CNN IN THE MONEY
Is Recent Stock Market Success End Of Bear Markets?; A Look At U.S. Security Holes; A Look At How College Football Affects College Campuses
Aired September 6, 2003 - 13:00 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 program. I'm Jack Cafferty.
Coming up on today's edition of IN THE MONEY, busting out of the bear trap. Both the Dow and the NASDAQ headed for blue sky. We'll find out whether it's time to start feeling good about Wall Street all over again.
Plus, safe or sorry. Some of the flashier measures designed to protect you from terrorism don't deliver the goods. We'll look at the holes in America's security blanket.
And coming up, college ball and college bucks. A top team can boost a school's prestige and its income. We'll see how the action on the field plays out on campus.
Joining me today, as always, CNN Correspondent Susan Lisovicz and "Fortune" magazine editor at large Andy Serwer.
Jobs report out yesterday. Unemployment rate went down. Number of lost jobs went way up. How are those two compatible? How does that work?
ANDY SERWER, "FORTUNE" MAGAZINE EDITOR AT LARGE: Well, it means that less people are looking for work. The pool goes down. People are off unemployment insurance. They're off unemployment benefits, I mean, and they're not looking for work, and the trend is terrible. I mean 93,000 August, 49,000 in July, 83,000 in June. So I've got 225,000 jobs lost over the summer. That's bad.
SUSAN LISOVICZ, CNN CORRESPONDENT: And the economists were actually expecting a gain of 12,000 jobs. That jobs report for the month preceded by a day the weekly jobless report, which was also much -- jobless claims, which was also much worse than expected. We'd been getting all These really encouraging signs, factory orders, productivity, retail sales.
SERWER: That's -- yes.
LISOVICZ: The Achilles' heel, jobs.
CAFFERTY: But, typically, the jobs are the lagging indicator...
CAFFERTY: ... the last thing to show recovery coming out of a recession. You get improvement in everything else. The last thing to show up is the jobs. How concerned are the people down on the Street with the fact that these jobs numbers haven't come around as yet?
LISOVICZ: Well, I think that it was kind of a jolt to what had been a honeymoon on Wall Street. I mean we saw this NASDAQ winning streak, hadn't seen this kind of win, seven consecutive gains, since February of 2000, and, if that sounds familiar, that was about the time the NASDAQ was reaching its all-time high.
SERWER: So the jobs are going overseas. We've got this whole song and dance again like we had in the previous decades. That's number one.
SERWER: Number two, blame it on the computers because the productivity Susan mentioned...
CAFFERTY: Way up.
SERWER: That's going way up. That means we're doing the same amount of work with less jobs.
LISOVICZ: And the jobs that are being created are going overseas.
CAFFERTY: That same productivity is the thing that allows Andy Serwer to take this exorbitant amount of vacation time every summer...
SERWER: What are you talking about?
CAFFERTY: ... where he's hardly ever here...
SERWER: What do you mean?
CAFFERTY: ... because he...
LISOVICZ: He was working...
CAFFERTY: ... can get so much work done...
LISOVICZ: He was working...
SERWER: Thank you.
LISOVICZ: He did that story on Maine fishermen, lobstermen.
SERWER: I was busy.
CAFFERTY: Up there doing that lobster story. For those of you who don't have the stomach to look at your 401(k) statements anymore, you may want to change your mind. As we've been suggesting, the markets are looking better than they have in a long time.
Joining us now for more on that and whether there is new strength in stocks that may actually result in some job creation at some point, Financial Correspondent and a very hardworking friend of mine, Christine Romans.
CHRISTINE ROMANS, CNN FINANCIAL CORRESPONDENT: Hi there, Jack.
You know, there's still plenty of caution on Main Street about stocks. I mean everybody knows people who say should I be getting in now. There's no doubt about it.
It has been a sensational six months in stocks on Wall Street. The Dow and the S&P 500 are up 25 percent. The NASDAQ up 43 percent since March.
This week, no exception. The NASDAQ staging its longest winning streak in three years, hitting a whole series of new highs for the year in a row, something that hasn't happened since 1999.
(BEGIN VIDEO CLIP)
RALPH ACAMPORA, PRUDENTIAL EQUITY GROUP: I'm telling you the very, very serious buyers in here, very, very intelligent buyers -- they're already building their positions. So get in.
(END VIDEO CLIP)
ROMANS: One of the reasons he's so bullish, the value line index of 1,700 stocks hit a record high this week. A record high! That's the statistic that shows the average stock is doing the yeoman's work here to drive this market higher. Acampora predicts a new all-time high for the Dow maybe next year.
But, Jack, haven't we heard all this before, the love affair with tech stocks, even though the price-to-earnings ratios are sky high, the bullish calls from Wall Street that entice Main Street into the market just as it falters?
We have, but, this time, the bulls say it's different. They say the economy is improving slowly. Interest rates are still quite low, and tax relief from Washington makes certain stocks attractive.
So take all that, if you will, but there is no doubt about it, the last six months have been pretty phenomenal in the stock market.
CAFFERTY: Indeed, they have.
What about the fact that this is so far a jobless recovery, Christine, and, in past recessions, as we were talking a few minutes ago here, the jobs are one of the last things to show improvement when the economy's coming out of a downturn.
