CNN IN THE MONEY
Fundraising Push for 2004 In Full Swing; Which Companies Offer the Best Opportunities for Minorities?
Aired June 29, 2003 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: From New York City America's financial capital, this is IN THE MONEY
JACK CAFFERTY, HOST: Welcome to the Sunday do of IN THE MONEY. I'm Jack Cafferty. Thank you for joining us.
Here's a rundown of what lies ahead on the program today. The fundraising push for the 2004 presidential election already going full speed. We're going to talk about whether campaign donations are replacing the voters and distorting the democratic process.
Minorities making their way up the corporate ladder can sometimes find the climb pretty tough, but some companies are a lot better than others, and we'll take a look at a new list of the best firms for minority workers.
Working for $5.15 an hour would probably leave you feeling more than just minimum rage, but is that enough to cover room and board in America? We'll talk to a woman who voluntarily did this for a couple of years and then wrote a best-selling book all about it.
Joining me this afternoon as always for the next 60 minutes, CNN financial correspondent, Susan Lisovicz, and "Fortune" magazine editor at large, Andy Serwer. And of course one of the big stories of the last week, that two-day fed meeting where they decided to cut rates by a quarter of a point. We sat here last week and we all made predictions, and you two had it right. I thought they would go half a point -- yes.
ANDREW SERWER, "FORTUNE" MAGAZINE, EDITOR AT LARGE: We got it right, you didn't. Did you add that part -- and you didn't?
CAFFERTY: Yes, and I didn't. That's right.
SERWER: OK, I just want to get that part in, because you said that we got it right, but I...
CAFFERTY: No, no, no. I didn't. I made a mistake.
SERWER: No, you just -- you can't, that's like the weather, Jack. Now I'm letting you off. It's like trying to predict the weather. No one can.
CAFFERTY: Actually, you know, there were a lot of people in my camp who were kind of hoping for a 50 basis point cut. SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: Yes...
CAFFERTY: Why do you suppose they didn't go that far?
LISOVICZ: Well, I think that actually there were -- there was a sizable audience. I mean, it was minority, but still a sizable audience that were saying that the fed shouldn't do anything at all. It takes a long time, six months or so, for these kind of rate cuts to work -- work their way through the economy, and by that point, supposedly, the economy would be chugging along anyway. By next year.
SERWER: Yes, but, I think that the fed only did a quarter point because they didn't think we needed a half point, they didn't think we needed shock therapy. I mean, it's sort of like they're damned if they do, damned if they don't.
SERWER: Because if they do a half point it makes them look like they're panicking -- No. 1, No. 2 they start to run out of powder, because fed funds are so low.
LISOVICZ: Running out of ammo.
CAFFERTY: (UNINTELLIGIBLE) down to 1 percent now. What does that do to money market deposits? There are, literally, trillions of dollars in money market accounts around the country.
LISOVICZ: The expense of having the money market account might, in fact, overwhelm your return, so...
SERWER: The average rate now, is 6.6. Remember, in 2001 it was 6 percent, now it's .6. It's heading to .44, people are suggesting, and you really need to shop around here, because you can find them that still yield close to 1 percent. If you're -- you're right, Susan. I mean, you can get them yielding 3, and your expenses are more than that. I mean, it's crazy.
LISOVICZ: You might as well just keep it under your mattress.
CAFFERTY: There you go. We haven't been bombarded with mean spirited television ads or those endless piles of direct mail yet, but hang in there, it's all coming. The run for the money and for the White House is already well under way.
The Bush team has set the bar very high, predicting they'll raise more than $200 million for President Bush's re-election run. "USA Today" reported this week, that the vice chairman of the Democratic National Committee will step down in order to form a new political group to raise millions of dollars for democratic hopefuls. Joining us now, to talk more about the impact of money on presidential elections, Adam Lioz, a democracy advocate at the U.S. Public Interest Research Group.
Adam, nice to have you with us. Thanks for joining us.
ADAM LIOZ, PUBLIC INTEREST RESEARCH GROUP: Thank you very much, Jack, and Susan and Andy for having me.
CAFFERTY: We mention this as a -- the new American presidential primary and, talk about that for a minute. Is it -- is it not true that by the time the electorate's attention begins to focus on the elections it's the candidate with the fattest wallet that has the best chance of tapping into the voter when he's ready to listen?
