CNN IN THE MONEY
Bush Administration Accused Syria Of Allowing Fighters Through Border; Does "Consumer Reports" Suggestions Match Cars Being Sold?; High-end Fashion Labels Beating The Drop In Apparel Sales
Aired September 21, 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.
SUSAN LISOVICZ, CNN CORRESPONDENT: Welcome to IN THE MONEY, I'm Susan Lisovicz, in today for Jack Cafferty.
Coming up on today's show -- Crossing the line: The Bush administration says Syria is letting fighters through its border into Iraq and sitting on weapons of mass destruction. We've heard that before.
We'll speak with a congressman who's pushing a bill that would turn Washington's words into action.
Also ahead -- One for the road: A lot of car buyers won't even take a test drive before they've checked out "Consumer Reports" magazine. Find out whether what's on the page matches what's on the streets.
And the Power of a name: Designer clothes are beating the drop in apparel sales. We'll ask one of fashion's top talents about the business and pleasure of creating a look.
Joining me today, a couple of our IN THE MONEY regulars. "Fortune" magazine editor at large, Andy Serwer and Shawn Tully, a senior writer at "Fortune."
You know, it's so disturbing to hear about Syria in the wake of all of the other chapters that just continue to unfold between Iraq taking more time and money, continuing concerns about Iran, Saudi Arabia, the Palestinian situation; it's really just seeming endless, now.
SHAWN TULLY, SENIOR EDITOR, "FORTUNE": You wonder if some of the weapons of mass destruction -- they were supposed to be in Iraq and now we're discovering they're in Syria. Did they cross the border or has Syria always been a bigger threat? That's one of the big questions.
ANDY SERWER, EDITOR AT LARGE, "FORTUNE": Well you know, two questions I hear, and there's two ways that people are -- Americans are asking this. One, do we have the stomach for the war in Iraq, and two, should we be there at all? More and more people I talk to say -- yes, Afghanistan, I understand that, but I'm not sure I understand Iraq, I'm not sure. There are no weapons of mass destruction there, he didn't do anything to us directly, why are we there? People are questioning that. The Bush administration has to continue to convince Americans that we need to be there.
LISOVICZ: Those are very good questions about Iraq. And now we have questions also, about Syria. The Bush administration has been fretting over how to handle Syria, a country that's both crucial for stability in Iraq and a big headache for Washington. This week the administration went back to telling off Damascus, but didn't back it up -- its words, with action. Undersecretary of State John Bolton testified before a House subcommittee, calling Syria in his words, "a rogue state." He alleged that Damascus supports terrorism, lets fighters cross its border with Iraq to hit U.S. troops, and is developing weapons of mass destruction. But, he says the administration is still figuring out how to respond. Democratic congressman, Eliot Engel, of New York is co-sponsoring a bill that calls for punishing Syria financially unless it makes changes America wants. Congressman Engel now joins us from Washington.
REP. ELIOT ENGEL (D), NEW YORK: Thank you.
LISOVICZ: Now, Syria, as I understand it, not -- not part of the axis of evil, but yet according to the State Department the only nation that supports terrorism that has full relations with the U.S. Am I right? And why is that so?
ENGEL: Well, you're right, and I'm still trying to figure out why that's so. Back in 1979 the U.S. State Department put forth a list of countries which aid terrorism. Syria was a charter member of that list. It's been on that list for the past 24 years, and it is the only country currently still on the list with which we have normal diplomatic relations. Syria's record, in my opinion, on terrorism is worse than even Iraq's. And Syria, of course, continues to occupy Lebanon. And the terrorists on Lebanon's southern border, Israel's northern border, are totally controlled by Syria. Syria has weapons of mass destruction. And yet, we wring our hands and we tell Syria that she ought to change her behavior, but for 24 years we've never backed it up with any kind of teeth.
SERWER: Congressman Engel, what exactly do you hope to intend, though, to do with your bill? What's the intention?