ROMANS: And they should have shown improvement by now. Angie Hanover (ph) at Bank One says that the recession that ended in 2001 -- we have lost more than 1.1-million jobs since then. He did a study over the past nine recessions.
At this point, 21 months into the recovery, we should have seen job growth of 3.8 million. We are in uncharted territory in terms of this jobless recovery. Yes, it is generally the last thing to recover, but it should have recovered by now.
A lot of economists, Jack, are telling me they expect it to pick up by the end of the year, maybe into next year, but these are the people who've been saying that throughout this year and have been wrong.
Andy talked about productivity. You know, you can get a lot more out of workers, and that's good for profits, but it's not necessarily good for the unemployed. We'll have to see how long that can go.
But most people are saying two things can happen. You either have to start getting jobs creation soon, or you're going to have an economy that's going to start to falter again.
CAFFERTY: All right.
LISOVICZ: President Bush is listening very carefully to you.
Sorry about that, Jack.
CAFFERTY: It's all right.
Christine Romans giving us the latest on the market.
LISOVICZ: And before you run out to by a thousand shares of Amazon, you may want to listen to what our next guest has to say. Jim Rogers says the next bull market is in commodities and not stocks. Jim is the author of "Adventure Capitalist: The Ultimate Investor's Road Trip," and he joins us now.
JIM ROGERS, AUTHOR, "ADVENTURE CAPITALIST: THE ULTIMATE INVESTOR'S ROAD TRIP": Susan, I'm delighted to see you again.
LISOVICZ: I'm delighted to see you again. I'm delighted to see you wearing that bow tie after all of the many countries -- triple- digit countries you've been to.
You say it's not stocks where the action's at. It's commodities. When I think of commodities, I think of gold. I think of oil. I think of pork bellies. Is that right?
ROGERS: Well, you're exactly right. I explain in the book, you know, we went through 116 countries over three years and 152,000 miles. It turns out that's the number one dream which people have in the world, is to chuck it all, get in the car, and drive around the world.
One of the things I learned -- and I explain in the book -- is that there is a huge shortage of commodities developing, and, whether you call it gold, oil, wheat, soybeans, rubber, whatever it is, that's where the action is now. That's the new bull market. It is not in stocks.
SERWER: Jim, Andy Serwer here. How are you doing?
ROGERS: Fine, Andy.
Listen, is this really a place for retail investors to play? I mean how -- isn't this the place for the pros in Chicago? How can you as regular investors get involved?
ROGERS: Well, absolutely not, Andy. I mean that's what people say always at the beginning of a bull market. But when the bull market gets really going and CNN is broadcasting from the soybean pits in Chicago, everybody will be piled in.
You can buy soybeans -- everybody has a horror story about soybeans. Their brother-in-law lost his shirt on soybeans but that's because he bought it on thin margin. You can buy pork bellies the same way you buy stocks. You can put up 100 percent of your money. You don't have to put up 10 percent of your money. Everybody can do this. It's very easy.
If you look at -- back over the last five years, you'll see that commodities have been a lot less volatile than Cisco, IBM, you pick the stock. Soybeans have not nearly been as volatile.
SERWER: You just call your broker then?
ROGERS: You just call your broker. Most -- well, there's one problem. Merrill Lynch got out of the commodity business in 1998. That's when the bull market started in commodities. But most brokers still are able to buy commodities.
CAFFERTY: Jim, Jack Cafferty.
Let me talk to you about the stock market for a minute. I watched a fairly learned dissertation -- at least it appeared to be so to me -- about the market, and the suggestion was that this stock market's behaving like it might be in the early stages of another bull market.
We've talked about improving economic data across the board with the exception of the jobs. We've got the traditional leaders in the early stages of a bull market, tech stocks, financial services. We've got the small and mid caps outperforming the large caps. We've got the growth stocks doing better than the value stocks. We've got new highs killing new lows on a daily basis.
What's your sense of what this market is right now, and why don't you like it?
ROGERS: Jack, where were those people six months ago? Where were they a year ago when the market was making its bottom? I mean that's when you should have been buying stocks. That's when I was buying stocks. I'm selling now. I've been selling all summer, as are most insiders, it turns out.
I explain in my book that you don't really make a low in any market until there's huge despondency and despair. The Japanese stock market has lost 80 percent of its value in 14 years. That's despair. We haven't had that despair.
People on Wall Street are still making a lot of money. We don't wash out a big bubble like we've had in the United States in two or three years with a small decline in the stock market.
LISOVICZ: And, you know, Jim, you have a pretty good track record since you launched something called the Quantum Fund with George Soros. So let's look at the charts if you can, your commodity index -- commodity index fund, and how that compares to the S&P 500, say.
ROGERS: Well, we started that commodity index fund, and it's an index fund. I don't manage it. The index manages it. We started it August 1, 1998, and, as you see, Susan, it's up over a hundred percent since then. Stocks have done virtually nothing, and I assure you stocks will not be the place to be in the next five years. I explain all this in the book, too.
SERWER: Yes, Jim, but do all these commodities really move in lockstep? I mean are soybeans the same as oil, the same as gold, the same as pork bellies, and, globally, does it all work in tandem?
