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CNN IN THE MONEY

Supreme Court Vacancies; Market Reacts To London Attacks; G-8 Conference; UnitedHealth And PacifiCare Merge; Discussion Of Mortgage Rates; Creative Coalition

Aired July 9, 2005 - 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, CNN ANCHOR: Welcome to the program. I'm Jack Cafferty. Susan Lisovicz is on vacation this week. Coming up on today's program, the difference between shaken up and shut down. We'll look at how the world's markets reacted to the London terrorist attack. See what's changed if anything since September 11th.

Plus, looking for the real deal. The G-8 Summit brought together powerful countries, for what? See if it added up to more than just a big the photo op.

Plus risky business. Mortgages with bigger risk, lower rates are getting more popular. See how they can affect the economy if real estate turns south.

Joining me today a couple of IN THE MONEY veterans. "Fortune" magazine editor at large Andy Serwer, Money.com managing editor Allen Wastler.

So our beloved colleague Robert Novak reporting on Friday -- we tape this show on Friday -- so late last week, as you watch it at home on Saturday or Sunday, Novak was reporting that William Rehnquist's resignation from the Supreme Court was imminent, could have come as recently as last Friday.

If it happens, and if Novak's right, then we have two vacancies on the Supreme Court. And my guess is that nothing else gets done in this country now for at least six or eight months until we get these Supreme Court things cleared up.

ANDY SERWER, EDITOR AT LARGE, "FORTUNE" MAGAZINE: And you know of course, Rehnquist was expected. Then we had the Sandra Day O'Connor deal. And Sandra Day of course is going to be the bigger deal because she's a moderate. Rehnquist replaced by W. When W. replaces W., he'll do a conservative. But when he replaces a moderate with a conservative, that will shift the courts.

ALLEN WASTLER, MANAGING EDITOR, MONEY.COM: And you are seeing a lot of hang wringing going on, you know, among Democrats, and the liberal side of the country saying, oh no, this is -- but I sort of took heart from the fact that the White House is telling its Republican allies, some of the more hard-line ones, to tone down the rhetoric. You know, let's have a nice, straightforward debate here ... SERWER: Jack's skeptical.

WASTLER: Which maybe, Jack, we can have a nice civil debate --

SERWER: Can't we all just get along here?

WASTLER: -- everybody can live with.

CAFFERTY: I will just point out the history of the previous five years when it comes to President Bush and his absolute unwillingness to compromise his ideals and his view of the world. He is a conservative. And I don't suspect that anything's going to change when it comes to nominating people to fill the vacancies on the court.

SERWER: You hear Judge Stevens also may be considering retirement as well. Sea change could happen.

CAFFERTY: Could change the entire country here in the next year or so. All right, we'll see what happens.

This week's terrorist attacks in Britain tested the nerve of the world's financial markets. The London Stock Exchange stayed open for business despite the attacks. The index fell sharply but then bounced back by the close. Here in New York, the Dow opened down about 90 points. But by the end of the day, was actually on the plus side of things, as was the S&P 500 and the NASDAQ.

For a look at how that contrasts with past attacks -- you remember the one in Madrid and of course the ones here in the United States on 9/11 -- and see what it can say about the future, we're joined by Greg Valliere who is the chief strategist with the Stanford Washington Research Group.

Greg, nice to see you.

GREG VALLIERE, CHIEF STRATEGIST, STANFORD WASHINGTON RESEARCH GROUP: Great to see you, Jack.

CAFFERTY: What do you make of the way the markets reacted to the attacks in London?

VALLIERE: I think people in the markets essentially got it right; this was not a repeat of 9/11. It was horrific, but not a repeat. Maybe more importantly I think people in markets realize that when something like this happens, you get an immediate reaction from the fixed-income market. Interest rates go down sharply. And I think that's a great tradeoff that keeps the equities markets in some balance.

SERWER: Greg, politically what about the UK and the British government and British people, more importantly, do you think that they will look to capitulate -- perhaps is the right word -- as the Spanish people did, and reelect -- or throw Blair out, or try to force him to withdraw troops from Iraq?

VALLIERE: That's a great question. I would be more concerned about the Continent, where these terrorists are making a very unabashed message to people there, that they need to pull out of any support for the U.S. or what's going on in Iraq. I think the Brits are -- have a backbone.

I question about the Continent. If you look at the demographics of the Continent, especially say France and other countries, there are thousands and thousands of these fanatics who are living right in those countries.

WASTLER: Greg, continuing the political ramification, what about President Bush? Does he get a bounce out of this? Usually, these situations give him a little traction and maybe help him with some of his proposals and his popularity.