ENGEL: Well, the bill calls on Syria to do three things. It tells Syria to stop its support for international terrorism, to end its weapons of mass destruction program, and to stop occupying Lebanon -- to get out of Lebanon, and if it doesn't comply, then sanctions would kick in. We'd have a ban on dual-use items going to Syria such as computers. We would take action against Syrian diplomats and against Syrian flights. We would freeze Syrian assets in the U.S., and we would put a total ban on trade between the U.S. and Syria. We've got to start somewhere. And hitting them in their pocketbook, I think, is the way to start.
TULLY: But congressman, we have seen sanctions fail so many times, including in Iraq. Why would they work this time? ENGEL: Well, I think that they -- it's a start. I think that Syria doesn't believe us. You know, we've talked tough. There's all kinds of evidence that Syria is allowing fighters to come through its border into Iraq, right now, to destabilize the situation in Iraq, to bomb and kill U.S. troops. We know during the war in Iraq, they allowed different kinds of armaments and weapons to flow into Iraq. Their record on terrorism is horrendous.
Hezbollah is in the Southern border of Lebanon, which they control. And they are constantly doing terrorist acts against Israel. Hezbollah is the group that blew up more than 200 U.S. Marines 20 years ago. And we just don't seem to do anything. We talk tough, and for some reason Syria has always led a charmed life. So, I think you start with the sanctions; you let them know that finally, politically we're not going to stand for it anymore, and you let them know there's a price to pay. Now, sanctions -- you're right, they don't always work. But, I think there are instances where they have worked. They worked in South Africa, they worked in other places. And I think it's time to slap Syria with tough sanctions.
LISOVICZ: You know, part of the problem, the way I see it, or at least the way I think I understand it, is that Syria plays good cop/bad cop. It kind of in some ways is reminiscent of Saudi Arabia. They give a little bit of information to sort of appease Washington and then do all this other stuff behind the scenes. Is that what makes handling Syria -- part of handling Syria so difficult?
ENGEL: Well, you're absolutely right. General Aoun, who used to be the prime minister of Lebanon and is a fierce opponent of Syrian occupation of his country, said that Syria is like the arsonist and the fireman all rolled up into one. They start the fire and then they put it out, and then we thank them for it. They've played this shell game and this terrible game for years and again, I think we need to call them on it.
SERWER: But Congressman, isn't Syria changing, though? I mean, they've had a leadership change. Bashar Asad took over a couple of years ago in 2000. I think, he's a 37-year-old former eye doctor who lived in London, married to a woman who has western ties, worked at a western bank. Shouldn't we engage them in a more constructive way?
ENGEL: Well, we're trying to engage them. Unfortunately, their -- we had high hopes. He succeeded his father, you know, it's a total dictatorship, there. And we had high hopes that perhaps he would be enlightened. In my estimation he's worse than his father because he's following the same horrendous policies, support for terrorism, occupation of Lebanon, weapons of mass destruction, but he doesn't quite have the grip that his father had.
Now, you contrast that right next door with King Abdullah of Jordan, with whom I met in Washington, yesterday. He succeeded his father, King Hussein, and he is a wonderful, enlightened, pro-western, pro-democracy, anti-terrorist leader of Jordan.
We had hoped that young Mr. Asad would do the same in Syria, but he's the exact opposite and in fact, in my estimation he's one of the worst we have in the Middle East. He's never embraced the peace process between Israel and the Palestinians. He's never wanted to make peace with Israel. And again, he embraced terrorists and terrorist acts. These terrorist groups, Islamic Jihad, Hezbollah, they are all headquartered in Damascus, the capital of Syria, and he's done nothing to shut them down despite Secretary Powell going to Damascus and demanding a shutdown. All we get is lip service from Syria, but never much more.
TULLY: Congressman, people are really asking now -- why are we in Iraq? Because of the deaths that we see, the drip, drip, drip of bad information and news coming out of Iraq. Is the fact that we are in Iraq and that we could soon see democracy in Iraq -- is this a good or a bad thing for Syria? Clearly, we see Asad panicking to a certain extent. We see the same thing in Iran. Will this help us to control Syria or hurt us?