ROGERS: That's a very, very good point. No, no more than the stock market does. Cisco didn't move the same as Phelps Dodge in the recent stock market rally. In no stock market do you have all stocks moving together.
No, but, essentially, when you have a bull market in stocks, nearly all stocks go up, and, when you have a bull market in commodities, nearly all commodities go up because the supply-demand dynamics get out of whack for all the same reasons.
CAFFERTY: But it is true that, as commodity prices are rising, it's usually an indication that there is increased demand, which often translate into increased economic activity, some sort of global recovery perhaps.
ROGERS: Absolutely, Jack. But remember the '70s. You probably aren't old enough to remember the '70s.
CAFFERTY: Are you kidding?
ROGERS: We had...
ROGERS: We had a gigantic bull market in commodities, huge bull market, and the economies around the world were horrible. But that's because it's not just demand, it's also supply and inventories. Right now, you have very little supply coming from any commodities market, and you have very low inventories all over the world.
CAFFERTY: Given the fact that you suggested I don't remember the '70s, Jim, you're welcome back on this program every week if you'd like to be here.
Jim Rogers "Adventure Capitalist: The Ultimate Investor's Road Guide."
Thanks for being with us. I appreciate it.
ROGERS: Thank you.
CAFFERTY: Still ahead as we continue on IN THE MONEY -- fasten your seat belt -- some of the measures aimed at keeping terrorists off our airplanes sound better than they perform. We'll look at U.S. security, what works and what doesn't.
Also ahead, making the cut. College sports are hot. Schools are spending big time to boost their prestige. Find out what's at stake when the team takes the field.
And Hamburger Helper. McDonald's wants teenagers and not just to supersize those fries. We'll tell you what they're doing with the younger generation as IN THE MONEY continues in a moment.
I remember the '70s, oh, too well.
CAFFERTY: Welcome back.
As we approach the anniversary of the horrible events of September 11 two years ago, many Americans are asking if the country is safer today than it was two years ago. There is more airport security certainly with more devices to screen our luggage and search or bodies, and the government is still tossing around the idea of a high-tech national I.D. card. But are these measures really the best way to spend our money?
Joining us to talk more about this is security guru Bruce Schneier who just wrote a book on this topic, "Beyond Fear: Thinking Sensibly About Security in an Uncertain World."
Bruce, welcome. It's nice to have you with us.
What's wrong with the way the country is going about trying to make itself safer?
BRUCE SCHNEIER, "BEYOND FEAR: THINKING SENSIBLY ABOUT SECURITY IN AN UNCERTAIN WORLD": Well, a lot of the measures, I don't think, make much sense. Security is always a tradeoff. You're giving up something, whether it's money or freedoms or convenience, and you're getting some security in return.
A lot of the things you just mentioned, increased security at airports, national I.D. cards, actually don't do very much and they cost a whole lot. So, to me, we're kind of wasting our money. We're not getting much security for what we're spending.
LISOVICZ: Well, let's focus specifically on aviation, Bruce, because you're especially critical of that area. You say there really are only two ways to improve the security of airlines. Lock the cockpit doors. That's being done, right? And then tell passengers to fight back. How realistic is that?
SCHNEIER: Well, I mean those things have already been done. I mean what I was saying is those are the only two things we have done that have really done any good. Passengers learned to fight back within hours. You know, the fourth plane. It's -- that's already happened. It's not something you have to actually teach them. It's something people picked up on immediately.
But things like, you know, taking pocket knives from grandmas, things like passenger profiling, things like making sure people sit down for the first half-hour if they're flying in and out of D.C. -- those things seem to make no difference. They're real expensive, they're real intrusive, they're real annoying, but anybody who flies looks at that and laughs. We know that doesn't make a difference.
What matters is can the guy get into the cockpit and will the other passengers let him, and we've already done that.
SERWER: But, Bruce, broadening this out a little bit, I mean aren't we most threatened by the things that we can't imagine? If you bear with me here for a second, I mean no one anticipated 9/11. No one even imagined something like that could take place. How do we defend against something that we can't even begin to think of ourselves?
SCHNEIER: In a lot of ways, you can't, right. We can defend against yesterday's attacks, and, in some ways, that's a good idea because lots of people are copycats. Lots of criminals will use the same crime techniques that made the newspapers last month.
But the really clever people -- and I would consider some of the terrorists we're worried about to be really clever -- are going to think of something new, something we haven't thought of. The only way to defend against them is to actually go after the terrorists.
You know, things we've done that I think have been good have been stopping terrorist funding, preventing communications, preventing their free movement, arresting terrorist leaders. Those will make us safer, regardless of what they're plotting, because we're going after the people.
But defending the targets, in some ways, makes no sense because there are so many targets. You can't -- you can't defend against them all.
CAFFERTY: The -- the suggestion that the tradeoff for security is a loss of privacy -- the events of September 11 -- the people who did that were in this country. They'd been in this country. They were taking flying lessons in this country. They were living in this country. They were rehearsing the events of September 11 by getting on and off the airplanes and going in and out of the airports around here.