LIOZ: Unfortunately, that's very true, both at the presidential level and for congressional races. We actually call it the "wealth primary." In this past congressional session 94 percent of the candidates who raised the most money were victorious on Election Day, and unfortunately in spite of our limited public financing for presidential races nearly every presidential candidate who's raised the most money has emerged with his or her party's nomination, or I should say "his" party's nomination in the past. So, very much so, there is a wealth primary going in which, if you hope to win you need to really raise a lot of money.
Now, that wouldn't necessarily be a huge concern of ours if candidates were raising money from average Americans, in that case that might be a proxy for public supporter popularity, but our research shows that, in fact, is not the case. These candidates are overwhelmingly depending upon a very narrow set of wealthy donors for their money. As an example, President Bush, as you may know, didn't report any fundraising in the first quarter, but the democrats did, and they reported raising more than 80 percent of their money in contributions of at least $1,000. Now...
SERWER: Adam -- oh, go ahead.
LIOZ: Oh, I was going to say, that's well beyond what most Americans can afford to give.
SERWER: Let me jump in here and ask kind of a far out question, which I sometimes specialize in, Adam. What -- and that has to do with our founding fathers and our political history. What do you think the founding fathers would have think about the mess we're in right now? And, aren't presidential candidates and senators always part of the economic elite? I mean, if you adjust for inflation, aren't it always a bunch of rich guys getting elected and funding their own campaigns? I mean, it's timeless, isn't it?
LIOZ: Well, I think that throughout our history that's probably been fairly accurate, although I wouldn't say the founding fathers would be entirely be satisfied with that. I think someone certainly like Thomas Jefferson had a lot of faith in public opinion and public will.
SERWER: But, he was a rich guy, too.
LIOZ: He was a rich guy, but he would have liked, I think, to see the popular opinion rule in this country, and I think, you know, our history has been a process of moving towards that. Don't forget, back in the founding fathers' era we didn't have women voting; we certainly didn't have African-Americans or other minorities with the franchise.
And so, I believe we're moving in the right direction, and at this point in our history it's no longer acceptable that candidates are either in large part self-funding, we have a situation right now where a quarter of the congress are millionaires compared with just 1 percent of the population, and actually in this last election cycle 43 percent of the newly elected members were millionaires. So, in this modern era it's no longer acceptable that we have an economic and political elite. We need to have, as President Lincoln spoke of, a government of the people, by the people, and for the people, and we can get there with some sensible changes in our campaign finance laws.
LISOVICZ: And, you know, Adam, I'm looking at some of your suggestions, but I also have a far out question.
LISOVICZ: You don't only specialize in it, Andy.
I mean, one of them is lower contribution amounts or give a tax credit for small contributions or put spending limits on campaigns. What about limiting the campaign time itself? It's been done in big civilized countries like France and England, where you just put a cap on the amount of time that a candidate can campaign. What about that idea?
LIOZ: Well, I think that the time spent fundraising or time spent campaigning has often portrayed -- been portrayed in a very negative way, primarily because of how Americans experience modern campaigns. It's very often negative TV ads, and that turns a lot of people off, and it's very often done strategically to lower voter turnout and suppress that. However, I actually don't think -- if candidates got back to campaigning in a grassroots fashion and if campaigning and fundraising through low contribution limits were actually similar activities where there were barbecues and fish fries, candidates went door to door, then I don't think Americans would be nearly concerned -- as concerned as they are now with the amount of time candidates spend campaigning. So, I think that may be, you know misplacing the focus a bit from time to where it really should be focused, which is money. The problem is that candidates are getting their money from a narrow segment of Americans, and that's determining who wins and I think we should keep the focus there.
CAFFERTY: Let me try a crude analogy here. Political ideology at election time is product. If a corporation makes widgets and they want to sell their widgets and the springtime is the season people buy their widgets, they start advertising in the winter and they develop a budget and they go out and they push the product to the people who can afford to buy it. Why shouldn't the political system operate like the rest of this capitalistic society operates?