VALLIERE: It's hard to address something that cynical right after this tragedy. But this being Washington, obviously people have. And I think that the voters showed last November that the president has very high ratings in this area and I wouldn't be shocked if his numbers go up by three or four points.

That said, does this mean his agenda is suddenly going to sail through Congress? No way. I still think the basics still apply. Things like Social Security are on life support. I don't think this will fundamentally lift his agenda. And the other thing -- very quickly -- that will dominate all the news, as you guys discussed, is going to be Supreme Court nominees. I don't think a slightly higher job rating will make that much of a difference.

CAFFERTY: You alluded to the Continent. Let's talk about Misters Chirac and Schroeder, and how they may react or choose not to react to the events in London. Is this likely to widen the rift between France and Germany and the United States and England, or might it push those guys toward the west a little?

VALLIERE: Well they're both lame ducks, as you know, to one extent or another, I think. And that makes their -- and they have their own internal issue, the weak economy, faltering currency, some scandals in France. So they have their own set of problems as well.

That said, I think, again if you look at the demographic makeup on the Continent -- and you and I have talked about this before, Jack -- the only area of society in Western Europe that is having positive birth rates is Muslim. Every other part of society, native Europeans have a negative birth rate. I think there's still going to be some appeasement of these people because there's so many of them.

SERWER: Greg switching back to the stock market, do you believe, as I do, that there is a terror discount in stock prices in the United States? After all, the market hasn't gone anywhere since August of 2001. In other words, there's been no growth.

If the market had grown 7 or 8 percent since then, we'd have Dow 14,000. A lot of people made much of the resolve of the stock market. But actually, it didn't go down because it's already down. Think that's right? VALLIERE: One of my favorite things, I think just as there was a terrorism premium in oil, I think there's clearly one in the S&P in the stock market. We all went to bed a couple nights ago thinking, well, the market in the next few months will be affected by the Fed and interest rates, by earnings, by oil prices. And now there's another one that's back, just as it was right after 9/11. And geopolitical risk, which cannot be quantified, is now a real factor, and a negative, I think, for the overall stock market.

WASTLER: Greg, you mention the Fed. Do you think events like what happened this week in London factor into their thinking about what to do on interest rates?

VALLIERE: I do, if they're repeated, if this is just a -- if 7/7 was just a one-time incident and there are no repeats, probably not. But God forbid, if there are more incidents, I think it has to make the Fed more dovish. I think that the clear play here is that if we have more terrorism, interest rates could go even lower.

CAFFERTY: What about the vulnerability that remains here in the United States, Greg? Our ports are vulnerable, our transportation, infrastructure is vulnerable. We haven't done, if you ask members of the 9/11 Commission, nearly enough in the wake of the attacks on September 11 to protect this country against future acts of terrorism.

Now they're blowing up the transportation infrastructure in the city of London during rush hour. Do you expect it might ignite any sort of sense of urgency in the United States to do little more than pay lip service to being safe here?

VALLIERE: Absolutely, Jack. For all of us who are on trains a lot, I'm on Amtrak all the time. I just shudder to think how easy it could be to get something on an Amtrak train, or get something on the New York City subway. So I feel very confident in predicting over the next few weeks there is going to be a real intense reexamination of whether these are very, very soft targets, which I think they are.

SERWER: Greg, is it really appeasement, though? We're talking about the British having a backbone. I mean to withdraw from Iraq and turn over the security to the United Nations, I mean, and how would the markets react to that? Wouldn't that be seen as a positive?

VALLIERE: No. I don't think so. I think the message to al Qaeda and to Bin Laden, people like that, would be that at the first sign of blood we get a little squeamish. I'm sorry, I think that was one of the messages, accurately or not that came out of Madrid. I think this would be the exact wrong time to send any kind of signal like that. That might even give them more of an incentive to do even more.

CAFFERTY: Interesting stuff. The story that unfolds going into the next weeks and months could become even more so. Greg Valliere, thank you for joining us. Always a pleasure to get your thoughts on these things. Chief strategist, Stanford Washington Research Group, from the nation's capital, thanks again.

VALLIERE: You bet. CAFFERTY: When we come back on IN THE MONEY, making nice or making a difference? We'll look at whether a G-8 Summit adds up to anything more than just another photo op.

Plus, building a bigger safety net as United Healthcare hooks up with Pacific Care. See what the market makes of the deal.

And would you open your wallet for these people? Find out if celebrities really help when it's time to raise money for a cause.