What's wrong with taking some steps, even if it means sacrificing a little bit of privacy, to do a better job of trying to identify what bad guys might be in the country so that we can maybe get to them next time before they get a hold of four airplanes?
SCHNEIER: There's nothing wrong with it as long as it works. I mean now we know, right, we can stop you from taking flying lessons. We could ground all the aircraft. We can do enormously invasive things to defend against what they did two years ago.
But we're not going to be able to figure out what they're doing next. And my worry about a lot of these privacy-invasive countermeasures is less the invasions of privacy and more that they don't work. It -- again, it's a tradeoff. We can decide to give up privacy for more security.
My problem is we're actually not getting more security. If you think about the two measures I like about airports -- locking the cockpit door, having passengers fight back -- there are no privacy implications. The things that don't work -- you know, taking pocket knives out of the hands of innocent people, passenger profiling, national I.D. cards -- those things have enormous privacy consequences, and they don't do much good.
LISOVICZ: But, Bruce -- but, Bruce, a lot of Americans say that they're willing to deal with a certain amount of inconvenience in their life. If you took this enormous amount that's being spent on homeland security and you were in charge of it, where would you spend the money?
SCHNEIER: I would invest it in intelligence, in investigation, either the FBI or whatever -- the CIA, whatever organizations will do a lot of this investigation, putting agents on the street, sifting through intelligence, going into other countries, helping them clean up their acts.
Those sorts of things are going to do a lot of good. They're going to make us safer because they're going to make the world a safer place. Going into countries and helping them economically. We have a lot of people who hate the United States. That's bad, and, if I can make them hate us less, I think I'll be a lot safer.
Building a fortress around me or my city or my family or my country I don't think is going to work.
LISOVICZ: We're going to have to leave it at that. Bruce Schneier, though, you've raised a lot of good points.
Author of "Beyond Fear: Thinking Sensibly About Security in an Uncertain World."
Thanks for joining us.
SCHNEIER: Thanks for having me.
LISOVICZ: Up ahead on IN THE MONEY, the burger joint and the babe magnet. Find out why McDonald's hired a pop star to pitch its business.
Plus, Pigskin 101. We'll give you an introductory course in college football and look into whether it's really profitable for America's universities.
And the REIT stuff as opposed to the right stuff. We'll tell you about REIT, the swanky property investment with a geeky name.
CAR LOANS 36-MONTH NEW -- HIS WEEK: 5.29 PERCENT, LAST WEEK: 5.29 PERCENT 48-MONTH NEW -- THIS WEEK: 5.56 PERCENT, LAST WEEK: 5.56 PERCENT 36-MONTH USED -- THIS WEEK: 5.95 PERCENT, LAST WEEK: 5.95 PERCENT 48-MONTH REFI -- THIS WEEK: 5.29 PERCENT, LAST WEEK: 5.29 PERCENT
CREDIT CARDS WEEKLY AVERAGES STANDARD -- FIXED: 13.17 PERCENT, VARIABLE: 13.84 PERCENT GOLD -- FIXED: 13.67 PERCENT, VARIABLE: 12.26 PERCENT PLATINUM -- FIXED: 12.68 PERCENT, VARIABLE: 11.15 PERCENT
MORTGAGE RATES 30-YEAR FIXED -- THIS WEEK: 6.47 PERCENT, LAST WEEK: 6.44 PERCENT 15-YEAR FIXED -- THIS WEEK: 5.81 PERCENT, LAST WEEK: 5.81 PERCENT 1-YEAR ARM -- THIS WEEK: 4.24 PERCENT; LAST WEEK: 4.21 PERCENT
LISOVICZ: Let's take a look at the other top stories of the week in our "Money Minute."
There's a new media giant on the block. The one-time French water company that became a big company player named Vivendi agreed to sell its U.S. entertainment assets to NBC in a deal valued at more than $14 billion. The agreement combines NBC's broadcast and cable networks with Universal Studios. NBC, of course, is owned by General Electric.
Oil prices finally cooled off a bit, but don't expect it to last. Industry experts say the peak summer driving season is over, but, soon, the home heating oil market will drive supplies down as well. Gas prices remain near all-time highs across the nation.
And New York State Attorney General Eliot Spitzer is now targeting some mutual fund managers. Spitzer says some mutual funds allow preferred investors to buy and sell shares after the markets close. Spitzer says that's like betting on yesterday's horse races. One New Jersey based hedge fund has already agreed to pay a $40- million settlement, and Spitzer is also probing Bank of America, Bank One, and Janus Capital -- in other words, some of the biggest players in the business.
CAFFERTY: Let them buy and sell mutual funds share after the market closed.
SERWER: Nice work...
LISOVICZ: Yes, after all the information is out.
SERWER: ... if you can get it.
CAFFERTY: Man, I want a part of that deal.
CAFFERTY: The State of Oklahoma finally decided to take matters into its own hands, after waiting a good, long while for somebody else to do it and seeing nothing happen, and they have charged some former WorldCom executives with fraud. Former CEO Bernie Ebbers pled not guilty in the case that stems from the biggest accounting fraud and bankruptcy in history.
CNN Financial Correspondent Allan Chernoff's been covering the story, and he joins us now with the very latest.
Allan, nice to see you.