LIOZ: Well, I would say that every American has a fundamental right to have an equal opportunity to influence the political process. We have the concept in this country of one person, one vote. We don't necessarily feel, in this country, that everyone has the right to the same amount of widgets, but we do feel that everyone experiences or should experience an approximately equal right to political expression and so, when we have a situation when the amount of money that you have is -- becomes a proxy for your ability to express yourself in political...
(INTERRUPTED BY CNN COVERAGE OF BREAKING NEWS)
CAFFERTY: A big and not that unexpected a response to our e-mail question of the week last week, which was: "Are your expenses rising, falling, or staying the same?"
Roberta from Tucson wrote this. "My expenses are constantly rising and my income stays the same. Eat less is the key, I guess. I need to lose weight anyway."
Another viewer wrote: "My health insurance up $38 a month, my cable bill is up $10 a month, gasoline is up, property taxes are up too. I'm nickeled and dimed to death."
We'll have a new e-mail question a bit later in the program. You'll want to stay tuned for that. The end of that last e-mail about being nickeled and dimed to death is a pretty good segue into our next segment of the program.
Rising costs certain a problem for many Americans but what about those who live day after day just above the poverty line? Minimum wage in this country $5.15 an hour and it hasn't been raised for six years.
Our next guest wanted to find out firsthand what making the bare minimum was like and what trying to survive on just a little bit of money was all about. She detailed her trials and tribulations in what became a "New York Times" best seller titled "Nickel and Dimed." Author Barbara Ehrenreich joins us now from Charlottesville, Virginia. Barbara, it's nice to have you with us. Thank you.
BARBARA EHRENREICH, AUTHOR, "NICKEL AND DIMED": Glad to be with you.
CAFFERTY: At the end of this experience what was the biggest misconception you had had before it started about living on something just slightly above minimum wage?
EHRENREICH: I think I thought it would be easier than it turned out to be. I had my little calculations before I went into this and I thought I could do it if I could hold the rent down to say $500 a month. I wasn't able to do that. What I found really was that there's a big mismatch between rents and wages out there. SERWER: Barbara, you talk about that mismatch, so what do people do? What did your coworkers do to get by, number one, and number two you talk about wages should be raised, how would that happen? How would you do that?
EHRENREICH: Well, first let me say I was actually above the minimum wage. I averaged in all the different jobs I had $7.00 an hour, so I was working as a maid with a housecleaning service, a hotel housekeeper. I was a waitress, a nursing home aide, and a Wal-Mart floor clerk and it averaged $7.00 an hour.
So, people I was working with were making the same amount of money. One strategy for survival is that you live with other people who are making some money. I mean, you know, you have a spouse or a boyfriend or a roommate, somebody you just met maybe.
The other strategy is more than one job and this seemed to be very, very common, especially full time and half time or part time job, something like that. Then you can try to get it together.
But I did work with people who weren't managing by any means. I worked alongside people who were homeless and although they were full time workers. I worked alongside, and I think this was the really hardest thing to take, people who were not getting enough food in the working day because they didn't have any money and they didn't have any food at home. So, it's hard.
LISOVICZ: No question about it and, you know, because of this existence, this trial existence that you led it gave you a different perspective on welfare reform. A lot of people, a lot of voters really like that. They think that, you know, they say welfare really reinforces people to be on the dole but you have a different perspective as a result of your experience.
EHRENREICH: Yes, welfare reform basically said to women who had been receiving welfare, all right no more. You've got to get out into the workforce and you will be all right if you get out into the workforce. You'll be able to support your children. You'll rise out of poverty.
What we know from studies that have been done is they haven't risen out of poverty, of course, because they're going to very low wages. I don't think there's a problem with a work ethic among American workers.
Everyone I worked with, including people who had spent some time on welfare, really cared about their jobs, really put their heart into it. I just don't think there's a pay ethic on management's side when it comes to that level of employees.
CAFFERTY: You mentioned a whole variety of different things you did. What was your favorite? Is there anything you'd go back to where you had a little fun and met some people you enjoyed being around or were they all just drudgery?
EHRENREICH: Well, you were just talking about food, so I would say I kind of enjoyed being -- I kind of enjoyed waitressing. You get to control how much whipped cream goes on those sundaes.
CAFFERTY: Well, that's true.