(COMMERCIAL BREAK)

CAFFERTY: When you see a G-8 Summit on television it looks like the kind of thing that probably is really important, you know, big stuff happening. Got all those powerful world leaders together, got the fancy photo ops. They all wear them expensive suits. They all speak better English than I probably am doing during this introduction.

This week's G-8 Summit got under way in Scotland. We couldn't help wondering if anything really Earth-shaking gets done at these things. From Washington, Nile Gardiner is going to tell us about that. He is a fellow at the Heritage Foundation, which is a conservative think-tank.

Nile, nice to have you with us. Welcome.

NILE GARDINER, HERITAGE FOUNDATION: Thank you very much.

CAFFERTY: Let's start with this. Can you name the single most important thing ever to come out of a G-8 Summit meeting?

GARDINER: I'm afraid I can't, actually. I think that's an impossible task.

CAFFERTY: It was a trick question.

SERWER: Switch to ...

GARDINER: Very tricky.

CAFFERTY: So the bottom line is, this is much ado about very little. However, the events in London last week are likely to refocus the meetings that remain to the subject of terrorism and presumably some discussions maybe behind the scenes will produce something.

But overall, this is about communiques that have no substance. This is about photo ops. This is about what?

GARDINER: I think, largely, the G-8 is about talking shop, really -- a meeting of world leaders that discusses a great deal, doesn't ultimately achieve very much. Having said that, I think this G-8 Summit did achieve one thing and that was an agreement on debt relief for Africa's 18 poorest nations. Now that is a significant step.

But definitely this G-8 Summit was hugely overshadowed by the London bombings. And the fact that the G-8 Summit was not originally intended to discuss some of the more pressing world issues such as global terrorism, the war on terror, the battle against rogue states, demonstrates just how out of touch these summits have become.

SERWER: Now, let me ask you, did the bombing and the distraction -- I guess if you can call it that -- that it created, did that serve to underscore a rift between the UK and the European nations, do you think?

GARDINER: I think certainly the British response to these bombings is going to be vigorous. It's going to be very different to that of the Spanish government. And I think a clearer aim of the al Qaeda attack was trying to divide the United Kingdom from the United States and to force UK forces to withdraw from Iraq. I don't think we will see that.

We are, in fact, I think, going to see the US-UK alliance being strengthened as a result of these bombings. We'll see possibly even more British troops sent to Iraq as a result of the bombing. Certainly, the terrorists won't succeed.

I think certainly there's a divide between Britain and some of the other big players in Europe such as France and Germany. The French and the Germans will be urging Tony Blair not to use military force in response to these bombings. I think that Blair is going to be under a lot of pressure from the British public to actually retaliate against whoever is responsible for harboring, funding, abetting, these terrorist. We may indeed see a possible a U.S. and British military reaction to these events in next few days.

WASTLER: Now this leads into another thing the political rift in Europe. How do the French and the Germans and the other members of the G-8, the non-superpowers in the G-8, how do they view the meeting?

We sort of, smart alecky Americans, we're the superpower, so we tend to sort of look down on it. But I wonder if the other nations maybe look at it as their chance to exercise a little leverage on us. Is that fair?

GARDINER: Yes. I think a G-8 Summit or, for example, a meeting of the U.N. General Assembly is far more important to continental European powers than it is to the United States. It's an opportunity of course for countries such as France and Germany really declining powers on the world stage, to try and rein in the U.S. superpower.

And certainly, we saw behind the scenes, at the G-8 Summit, a degree of tension between the United States and the French and the Germans, particularly over the issues of foreign aid and global warming. And certainly this summit was used as an opportunity to try to pull down the U.S. Goliath. I don't think the Europeans actually succeeded in doing so, but that was certainly the intention.

CAFFERTY: You talk about foreign aid and global warming -- and I don't mean to minimize those items as issues, but you've got a nuclear weapons program under way in North Korea. You got a new, a very conservative president in Iran. They also are developing some sort of nuclear program. They say they just want nuclear power a lot of people think they want nuclear weapons. There are serious terrorism issues around the world.

I mean if you're going to get together and have a summit, shouldn't they maybe try and pick some issues that are more timely and more urgent and perhaps more meaningful in terms of trying to address them?

GARDINER: Well, that would certainly make sense. And one would hope that a summit like this would be addressing the dangers of a nuclear armed Iran, the dangers posed by a nuclear armed North Korea.

I think at the end of the day, the real business in terms of national, international security is handled by the United States and Great Britain and so the meetings between Bush and Blair we see frequently in Washington for example, are the meetings where the real decisions are taken in terms of how to fight the global war on terror.