ENGEL: Well, Syria desperately wants us to fail in Iraq because if we succeed in Iraq and democracy takes root there, it's certainly a threat to the dictatorship of his country and to other dictatorships in the Middle East. You know, Israel is the only democracy in the Middle East, when you look beyond Israel there isn't else much there. So, he would like us -- Asad, to fail in Iraq. So therefore, if we fail in Iraq and we don't implement democracy and the American people get fed up and perhaps he's hoping that we'll cut and run, then he can continue his vicious reign, and so he's got an instance, a reason to try to hurt us in Iraq and that's precisely what he's trying to do.
SERWER: Right. Right. OK. Congressman Eliot Engel from Washington, D.C., thanks very much.
Coming up on IN THE MONEY: There's one thing car buyers read as closely as the price tag. We'll look at "Consumer Reports" magazine and see whether it's the next big thing for a test drive for rating a new car.
Plus, kicked off the Street: With Dick Grasso out as chairman of the big board, we'll look at what's ahead and what it means for investors.
And bulletproof clothing? Apparel sales are down, but stuff with designer names on it is going strong. We'll ask a fashion industry star what makes the business tick.
SERWER: If you can't beat them, join them. That's the philosophy Detroit's Big Three have taken to heart when it comes to the independent auto rating doled out every year by "Consumer Reports" magazine.
Joining us now to talk about that is "USA Today" reporter Earle Eldridge.
Earle, welcome to the program. These "Consumer Reports" ratings are a huge deal. Tell me how consumers use them to buy cars. EARLE ELDRIDGE, "USA TODAY": Well, it is very influential. Most consumers will consult "Consumer Reports" and rely on them more than they even do with their friends. Independent surveys have shown that fully 40 percent of people that go out and buy cars turn to "Consumer Reports" and it's even higher for certain segments. For example, minivans -- buyers, their percentage is usually about 60 percent -- of those buyers turn to "Consumer Reports." So, their influence is very prevalent.
TULLY: Earl, we've been reading recently about how "Consumer Reports" actually, on some occasions, has collaborated with the car companies to look at some of their new models before they're sold to the public and consult with the companies on improvements. Does that undermine the credibility of "Consumer Reports"?
ELDRIDGE: Well, some would say it does, but others would say if it makes a better car what's the problem? Particularly the Detroit automakers -- Ford, General Motors, and Chrysler. For years, they had not done well in the ratings with "Consumer Reports," so they decided, hey, maybe we need to consult with them. Just last year -- Ford is redesigning its Windstar minivan, and they decided that they would take a camouflaged -- the new minivan's going to be called Freestyle -- Freestar, and they decided to take a camouflaged vehicle up to the engineers with "Consumer Reports" and ask them to look at it.
They did a quick test; they left the vehicle up there for two days -- two or three days. The engineers did a quick run through the vehicle, came back with the Ford folks, and made some suggestions such as making the storage trays a little deeper and relocating the door handles for the interior passenger and driver side, and Ford decided to do that. Some would say that that's a little bit too much influence. Now if...
LISOVICZ: But, you know. But Earle, I mean -- you know, if it makes the car better, I think there's a lot of consumers who say, you know -- right on! But, I think there's -- the problem might occur afterwards. Say, that the car goes to these independent engineers who check the vehicle and one of the Big Three makes the changes.
Doesn't "Consumer Reports" then, feel somewhat obligated to give them a high rating if they followed through on some of the suggestions? What if the finished product has some things they still don't like? Are they more or less inhibited, then, from criticizing as aggressively as they might prior to these -- this kind of collaboration?
ELDRIDGE: That's a good question. And I asked that of some of the folks at "Consumer Reports" and they indicate that what they do is not a thorough test, that they're just looking for how the vehicle feels and how the knobs and switches work, so it's not a thorough test. They claim that that -- because of that it doesn't influence their final result.
Now, some other journalist-type organizations have said that perhaps "Consumer Reports" should at least disclose and tell readers that -- hey, we had some early input into the development of this vehicle and these were the things that we had suggested. Now, you know, if they decide to do that, I mean, that's up to them.
SERWER: Earle listen, I got to take a minute, here, to tip my hat to "Consumer Reports." I mean, it's a very unique organization, non-profit. It's a pretty good thing. And it's interesting to me, it's one of the few pay Web sites out there. I think it costs about 20 -- $24 a year -- I got it written down here, to subscribe. But it's great because if you want to go out and, not only buy a car, but a new toaster or a new TV or something, you can go on there and check it out. So, I got to ask you, Earle, are you a subscriber to "Consumer Reports?" Do you go to the Web site yourself?