EHRENREICH: And that's -- I liked the nursing home job except it was terribly understaffed and I was constantly terrified of, you know, killing some patient inadvertently, but I had like a feeling of actually, you know, helping people.
EHRENREICH: So, it was -- this was not all grimness. There were things I enjoyed a lot.
SERWER: Barbara, I want to take you on the other side though. What was something that was really terrible? I mean did you have anything that was truly dreadful?
EHRENREICH: Yes. You know the worst job, and I was surprised by this, was the housecleaning job with one of these maid services, you know, that you could find in the phone book where you work in a team and you go from house to house.
That was the most physically damaging job, even young women who had been there like three months or so had some kind of injury because we had such extreme time pressure to clean those houses. We literally ran around them with our backpack vacuum cleaners on our back. That's pretty tough on your back and scrubbing the floors on our hands and knees. So, that was the worst, the dirtiest, and actually the lowest paid too.
LISOVICZ: You know, Barbara, I'm curious as to how you were treated by your managers, you know. We have, of course, what is called a jobless recovery. A lot of people underemployed, don't have jobs, and taking huge pay cuts just in order to get some money coming in. Were you treated well? Did you find that your work was respected?
EHRENREICH: No, I can't say that. I should mention that the conditions I'm describing apply to before the economic downturn. I was doing this between the years 1998 and 2000. Absolute, you know, peak of prosperity, so it couldn't have been better really, even though it was terrible at the time.
Now it is worse but still the attitude of management toward the entry level, low wage worker seems to be well, they almost look on you as if you're a criminal. You know, you've got to have the drug test. You got to take a lengthy personality test where they try to get you to confess that you are a thief, et cetera.
There's a lot of surveillance when you go to work, very few rights. They can search your purse at any time. So, you do feel like you've gone, (unintelligible) to the bottom really of the hierarchy when you get in these jobs.
SERWER: I'm sorry, just quickly, you talk about a lot of problems. What in your mind would be some solutions to these problems?
EHRENREICH: Well, you know, basically people need more money. They need to be able to earn more. I wish more employers would see the wisdom of treating people better, paying them better, and not having such high turnover for example.
I think we need certain benefits like health insurance for everybody. That shouldn't even be the employer's responsibility. That would make life a lot easier. There's a long, long list of things we know we should have been doing as a country years ago and remain undone.
CAFFERTY: Barbara, there is that old phrase you don't know what it's like until you walk in the other person's shoes. You've done that and I appreciate you spending some time to share your insights with us here on IN THE MONEY. Thank you.
EHRENREICH: My pleasure.
CAFFERTY: Barbara Ehrenreich, author of "Nickel and Dimed" on not getting by in America.
Next up, a surge in tech stocks may make a tempting offer for you if you're looking about getting into the stock market. We'll take a look at whether or not we're talking about double bubble trouble when it comes to techs.
How much would you pay for a good bottle of scotch, a really good bottle of scotch? There isn't any scotch anywhere worth what these guys think they're going to get for this. We'll tell you about it.
LISOVICZ: It sure seems like old times in the stock market. Technology shares are surging once again with the tech heavy NASDAQ up more than 20 percent so far this year. The question now for investors is whether they should get in the game or stay on the sidelines.
Joining us to help answer that question is Arnie Berman. He's a technology strategist at the Soundview Technology Group. Welcome.
ARNIE BERMAN, SOUNDVIEW TECHNOLOGY GROUP: Hi, good to be here.
LISOVICZ: Well, you know, Arnie there's that old expression been down so long it's starting to look up to me. I mean let's face it, tech shares were completely collapsed over the last three years. Is it just a question of valuations that they're beginning to look cheap?
BERMAN: Well, I think the more aberrational prices that you saw were certainly what we experienced last October and even more recently in March than the kinds of prices that you're seeing today.
What I find fascinating right now is the number of people that are suggesting that valuations are extended, that the stocks have surged too far, that it's time for a pullback, yet when you look back the stock prices today are barely, are almost back but not quite to where they were on September 10, 2001, the day before the attacks.
And, if you look at the context today versus the context then, virtually everything about the world today is better. Growth rates are again positive. Earnings revisions are stable. Valuations are lower. Cash flows are generally higher. They're growing faster. There are no longer, the estimates are no longer in free fall and certainly the interest rate context is better.