The real decision-making is not made at a summit such as the G-8. I think that ultimately, the war on terror and the battle against rogue regimes is really being run by two nations, the U.S. and the UK, with certainly the lead role-played by the United States.

SERWER: So now, just quickly, wouldn't that suggest, then it does make sense for these nations to get together and talk about global warming and AIDS and poverty?

GARDINER: Well, I think that -- it's good for world leaders to address some of the softer issues. They also need to recognize that we're living in an extremely dangerous world. And we have to address the threat posed by very dangerous rogue state. Unfortunately, think many European countries are simply unwilling to accept the reality of an extremely dangerous world.

SERWER: All right. Well, duly noted. We've got to leave it on that point. Nile Gardiner, who is a fellow on Anglo-American security policy at the Heritage Foundation, thank you for coming on the program.

GARDINER: Thank you very much.

SERWER: Coming up after the break, vital signs, UnitedHealth and PacifiCare are getting together in a deal worth more than $8 billion. See if that's raising Wall Street's pulse.

Also ahead, betting on tomorrow. A look at whether a high-risk mortgage is worth the money you save in the short run.

And monkey business. Find out how the cargo in your trunk could make your ride a little easier. We've got that on the "Fun Site of the Week" there, right? Yes.

(COMMERCIAL BREAK)

WASTLER: Now let's take a look at the week's top stories in our "Money Minute." It was a mixed June jobs report. Employers added 146,000 jobs last month. But that was short of what Wall Street was expecting. With fewer people looking for work, the unemployment rate dropped to 5 percent, the lowest it's been since 9/11. And the softer job report may encourage the Fed to end its interest-rate hiking policy.

The employee discount for everyone program got the motors running at GM. The incentive made June the best sales month at General Motors in almost 19 years. SUV and truck sales jumped by almost 70 percent. GM's now extending the program, and Ford and Chrysler are rushing to offer similar incentives.

And if you're sick of all those confusing and sometimes nauseating prescription drug ads, you may have a reason to smile. The big drug companies spent 10 percent less on TV advertising last month than they did in June of 2004. Industry experts say they expect the drug industry to continue that trend in order to get overall costs under control. And of course you can catch up on all the business news of the week at CNNMONEY.com.

SERWER: Not everyone's cutting back on spending, though. UnitedHealthcare says it's buying PacifiCare Health Systems for about $8 billion. UnitedHealth is hoping to get bigger and use its size to bargain for better rates with hospitals and drug makers.

UnitedHealth shares are trading close to its one-year high. The stock's been on a steady climb for most of the last 10 years. That makes UnitedHealth our "Stock of the Week".

You know with this deal, they'll become the number two player in this business, with 26 million customers. WellPoint's number one, with 28 million. It's good for Wall Street. A lot of people concerned on the customer side, though, because they're going to be squeezing those people and they continue to do so.

CAFFERTY: Yes. A heart transplant patient will now be handled between 8:00 and noon, as an outpatient and you'd be out of there by the afternoon. Seriously, if you're a stockholder in this company, it's probably a good idea. If you need medical care, it may not be so hot.

How come the government sits idly by and watches these things go on?

SERWER: I think it is being scrutinized.

WASTLER: Yes. I think they'll take a good, hard look at it, because more and more consumers are getting upset about the consolidation, which is always bad for the consumer. Also remember, that increases their leverage with drug makers and all the other offering providers out there. Those guys, they have some great lobbying groups up on Capitol Hill.

CAFFERTY: I've heard that, yeah.

WASTLER: So we can expect a little battle about this. SERWER: Yes. A couple points here. PacifiCare, big with elderly patients. So that's actually a particular concern. And there are some investigations about both of these companies refusing to pay and reimburse patients. We've heard that before.

And you know, UnitedHealth has made its mark by being a cost- conscious company. They're out of Minitoke, Minnesota. The stock's gone from $10 to $50 over the past five years. They've done that by cutting costs. So again this speaks to your point.

The company has a $67 billion market capitalization, you know, which is a lot bigger than a company like Disney or Yahoo!. I mean it's a giant. It's one of those companies that you don't know much about until you try to go to the hospital and get reimbursed and then you're like, oh yes, those guys. Know them pretty well.

WASTLER: I always wonder about companies that are buying growth. It always makes me worry a little bit. Because how long can you keep buying growth, buying growth, buying growth? That's what they did in the late '90s and it turned out to be not good for many companies.

CAFFERTY: So presuming that we all stay well, the question is do you buy the stock? You said it has gone from $10 to $50 in the last five years. No sign the climate will change appreciably at least in the short term. Is $50 too expensive to buy shares of this company now?