ELDRIDGE: Oh, absolutely. I mean, when you look at all the sources of information out there there's, without a doubt, that "Consumer Reports" is the most trusted source of information out there. You know, they're very thorough on their testing, perhaps the most important thing that I think consumers look at, particularly in autos is their reliability ratings. You know, they poll their subscribers to get an idea of -- you know, whether or not they had problems with certain vehicles and -- you know, that's pretty good. But, I think that also...
LISOVICZ: But Earle, it should be said that as much as the Big Three are concerned about what these ratings show from "Consumer Reports," "Consumer Reports" knows that they have a real gold mine with these auto reports.
ELDRIDGE: Oh, there's no doubt about it. That's why they're putting out more of them. I mean, they only -- before they only had the April auto issue, and now they've got like eight different publications that you can go into. But, I think some of that, too, might be increased competition. You can go on the Internet and get a lot of information in terms of vehicle pricing and how to buy cars. There's even Web sites with consumer complaints about certain cars. So, I think some of it might be them acknowledging that there's more information up there and they need to step up to the plate and provide even more detailed information for readers.
LISOVICZ: Well, I do have to put a full disclosure that, before I bought my first car I did go to "Consumer Reports" before I did so.
SERWER: Oh, OK. You did. All right.
ELDRIDGE: And, that's a good thing. That's a good thing.
LISOVICZ: I don't subscribe to the Web site. Earle Eldridge, auto reporter with "USA Today," thanks so much for joining us.
Next up, Dick Grasso is out. We'll talk about what brought him down and whether he'll soon have some company.
Plus, we'll find out whether profits rise and fall along with the hem lines when we take a closer look at the fashion industry.
And take the money and run, or is it, take the money and bulldoze? Find out how someone in Georgia pulled off a hefty crime.
SERWER: Time now to look at the week's top stories in our "Money Minute." Three former Merrill Lynch bankers pleaded "not guilty" to helping Enron report phony profits. Federal prosecutors say Daniel Bayly, Robert Furst, and James Brown made a $12 million loan to Enron look like a profit making sale. Good stuff, that. Prosecutors also say Merrill made about $750,000 in return for doing Enron's fuzzy math.
The post-Labor Day job cuts are rolling in, sad to say. RJ Reynolds tobacco cutting 40 percent of its workers. That's about 2,600 employees. RJR says sales are being hurt by all the generic cigarettes on the market.
And if we all look a little leaner and a little meaner today, it may be because we've lost the AOL from our parent company's AOL Time Warner name. CEO Richard Parsons made the announcement Thursday, saying going back to the old Time Warner name better represented the company's assets. Here, here!
The big story, though, was Dick Grasso's decision to step down as chairman of the New York Stock Exchange. And based on your e-mails, not many of you are shedding a tear. Last week we asked you if you thought Grasso should step down and/or return at least some of that $140 million pay package. The results were staggering. 78 percent of you said Grasso should go. Well, good stuff. Just 22 percent said he should stick around.
LISOVICZ: And Jack Cafferty wasn't even here to vote.
LISOVICZ: And joining us now for more on Grasso's resignation and what's next for the NYSE board is CNN's financial news correspondent Chris Huntington.
What a week, Chris, and more changes ahead, undoubtedly, right?
CHRIS HUNTINGTON, CNN FINANCIAL CORRESPONDENT: Oh, Susan, undoubtedly. Of course, there's huge calling for the heads of the boards of directors to start rolling. You know, this is -- this is not going to end anytime soon. Carl McCall, in a press conference, saying that he wants to restore credibility. He told floor traders he wants to move forward, and that engendered the response that, well, moving forward, Carl, seems to sound like sweeping things under the rug. There certainly -- if McCall wants to restore credibility at the Exchange he's going to have to heed the warning that was put out by the big pension funds earlier in the week.