CAFFERTY: Wait a second, Arnie.
BERMAN: As are the overall risk premiums lower, so really in every way the situation is better than it was in September, '01, yet back then since NASDAQ had declined 38 percent in the four months leading up to September, '01...
BERMAN: The perception was that they were cheap.
CAFFERTY: I'm sorry. Let me interrupt. What do you mean things are better now than they were then? We got a recession that's barely over. We go not growth in the economy. We got people out of work, over 400,000 that are on unemployment. It's been there for weeks and weeks and months.
Forward guidance coming out of these companies when they report earnings all say basically the same thing there ain't nothing on the horizon. We can't see any dramatic upturn in business, revenue, sales or anything else.
We've got a government and a Federal Reserve concerned about deflation. We've got jobs being exported out of this country to every other place on the planet. What do you mean things are better?
BERMAN: A lot of the situation you describe, those things were all in front of us back in September, '01. When you look at the situation today what the market is suggesting is that things are better now and going to continue to get better in '04.
Back then, growth rates for the S&P 500 and for the technology companies was negative. These companies were shrinking. They're again growing. At that point, estimate revisions were all negative. At this point, there is stability.
In fact, if there's a word that we're all going to get sick and tired of hearing during report season in July, it will be word stability. Everybody is talking stability at this point and since we only have stability very few folks will be willing to say that it's going to get better.
SERWER: Arnie, Arnie, Arnie. I mean these stocks have run up though. I mean you may be right. Let's just say you're right but isn't this already priced in? I mean Yahoo is up three times since October, threefold and it's got a PE, a price earnings multiple of 137. Now, would you buy that stock right now? BERMAN: Yahoo's OK. It certainly wouldn't be my best idea right now. One of the ways to look a Yahoo, though, because it's an interesting case study is Yahoo is essentially a play on advertising and ultimately in a good advertising environment they're leveraged that more core advertising will be over the web than it was the last cycle and more of the web advertising is going to be over the big portals that everybody goes to.
But in the context of an environment where advertising was shrinking, Yahoo was not going to realize any of that leverage. So, a lot of what's helped the stock is the fact that there is leverage to an improved economic environment in the tech sector and, frankly, that leverage I think is about to become one of the great virtues of investing in tech stocks, when for the last couple of years the cyclicality of tech was the thing that investors were most afraid of.
LISOVICZ: But, you know, Arnie just very quickly, I mean stability is one thing. We're talking about growth here. A lot of investors have been burned. When are we going to see growth in the tech sector; that is, companies spending on infrastructure where you see chip sales surging, the real infrastructure of technology starting to pick up?
BERMAN: Let's be clear about this that first of all when I say it's time to get back into tech stocks, I don't mean to say that we're going back to the late 1990s, that it's not as though these stocks are becoming one decision vehicles again where for the longest time it seemed like they were all buys and holds and then later on it was just sell and forget.
I think we're getting back to a normal environment which means that tech investing is difficult that valuations matter, product cycles matter, timing matters, financial statements matter, remembering to sell matters.
It's hard and that's the way I think it's looking to be going forward, and I think what you're seeing out there is that growth has turned positive. It's like to turn more positive into 2004 and that sort of acceleration has always been meaningful to the performance of the stocks in the past.
LISOVICZ: We'll have to leave it at that. Tread carefully in any case, right? Arnie Berman, technology strategist with Soundview Technology Group, thanks for joining us.
BERMAN: Thank you.
LISOVICZ: Just ahead, old scotch and new money. Whiskey maker Chivas Regal offering up some high-priced spirits but if you want a glass you might need a second mortgage. We'll explain after the break.
First, though, Andy's got the debut edition of "Fortune" Fundamentals.
(BEGIN VIDEO CLIP) SERWER: Today we're talking bulls and bears. Just what is a bull market and what is a bear market? Well, the generally accepted definition of a bull market is when stocks are up 20 percent or more from a recent low. A bear market down 20 percent from a recent high.
So, just where are we today? Well, in fact, the market's been on a little bit of a tear lately. In fact, the Dow is up about 20 percent from its March lows. However, longer term going back to the spring of 2000, the Dow is down 20 percent still from its high back then.
