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CNN Live Event/Special
Top 25 Business Events
Aired July 09, 2005 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACQUI JERAS, CNN METEOROLOGIST: CNN Weather Center, brand new information now on hurricane Dennis. A 3:00 advisory Eastern Time is in and Dennis still holding category two strength with winds, at 100 miles per hour. However the central pressure has dropped again by about three millibars and usually when you see this gradual trend of the pressure dropping we start to see the winds translate and they begin to speed up.
We haven't seen that yet, gradual strengthening is expected and I do think later on this afternoon we'll see the wind speeds start to pick up. So still some potential for this to become a stronger hurricane before it does make landfall.
The location right now is about 295 miles south of Apalachicola or about 425 miles southeast of Pascagoula. It's still moving on the same general track about 14 miles per hour to the north and west. We'll watch it continue about the forward speed is what we're expecting before it makes landfall.
Still our best estimate is going to be some time tomorrow in the afternoon hours. We've seen already very strong winds. Also, some very heavy showers and thunderstorms. We've had a few tornado touchdowns; not much for damage going on across the Florida peninsula and into the Keys.
Rainfall amounts around Sarasota already four to six inches. We could see some locally heavier amounts pushing a foot before the storm is out of the Florida peninsula and into the panhandle area. We'll have more coming up one half-an-hour from now.
ALI VELSHI, CNN CORRESPONDENT (voice-over): Twenty-five years and 25 stories that changed the way we do business. A new twist on economics 101, how supply and demand supply define our sense of style.
UNIDENTIFIED FEMALE: Cheap is definitely chic.
VELSHI: And the trends that have everyone talking. It's risky business, but customers say that's entertainment.
UNIDENTIFIED MALE: It's a game that appeals to those that are very competitive, like being on the edge.
VELSHI (voice over): From boom to busted. It's all about the money as we count down the "TOP 25" business stories that defined our world over the past 25 years. VELSHI: Welcome to CNN's TOP 25, I'm Ali Velshi joining from you New York City. This month we're counting down the top 25 business stories of the last 25 years as CNN celebrates its silver anniversary.
Well, the New York Stock Exchange traces its origins back to of all things a buttonwood tree, which stood at 68 Wall Street. Back in 1792, a group of 24 businessmen gathered around that tree and they came up with a system that's evolved into today's financial markets.
Well, the tree's long gone, but the system remains. It's made millionaires out of some investors and it's stolen the life savings of others.
(voice-over): We're covering the business stories that have redefined the way we live, work and play. As CNN celebrates its 25th anniversary, we asked the editors of "Money" magazine to come up with a list.
ERIC SCHURENBERG, MANAGING EDITOR, "MONEY" MAGAZINE: We look back at the kinds of changes that have occurred over those two-and-a- half decades and we tried to think of the business process, the business event that affected those changes.
VELSHI(on camera): Twenty-five years and 25 business stories. We begin our countdown with a look to the east, to where some people say the economic sun is risen. At number 25: The fall of Japan and the rise of China.
VELSHI (voice-over): Japan dominated the global economy in the '80s as the industrial powerhouse invested heavily abroad and filled American roads with small, fuel-efficient cars. But Japan's boom turned bust in the '90s, as it's banking and financial sectors verged on collapse, just as the economy of its giant neighbor and rival started to blossom.
China quickly embraced capitalism; producing inexpensive goods with its cheap labor, fueling both U.S. imports of Chinese goods and nearly doubling U.S. exports to China in the last five years.
SCHURENBERG: When Japan was in the ascendancy, we questioned whether we could ever compete with such an efficient manufacturing power. Now that China's in power, we wonder whether we can hold any manufacturing jobs here and whether we can ever recover from owing so much money.
VELSHI (on camera): The stock market say bit of a gamble and like when you play cards, you have to know when to hold and when to fold. And that brings us to story number 24 on our countdown. Veronica De La Cruz deals you in on a craze that swept the nation.
VERONICA DE LA CRUZ, CNN CORRESPONDENT: From sports betting to slot machines; the racetrack to the roulette wheel, gambling is a multi-billion dollar industry in the United States.
Nevada was the first to legalize it to boost its economy after the depression. Today, Las Vegas is the greatest gambling phenomenon in the world. In 1978, New Jersey opened its first casinos, legalizing gambling to revitalize the rundown resort town of Atlantic City.
(on camera): Twenty-five years ago you would have to go to Vegas or Atlantic City if you wanted to gamble. Today, those opportunities exist in many other places across the country, like right here in Cherokee, North Carolina.
(voice-over): 1988 sought the emergence of Indian casinos. Former Chief Joyce Dugan says the Cherokees fought hard before betting their economic future on the trend.
JOYCE DUGAN, HARRAH'S CHEROKEE CASINO: We were very poor; as most Indians were throughout this country at that time. It offered us the means of economic development that might be lasting.