(BEGIN VIDEO CLIP)
SEAN HARRIGAN, PRESIDENT, CALPERS: Today we're trying to pull the pig away from the trough. The next step is to figure out who filled up the trough.
(END VIDEO CLIP) HUNTINGTON: Seriously, they're going to have to -- McCall is going to have to make clear which board members are serious about reform. We're hearing talk among the board members that they want to tone down the dominance of the big securities firms at the New York Stock Exchange, and McCall confirms that that's indeed where the governance reforms are going. There are a couple of board meetings, there's one on Friday, also next week. We'll begin to hear about these changes, but if we don't see some resignations from the board I don't think the criticism is going to die down.
LISOVICZ: You know, Chris, there are so many changes that are under discussion, for instance, whether the New York Stock Exchange will lose its regulatory status, what will happen to the board, and the fact that nobody wants to step in to replace Dick Grasso, right now. Some of the best and brightest have already turned it down, including former treasury secretary, Robert Ruben; silicon valley lawyer, Larry Sonsini; Donald Marren...
LISOVICZ: ...formerly of Paine Webber. What is that telling you?
HUNTINGTON: Well, not the least of the problem is they know they're going to get paid a lot less than their predecessor, so I -- it's a hot potato position, right now. I mean, as witnessed by the fact that even the board couldn't even figure out who would be interim director and that fell back in the lap of Carl McCall. Clearly their first priority is to come up with some kind of a transition plan, and their -- they -- McCall made that clear, that that's what they're going to work on. But, you need a high-level person who is above reproach and just able to just sort of walk in and instantly cast an air of credibility over an institution that is very much tarnished, right now.
LISOVICZ: Boy, and it will take some -- an icon to do that, right now, that's for sure, to meet everybody's demands.
Chris Huntington, thanks so much for joining us.
LISOVICZ: You know, one of the things, Shawn, that I know that you've pointed out is, a lot of people are saying -- well, why should I care? All right, so yet another big fat cat has resigned. But the fact is that anyone who invests in stocks should care.
TULLY: Yeah. Because they're paying his salary, and his bonus, in effect. People are paying -- by way of the fees that are being collected by the specialists on the floor. That the -- it's a very inefficient system. The system that the New York Stock Exchange uses involves having specialists who actually take orders and then place the orders, it's a slow system, it costs a lot of money. The fees that they charge, which we pay indirectly go to pay the salary and this huge $140 million bonus...
LISOVICZ: Through our brokers.
TULLY: Right. Through our brokers. And, one of the big issues here, is whether the New York Stock Exchange should, not only, have its regulatory authority stripped away from it, but whether it also should have to be deregulated to the point where it's on an equal footing with the electronic systems which are much quicker and much lower cost.
SERWER: But, you think about the history of the Exchange. I mean, what is the Exchange? It's a club. It's a bunch of guys, 200 years ago, who got together to form an organization to control and trade stocks. Now, what happened over time is it also evolved into a regulatory body. So, the club was regulating itself. That's nice work if you can get it. And, that's what Shawn's talking about -- separating it. I think it may go public. That would be a way of taking it away from the market regulating activities. But, you are going to see some very big changes coming down.
LISOVICZ: Yes. That's for sure. And you know, when we're talking about stocks, let's talk about the stock market. It's been a very good week in what is traditionally a very bad month. This week, General Motors became the last of the Big Three automakers to wrap up a tentative labor deal with the United Auto Workers. But, union issues weren't a major problem for the company. That was once the world's largest corporation. The big challenge for GM, these days, is getting people to buy new cars in a market that may be tapped out after posting so many big sales numbers in the last three years. Looking at GM shares, you can see they're not far off their year high. But, what this chart doesn't show you is the fact that GM shares are more than 50 percent down from where they were about three-and-a-half years ago. GM, our stock of the week.
SERWER: You know what's interesting, actually, the stock, I was surprised, I went back and looked, it hasn't done that badly over the past five years, which is to say it's gone from about 40 bucks to 40 bucks, but that's what the stock market's done. No, I mean seriously, it hasn't done that badly. But this company is -- you know, it's a huge American giant that has just been struggling for years. Big in trucks, abdicated, of course, the whole sedan market the way the rest of Detroit is. Toyota's going to make the number one sedan in the United States, this year, for the first time ever. So you know, it's going to be around for a long time, but what kind of company is it going to be 20 years from now?
