which three departments of the federal government he would eliminate and there was one Texas based reporter who was covered Perry almost his entire political career who described the moment as perhaps the time of death of his campaign. It really is something you have to see. Take a look.
(BEGIN VIDEO CLIP)
PERRY: I will tell you. It's three agencies of government when I get there that are gone. Commerce, education, and -- the -- what's the third one there? Let's see.
UNIDENTIFIED MALE: Five.
PERRY: Five, OK. Commerce, education, and the --
UNIDENTIFIED MALE: EPA?
PERRY: EPA, there you go.
UNIDENTIFIED MALE: Seriously? Is EPA one of your --
PERRY: No, sir. We were talking about the agencies of government -- EPA needs to be rebuilt.
UNIDENTIFIED MALE: You can't name the third one?
PERRY: The third agency of government I would do away with is education, the -- Commerce -- Commerce and, let's see. I can't. The third one, I can't. Sorry. Oops.
(END VIDEO CLIP)
ACOSTA: That may have been the oops heard around the world in the spin room right after the debate. Several Republicans strategists, Ali, were telling me they think that was the end of the Perry campaign, that that was a fatal blow that he could not recover from.
That explains why the Texas governor went into that spin room to talk to reporters to try to contain the damage. Even sent out a tweet last night, we can put it on screen for you. He said, really glad I wore my boots tonight because I stepped in it out there. I did still name two agencies to eliminate.
Obama, President Obama he says, has never done that. So that's from the Texas governor. But Ali, make no mistake, folks are comparing this to the Dean scream from the 2004 campaign. And it is going to be difficult for Rick Perry to recover from this -- Ali.
VELSHI: All right, and as we mentioned, it knocked Herman Cain out of our discussion for a few minutes. I don't know how long that will last. Did Herman Cain have any response to that? Did his people have any response to what Governor Perry did for the questions -- question asked of him?
ACOSTA: Not really. You know, I tried to go up to all the campaigns last night. None of them would say on the record what they thought about Governor Perry's moment last night.
But Herman Cain was asked about those sexual harassment allegations during the debate. The moderators came up with a way to ask Cain in a crafty fashion wouldn't this be a hiring issue for the American people the fact you have these allegations facing you on -- here is how Herman Cain responded.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Why should the American people hire a president if they feel there are character issues?
HERMAN CAIN (R), PRESIDENTIAL CANDIDATE: The American people deserve better than someone being tried in the court of public opinion based on unfounded accusations.
And I value my character and my integrity more than anything else and for every one person that comes forward with a false accusation. There are probably -- there are thousands who would say none of that sort of activity ever came from Herman Cain.
(END VIDEO CLIP)
ACOSTA: Maybe fair to say that Herman Cain was the big winner last night only because of that moment involving Rick Perry because it totally took the focus off of the Cain campaign.
And Ali, unless -- unless more evidence comes forward, unless much more accusers come forward for Herman Cain, it appeared last night that that crowd here at this debate, you know, obviously heavily Republican crowd, is willing to give Herman Cain the benefit of the doubt and they appear to be right now standing behind him and as, you know, this campaign is changing by the minute -- Ali.
VELSHI: Absolutely is. Jim, thanks very much. Jim Acosta in Michigan for us. At 7:25 a.m. Eastern Time, the governor of Texas, Rick Perry will be joining us live right here on AMERICAN MORNING.
ROMANS: All right, the Air Force is bidding -- admitting now that the ashes of cremated body parts belonging to U.S. soldiers were routinely dumped in landfills all the way until 2008.
Family members of those troops were never told. The practice has been stopped. Those ashes are now disposed of at sea. An Air Force spokesman admits, quote, "We could have done it better."
VELSHI: The debt crisis in Europe is sending markets in Asia tumbling overnight. Hongkong's Hang Seng plunging 5 percent, Japan's Nikkei down nearly 3 percent.
All of that coming on the heels of the worst decline for the Dow since mid-September. But we are seeing futures in the U.S. higher this morning. So I don't know, Carol.
COSTELLO: I know.
VELSHI: Over to you.