DE LA CRUZ: The tribe partnered with Harrah's in 1995. Today nearly four million people a year visit their no-alcohol casino. It's paid off for the Cherokee, who had seen decades of broken promises.
MICHELL HICKS, CHEROKEE CHIEF: We have approximately 13,000 members Each member is receiving approximately $7,000 per year from the casino profit.
DE LA CRUZ: Those profits also built a pool; a wellness center, dialysis facility and more importantly, residents say, it brought in jobs and education. The growth of gambling has helped to begin changing its image from its historic connections to sin and crime, into just another leisure activity.
THOMAS O'DONNELL, HARRAH'S CHEROKEE CASINO: It's a way to get away and relax and enjoy. I mean, I think the social aspects of the casinos themselves: You meet a bunch of new people, you meet people like yourselves and you have fun.
DE LA CRUZ: In the U.S. right now, 47 states have some form of gambling. Twenty-eight states have Indian casinos and the latest trend, online gambling with more than 1800 Web sites already raking in billions. Thanks to cable television, Texas hold em poker has a hold over new fans.
O'DONNELL: It's a game that appeals to those that are very competitive, like being on the edge, the risk, that strategy.
DE LA CRUZ: That risk needs to be a factor as Americans take a gamble on this form of entertainment.
DUGAN: We never want anyone to come, thinking they're going to win to pay their house payment or their light bill. We want them to come and have an experience like they would going to a movie or to a ball game.
UNIDENTIFIED FEMALE: Big winner!
VELSHI: At number 23 is the Savings and Loan crisis. Back in 1982 the federal government relaxed some rules, allowing S & L's to go beyond the home mortgage business into more profitable and riskier areas.
Real estate was booming, so the S & L started lending heavily to developers and construction companies. When real estate prices collapsed, they took half the country's S & L's with them. While investors lost billions, some industry insiders profited illegally. Those convicted of felonies spent, on average, five years behind bars.
UNIDENTIFIED MALE: With this bill, substantial funding...
VELSHI: In 1989, a bailout was announced to help repay those who held accounts at the thrifts.
STEPHEN GANDEL, STAFF WRITER, "MONEY" MAGAZINE: The accounting regulation on small banks is much tougher than it used to be. So, our nation's financial institutions are stronger because of the S & L crisis, than they used to be.
VELSHI: Freedom from government control is at number 22. Deregulation. Intended to increase competition and promote innovation, deregulation sparked the growth of discount airlines. Today, airline tickets are a deal, but workers and investors in the traditional airlines feel like they paid the price.
ELLEN STARK, ASST. MANAGING EDITOR, "MONEY" MAGAZINE: Over the past 25 years we've seen the deregulation of the airline industry, many parts of the financial services industry, the telephone industry. We're starting to see it in utilities and this is changing so many things for consumers. It's leading to more choice and lower prices, but in many cases, it's also leading to tougher decisions and more headaches.
VELSHI: We're counting down to number one as our look at the top 25 business stories of CNN's first 25 years continues. Coming up: Sticker shock at the pumps.
UNIDENTIFIED MALE: Think people were really shocked that a small group of small nations in the Middle East could have such an affect on our economy.
VELSHI: And later, the number one story. Fortunes were made and lost in a moment. We're not talking Vegas.
VELSHI: As we count down the top 25 stories of CNN's first quarter century, we continue with three letters that created quite a buzz. IPO, Initial public offering. It's the first public sale of a stock by a company, but the Internet age gave it an entirely new meaning. Here's number 21.
VELSHI (voice over): When the tech boom hit led by Netscape in 1995, the search engine company's IPO made history and wet the appetite of investors. In its first day the stock tripled in value. It wasn't long before everyone wanted in on what seemed like the fast track to overnight wealth.
GANDEL: The increase in IPOs made everyone from secretaries to CEOs wealthy. Stocks you've never heard of went up 200 percent in their first day of trading.
VELSHI: Other companies became household names after they went public. At the height of the boom in the late '90s, the average first- day return for IPOs was 65 percent. By 2000, nearly 400 new offerings had raised more than $61 billion. The Internet bubble eventually burst.
GANDEL: It's likely that IPOs won't rise as much as they did in the '80s and '90s and therefore the overnight instant wealth has managed.
VELSHI: Well, faded but maybe not vanished. Google's stock tripled in the nine months following it IPO. Leading the charge at number 20. Electronic payments from credit and debit cards to online banking to that little box that whizzes you through the tollbooth, but will we ever be totally cashless? Think about stored value cards; reload able cash cards you can use for everyday purchases from buying a cup of coffee to using a vending machine.
STARK: You'll see more stored value cards which might be a way for you to pay for small things with just a few -- something that's just a few bucks would be taken off of a stored value card rather than a debit card.