TULLY: Another problem is that the mortgage market has fallen off a cliff, now.
SERWER: They're in that business.
SERWER: They're in that business, too. And therefore all the analysts are saying their earnings are going to drop substantially next year from about five bucks to three-fifty because of the big decrease in mortgage originations and the new car sales market is flat. LISOVICZ: I think one of the interesting things is that the Big Three was able to reach concessions with its workers so quickly, and why is that? Had they reached some sort of higher sense of enlightenment? No. It's really that they had come to terms with the common enemy -- enemy, which is not management or the labor unions, it's the cheap competition overseas.
SERWER: Well, that's right. And both -- both of them weren't negotiating from a position of strength. The unions had no leverage, and the car companies had no leverage. And you're right, let's get together and work this thing out. And it was the smoothest negotiations ever with those Big Three and with also with the auto parts makers.
LISOVICZ: Shawn, I know that you're so demure and laid back. Tell me, would you buy GM stock, right now?
SERWER: Would I buy it? I wouldn't buy it, no. I just -- oh, Shawn? I'm sorry. I'll jump in.
What would you do, Shawn?
TULLY: I would not buy it.
SERWER: Oh no, I'd buy it. No, I wouldn't buy it. I'll stick with my guess. I mean, I just don't think it's really going to go anywhere for a really long time.
Anyway, coming up next on IN THE MONEY -- Double trouble: More and more couples have two jobs and one hard time making ends meet. Find out why when we speak with the author of "The Two-Income Trap."
Also ahead, business models: Yow! Fashion turns life into theater, and people will pay big money for the right costume. We'll get a designer's eye-view of the industry from Narciso Rodriguez. Stay tuned.
SERWER: For a lot of American families, two incomes are too little to keep up with the cost of a middle-class life. To help us figure out what's behind that trend, we're joined from Watertown, Massachusetts, by Elizabeth Warren. She's a professor at Harvard Law School and the co-author of a new book called "The Two Income Trap: Why Middle Class Mothers And Fathers Are Going Broke." Welcome, Elizabeth.
ELIZABETH WARREN, PROF. HARVARD LAW: Thank you.
SERWER: I want to ask you -- you've run numbers that are fascinating. It showed that one income 30 years ago did better, or does better, than two incomes do today. Now, can you explain -- there are the numbers up there. It's unbelievable and depressing maybe. Can you explain why that's the case?
WARREN: Well, we thought that this was going to be a story about over consumption. When we discovered that families with children are about three times more likely to file for bankruptcy than their childless counterparts we thought it meant they were spending too much money on Gameboys and trips to the mall.
So we actually dug into unpublished government data and we compared the family of the early 1970s with the family of the year 2000 to figure out the differences in spending. Of course, these numbers are adjusted for inflation.
What we discovered is that today's two-income family is spending it on the basics. Mortgage, health insurance, a second car so mom can get to work. Paying tuition or preschool for the little ones, or college, if they're at the other end of the age spectrum, and, of course, they're in a higher tax bracket. And those core expenses, the ones they really can't get around once they've committed to them, those are the ones that are pushing families to the wall financially.
TULLY: Now, Elizabeth, one of the things I found fascinating reading stories about your book is that you ascribe a lot of these problems to the educational system and specifically, people who want to move to towns that have good schools. And they are bidding up the prices of houses to the point where their mortgage payments probably adjusted for inflation are much higher than this family you were talking about from the '70s.
WARREN: In fact, let tell you how much they're mortgage payments have grown. Today's median income family's mortgage payment has grown 70 times faster than a father's wages. In other words, families, in order to get into decent school districts are spending, spending, spending on the mortgage.
And I want to be clear here. We're not talking about families at the top end who are trying to get only into the fanciest school district in the entire area. We're talking about families under economic pressure, up and down the line, who believe that the only way they can provide a decent education for their children is to stretch up the line in terms of that housing purchase.
LISOVICZ: That's a really profound finding. And I bet a lot of our viewers are thinking, yes, I've done that, or they know people who have done it. I certainly was thinking that when reading stories about your book.