So, it's all a matter of perspective. Longer term we're still in a bear market. Shorter term the bull is back and running.
(END VIDEO CLIP)
CAFFERTY: Buying a round of drinks can get pretty steep sometimes. Wait until you hear how much Chivas Regal is going to charge for one bottle of their special 50-year-old scotch.
And you can e-mail us your comments, the address, firstname.lastname@example.org.
CAFFERTY: If you're a connoisseur of fine liquor and you got a pocket full of money to burn this story is for you. Chivas selling s special scotch $10,000 a bottle, it's a special edition marking the 50th anniversary of Queen Elizabeth sitting on the throne in England. Her coronation would be the anniversary.
CAFFERTY: If you're interested, you'll want to move quickly though. There will only be ten bottles sold in the United States.
SERWER: Going, gone.
CAFFERTY: There you go. Time to recheck the mailbag. The segment that we did on the push to reduce employee obesity produced this response from Vicky who lives in Nebraska:
"Most heavy people I know are never sick. My skinny co-workers are sick just as much as the overweight ones if not more so. Saying overweight workers make health care costs go up is the most ridiculous accusation I have ever heard."
We got a lot of e-mails commenting on that story from Florida about a nosy neighbor who blew the whistle on a little girl's lemonade stand because she didn't have the proper permit.
Rick in Colorado Springs wrote this: "Operating a lemonade stand without a permit, gosh, my town would have put her in foster care, arrested her parents, sentenced them both to five years, and then launched an investigation charging everyone who bought lemonade from the stand with conspiracy."
And, our segment offering tongue-in-cheek advice to prison bound CEOs produced this reaction from one viewer who wrote: "I hope President Bush will confiscate all the crooked CEOS' assets and pay back the people before the CEOs donate to his reelection fund."
The issue of campaign finance will be our lead story on tomorrow's edition of IN THE MONEY. We'll talk about whether political fund-raisers have become this nation's real presidential primaries.
Our e-mail question of the week is as follows: "If your currently looking for a job how long have you been looking and what kind of success and/or frustration have you met with?" You can mail in your answers at email@example.com.
We spoke at great length last week about a neighbor who turned in this little kid...
LISOVICZ: You did. You did in particular.
CAFFERTY: Well, I did, because quite frankly I got really -- I got a knot in my shorts about that deal. Not only was the neighbor out to punish a little kid. The cops came and gave her some kind of summons and forced her to shut down the lemonade stand.
LISOVICZ: But they later came back and bought some lemonade.
CAFFERTY: This was some town.
SERWER: You're reading this wrong. I feel badly for this woman, this poor snitch.
CAFFERTY: You do.
SERWER: The woman who turned in the little girl. I mean someone needs to enforce local ordinances. Someone needs to stand up for the local laws that made this country great and this woman is doing it.
LISOVICZ: You probably like the woman who...
SERWER: Get her off the street, she's selling.
LISOVICZ: (Unintelligible) Linda what was her name?
SERWER: Linda Tripp.
LISOVICZ: Linda Tripp (unintelligible).
SERWER: All these people, they're, yes, they're doing the right thing.
CAFFERTY: They are doing the right thing.
LISOVICZ: But, look, my prediction from last weekend stands correct which is that this little girl's business would quadruple. She made an appearance on David Letterman. She probably has her own business manager, her publicist, an agent.
SERWER: They should put the snitch on David Letterman. They should put the other lady on. She's the hero of this story.
CAFFERTY: All right, Scrooge, that's enough.
LISOVICZ: She called the neighbor a crabby neighbor this little girl.
CAFFERTY: Well, good, that's a good one.
SERWER: She should sue her for that.
CAFFERTY: Crabby, nosy, intrusive.
CAFFERTY: And that's it for this edition of IN THE MONEY. My thanks to our regular contributors, financial news correspondent Susan Lisovicz, and "Fortune" magazine editor at large Andy Serwer. Join us next week, 1:00 Eastern, on Saturday, 3:00 Eastern on Sunday. And for additional fun and excitement, tune into "AMERICAN MORNING" weekdays at 7:00 a.m. See you tomorrow.
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