VELSHI: The next challenge figuring out a way to tip someone without cash. Number 19 is the talk of the town. Cell phones are everywhere from the streets of Manhattan to the monasteries of Tibet.
ELLEN MCGIRT, SENIOR WRITER, "MONEY" MAGAZINE: More cell phones were sold in the last year than in the last ten years combined. They're more popular than any other form of technology. They outsell anything.
VELSHI: And they're not just for yakking. Today's cell phone have still and video cameras. You can surf the web on them, and yes, of course, you can play games on them.
Number 18 on our countdown: Investors got a wake-up call on black Monday, October 19, 1987. It was the day the stock market crashed. Investor panic triggered a massive sell-off, causing the worst one-day percentage drop in the history of the New York Stock Exchange.
In a single day the Dow Industrial average lost 22 percent of its value, half a trillion dollars of investor wealth was lost that day, sending stock markets around the world into a tailspin. Unlike the stock market crash of 1929 that resulted in the great depression, the 1987 crash wasn't near as damaging.
SCHURENBERG: The crash of '87 was a dramatic story, took only a little over a year for the stock market to get back where it was. And that gave people perhaps a little to much confidence in the residuals of stocks.
VELSHI: Times Square, it's the crossroads of the world. And all of these cars are proof that America uses more oil than anyone else in the world. That brings us to number 17 on our list, oil. Here's Kathleen Hayes.
KATHLEEN HAYES, CNN CORRESPONDENT (voice over): Twenty-five years ago an oil shock that rocked the United States. One of the most dramatic moves yet on the roller coaster we're still riding today. Flashback to the early '80s, OPEC flexed its newfound muscle flooding output, boosting prices. Iran and Iraq at war. Oil skyrockets. In 1981 crude oil soars to over $80 bucks a barrel expressed in today's dollars and gasoline spikes up to more than $3 a gallon.
ERIC BOLLING, INDEPENDENT ENERGY TRADER: I think people were really shocked that a small group of small nations in the Middle East could have such an effect on our economy.
HAYES: It hit the U.S. economy hard as it enriched the oil barons. It seeped into pop culture. An oil tycoon named J.R. dominated the airwaves. Back on Main Street a grimmer reality. Sky- high oil prices helped push the U.S. into a deep and painful recession.
JOHN KILDUFF, SR. OIL ANALYST, FIMAT USA: Each of the last four recessions were preceded by energy price spikes.
HAYES: Oil shocks did shock some of us into driving more fuel- efficient cars. By the 80s, many traded in luxurious gas guzzlers. It didn't change everyone's ways because surging oil helps create recessions and recessions/demand for oil. Oil fell below $10 a barrel in 1986. Oil shock, 1990. Iraq invaded Kuwait. It caused a recession and that was followed by a global oil glut. The price of crude oil dipped back below $10 a barrel by December 1998. The availability of cheap oil and gas laid the foundation in the late '90s for the age of the SUV, the modern gas guzzler.
KILDUFF: The SUV has flourished as a result because of gas going to as low as 79 cents a gallon in some places. It is just a tremendous disregard all of a sudden for fuel efficiencies. HAYES (on camera): Hybrids are hit now, but are still driven only by a few. The United States is consuming more oil and gas than ever, because even with prices at record highs, many of us complain, but can still afford to fill our tanks. Who it really hurts is the poor. Families on the bottom rung of the economic ladder are spending an estimated 10 percent of the after-tax income on gasoline.
HAYES (voice over): Also guzzling more gas now, China and India as their economies continue to boom. That's why oil shock 2005 is different from the past. It's not a supply shock forcing prices higher, it's our own insatiable demand.
BOLLING: This one is way more relevant to me because unless demand slows down, you're going to continue to pay higher prices.
VELSHI: We're on our way to number one. Want a hint? It was about big dreams.
UNIDENTIFIED MALE: People were driving around in fancy cars, they were retiring very young.
VELSHI: Also coming up, justice served and lessons learned and the urge to merge. Corporate marriages give birth to layoffs. There's more to come on CNN's TOP 25.
VELSHI: We're counting down the top 25 business stories of the last 25 years. Back in 1980 it cost 50 cents to ride the subway. Today it's two bucks. Lots of things cost more today than they did back then, but some of them hurt more than others.
At number 16, managed care and HMOs.
MCGIRT: Of all of the issues facing this country, access to health care, affordable healthcare is the single toughest nut to crack.
VELSHI: Managed care was designed to ensure more Americans for less money. At their peak in the '90s, 80 million Americans belonged to HMOs or health maintenance organizations. For a flat monthly premium, HMOs covered medical care by providers with within a specified network, but costly medical innovations and the soaring cost of malpractice insurance meant higher costs for the HMOs, leading to surcharges for patients of cumbersome approvals process and claims that were denied outright. For many consumers, the promised savings evaporated. Last year $69 million people were enrolled in HMOs. Meanwhile more than 45 million Americans still remain uninsured.