SERWER: The stock's not that expensive, Jack. I mean it's a growth stock, but it's kind of under known -- if you will -- a little bit. It is not a high-profile name. It's done pretty well flying in the face of a lot of resistance. So you know, this is one that maybe has a little bit of wind in its sails. Although you know, who knows? I mean it could get investigated tomorrow. You know, it's certainly done the job so far.

CAFFERTY: Good.

SERWER: All right. Coming up on IN THE MONEY, save now, pay later. We'll look at whether interest-only mortgages are good for you and the economy.

Plus, Bono a-go-go. The U2 singer is one of the biggest celebrities with a cause. Find out if famous faces are enough to get you behind a campaign.

And the rings toss. We'll tell you why New York ought to be celebrating the fact that it didn't get the Olympics.

(COMMERCIAL BREAK)

ROB MARCIANO, CNN METEOROLOGIST: I'm Rob Marciano in the CNN Weather Center. We're tracking Hurricane Dennis which, continues its march into the Gulf of Mexico. But the eastern flank of the storm continues to rake the western shoreline of Florida, Tampa included. We have a weather watch box out for the possibility of tornadoes until 4:00 this afternoon. We've already seen two tornadoes touch down in the Tampa metro area. We have another couple of tornado warnings out for this line of thunderstorms or squall line, which the National Weather Service says is capable of producing more tornadoes. Pinellas and Hillsborough Counties are the metropolitan Tampa counties under the gun here for the next 20 minutes, until about 2:00.

Here's the center of the storm. It is becoming better organized. You see vividly the eye of the storm, as it heads north and west, toward the coastline now, of the Panhandle of Florida. It is a cat 2 storm with 100 mile an hour sustained winds. Its movement is northwesterly of 14. Expected to increase a little bit and get to right at category 2 to category 3 status when it makes landfall, ETA. tomorrow for the eye wall to come through sometime in the early to mid afternoon.

But the effects of this storm are going to begin to be felt across the Panhandle of Florida beginning wake-up tomorrow. You might see squall lines beginning tonight. This storm may very well bring a tropical depression to places like Memphis by the time we get to Monday.

That's the latest from here. Now back to IN THE MONEY.

SERWER: Red-hot mortgage products like interest-only loans may have helped consumers buy big in a sizzling market. Soon, they may force many homeowners back out in the cold. Our next guest says this trend could have a huge impact on the overall economy.

Greg McBride is senior financial analyst with Bankrate.com and he joins us now to explain.

Greg, welcome to the program. First of all can you explain to us what interest-only mortgages are all about?

GREG MCBRIDE, BANKRATE.COM: Interest-only mortgages create an option for people that are really strained by affordability because that initial payment is based only on the interest that is due for that month. You're not actually repaying any principal. So it keeps that monthly payment very low. That is very popular among buyers in very costly housing markets.

CAFFERTY: Why are they dangerous?

MCBRIDE: The danger here is that at some point down the road, that loan changes. You go from paying interest only to paying both interest and principal each month. Then, on top of that, you're subject to a higher interest rate when that rate becomes adjustable. The two factors together could produce a significant payment shock at some point in the future.

WASTLER: How significant a payment shock? Are we talking like a $100 more a month, $200, $500? What would be reasonable to expect, say, on a $200 grand, $300 grand mortgage?

MCBRIDE: In that instance, you're talking about a payment that, say if you have interest-only for the first five years, you're talking about a payment that could literally jump $500 or $600 a month at the end of that five-year period. And that's a very significant increase, when you consider that many household incomes won't increase anywhere near that pace during that period of time.

SERWER: All right, Greg, I can see those palm trees behind you. Where are you in West Palm Beach? Looks pretty nice down there.

MCBRIDE: Yes.

SERWER: Housing markets are red hot in certain places -- Florida being one of them. Why don't you talk a little bit about this? What's your feeling on whether or not there's a bubble in the housing market? There's got to be in certain regions, right?

MCBRIDE: Housing is like the weather. It boils down to local factors. So if you're talking to somebody in Akron, Ohio, they're saying, housing bubble? What housing bubble? They haven't seen that appreciation in the past five years that many markets in Florida, California, or the Northeast have.

It's those markets that have seen this very stellar rate of appreciation in the past several years that are most susceptible to a bubble. Those are also the areas where the instance of interest-only mortgages is the highest.

CAFFERTY: A lot of economists, though, expect, Greg, interest rates are going to remain low for a long time in this country. Long- term rates have come -- actually come down in the last year or two.