COSTELLO: No. It is a roller coaster ride. I think I was talking to Christine earlier about this. You don't even pay attention anymore if you are an everyday investor like I am. The markets are down 400 points. They are back up the next day.
ROMANS: Now, we're negative on the air for the S&P and the NASDAQ. But I think you will see a little snapback today at least in the first few minutes only because there are people out there shopping for opportunities. And they worry that yesterday was the worst-case scenario for Europe is what we were talking about.
COSTELLO: It is always the worst-case scenario. I mean, really. I don't know.
Coming up on AMERICAN MORNING, another devastating blow to eastern Turkey. An earthquake strikes the same area ravaged by a monster quake just a few weeks ago. Now a desperate search is on for more survivors.
VELSHI: Some Blackberry users having a bout of deja vu. Did you get all your e-mail this morning? What the company is saying about it this time. It's 15 minutes after the hour.
(COMMERCIAL BREAK)
COSTELLO: Eighteen minutes past the hour.
Happening right now, in line in what you are looking at, that's News Corp.'s James Murdoch. He's speaking in his second part of an appearance. A Parliament Committee is investigating Murdoch's role in a phone hacking scandal and the now defunct "News of the World" tabloid.
Parliament wants to know how much he knew about the hacking and when he found out about it and whether he lied to Parliament when he testified the first time around because there are some discrepancies in his story. Today could determine Murdoch's future in the News Corp. empire. We'll keep you posted. VELSHI: Rescuers are speeding up their search for survivors after a 5.7 quake struck Eastern Turkey last night. At least seven people were killed when two hotels came crashing down. The death toll could spike. Dozens of people are still trapped in the debris and in the rubble. So far 25 people have been rescued. This is the second fatal quake to hit that area in a matter of weeks.
ROMANS: All right. We've had earthquakes in the Midwest, too, this week now. And now snow.
Rob Marciano in the Extreme Weather Center. Some of the pictures out of Des Moines yesterday, I mean, it looked like, you know, it looked like the depths of winter.
ROB MARCIANO, AMS METEOROLOGIST: Absolutely.
Iowa through parts of Wisconsin, a lot of snow falling and snow on the ground. You may say, well, they get that. Yes, but it's still kind of early for that.
Let's roll the video of stuff falling out of the sky. Yes, there it is. Snow in places like Des Moines, Iowa. Seeing it, it's the wet stuff again. So sticking to the stop signs, sticking to the trees. Not as much sticking to the roadway, but there you go. Same deal to get leaves on the trees still and those tree limbs - tree limbs get weighed down and the trees come tumbling down. We saw it in parts of Iowa and we saw it in Wisconsin as well.
Antigo is seeing 14 inches of snowfall; 14 inches in Wisconsin. A lot of these areas will see a measurable snow of three inches or more typically mid-December, not mid-November. So that's certainly remarkable.
Also remarkable, the storm that rolled through Alaska yesterday, wind gusts to 89 miles per hour in Wales, Alaska; Tin City seeing 85 mile an hour winds; plus blizzard conditions, a remarkable storm there.
Storm out of the Midwest now, traversing across the Appalachians, is weakening. So we'll see a little bit of rain getting into the northeast. Then also little bit of rain coming in on the northern side of this, Tropical Storm Sean, winds of 65 miles an hour. It will be making the right turn not to affect the U.S. But some of that moisture is getting trained up in eastern New England later on today and tonight. We'll see some of the rain from Sean. It will be wet across Boston.
Guys, back up to you.
VELSHI: All right, Rob.
ROMANS: Thanks, Rob.
VELSHI: Thank you.
MARCIANO: You bet. VELSHI: Coming up ahead on AMERICAN MORNING, the debt crisis in Europe. Greece and Italy staggering. France and Germany are plotting the U.S. economy and your 401(k) is on the line. We're going to ask Drew Kanaly. He's the Chairman and CEO of the Kanaly Trust where we - where this is all heading.
ROMANS: Yes. And what it means -
VELSHI: Yes.
ROMANS: And what it means for us, right.
Plus, that Cheeseheads rejoice Packer fans. They've got to do no NFL team gets to do or fans get to do. We're going to have the lowdown from Lambeau.