But, Elizabeth is there something that these people can do? In other words, we've got interest rates at 45-year lows. This shouldn't be happening. Is it the way these people finance their homes as well that is getting them in trouble? In other words, are they taking on too much debt, for instance?
WARREN: Well, we try to do two things in this book. We interviewed more than 2,000 families for putting together the stories, and we used that to supplement all of the federal data that we looked at. But what we do is, we try to give analysis for individual families about what they can do.
And we have to split it off here. Families that are not yet in financial trouble, who are making those initial decisions to purchase, and families that are already in terrible financial trouble.
For families who are not in financial trouble, we recommend that the same way that they check the smoke detectors and get rid the oily rags before the house is filled with smoke, they need to do the same thing about their family budgets. They need to take a financial fire drill. And we try to lay out how to do that.
And the insight of this book is that, virtually, every financial planning book tries to focus families on discretionary consumer spending. Do you know how expensive it is if you go out to dinner, take your children to the movies? What our data shows is that's not why families are going broke. So what we try to do is focus families on those basic expenses. Those fixed expenses. Those expenses that will get you into real trouble, if someone loses a job or someone gets sick, because they can't be cut by 20 percent or miss a payment.
SERWER: Right. Okay, Elizabeth Warren. Thank you very much from the Harvard Law School. The co-author of "The Two Income Trap: Why Middle Class Mothers And Fathers Are Going Broke." Thanks very much.
WARREN Thanks for having me.
SERWER: And this is the perfect time to ask our email question of the week, "could you and your family still make it with only one income?" Email your answers to inthemoney@CNN.com.
LISOVICZ: Some of us who only live on one paycheck. Right, John?
Just a ahead on in the money, the models are all still too beautiful and thin, but the fashion business is changing. We'll talk about that with a top designer.
And for crafty criminal out there, it's take the money and haul! We'll have the details on a unique ATM heist.
LISOVICZ: We heard the word fabulous said a lot more this week. We saw a lot of air kissing too. Of course, it's fashion week in New York. And despite a sluggish economy, business for the top designers couldn't be better. According to a new report, women's high-end designer labels grew by nearly 3 percent in 2002 while sales from the apparel industry overall have been declining steadily.
So what's the secret? Joining us today to talk more about this is one of America's hottest designers, Narciso Rodriguez, who was recently named designer of the year for the second time in a row.
Congratulations. It should be said that's never happened, even with some of the great... TULLY: That's a first?
LISOVICZ: It's a first. And maybe it will be a third. But, you know, when we think about the great icons in fashion you know, Calvin, for instance we think of this elegance and simplicity. We think of Ralph this updated classics. When we think of Rodriguez, Narciso Rodriguez what kind of look comes to mind? What are you known for?
NARCISO RODRIGUEZ, FASHION DESIGNER: Tailoring. Feminine clothing. I like to think that what I represent is something based in quality, luxurious materials. A great fit.
SERWER: Narciso, I'm not going to ask what do you think about Susan's look here, but if you want to comment, you can.
RODRIGUEZ: She looks very nice.
SERWER: She looks...
SERWER: I'm a business guy, right? Do fashions follow or reflect what's going on in society and the economy and our culture? How does that work?
RODRIGUEZ: I believe so. I think certainly after September 11, the collection that I wanted to present was a collection that was more positive. Something happier. Something to, you know, bring a little joy to the world. You know, and the -- it rocked the fashion industry, as many industries, but we were very hard-hit. Especially the smaller companies because it happened during show week.
SERWER: Everything now, though, what are things saying now about the world, do you think?
RODRIGUEZ: I think now is, you know, it's been -- I don't think that feeling has changed. I think people are looking for color. People are looking for quality. People are looking for good things, and I think that's why we've seen high-end designer go up, while the other markets haven't.
TULLY: So what you're saying, that in tough economic times like we have now, people are interested in clothes that last longer, that are more durable and better made?
RODRIGUEZ: Absolutely. I think it's -- they want quality. And they're -- they don't have problem spending more for it, because they know it's going to be something that endures longer.