Is this a good time to finance out of those interest-only mortgages, if you're in one, and go to a more conventional-type product, which will have, presumably, low rates for the foreseeable future?

MCBRIDE: It's a tremendous window of opportunity to do exactly that. Refinance out of that interest-only or short-term adjustable rate mortgage, which is pegged to short-term interest rates that have been rising. And get out of that product and lock in that fixed rate financing for the period of time you feel you'll be in the home.

Many fixed rate mortgages right now, 5.5 percent, 5.75 percent, and some of those hybrid arms, like a five-year fixed rate, for 5 percent, maybe a little bit more, so great opportunity. You do have to bite the bullet and take a higher payment now than you would have with the interest-only loan. But it removes any possibility of surprises down the road.

WASTLER: So Greg, I have a 30-year fixed rate, plain vanilla mortgage. Why should I care, or should I even care, if my neighbor and my neighbor and my neighbor and my neighbor, all these people have interest-only loans? It's not going to impact me if their loan payment goes up, is it?

MCBRIDE: One of the concerns is that if we get into an environment over the course of the next several years where many homeowners are facing this adjustment that's pushing their payments much higher, it could lead to an increase in foreclosure. And unfortunately, for you, the foreclosure of your neighbor's house affects the market value of every house on the street.

So there is some economic concern that if we do see a spike in foreclosures and defaults in certain markets around the country it could have a detrimental impact to the broader housing market.

SERWER: Greg, I really want you to come clean on me here for a minute and tell me, if you are going out to buy a house or a condo right now, what kind of mortgage would you get?

MCBRIDE: Well -- and I'll tell you right now this is the kind of mortgage I think is suited for the typical home buyer, and it's not necessarily the 30-year fixed. The average homeowner moves every eight years or so. In that respect, the best loan option is what's known as a hybrid ARM -- gives you a fixed rate for an initial period of years before becoming adjustable.

If you feel you're going to move within the next 10 years, get a rate that offers you a fixed rate for the first 10 years and then becomes adjustable. That rate's lower than a 30-year fixed, but as long as your timetable pans out, you won't face that risk of adjustable rates later.

CAFFERTY: What about the escalating prices in the real estate market across the country, 10, and 15 percent a year for the last several years, and some say there's no end in sight, particularly in high-demand areas like the big cities on both coasts? What do you see if you look forward in terms of the domestic real estate prices, and how fluctuation there may impact the ability of people to make their payments or even buy a home?

MCBRIDE: The mentality that this recent appreciation we've seen is something that can continue into the future -- it's really scary because it parallels the mentality of the stock market in the late '90s, where everybody assumes that things were different now.

The reality is these rates of appreciation are the not sustainable over the long term. And people that are banking on appreciation to build equity, rather than doing so for their monthly mortgage payments, they could be in a very difficult spot if prices stagnate for any length of time, or if prices in their market were to decline by any measure. They would not have that equity to cushion them in the event that they needed to sell the home, and household budgets just aren't in a position to avoid sharply higher monthly payments.

WASTLER: OK, well Greg McBride of Bankrate.com, thanks for joining us and talking to us about this. We appreciate it.

MCBRIDE: Thank you.

WASTLER: There are lots more to come here on IN THE MONEY. Up next, smile for the camera. Hollywood stars can deliver the kind of attention a world cause wants. See if a goodwill ambassador can really bring in the Benjamin's.

And forget the tiger in your tank, how about a monkey in your trunk? Stick around for our "Fun Site of the Week".

(COMMERCIAL BREAK)

WASTLER: Celebrity response to world causes is nothing new. We saw it after the attacks of September 11th, after the tsunami last December, and more recently ahead of this week's G-8 Summit. But do we really care what causes stars feel are important? My next guest says yes.

Robin Bronk is executive director of the Creative Coalition. She pairs causes with celebrity spokespeople. She joins us now. Welcome, Robin.

ROBIN BRONK, CREATIVE COALITION: Hi, how are you?

WASTLER: I'm doing fine. And now I tend to be one of these cynic types. When I see a celebrity promoting a cause, I roll my eyes and go, oh, geez this can't really be working.

Am I right, wrong? I take it you think I'm wrong?

BRONK: Well I assume that you do roll your eyes, so I guess you're right about that. But just by way of background, the Creative Coalition is almost 20 years old. We are the public policy home room for the arts and entertainment industry. We were founded by activists who happened to be actors. They were Ron Silver, Chris Reeve, Susan Sarandon, Steven Collins and Alec Baldwin.