It is 21 minutes after the hour.
(COMMERCIAL BREAK)
VELSHI: Welcome back. "Minding Your Business" this morning. Twenty-four minutes after the hour.
After two days of gains, U.S. markets took a tumble yesterday. The Dow, NASDAQ and S&P 500 all lost more than three percent. It could be in for another rocky day. But U.S. futures are actually trading much higher this morning.
Now, all of this volatility is because of Italy and Greece and global fears about the debt crisis in Europe. Now, in the spotlight again today, Italy. The world is waiting to see whether the person who replaces Prime Minister Silvio Berlusconi will be any more effective than he's been at getting Italy's financial crisis under control. And that uncertainty is fueling market volatility again today.
European stocks are up right now while Asian markets closed sharply lower. Also this morning, rumors are moving markets at the European Union may break up, may get smaller. The President's Office in Germany denying reports this morning that it supports the breakup of the E.U. and the French President's Office says no comment.
Back here in the United States, we are expecting a new report on the number of jobless claims filed for the first time last week. This will give us a fresh look at the employment situation in this country and the help of the labor market. We'll get you those numbers as soon as they're available up two hours from now.
Oh, BlackBerry not again. Research In Motion says it's investigating reports that BlackBerry e-mail is slow, but the company says there is no system-wide outage. Last month, tens of millions of BlackBerry users lost e-mail and BBMs for days and the company's stock price suffered big time as a result.
Alabama's Jefferson County is now the largest local government in the United States to ever file for bankruptcy. The country - the county which includes Birmingham plunged more than $4 million into debt by corruption plagued sewer project.
And if you want to own a piece of the undefeated Super Bowl champs, the Green Bay Packers are planning to sell stock to the public next week. It's the team's first stock offerings since 1997. Shares are expected to go for about $200. The team is the only publicly owned franchise in the NFL. The Packers plan to use the cash to make improvements to Lambeau Field.
AMERICAN MORNING right back after the break.
(COMMERCIAL BREAK)
COSTELLO: Overnight, riots at Penn State after legendary coach Joe Paterno is fired. Is the culture of big-time college football drowning out the real tragedy -- on this AMERICAN MORNING.
(MUSIC)
ROMANS: And welcome back. It's 30 minutes past the hour.
Top stories:
Joe Paterno has coached his last game at Penn State. Paterno and the university president were fired effective immediately in the wake of a growing child sex abuse scandal of the school.
Despite a plea from Paterno to remain calm, angry students clashed with police in the streets of State College, Pennsylvania, following last night's decision.
VELSHI: Air Force admitting the ashes of cremated body parts belonging to U.S. soldiers were routinely dumped in landfills until 2008. Family members were never told. The practice has been stopped. And those ashes are now disposed of at sea.
COSTELLO: And Rick Perry's White House bid appears to be on shakier ground this morning. At last night's Republican debate near Detroit, the Texas governor had what could be a fatal deer in the headlights moment when he was asked about three government departments he would cut if president. He could only remember two of them.
ROMANS: More now on our top story this morning: Joe Paterno fired after 46 years as head football coach at Penn State. As we mentioned, some students reacted with anger. They tipped over a news van and police used tear gas to disperse the crowd of protesters.
Sara Ganim, reporter for the "Patriot-News," has been covering the Penn State scandal. She joins us from State College, Pennsylvania.
Good morning to you.
Those pictures of rioting students, I keep thinking there could be Penn State students right now who are potential victims of Jerry Sandusky who are watching their fellow students rioting for football and for their coach and not for the victims.
SARA GANIM, CRIME REPORTER, "THE PATRIOT-NEWS": Yes. You know, I talked to the sister of one victim last night. She is a Penn State junior here. Earlier in the day, she said that she actually supported Joe Paterno, that she believed that he did the right thing. And that she was upset with Penn State President Graham Spanier but not Joe Paterno.
When that rioting happened last night she sent me a message and said, any pride that Penn State had left is now gone.
So, that's a little sliver into what victims may be feeling right now.