It's a business story that hits home. Tax cuts are a number 15. In 1981 Ronald Reagan signed the biggest tax cut in U.S. history. While Americans got used to lower tax rates, prompting this famous campaign pledge.
RONALD REGAN: Read my lips, no new taxes.
VELSHI: President Bush broke that pledge, leaving the next federal tax cut to President Clinton. The Roth IRA or individual retirement account created in 1997 built on the success of the traditional IRA. Instead of letting workers delay paying taxes on their retirement savings, the Roth allowed their savings to grow tax- free and why give people tax deductions when you can just send them a tax rebate check? In 2001 the average head of household received $500 from the Feds.
STARK: Between now and 2011, Congress will have to decide whether to make all of the Bush tax cuts permanent. So that will be a big political issue over the coming years.
VELSHI: An era of pink slips begin at number 14.
SCHURENBERG: Down sizing, the death of manufacturing, the loss of power by the unions, represents a major shift in the American economy, away from production line, factory work and heavy industry towards an economy that's more based on services.
VELSHI: In the mid-80s, General Electric sparked an era of down sizing when it laid off a quarter of its workforce in order to remain competitive. Tens of thousands of blue-collar factory workers, once the backbone of the U.S. economy, lost their jobs. Down sizing expanded to the white-collar ranks. No longer did a good corporate job mean job security and now, outsourcing and new technologies are replacing traditional American jobs.
VELSHI (on camera): Excess in the 80s can be summed up in one line from the 1987 movie Wall Street, "Greed is Good." Greed led some people. Some of the richest people on the planet to put their hands in the cookie jar. While a fair number of them found their hands in a pair of these. Chris Huntington has story 13, the perp walk.
CHRIS HUNTINGTON, CNN CORRESPONDENT (voice over): The sight of Michael Milken being called into Federal Court in the spring of 1990 sent shockwaves well beyond Wall Street. There was the so-called king of junk bonds being pushed and shoved, dethroned by an ambush federal prosecutor.
UNIDENTIFIED MALE: How do you feel about your publicity.
HUNTINGTON: U.S. Attorney Rudolph Julian had bagged investor Ivan Foesky who agreed to plead guilty to conspiracy and cooperated with the government's investigation of insider trading. Foesky led the Feds to Milken and a '98-count criminal indictment for racketeering and insider trading. Milken never went to trial and instead he pleaded guilty to six securities violations after they dropped the insider trading charges. His initial sentence of 10 years was trimmed to 22 months but he was barred for life from working in the securities industry.
One of Milken's customers had been a savings and loan CEO names Charles Keating. Seeing him in a jump suit and handcuffs was a small payback to the Lincoln Savings & Loan depositors who lost their money because Keating had spent it on junk bonds, which plunged in value.
HUNTINGTON (on camera): The legacy of Keating & Milken extends well beyond their own cases. It's a legacy fueled by the public outrage over white-collar crime and the demand to see those responsible at the highest levels held accountable.
John Moscow prosecuted white-collar criminals in New York City for more than 30 years including Ex Tyco Dennis Koslowski. Moscow knows the power of the perp walk.
JOHN MOSCOW, FORMER PROSECUTOR: To the extent that the public has satisfied that justice has been done prior to a conviction, that's bad for the prosecution. So it's not an easy question. Is there some kind of desire for retribution?
HUNTINGTON: Dennis Koslowski looked shell shocked after being convicted of stealing hundreds of millions of dollars from Tyco and its shareholders. His arrest in June of 2002 kicked off an unprecedented two-year run of CEO round-ups that included Sam Waksal, for insider trading, Martha Stewart for lying to federal agents about her sale of Imclone stock, Don Regis for looting Adelphia Communications and Bernard Ebbers for cooking the books at Worldcom.
UNIDENTIFIED MALE: The real question is what is the role of the criminal justice system? And does shame have a role in that?
HUNTINGTON: The gang from Enron might know the answer while former CFO Andrew Fastow is headed for prison, former CEO Jeff Skilling and former chairman Kenneth Lay are headed for trial and still presumed innocent, after being paraded before the cameras, they may already have been convicted in the court of public opinion.
VELSHI: From corporate perps to corporate perks. Number 12 on our countdown, when Lee Iacocca, took over the struggling Chrysler Corporation he took a $1 annual salary. When the company turned around he cashed in. Others who root financially with the companies included Bill Gates and Jack Welch. Arguably they earned their hefty keep, but other CEOs, road the compensation wave along with them. The average Fortune 500 CEO made $10.2 million in last year in salary, options and performance-related bonuses, but there's a new extra. Extra accountability.
GANDEL: Corporate boards and shareholders have taken a lot of power back from CEOs. Now it's more of a who's first, get paid later.