ALLAN CHERNOFF, CNN FINANCIAL CORRESPONDENT: Thank you, Jack.
And more than a year after WorldCom did declare bankruptcy, Bernie Ebbers finally appeared in court to face criminal charges. It all happened in Oklahoma City on Wednesday where the state attorney general charged Ebbers with 15 counts of violating Oklahoma's Securities Act.
At his arraignment, Ebbers had his mug shot taken. He was fingerprinted. He then gave $50,000 in bail bond, in cash, and he declared his innocence. A hearing has been set for October 30th. Outside, his attorney said he looks forward to seeing the state's case against Ebbers.
(BEGIN VIDEO CLIP) REID WEINGARTEN, EBBERS' ATTORNEY: We know of no evidence whatsoever, no deposition, no witness statement, no document, no e- mail, no fax, no evidence whatsoever which links Bernie Ebbers to securities fraud.
(END VIDEO CLIP)
CHERNOFF: Ebbers has been able to evade federal charges even while five of his former employees have been indicted and four have actually pled guilty. In those cases, the smoking guns were e-mails just like these between executives at the company.
But Bernie Ebbers was a low-tech executive. He rarely used e- mail, even though WorldCom was the number one provider -- and still is -- of Internet telecommunications service. That's presented quite a challenge to prosecutors.
(BEGIN VIDEO CLIP)
CHERNOFF: Do you actually have evidence that Mr. Ebbers engaged in anything illegal?
DEBRA PAZ, OKLAHOMA ASSISTANT ATTORNEY GENERAL: Yes, we do.
CHERNOFF: Exactly what?
PAZ: I'm not at liberty to discuss evidentiary matters with you at this time.
(END VIDEO CLIP)
CHERNOFF: So the big suspense in this case: Does Oklahoma really have a smoking gun? Can Oklahoma, in effect, trump the feds -- Jack.
CAFFERTY: You know, they don't mess around down there in Oklahoma. If they find him guilty, he could be doing a stretch. In the joint, that is. We're not talking about a couple of weekends here, are we?
CHERNOFF: Well, the charges do carry actually up to 10 years in prison per count. But, of course, let's keep in mind those are theoretical numbers.
CAFFERTY: Well, theoretically, he could go away for 150 years. Theoretically.
CHERNOFF: Theoretically, that is correct. In practice, that is very unlikely.
CAFFERTY: I understand. Allan Chernoff, thank you very much for the latest. I appreciate it -- Andy.
SERWER: McDonald's says things are looking up for the most part these days. The fast-food giant had better U.S. sales figures in August, and the steep declines in its restaurants were suffering in Europe eased a bit. This comes as McDonald's is launching a new global ad campaign aimed at younger customers. That's why pop star Justin Timberlake, a favorite of Jack's, is being featured in many of the new commercials which will air in 188 countries.
Shares of McDonald's have been on a roller coaster all year, and they're now just about where they were a year ago. McDonald's is, therefore, our stock of the week.
And it's not just a year ago. You go back two years, three years, five years. This stock has really gone nowhere over those time periods. And, you know, what are they doing?
LISOVICZ: But -- well -- and, of course, McDonald's in the past year posted its first ever quarterly loss. This is the world's biggest restaurant chain, but it's had some improvements. There was an investment -- investor conference this week, and McDonald's executives were saying that they are seeing substantial improvement in the U.S. and slowing improvement in Europe. They're making a lot of big changes.
CAFFERTY: Let's talk about Justin Timberlake because he is one of my favorite people in...
LISOVICZ: Who is he?
CAFFERTY: Wasn't he married to Jennifer Lopez?
SERWER: I forgot. No, he's -- no, I don't think so.
LISOVICZ: No. She's had several husbands, but no.
SERWER: You got that wrong. You got that wrong.
LISOVICZ: 'N Sync. 'N Sync.
SERWER: Did you hear that they are getting a Happy Meal for adults, that McDonald's is rolling that out?
CAFFERTY: A Happy Meal for adults?
SERWER: Yes, you get a little prize in there.
SERWER: Seriously. Seriously. Well, these guys will try anything. Jack. We talk about McDonald's a lot on "AMERICAN MORNING" and all the various things like getting involved in fat campaigns in Houston, salads with Paul Newman salad dressing. They tried all the different restaurants with Boston Chicken and pizza parlors.
I mean, you know, it's very tough. When you're that big, you're going to grow the same as GDP to really try to outstrip the other guys. The burger market is mature and possibly saturated. LISOVICZ: Well, they've had a lot of problems on the core basics.
CAFFERTY: Wait a second. Did you just say the burger market is saturated?
SERWER: Saturated fats.
CAFFERTY: I thought that's what you said.
LISOVICZ: That's right. Pun intended. Quality, service, food. They've had -- they've had to make changes in all three areas. The $4.99 Happy Meal for adults -- because I know you're dying to know...
CAFFERTY: Yes, tell me what goes in that.
LISOVICZ: The new salads -- new salads, bottled water, and a stepometer that tracks distances walked, and a walking program developed by a celebrity trainer.
SERWER: Jack's getting out of his suit right now to get one.
CAFFERTY: I don't want to hear any more.
SERWER: That's what he's having for lunch. He's having it for lunch.