ROMANS: I want -- she also told you -- I want to take some of the comments she had made to you, sister of one of the -- one of the alleged victims you talked to. She's been really upset about it because, you know, a lot of people aren't focusing on the victims in all of this, she says. And instead, they're focusing on other things like football. And as much as you shouldn't blame the football players, they should be focusing on their respect for the families and what they have been through.
Has the Sandusky and the alleged crimes and victims here been overshadowed by the powerhouse football?
GANIM: I absolutely think the scandal overshadowed the criminal case and -- the criminal sex case. And, you know, I think that -- this is -- on campus, there are people who are take thing very seriously. But there are people on campus who are not. This sister told me that she goes to class and people are making jokes about being Sandusky.
So, it's really -- you know, there's some insensitivity to a degree here. And it's not -- you know, it is not clear that this is a small group of people or just this overwhelming --
(CROSSTALK)
GANIM: -- feeling of we need to come back and push back and defend ourselves.
ROMANS: Right. If it's pockets of immaturity of kids 18 years old who cannot grasp what's happening there or whether it is something else. But that's interesting that she's -- her fellow students don't know that she's the sister of an alleged victim and is seeing all of this. That's interesting.
I want to talk to you about Sandusky now. Let's bring the focus back to him. That's what this is about. This is assistant coach -- a revered and illustrious assistant coach who retired from the program, but whose alleged crimes went on these facilities long after he had retired.
He is out on bail ordered by the judge to stay away from children. Still maintaining his innocence according to his attorney, right?
GANIM: Yes. He issued a statement through his attorney yesterday saying that he was saddened and distraught that this -- this is before the announcement last night, but that this could end the career of coach Joe Paterno and Penn State President Graham Spanier. You know, that actually fielded a lot of anger on Twitter. People are saying, you know, we don't care what he thinks.
But that was a statement he issued yesterday and the end of it he said, you know, after all of this, I still maintain my innocence. And dispute the allegations of the attorney general has set forth.
ROMANS: Which means there will be a long legal process here, no question. I know that he's not due to appear for his next hearing until sometime in December. Meanwhile, he is home but can't have contact with children, right?
GANIM: Yes. There was an order that was filed in court by the ex-wife of one of his adopted sons and it prevents him from having contact with his or unsupervised contact or overnight visits with his minor grandchildren. Now, there's a blanket order that was issued by the judge after his arraignment on Saturday that he can't have contact with any minor children.
ROMANS: Last question. Wide receiver's coach, Mike McQueary, he is someone who will be central in this case, no question. He is the young man who was graduate assistant who back in 2002 according to "The New York Times" went to Joe Paterno's house and said coach, this is what I saw, and told him according to "The Times" in graphic detail about a sexual assault happening on the facilities there. Will he be on the sidelines this weekend for this game?
GANIM: You know, that's unclear. The trustees were not addressing any specific questions about Mike McQueary. They were fielding the same questions about Tim Curley and Gary Schultz. They would only say for the three of them that their future in Penn State hasn't, you know, been decided yet. For right now, their positions stay the same, but that could be addressed again down the line.
ROMANS: And Mike McQueary is not talking?
GANIM: No. I haven't been able to make contact with him, his attorney, or anyone close to him.
ROMANS: I'm sure that with the legal process that's unfolding here, I'm sure there are a lot of people over time, we're going to hear more about this story. But I suspect years after the alleged incidents, it's just all now beginning.
Sara Ganim of "The Patriot-News" -- thanks so much, Sara.
VELSHI: All right. Ahead on AMERICAN MORNING: it's the Euro zone unraveling. France and Germany reportedly talking about the downsizing the E.U.
So, what does it mean for the U.S. economy? We'll ask Drew Kanaly. He's the chairman and CEO of Kanaly Trust.
(COMMERCIAL BREAK)
VELSHI: Welcome back to AMERICAN MORNING.
The Eurozone crisis is sending a chill through the world markets right now. The Dow took its worst hit in six weeks yesterday. Markets in Asia took a beating overnight. They are coming back in Europe now.
Nina dos Santos is live in London this morning.