VELSHI: We continue our countdown of the top 25 business stories of the last quarter century. At number one, Americans took control of their financial destinies.
UNIDENTIFIED MALE: I pick and choose where I want the money invested.
VELSHI: Later if it's not on the shelf, it's probably because you bought it and merger mania grips Corporate America. Stay tuned to CNN's TOP 25.
JACQUI JERAS, CNN METEOROLOGIST: Hello, everyone, I'm Jacqui Jeras in the CNN Weather Center. Parts of Florida are continuing to get hit hard, at this time, from Hurricane Dennis. We're looking at the Western coast, Southern parts of the peninsula and then also into the Panhandle, at this time.
This is a live, of what we call, level two Doppler radar image that you're looking at, right now, and these lightning strikes, live light thing strikes. The storm is still holding winds around 100 miles per hour, but the pressure has been strengthening a little bit. The forward speed has been moving about the same, so it's just under 400 miles now away from Pensacola. It's continuing to push up to the north and to the west around 14 miles per hour.
We do have a tornado watch which is in effect for much of central and southern parts of Florida, extending all of the way up into the Big Bend area. That will continue until at least 11:00 tonight, local time, a threat of tornadoes in these outer bands. We'll bring you another update coming up and complete team of coverage, that's at the 4:00 Eastern time hour. Now back to the program.
ALI VELSHI, HOST: Welcome back to CNN's TOP 25. I'm Ali Velshi on Wall Street, the beating heart of American capitalism and no better place to continue our countdown of the top business stories of the last quarter century. Well, we asked the editors at "Money" magazine to put together a list as CNN celebrates its own 25th anniversary. "Merger Mania" comes in at number 11. Here's Allan Chernoff.
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Alisa Drayton, lawyer, MBA and unemployed for more than a year. Drayton, $90,000 in debt from student loans, is a merger victim, laid off from a corporate lending job after Bank of America bought New England's biggest bank, Fleet Boston.
ALISA DRAYTON, UNEMPLOYED: I was already reliant on that position not only just to develop my career, but also just the salary that I was making there.
CHERNOFF (on camera): Mergers over the past quarter century have changed not only the business world,, but also America's daily life. At a minimum, people have seen the name of their bank change, often several times or their phone company. Hundreds of thousands of people, though, have lost their jobs directly as a result of mergers.
(voice-over): Time and again, chief executives have pointed to financial benefits of mergers, including cost savings through job cuts. JAMES DIMON, CEO, BANK ONE: It's about 10,000 -- we expect ultimately 10,000 head count down.
KENNETH LEWIS, CEO, BANK OF America: Our company will feature increased earnings in revenue diversity, creating stronger, more consistent results for shareholders. CHERNOFF: Merger-driven corporate overhauls, labor experts say, have changed the way most working Americans view their jobs, whether or not they've been laid off.
RON ESPOSITO, MANAGEMENT CONSULTANT, PC: Most of the merges have resulted in very significant and massive downsizing, typically resulting in unemployment. That stress of not having any job security, any longer, in our workforce, I think is very significant in terms of the impact that it's having on people's physical and emotional well-being.
CHERNOFF: For some investors, though, mergers have generated spectacular wealth. Shareholders of General Foods saw their stock jump 40 percent when Philip Morris bought the company in 1985. Philip Morris shareholders did even better. Twenty years later the stock, now called Altria, is up 2,200 percent. But the majority of mergers, academic studies show, fail to deliver for shareholders. DaimlerChrysler's stock has lost half its value since the automakers combined in 1998. Merger consultant, Mark Sirower say, executives tend to rush into corporate marriage.
MARK SIROWER, AUTHOR, "THE SYNERGY TRAP": Then tend to fall prey to this myth, if I don't do this deal now I'm going to be left without a dancing partner or there won't be any other -- any other deals for me to do. But in fact, there's a universe of opportunities.
CHERNOFF: Among the biggest flops of all-time, AOL and Time Warner, parent of CNN. Time Warner's stock price is only one-quarter of what it was in early 2000 when the merger was struck.
(on camera): During the past quarter century, Americans have been gradually adapting to the upheaval that often comes with merges, good thing because after the dot com bust, the pace of merges has been pick up again. In fact this year is on track to be the biggest year for mergers since the all-time record was set in 2000.
VELSHI: Well, if mergers had people concerned about their future so did under funded pensions. What used to be a sure thing, the idea that your company would continue to pay you after you retired is now for millions of Americans, just a broken promise.
(voice-over): A change in plan is at No. 10 with the rise of the 401(k) and the decline of pensions. In 1981 the 401(k) was created, named creatively for its tax code number. It allowed workers to deduct money from their salary before that money was taxed, as long as they put it aside for retirement. The 401(k) gave workers control over and responsibility for their retirement savings. ERIC SCHURENBERG, MANAGING EDITOR, "MONEY" MAGAZINE: The rise of the 401(k) and the decline of the pension captures a kind of shift in the American mindset. The institutions that once took care of you aren't going to do that anymore, at least not to the same extent.