LISOVICZ: How can you explain the success of, say, somebody like Isaac Mizrahi, who used to do high-end work as well, now at Target, and you see this cheap chic, which has really taken hold in the last decade?
RODRIGUEZ: I think everybody wants to own a piece of fashion. Whether you can buy a designer's fragrance and not afford it. LISOVICZ: Which you're also doing, I should say. For her.
RODRIGUEZ: Yes, for her. or if you can afford the actual code or dress, or you want a piece of a designer's look. And -- and everybody at our levels wants to be stylish and have some fashion in their life.
SERWER: Do you follow this thing where it says that higher hemlines mean the economy's going well or -- do you guys -- people on Wall Street talk about that. Do people in the fashion industry ever talk about that?
RODRIGUEZ: No. I think that's sort of antiquated, I this.
SERWER: Or a myth.
LISOVICZ: Where are the hemlines right now? Just straighten us out on that.
RODRIGUEZ: Fashion today is so -- so open. I think it's about offering women choices, and a woman can wear a short skirt, a knee- length skirt or long skirt and not be incorrect.
LISOVICZ: Speaking of women, you have some of the most fashionable women who wear your clothing, Sarah Jessica Parker, "Vogue's" editor-in-chief, Anna Wintour. What would you on the map was Carolyn Bassett Kennedy. You designed her wedding dress. Everybody in the world wanted to do her dress. How important was that to really launch yourself on the world stage?
RODRIGUEZ: I think firstly, it was a very personal project for me, because Carolyn was a great friend. But it brought so much media attention to -- unexpected media attention, while I was working in Paris. It was very important.
LISOVICZ: It was a beautiful dress.
RODRIGUEZ: There were, I think, 3 million kiosks around the world with a huge cover of one of the magazines of her and John and her dress. So it was very important. I didn't expect it, though.
SERWER: All right. Interesting stuff, Narciso Rodriguez, fashion designer. Thank you very much.
RODRIGEZ: Thank you so much.
SERWER: Coming up, more on an enterprising thief in Georgia who stole an entire ATM. But first, take a listen to my latest fortune fundamentals lesson on life cycle funds.
SERWER: One problem about investing is that to do it right involves a boat load of work. Example, your objectives and goals as an investors different when you are 25 from when you are 55.
Early on in life, you want to be more aggressive and own more growth stocks. Later in life you want to be more conservative and own bonds. And now there is some new mutual funds that manage this transition for you. They're called life cycle funds, and in many ways they appear to make good sense.
Here's how they work. These funds start off with a target retirement date, say, 2010, 2020, 2030. Then over time the funds mix of assets is gradually adjusted, selling stocks and be buying bonds, or money market funds, as retirement gets closer.
A typical fund might begin with a mix of 90 percent stocks and 10 percent bonds. But as your retirement date nears, the fund shifts to 20 percent stock, 75 percent bonds and 5 percent cash. A couple of things to be aware of, make sure the life cycle fund has low fees. Don't jump in and out of these funds. That ruins the whole point. And remember that these funds are somewhat cookie cutter and may not be right for you, say, if you have six kids.
Even with life cycle funds, investing right still means a lot of work.
LISOVICZ: We don't want to praise criminals, but you have to give credit to the person behind this crime in Georgia. Police in Snellville say someone used a backhoe to rip an entire ATM right out of a gas station early Wednesday morning. That's pretty graphic evidence. The thief or thieves got away with about $2,500. But that doesn't include the $15,000 worth of damage to the gas station wall. Police say they don't have any suspects so far, but they should be looking for a battered backhoe.
SERWER: When they catch this guy, they've got to give him points for creativity. Three to five years, give them five to seven. And you can build a new wing in the prison with that expertise.
LISOVICZ: And that's all for this edition of IN THE MONEY. As always, thanks for our panel members, Andy Serwer, editor-at-large of "Fortune" magazine. And also from "Fortune," senior writer Shawn Tully.
Join us next weekend when Jack will be back for 2 great editions of IN THE MONEY. He'll be tanned and rested after his vacation, just like a former president. That's next Saturday at 1:00 pm Eastern, Sunday at 3:00 pm.
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