Tasked with trying to make sense of what's going on, Nina. We've got divergent market reaction. We've got talk about a smaller Eurozone.
What's your read?
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: Yes. Well, first of all, let's run through statistics. Pretty sobering, Ali, what we had was $1 trillion wiped off of the global value of world markets yesterday. And we also had just when Asian markets shut a few hours ago, lost to the tune of about 5.2 percent for the Hang Seng banking stocks, particularly heavily affected in Asia, as everybody is concerned about this contagion spreading now to Italy from countries like Greece.
On the brighter note, though, we do have the FTSE 100 where I am here in London down. We have the DAX trading higher. And this is largely on the back of optimism that Italy may manage to pass through those badly needed emergency bills -- bills that perhaps may cost Silvio Berlusconi, the prime minister there, his political scalp. But it seems as though the latest indications we are getting is they may go through the upper hands of parliament by the end of the week.
And on a positive note, Italy did test the bond markets the other day, Ali, and they managed to bring those yields and actually sell about 5 billion euros worth of bonds at yield of just over 6 percent. That was largely thanks to the ECB supporting market, but it is a positive note at the moment.
VELSHI: OK. So, we are marginally better off than we were yesterday. But still a great deal of uncertainty in the rattling markets. Thank you for that, Nina dos Santos, in London.
ROMANS: All right. Right now, there's one country in Europe that accounts for 25 percent of the Euro zone's debt, Italy. And it's the third largest bond market in the world.
The Italians have racked up 1.9 trillion euros of debt. That's about $2.6 trillion of the size of its debt engulfing the size of the overall economy. Now, there are reports Germany and France have been holding talks to downsize the E.U.
Let's discuss where all of this is heading with Drew Kanaly. He's chairman and CEO of Kanaly Trust. He joins us live from Houston this morning.
Good morning.
I mean, I think people know that the stock markets are a roller coaster. But they feel as though this particular ride on the roller coaster may be just beginning. What is happening here in Europe as it pertains to what happens in the United States and our own financial future?
DREW KANALY, CHAIRMAN AND CEO, KANALY TRUST: Well, what it means is, you know, we are all in this together, aren't we? We're all trading partners. And so, for the U.S., Europe is a big trading partner but not nearly as big as, say, we are with China.
Now, China is a very big trading partner with Europe. It's like 20 percent of their trade. So this is a very big deal to China. So we are all related, aren't we?
So, if we do see a very significant slowdown, recession of Europe, some would say they are in a recession and certain economies there. Then it's a big deal going forward.
So, that's why you see all of the markets really, you know, positive here yesterday. Some would say more than just positive. Wouldn't they?
ROMANS: I know.
KANALY: But it's a very big deal.
You know, in the tease, you mentioned about 401(k) investments.
ROMANS: Right.
KANALY: Let me say something to the CNN viewers. I mean, most important thing about your 401(k) right now, the most important thing is you contribute to it. Don't stop contributing to your 401(k). You know, if you are a good employer, especially like Kanaly, you get a match.
So, the act of saving is the most important thing to be doing now and not being troubled by financial markets -- especially if you are a young investor -- we're going to work through these things eventually. So, it is the act of savings is the most important thing to remember right now.
ROMANS: I think that's good advice. I also think people see a day like yesterday and then they make a move in their 401(k) when -- the point is that you are never going to outsmart a market that's unpredictable.
KANALY: No.
ROMANS: You know? So, that's another -- that's another thing people should remember, too, to be, you know, know what your risk tolerance is and if you are closer to retirement, though, you should not be fully exposed to the stock market especially now with a lot of uncertainties throughout the rest of the year.
KANALY: Yes. What you want to see especially -- you want to see our clients ultra diversified. Well, what's that mean? That means you are more than just in stocks and bonds. You are in other asset classes that they are going to give you a return hopefully that don't correlate or move exactly with the stock or bond market.
So, examples of that would be gold and example of that would be a master limited partnership. Now, that's the less glamorous side of the energy business, it's pipelines and terminals. And it really isn't exposed to the price of energy, just the volume of energy that moves from the economy.