VELSHI: It changed the way we live, work, shop and stay in touch. The personal computer is at No. 9. In 1981 IBM introduced the PC for a little over $1,000. Last year, nearly 78 million households had one, with new innovations, the PC has become more accessible, affordable, and mobile. Hand-held devices are everywhere and laptops outsold PCs in May for the first time ever.
ELLEN MCGRIT, SR. WRITER, "MONEY" MAGAZINE: Clearly, the personal computer is the single most important tool of the empowered individual.
VELSHI: By the way, IBM got out of the PC business last year. Today, Dell is the world's biggest computer.
At No. 8, a global turning point: September 11, 2001.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The terrorists, who attacked the United States on September 11, targeted our economy as well as our people.
VELSHI: On that dark day nearly 3,000 people were killed in the attacks including citizens of 80 countries. The economic impact was profound. In the first 11 days after the attacks, the immediate loss was estimated at $164 billion. The total cleanup cost $750 million with $9.3 billion in insurance claims. No longer feeling so secure, Americans chose to avoid public places and travel. September 11 crippled the insurance and travel industries.
MCGRIT: I think it would be impossible to overstate the impact of September 11 had on attitudes and psyches and action of Americans, really people around the world, in the last 25 years.
VELSHI: But, Americans proved resilient. Within 30 days the Dow was back to the level it was at before September 11. Consumers did their part, too. Holiday sales for 2001 were higher than they were the year before.
The phenomenon that made the average worker wealthy is at No. 7, the rise of the individual investor. In 1980 only 13 percent of Americans owned stock. By the late '90s that figure quadrupled. Individual investors had spurred the growth of 401(k)s, mutual funds and online brokers. The widespread use of the Internet helped break down those barriers between Wall Street and Main Street.
STEVEN GANDEL, STAFF WRITER, "MONEY" MAGAZINE: Stocks used to rise and fall based on the whims of a number of fat cats on Wall Street. Now, with millions of individuals investing in the market it's much harder to manipulate stock.
VELSHI: We're closing in on the No. 1 business story of the last 25 years. Here's another hint. Buy low, sell lower? But first, home may be where the heart is, but is there endless love in real estate prices? We continue our countdown on CNN's TOP 25.
VELSHI: This is the famous Wall Street bull. You know, from the whole bull and bear legend. Here's one idea of where those terms came from. An attacking bull has to have its head down, its horns down to pierce the soft underbelly of the bear. As the bear goes up, bull markets go up. An attacking bear has to descend upon the bull with its claws and as it descends bear markets descend. Those two terms apply to real estate as well and that's No. 6 on our countdown. Here's Geri Willis.
GERI WILLIS, CNN CORRESPONDENT (voice-over): Even before CNN opened its doors, Paul Mason and his wife Anne were opening their front door for the first time to their Monroe Connecticut home, 25 years later, the Masons' consider themselves wealthy, thanks to that investment.
Paul MASON, HOME OWNER: We bought it in October of 1979. The purchase price at the time was $78,000. After renovations and all that we've done and the market in general, we received an offer for -- just a few days ago, for $400,000 which we accepted.
WILLIS: Like many Americans the Mason's have enjoyed the fruits of the real estate boom. Twenty-five years ago, Americans bought nearly three million homes each year. Median prices were just $62,200. Today, we're buying nearly seven million homes each year and ponying (SIC) up $206,000. But in recent years prices have skyrocketed because low interest rates have heightened demand. Bakersfield, California, residents have seen prices rise 33.7 percent this year. Other beneficiaries? Large metro-markets and coastal cities where boomers would like to retire.
ROBERT SHILLER, AUTHOR, "IRRATIONAL EXUBERANCE": The speculative enthusiasm that we saw in the 1990 when the stock market was transferred to the housing market.
WILLIS: According to the Federal Reserve, housing makes up half of the total wealth of Americans, age 55 to 64.
DAVID LEREAM, NATIONAL ASSOCIATION OF REALTORS: Real estate is now wealth creation rather than just a place to live. Real estate is an investment that stands side by side with stocks and bonds.
WILLIS: one of the beneficiaries of the boom? The national economy. Over the past five years the sizzling market for residential home and condos has created 1.2 million jobs in construction, mortgage lending, and real estate sales. But the legacy of the boom is less certain. Americans have gorged themselves on mortgage debt, leaving them vulnerable to any price weakness. According to the century foundation, Americans in the bottom 20 percent of the earnings spectrum almost tripled the value of their mortgage debt between 1989 and 2001. Those in the next bracket, between 20 percent and 40 percent of the earnings spectrum, took on more than twice as much mortgage debt in that period. For that reason, people like the Masons' are sitting pretty. Despite sinking roughly 70,000 into major renovations, they've paid off their mortgage. Now proceeds from the sale are all theirs, free and clear. And there's no place like their valuable home for their financial well-being.