So whether or not -- and this still holds true now for our membership -- whether or not they are actors, or directors, or producers, writers, or if they were a physicist or dry-cleaner, I think all of these people would still be active in their communities and active in promoting issues.

SERWER: Robin, when does it make sense, though, for a celebrity to ally themselves with a cause, if you will, become a spokesperson, and when does it not make sense?

BRONK: Only it only makes sense for celebrities or anyone to get behind a cause or get involved in a cause if there is a personal connection to that particular cause. It makes no sense at all for any of us to just jump into a cause and jump out of it. We have to have a personal connection to it.

In other words, someone -- if it's someone in your family is affected by that cause, you are affected by the cause. Your community is affected by the cause. Your environment is. You've got to be personally connected. And there's got to be a reason for you to be connected to a cause.

High-profile members of the entertainment industry are no different than anybody else in that they have got to have a vested interest, and a vested reason, to be involved in a cause. CAFFERTY: How effective is the idea of celebrities marrying themselves to causes? I personally have problems with people who -- especially when it comes to actors, make their living pretending to be somebody else than who they really are. When you take a look at their personal lives, they make the rest of us look pretty normal.

Alec Baldwin for example says he was going to leave the country if George Bush was reelected president. The last I heard he is still here.

My earliest memories of Angelina Jolie were in that movie "Gia" where she was walking around in her altogether, which she followed shortly thereafter by her marriage to Billy Bob Thornton where they carried vials of each other's blood around each other's necks and talked at the Oscar's about what they did in the limo on the way over.

Isn't there a credibility problem with some of these folks now suddenly standing up and pretending to be ultra respectable and representing the underdogs of the globe? Or am I just being silly?

BRONK: Well you know it's interesting, because at the same time, which I think is particularly relevant to your show, it's interesting how today any kind of business or corporation is expected to wear their white hat. So at the same time that you're doing business, you are doing well by doing good. And I think it's expected today. I think there is a wave of this white hat. And this understanding that all of us need to be more involved, need to be vested in your community, vested in the nation.

So I think it's -- the same cynic will also say, well what about -- you know, name a business that's had some problems. And now they're taking up orphanages in Romania. So I think that good can come from this. But again, whether it's a business, a corporation, a CEO, a celebrity, anyone, there's got to be a personal reason why you are involved in that cause.

WASTLER: Robin, the most recent example we have of celebrity, you know, causes, I guess, is the Live 8 concert that just went on last week. Do you think that worked? Do you think it sort of changed since the days of Audrey Hepburn going around for UNICEF? I mean, what about that?

BRONK: You know, I think -- honestly I think that the public -- they're all more savvy to grassroots efforts, whether it is an organization that is formed specifically for a particular issue, or it's an organization that's been around forever. I think grassroots tactics are pretty common these days, whether it's a Washington-born agenda, strategy, or a more locally community-based strategy.

But I think we're all more savvy to, hey, it doesn't just -- we're not just going to all get together and hang out and talk about the issue and maybe something will come of it. I think we're all smarter. There are techniques, tactics, technologies that make it a lot easier and a lot more effective.

SERWER: Robin, we just have a little bit of time left. But I'm wondering if you see any of your clients or any of these spokespeople actually making the giant leap into politics, like Ronald Reagan?

There was actually talk of Bono, I think taking a role, was it the World Bank or the IMF, I think. Do you see any of this really happening?

BRONK: Well I think it is interesting, historically what's particularly interesting is there have been a number of actors and people from the entertainment industry who have gone on to elected positions. And again, these are -- if you're going to be involved in your community, it just doesn't matter whether you're an actor or a doctor or a dry-cleaner, you're going to be involved and that's the type of person you are.

So do I think it is more of a trend? I don't know if it's more of a trend now than ever before, because I think our elected officials do work very hard. It's a hard job. I think you got to want it to go for it. But the Creative Coalition again, it's at www.thecreativecoalition.org. We welcome your viewers to take a look at us and see what we do and we can give you any information you need.

SERWER: Good, OK, Robin. Robin Bronk is the executive director of the Creative Coalition. Can you get back to us if you think you can match up Jack Cafferty with a specific charity?

BRONK: You just give me your requirements.

SERWER: You go. All right.

BRONK: Thank you.

SERWER: We'll leave it at that. Just ahead, the one Olympic event where the losers can feel like winners. Find out why New York ought to cheer up over not getting the games.

And if you've got something on your mind about the games or the rest of this week's news, drop us a line. The address is INTHEMONEY@CNN.com.