So, there's other ways, other investment classes that you can put in your 401(k) that are going to be a nice match and then lower the volatility or risk in your portfolio.
ROMANS: Right. Do you think we are going to see a lot more volatility as we head into the end of the year as we are concerned about what the third largest bond market in the world is going to do? I mean, if people watch the Dow and S&P and NASDAQ, but I think most people don't realize that that's a small market compared to the global bond market, that is showing some signs of strain and concern.
KANALY: Right. So, in terms of volatility, this is going to be here to stay for quite some time. I mean, what's driving the volatility is a lack of policies worldwide that creates sustained growth and give the markets an optimistic view of how earnings and growth are going to be going forward. And so, until you see some major policy changes, you're going to experience this volatility certainly through 2012 elections here and well beyond because the Europeans appear to be moving on their own time.
ROMANS: It's interesting that you mentioned that.
KANALY: Markets don't lie.
ROMANS: Because what you have in Europe is you have too much debt and too slow growth. Guess what, the United States of America, even though now everyone is plowing into U.S. treasuries, the United States has too much debt and too slow growth, too. Are there lessons for the U.S. here?
KANALY: Oh, yes. I mean, it is a window in your future for sure. And so, this is exactly what we're going to be facing years from now. Without getting too technical, many would argue that our interest rates are artificially low here because we have the capacity through the Federal Reserve to buy our own debt. And at some point, we can no longer buy our own debt.
We're going to have to go to the marketplace and do that. And at that time, what interest rate will they demand for our treasuries. And so, you can look at the Italians or even the Greeks to a greater extent, and you can see once you're exposed to market forces and they have concerns about your capacity to sustain your debt, you're going to pay a higher interest rate.
ROMANS: A window into our future. Drew Kanaly, chairman and CEO of Kanaly Trust in Houston. Nice to see you this morning. Have a nice day.
KANALY: Thank you.
COSTELLO: The sun is turning trash into energy in some American cities. Brooke Baldwin shows us one company shining the light on alternative energy in this week's "Solutions."
(BEGIN VIDEOTAPE)
BROOKE BALDWIN, CNN CORRESPONDENT (voice-over): A mountain of trash covered with ten acres of solar panels. The idea, give an old landfill a new greener life.
DAVID STUART, REPUBLIC SERVICES OF GEORGIA: When a landfill is retaking waste, basically, it's dormant.
BALDWIN: But this new technology puts it back to use. This cover is lined with 7,000 flexible solar strips. It seals the landfill to keep rain out and methane gas in.
STUART: Any landfill generates gas as a natural byproduct and that methane is a resource that we will ultimately use as a beneficial project for local industry.
BALDWIN: And the solar panels on this landfill in Georgia will produce enough electricity to power more than 200 homes. Initially more expensive than the usual methods of closing landfills, liners, covered with dirt and grass, the solar blanket pays off with lower maintenance costs.
STUART: For the next 25 years, it will continue to provide a benefit to this community through the power it generates.
BALDWIN: Other solar landfill projects are under way in several states.
Brooke Baldwin, CNN, Atlanta.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
COSTELLO: Ten minutes until the top of the hour. Here's what you need to know to start your day.
(BEGIN VIDEOTAPE)
COSTELLO (voice-over): No graceful exit for Penn State football coach, Joe Paterno. He was fired effective immediately along with the university's president over the school's child sex abuse scandal. Penn State students reacted violently to the decision, tipping over a news van and clashing with police. A painful admission from the U.S. air force. The ashes of cremated body parts belonging to American soldiers were routinely dumped in landfills until 2008. The practice has since been stopped, and those ashes are now disposed of at sea.
Two out of three ain't bad. At last night's Republican debate near Detroit, Rick Perry had a motor city meltdown. He was asked about the three government departments he'd cut as president. And he could only remember two of them.
Karen Kraushaar and Sharon Bialek, two of the four women, who accused Herman Cain of sexual harassment are considering holding a joint news conference. Kraushaar's attorney says he hasn't been able to contact two other alleged victims to join them.
Locked out NBA players and owners will be back at the bargaining table noon today after they wrapped up 12 hours of talks late last night with no new deal. Games through Christmas may be in jeopardy if they don't agree on something very soon.