VELSHI (voice-over): At No. 5, the death of inflation. OK, death might be a bit strong, but the word "inflation" just doesn't spark the fears that it did 25 years ago. Inflation measures the change in prices year to year. On average, prices go up about 3-1/2 percent a year, but back in 1980, inflation was running at 13 percent. It seems like a distant memory, but with today's high price of oil, gasoline, jet fuel, home heating oil and the cost of getting your goods from the port from the warehouse and to the store, is inflation waiting in the wings?
GANDEL: There's a fear that inflation will begin to rise again, but that's probably not going to be the case. We get more of our goods in the United States from developing nations. And in those developing nations, the standard of living is much lower, so they pay their workers less, so that means they can produce goods at lower cost and keep our prices down.
VELSHI: At No. 4, the Internet. Suffering the web has become as commonplace as making a phone call. The world is now instantly at our fingertips: Shopping, banking, learning, communicating all from the comfort of our home. We literally live in a virtual world with no borders and no boundaries.
ELLEN STARK, ASST. MNG. EDITOR "MONEY": The Internet has brought businesses from all around the world in touch with consumers all around the world so it's expanded how people can do business. You don't have to buy everything in your own town anymore.
VELSHI: That brings us to No. 3, globalization. Our world keeps getting smaller and smaller. As U.S. companies expand their business interests abroad, political events like the fall of the Berlin Wall and trade agreements have opened new markets. Developing countries nearly doubled their share of U.S. exports and imports from 1990 to 2003, while low-cost imports have forced prices down at the cash register; there is a downside to that for millions of American workers.
SCHURENBERG: There's tremendous competition for labor. That means that wages will be held down in high wage countries and they'll rise in low wage countries. It means the job security in high wage countries is going to diminish even more than it already has.
VELSHI: Throughout the last 25 years there has been one rock solid, reliable feature of the business landscape: The consumer. Breakthrough trade deals made imports cheaper and a little thing called the Internet allowed you to shop everywhere at once. There's no doubt about it, the consumer is king. Here's Susan Lisovicz with story No. 2.
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): In the land of conspicuous consumption, there are big homes, designer shops, fancy cars, and right there in the shadow of Beverly Hills, the 99 cent store.
UNIDENTIFIED FEMALE: For 99 cents you get fresh pineapple, jalapeno chilies.
UNIDENTIFIED FEMALE: Getting what you need for a good price. That's always empowering, isn't it?
UNIDENTIFIED FEMALE: Yeah. Everybody's into bargains.
LISOVICZ: It is an obsession among the American consumers nationwide, regardless of age or income.
HOWARD DAVIDOWITZ, RETAIL CONSULTANT: If we want to define the last 25 years, we want more for less, that's what created Wal-Mart.
LISOVICZ: And does Wal-Mart grew from its humble backwater origins to become the world's biggest retailer, it used that size as leverage. It cuts costs everywhere. CFO's office is barely wider than his outstretched arms.
TOM SCHOEWE, CFO, WAL-MART: We'd like to rate every bit of expense out of the operation so that we can pass those savings on to our customer.
LISOVICZ: Another phenomenon coincided with Wal-Mart's growth and again the consumer benefited: Trade agreements that opened up cheap labor overseas.
DAVIDOWITZ: China has been the engine. China has been the supplier for cheap goods to America.
LISOVICZ: Cheap, yes, but not necessarily tacky.
UNIDENTIFIED FEMALE: Cheap is definitely chic.
LISOVICZ: Isaac Mizrahi designs couture ball gowns that goes for $20,000 each, but he generates most of the revenue designing for target.
ISAAC MIZRAHI, DESIGNER: This is a cashmere sweater at target.
LISOVICZ, (on camera): A hundred percent cashmere?
MIZRAHI: One-hundred percent cashmere and it is pricey. I mean, this is a pricey item at $49.99.
LISOVICZ (voice-over): But a consumer might still find that sweater even cheaper because of yet another innovation that further empowered the consumer, the internet.
UNIDENTIFIED MALE: You can do the comparison shopping online and then in many cases make a purchase decision right there and then.
LISOVICZ: The consumer, whose spending generates two-thirds of the $12 trillion U.S. economy has become more demanding and less loyal.
JEFF BEZOS, CHM. PRES. & CEO AMAZON.COM: I asked people at Amazon.com to wake up every morning afraid, wake up terrified, be very precise about what you're afraid of. Don't be afraid of our competitors. Be afraid of our customers.
LISOVICZ: And treat them very, very well.
(on camera): Consumers have always had a lot of clout, but with the rise of discounters, the Internet, and the global economy, consumers are now king. So it's not just about price, It's about comfort too, like leather seats, satellite TV, and extra leg room in economy class.