LISOVICZ: ... the McDonald's.
CAFFERTY: If you take a party of six, Justin Timberlake will come to your house and serve the meal to you in a French maid's outfit or something.
SERWER: Oh, boy.
CAFFERTY: Just ahead, a look at just how much the nation's colleges spend on their football programs. We'll find out whether it's paying off or not.
Just because your not selling a home doesn't mean you can't get in on the real-estate market. We're going to tell you how to buy real estate without buying any real estate.
Stay with us.
U.S. STOCK FUNDS, ONE-YEAR HIGHEST RETURN INPIX -- PROFNDS ULT. INT. INV. 195.83 PERCENT INPSX -- PROFNDS ULT. INT. SVC.192.83 PERCENT JAMFX - JACOB INTERNET 153.33 PERCENT
BOND FUND, ONE-YEAR HIGHEST RETURN FAHCX FID. ADV. INC. ADV. INST. 46.65 PERCENT FAHDX FID. ADV. INC. ADV. A 46.40 PERCENT FAXBX FID. ADV. INC. ADV. T 45.38%
CAFFERTY: The 2003 edition of the college football season's up and running.
College football can generate millions of dollars for schools through ticket sales and television deals, and, according to critics, that's the problem. They say the lure of the big bucks makes universities pour too much cash into their football programs at the expense of that other thing called an education. They also say only the biggest football programs make any real money at the end of the day anyway.
Here to look at what's fact and what's fiction when it comes to the college gridiron, Jennifer Lee, staff writer with the "Sports Business Journal." Jennifer joins us this morning -- or this afternoon, I should say, from Charlotte, North Carolina.
Jennifer, nice to see you.
JENNIFER LEE, "SPORTS BUSINESS JOURNAL": Good to see you, too.
CAFFERTY: Conventional wisdom is the top five or six or seven teams, the ones that wind up in the big bowl games at the end of the year, the ones that have the highly publicized programs make a killing, make tons of money from television and other things, and that the rest of the schools, football's kind of a loss leader. True or false?
LEE: I think it depends on which schools you're looking at.
CAFFERTY: Well, I just said the top five or six rated schools in the country that wind up playing in the big bowl games at the end of the year, the ones with the big names, Michigan, Notre Dame, Ohio State, you know, those kind.
The rest of the schools -- they have football teams. They have football programs, but they don't ever make any real money and some say it drains resources away from other perhaps better uses on those campuses.
LEE: I'd have to say false on that.
LEE: Mainly because football for division 1A schools is a revenue generator, no matter how you slice it. I mean, sure, the top programs are generating more revenue than the smaller programs, but it's still a revenue generator, and I think, for the most part, revenues generated from football programs exceed the expenses for those same programs.
SERWER: Jennifer, first of all, I want to report that Ohio State is totally out of the race now. The Maurice Clarett situation is a real problem...
SERWER: ... and USC's going to win the national championship this year.
LEE: Is that so?
SERWER: But what I want to ask you is this. Why is it, on the one hand, you've got the University of Michigan, the University of Virginia, Duke, North Carolina, Stanford, and then you've got the Baylors of the world on the other side? How come some schools can do things right and some schools just screw it up?
LEE: Well, Baylor is in the big 12, so they're definitely still getting a good chunk of revenue from the big 12 revenue distribution.
SERWER: Yes, but I mean look at what's going on there.
LEE: Well, I know.
SERWER: But that's what it's all about. I mean, you know, running a program. It's a university, right. Isn't it supposed to sort of have a reputation?
LEE: They have a reputation, but these are also kids that you're dealing with, I think, and I think a lot of people forget that, and, you know, kids -- kids make mistakes, and, unfortunately, the light shines brighter on those that are part of these big programs.
LISOVICZ: Well, there's a lot of big kids in pro sports, too, I'm afraid to say.
LISOVICZ: Talk to me, Jennifer, about corporate sponsorship. A lot of us sports fans have been horrified at these stadiums being renamed for Enron, for tech companies that no longer exist. Is it true that Louisville's stadium is now named for Papa John?
LEE: Yes. Papa John's paid -- I believe it was a $5-million figure -- for naming rights indefinitely, and I mean...
LISOVICZ: Is this...
LEE: ... you...
LISOVICZ: Is this going to catch on?
LEE: I think... LISOVICZ: Is nothing sacred?
LEE: I think it will catch on, but I think it also -- I think for college football in particular, it's a little tough since a lot of the stadiums out there are named after donors and individuals, and I -- I find it hard to believe that a school is going to step in and call, you know, the donor or the family of the donor and tell them they're going to be taking their name off the stadium in favor of X company.
CAFFERTY: What ought to be done to improve things? Nobody would suggest that it's a perfect world when it comes to college football. How would you change it for the better?
LEE: I think -- I think they need to focus -- try to focus back on the academic side of things. I mean...
CAFFERTY: It's about winning national championships.
LEE: It's -- well, I know.
CAFFERTY: The alumni don't care about academics. They care about going to the Rose Bowl or the Orange Bowl or -- you know, and spending a weekend in New Orleans at the Sugar Bowl or whatever and having a big time and getting the best high school recruits to show up as freshmen for next year's football team.