(COMMERCIAL BREAK)

CAFFERTY: Well, if you're one of those New Yorkers who's all depressed because the city didn't get the 2012 Olympics, maybe you should be celebrating instead. That's Allen Wastler's "Inside Out" for today. And I happen to agree with you.

WASTLER: Well you know there were some strong arguments, compelling arguments that the Mayor Michael Bloomberg was whipping out and all the supporters of it. It would bring jobs, Jack, 135,000 jobs to the region. And, I mean, $12 billion in revenue.

CAFFERTY: I know.

WASTLER: But $12 billion is an interesting number. If you look at the other side, how much did Athens have to pay?

CAFFERTY: Oh, yes. SERWER: $12 billion. I remember that.

WASTLER: Which makes me wonder if the supporters weren't pulling that -- see we'll break even. Yes, in the case of every Olympics hosted, with a few exceptions, it's ended up costing the host city a lot of money. I really wonder if that's worth the grand appeal of "we're hosting the Olympics." If you take, for example, Sydney, they're still paying $32 million a year to maintain all these venues they built for the Olympics in 2000 that nobody's even using anymore!

SERWER: Yes.

WASTLER: Plus, let's consider transport cost, security cost, which this week we saw, you know security is definitely a must. All the productivity loss you get because they're rerouting my train through Hoboken because you have to avoid certain Olympics things. I would take heart from it, gentleman. I would say good riddance.

SERWER: I hear Montreal is still pay paying, I mean that's 1976.

CAFFERTY: The other part, New York's got enough people in it now. We don't need anymore people here. Those of you planning to come here, please go somewhere else. It's hard enough to get around this city --

SERWER: Go home.

CAFFERTY: Are you listening? No, it's true --

SERWER: He's a great internationalist isn't he?

CAFFERTY: Summertime is just impossible. It took me an hour to get to the Lincoln Tunnel here to tape this program this morning. I don't care if they ever have the Olympics here, I wish some of the people here would move elsewhere. Move to Connecticut.

WASTLER: Good will --

SERWER: Lets move on.

WASTLER: OK, we love the trunk monkey here right? We've often brought you -- there's a new trunk monkey out. You'll love it. Trunk monkey; let's see you do your thing.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Don't worry, OK ...

UNIDENTIFIED FEMALE: Oh God I think it's happening.

UNIDENTIFIED MALE: Now?

UNIDENTIFIED FEMALE: Yes, right now! What are we doing?

UNIDENTIFIED MALE: OK, everything's going to be OK, all right? Breathe with the monkey.

UNIDENTIFIED MALE: The trunk monkey pediatric edition. An innovative idea you'll only find at Suburban Auto Group.

(END VIDEO CLIP)

CAFFERTY: Deeply disturbing.

WASTLER: Yes.

SERWER: That's deeply disturbing. I really think it is.

CAFFERTY: UnitedHealth could get some ideas watching the trunk monkey work.

SERWER: There are costs to be cut.

CAFFERTY: Absolutely. Here's a cheaper way to do it. A bunch of bananas, and bingo, junior's here.

Coming up next on IN THE MONEY. Time to hear from you as we read some of your e-mails from the last week. You can also send us an email right now we're at INTHEMONEY@CNN.com. Presuming that they allow us to continue after the commercial break, which begins now.

(COMMERCIAL BREAK)

CAFFERTY: All right, it's time now to read your answers to our question about how the war in Iraq is affecting your hometown.

Dan in Bluefield, West Virginia, wrote this, "We've had several National Guard members killed and many police officers have been gone for most of the last three years. Most of the people here also feel the government is spending too much on the war and not enough on our own economic development."

Dick in Corpus Christi, Texas, wrote, "We have benefited economically because our ports used to ship materials to Iraq. But we have seen support for the war erode anyway, as many of us believed there was a connection between Iraq and 9/11."

And a viewer in California wrote, "The war has made people in my town generally more respectful of one another. We're especially kinder to families with a son or husband serving in Iraq." And there are daughters and wives serving over there as well.

And now for next week's email question of the week is this, "Have you reduced your debt or taken on more in the past year?" Send your answers to INTHEMONEY@CNN.com. And you should also visit our show page at Money.com/inthemoney, which is where you will find the address of our "Fun Site of the Week" -- the trunk monkey as maternity nurse.

Thanks for joining us. You outdid yourself this week. Thanks for joining us for this edition of IN THE MONEY. Thanks to "Fortune" magazine Editor-at-large Andy Serwer. And my old pal, Money.com Managing Editor Allen Wastler.

We will see you next time. Enjoy the rest of the weekend.

(COMMERCIAL BREAK)

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