(voice-over): Some consumers say cheap comes with its own cost, lost jobs in the U.S. And American stores selling goods made under deplorable working conditions abroad.
UNIDENTIFIED MALE: We have to think about some economic justice issues about the globalization of the economy and then make some good choices about our consumer habits, here in the United States.
LISOVICZ: But for now, the consumer habit is an addiction to low prices.
UNIDENTIFIED FEMALE: And I'm still looking for the best value and the best price.
LISOVICZ: And companies that don't deliver do so at their peril.
VELSHI: We're finally at the top of the list. Have you figured out what No. 1 is yet? Here's a hint: Ignorance is not financial bliss. Stay tuned to CNN's TOP 25.
VELSHI: Time for the No. 1 story. It was the age of casual office wear of millionaire college grads and of the squarest of squares, stock market analysts becoming celebrities. Over the way it reshaped our lives, empowered the individual investor, made us rich and made us poor, the boom and bust of the '90s is the No. 1 business story of the last 25 years.
VELSHI (voice-over): Back in 1999, Steve Tanny was the picture of stability. STEVE TANNY, RETIREMENT INVESTOR: I worked for a plumbing supply company. I had been there for 22 years.
VELSHI: He had a pension, a bit of money came out of every paycheck and he expected to get a fixed monthly payment when he retired.
TANNY: And all of a sudden, it was decided by my company to turn the pension plan over to the employees.
VELSHI: And that made Steve part of a trend, companies shifting the risk and expense of investing for their employees' retirement over to their workers. Steve was now in total control of his destiny.
TANNY: I picked and choose where I wanted the money invested.
VELSHI: But he didn't know how or what to pick so he turned to his financial planner, Doug Flynn.
TANNY: I right to Doug with it because I had investments with him already.
VELSHI: Doug invested Steve's money in mutual funds, considered safer than buying individual stocks.
DOUG FLYNN, CFP FLYNNZITO.COM: We were up probably about 30 percent between the late '99 into early 2000.
VELSHI: But that wasn't enough for Steve. The tech boom was playing out all around him.
TANNY: People were driving around in fancy cars, people were retiring very young, buying houses, in Florida or in Las Vegas, all over the place.
VELSHI: His lack of understanding didn't stop him.
TANNY: I don't know makes the stock market. Honestly, I don't even know what makes stocks go up and down.
VELSHI: He didn't need to know, he just needed a way in.
MCGIRT: There was a pulling back of the curtain on how Wall Street worked, that was very actually very interesting and very empowering for the individual investors.
VELSHI: And while dot com companies stole the headlines, there were safer tech stocks to invest in with real products and real profits, like Lucent Technologies. Lucent was Steve's safe bet. One of the first stocks he bought in March of 200. Spun off from AT&T, Lucent was one of the most widely-held stocks in the world with more than three billion shares held in retirement accounts, pension funds, and by investors like Steve. Steve bought Lucent at $72 a share. Two days later the stock had dropped $5.
TANNY: And as it started going down I bought more of it. I was way over my head.
VELSHI: As Lucent dropped another $10 Doug tried to get Steve to sell. He just got completely wrapped up with it.
UNIDENTIFIED MALE: U.S. Stock markets take another steep dive.
UNIDENTIFIED MALE: The Nasdaq is down 337 points.
VELSHI: On the morning of April 14, 2000, 39 days after Steve bought his first stock an inflation report triggered a massive sell- off. It turned out to be the biggest point loss in U.S. Stock Market history.
(on camera): It was the biggest single-day loss of money, well, since money was invented. Look at it this way, each one of these thousand dominoes represents a billion dollars, on that single day, $1 trillion worth of investor wealth came tumbling down.
TANNY: I lost about 85 percent of what I had when it was turned over to me.
VELSHI (voice-over): Everybody lost money that day. Michael Dell's net worth dropped $2.3 billion, even Bill Gates lost $11 billion, but they didn't lose 85 percent of their retirement savings. Steve knew he was beaten so he turned back to Doug.
MCGIRT: He was smart enough at an early point, relatively, to say this is not for me, take it back.
VELSHI: But, swallowing his pride was tough. Steve knows others who hung on and lost more. His advice?
TANNY: Start all over again, just don't expect to get to up to that level again that you were at. Just try not to lose any more of it.
VELSHI: It was the bust of his lifetime, but it taught Steve the lesson of the ages.
TANNY: If someone told me, the odds on this couldn't miss, I wouldn't buy it.
VELSHI: Steve Tanny is still in the market, but now he's an investor, not a speculator. That's it for this edition of CNN's TOP 25. Check out our Web site, CNN.com/CNN25. And tune in next month when we count down the top 25 sports personalities of the last quarter-century.
From Wall Street, I'm Ali Velshi. Thanks for joining us.
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