When you say focus on academics, how do you do that without impacting the football program?
LEE: Well, I think it would be up to that -- well, to the university to decide first where they want their athletic program to be. I mean, do they want an athletic program that is successful only on the field and not successful in the classroom? And, you know, if that's their choice, obviously, there's ways of going about that.
But I think most universities would say they want a program that's, you know, balanced both on the field and in the classroom, and, you know, I think it's up to the administrators, the coaches to teach the students and to encourage the students in that direction.
CAFFERTY: All right, Jennifer. We're going to have to leave it there. Appreciate you joining us on IN THE MONEY.
LEE: No problem.
CAFFERTY: Thank you.
LEE: Thank you.
CAFFERTY: Jennifer Lee, "Sports Business Journal, joining us from North Carolina.
Just ahead, how to invest in real estate without buying any real estate. This is a magic program you're watching here. A little later, we'll open the e-mail bag, get your stories about the dumb things your bosses have done over the years. I have my own list. I'm sure you have yours.
Stay with us.
LISOVICZ: You don't have to be a homeowner to cash in on the still hot real-estate market. You can invest in something called a real-estate investment trust, or REIT. REITs allow investors to basically buy stock in a landlord's business.
Joining us now for more on REITS and whether they're a good move right now is Stephane Fitch of "Forbes" magazine.
STEPHANE FITCH, "FORBES" MAGAZINE: Hi there. How are you?
LISOVICZ: I'm fine, thanks.
And you think -- you think REITs are fine as well, but...
FITCH: Well, they've been -- they've been -- yes, yes. I mean it's been an interesting year because they've performed so well, and I'm never a fan of buying, you know, stocks that are rising, but there's still value here.
LISOVICZ: Do you separate them from commercial versus residential REITs?
LISOVICZ: For instance, there's plenty of vacancies, as we are well aware, in Houston, Silicon Valley, Silicon Alley here in New York City.
FITCH: Yes, absolutely. And -- and that's important. I definitely separate them. You've got office REITs and shopping mall REITs and strip center REITs.
And then there are apartment REITs, and apartment REITs are the more residential REITs, obviously, and they are probably, you know, not doing as well as everybody else because the housing market's been so hot. They've in a lot of ways -- you know, customers for apartments are buying homes instead.
So it's -- that sector is a little out of favor, and maybe those stocks are a better deal now if you're looking at the future. The way that REITs work is they can handle a little short-term vacancy and not crack up. They're not overleveraged, and they've got long-term leases in place. SERWER: Stephane, then what's the sector that you like the most in this area? You know, I know about one, like Chelsea REIT, that does the Woodbury Commons thing there, which is sort of an up-scale discount malls. I mean, you've got like all these little microsectors. What do you like now?
FITCH: You know what? I'm -- I'm a little bit of a contrarian. Hey, I mean it's "Forbes" magazine. I like buying stuff that is maybe a little beamed down, so I kind of like the apartment REITs right now.
You've got to be careful, you've got to be cautious, and you've got to pick the best names going in. But, you know, a couple of them are -- like Avalon Bay, for instance, out in San Francisco. Who would be buying apartments in San Francisco right now? It's a bad time for that.
But, you know, my theory is that stocks are maybe a little more beaten down. Avalon Bay is a very well-managed company. Its earnings or its funds from operations are pretty strong. It ought to be able to get through this tough time, and maybe there's upside later.
Another one is -- you know, I like the office REITs. If we've got an economic recovery company and, you know, we're sort of seeing the worst of the vacancies, then office REITs will do fine, and there are some very good companies. You probably know a couple.
Boston Properties run by Mort Zuckerman. You've got to love him, very smart guy, and he's been through some downturns. He knows what he's doing. He and his partner Ed Lidney (ph). I like Boston Properties...
CAFFERTY: How much attention...
FITCH: ... in the office sector.
CAFFERTY: How much attention should investors pay to a couple of facts: one, that interest rates have begun to rise and that probably we're off the lows in interest rates, won't see them again for who knows how long; and, two, we've been looking at 15-percent, 20-percent escalation in real-estate prices almost across the board in this country for the last several years. Has the sweet spot already faded into the woodwork here? How should individual investors take a look at those conditions?
FITCH: You know, I'm glad you're asking that question because, you know, when you see stocks going up for a long time and now, geez, you know, you start to see those vacancies and interest rates rising -- it's not going to be as easy these next couple of years, but I'm a long-term person. I hope -- I hope your viewers are as well, and -- and so you kind -- you kind of dip your toe in, and you spread it around a little.
I mean a good way to maybe deal with -- well, I don't know which company's going to come out on top. You know, hire a professional. Get yourself a REIT mutual fund. Let the mutual fund manager sweat the details. He'll spread you better around, you know, 20, 30 stocks, and -- you know, get ready for a little bit of volatility in the next year or two.
But, long term, I mean, you know, this sort of temporary moves in interest rates and stuff -- I mean, over the next 20 years, people are going to forget that there -- you know, there were interest rates rising this year.
CAFFERTY: Good stuff. Stephane, thank you for being with us. I appreciate it. We're going to have to leave it there.
FITCH: You bet.
CAFFERTY: ... of "Forbes" magazine joining us from San Francisco.