And Eddie Murphy quits the Oscars. Murphy saying he's decided to drop out as host of the academy awards. It's a decision coming on a day after the producer, Brett Ratner, quit over an anti-gay remark he made over the weekend.
(END VIDEOTAPE)
COSTELLO: And that's the news you need to start your day. AMERICAN MORNING back after a break.
(COMMERCIAL BREAK)
VELSHI: All this week, we've been showing you how to speak money, so more today, on how to invest. People used to buy individual bonds, stocks, and CDs. It's not really the best way for most people to invest these days.
ROMANS: No. You can easily put your money in multiple parts of the market all at once with mutual funds, index funds, exchange traded funds --
(CROSSTALK)
ROMANS: Let's start with mutual funds, the most popular way to invest. They pool money from hundreds or thousands of investors to build a portfolio tock bonds, real estate or other securities. Buy into it and you get a slice of the overall investment.
VELSHI: Right. Now, you only need a few hundred dollars to start building a portfolio. If you just have a few hundred dollars, you don't want it going to individual companies, make sure to check that the mutual fund's expense ratio, that is how much they charge each year to operate the fund, is reasonable. Also, check how much the fund is taxed. That will make a difference to your return. ROMANS: OK. There's also index funds. On average, The S&P 500 has an annual return of 10 percent.
VELSHI: Over --
ROMANS: Over very long period of time.
VELSHI: Yes.
ROMANS: Not recently.
VELSHI: Right.
ROMANS: But why not try to mimic that? That's exactly what index funds do. They replicate entire markets or specific industries.
VELSHI: Right. They're passive which means there's no fund manager deciding what to buy or sell on a given day. They mimic a fund that already -- index that already exists. So, they have a lower expense ratio and they are more tax efficient. Index funds tend to work best in very large transparent markets that have a proven track record.
If you invest in index funds for emerging markets or new industries, that could be risky. In places like that, you want an active fund manager who knows that industry or that market.
ROMANS: Let's talk about exchange traded funds, ETFs. They're basically index mutual funds that are traded like stocks. So, if you wanted to buy all of the stocks in the S&P 500 but not by a mutual fund that you could buy the S&P 500 ETFs. Just like one stock.
It offers all the benefits of index on tax efficiency, diversification transparency, but also gets you in the parts of the market that used to be too difficult to access with index funds.
VELSHI: The S&P, the ticker for that index fund is SPY. Annual funds are as low as 0.9 percent in an ETF. The average mutual fund fee is about 1.4 percent. You want to buy an ETF, you have to do it through a broker, an online broker. There'll be a transaction fee. It could be as low as ten bucks to do that.
ROMANS: I mean, you go on e-trade.
VELSHI: Yes.
ROMANS: And start it up right away. You don't even have to have a lot of money in there to try it. OK. Be sure to do your homework. You can get in-depth mutual fund information from the funds themselves. Third party ratings are there as well. There's a mutual fund screening tool for you to use at CNNMoney.com. there are so many resources --
VELSHI: Yes.
ROMANS: -- to really help you -- (CROSSTALK)
VELSHI: And there's more in our book. We spelled out exactly how do you this start to finish. "How to Speak Money" is available now. And, you can talk to us live later today. Ask us your questions about money. You can call in to standup with Pete Dominick on Sirius channel 124 at 3:00 p.m. eastern. We will tweet that information out as well.
ROMANS: That's right. We're going to tell you about buying a home. We're going to talk about owning versus renting, down payment, everything in between that little bit of an argument about whether now is the time of your life to buy or whether the whole notion that you're throwing away your money if you rent, if that notion is too old fashioned.
VELSHI: Carol, don't get between us in that argument.
(LAUGHTER)
COSTELLO: No, no. I'm smarter than that. Thanks, Ali and Christine.
ROMANS: You're welcome.
COSTELLO: Ahead, a student revolt overnight riots at Penn state. Fans rallying for their icon after head coach, Joe Paterno was fired, but, is this taking away from the victims of that terrible sex abuse scandal at the university? We'll be back.
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