As we continue...
Was it Chicago? Where was Stephane?
CAFFERTY: He was in Chicago.
SERWER: In America.
CAFFERTY: The Windy City.
Still ahead, as we continue here, we'll tell you about a guy who went looking for work and found a whole lot of trouble instead, courtesy of the government.
And if you've got a hard luck story of your own, well, here's where you can offload, boys and girls. Think of us as your therapist at a discount. Or if you've got ideas about the program or story ideas you'd like to see us cover, send us an e-mail. Out address is email@example.com.
We shall return in a moment.
DID YOU KNOW? REITS WERE CREATED BY CONGRESS IN 1960 SO SMALLER INVESTORS COULD INVEST IN REAL ESTATE. SOURCE: NAREIT
CAFFERTY: Bureaucrats. Everybody hates them, and yet the world seems to not be able to do without them. Here's a little story, though, that might get your attention just for a moment. Unemployed man in Buffalo, New York. He decided to pay a local radio station a thousand dollars, buy some air time, so he could go on the air and showcase his broadcasting talents. He did a short thing on a Saturday sports show. He paid for the time.
The state labor department said that the unpaid radio gig -- he didn't receive any compensation. He paid for the time. The labor department said it qualified as work and, therefore, disqualified the man from getting his unemployment benefits.
They're all heart, aren't they?
Now not only has the state put a halt on his future unemployment benefits, but it's asking the man to return the $605 in benefits that he had collected before he went to the radio station.
LISOVICZ: My question is: Is the guy any good? Can he say let's go to the videotape?
SERWER: Bring him up here. Listen, you know, obviously, the state -- the bureaucrats have spent more than $605 trying to track this case down. They should all be tanked, canned, and this guy should have the job. They should give him the job in the unemployment office.
CAFFERTY: There you go.
SERWER: These people are just crazy. They're wack, right?
CAFFERTY: They're wack.
SERWER: I mean...
CAFFERTY: Andy Serwer's view of the...
SERWER: I mean I -- it blows my mind.
CAFFERTY: It's true. It's true. Your mind...
SERWER: My mind is blown.
LISOVICZ: I'll bet he gets a better job. I bet he gets a better job.
CAFFERTY: Well, I -- we're helping him. Call that Buffalo radio station. Get this guy a job.
LISOVICZ: Well, he has no job, so any job's going to be better.
SERWER: Bring him up here. Bring him up.
SERWER: ... sports thing.
CAFFERTY: Yes. You can come here. You can be a guest on this program.
CAFFERTY: We'll talk about what it's like to be unemployed, which we may be if I don't get on to the e-mails here.
Time to check your answers to last week's question where we asked: What's the dumbest thing your boss has ever done?
SERWER: Oh, my gosh.
CAFFERTY: And we've got a lot of e-mails.
Kathleen in California, "In the early 1980s, my boss was in charge of inviting 1,800 people to a newspaper launch party in Los Angeles. He thought it would be classy to send the invitations by telegram. The trouble is he forgot to put the time of the party on the invitation. He had to resend all 1,800 of them, cost $5,000."
Bob in Illinois writes, "My boss once ordered me to cheat a customer. I refused and quit. He did it, and the owners demoted him when they found out."
Jeff wrote, "The dumbest thing my boss ever did was tell my co- worker that he would get me to marry her. Now he no longer has his job, and my co-worker is still a psycho."
Drew in Ontario wrote, "The dumbest thing my boss ever did was hire me."
Time now for our e-mail question this week. In light of our earlier discussion on college football, think about this for a moment. Do you think that college athletes of today should be paid to play their sports and do away with all of those rules about you can't take a tie or a T-shirt from an alum or -- you know, all of those...
LISOVICZ: Aren't they already?
CAFFERTY: Yes. Well, they're not supposed to be, but, yes, I mean -- some of them, I guess, are. But some say it would just be better to go ahead and pay them, and...
CAFFERTY: And you can send us your thoughts on that to firstname.lastname@example.org. What do you think? Pay them?
SERWER: Yes, absolutely.
CAFFERTY: Pay them?
SERWER: Abso -- I think so. CAFFERTY: No?
CAFFERTY: Why not?
LISOVICZ: I think they should go to school to graduate. I'd like to see...
SERWER: Yes, but this -- but the NFL...
LISOVICZ: I'd like to see a better return on the graduation rate at...
SERWER: ... and basketball should be -- there's some minor leagues that should be paying these people. They should blow up the NCAA. Blow them up. I -- you know, it's worthless. It's worthless.
CAFFERTY: One thing about having Andy back from vacation, he comes back armed with ideas about what's right and wrong in the world.
SERWER: ... it's unbelievable. I don't...
LISOVICZ: On fire. On fire.
SERWER: ... like them.
CAFFERTY: All right. That's it for this edition of IN THE MONEY. Thanks to our panelists, CNN Financial Correspondent Susan Lisovicz and "Fortune" magazine editor at larger Andy Serwer.
We'll be back tomorrow at 3:00 Eastern Time. Be afraid. Be very afraid. We'll look at the new report that Osama bin Laden's living in the mountains of Afghanistan and plotting new attacks against America. See you then.
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