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YOUR MONEY

The United States' Relationship with China; The Effect of Holiday Shopping on Small Businesses; The Housing Market; Forecasting the Friendly Skies

Aired October 31, 2009 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(BEGIN VIDEO CLIP)

CHRISTINE ROMANS, CNN HOST (voice over): The economy is finally growing. Evidence the recession could be ending. But with job losses and foreclosures, when does it turn around for you?

Thought the AARP was for senior citizens? If you are 20, it you're 30 or if you are 40, they are ready for you now.

And forecasting the friendly skies. We have got a cheap airline ticket with your name on it. Boarding all rows, it's time to talk YOUR MONEY.

(END VIDEO CLIP)

ROMANS: All right, hello and welcome to YOUR MONEY, I'm Christine Romans. Ali Velshi is with us in Houston today. Ali one of the big stories this week, the economy is finally growing.

ALI VELSHI, CNN HOST: Finally growing. The gross domestic product, GDP was up for the third quarter. That is the third three month period of the year that is the first increase in more than a year. What does that mean about the economy and more importantly to our viewers at home? Christine it is your turn and give up the 60 second break down, you picked a good one today. I didn't quite make it last week. I got buzzed repeatedly, because I was way more than 60 seconds. I was trying to explain the housing market. So let's see if you can do that, a minute on the GDP starting right now.

ROMANS: All right. This was the best economic news since President Obama took office. The GDP measures how strong our economy is. From July to September, the battered American economy finally grew. The previous four quarters saw the American economy shrink. That is a rare and painful condition, it means factories are idle, stores close, and companies fail and people lose their jobs.

Now that the economy has actually registered growth, many say the recession may be behind us. A couple important things here, it grew because of cash for clunkers, it grew because of purchase of homes backed by the home buyer's tax credit, and it grew because the government was aggressively in there juicing the economy. Supporters of the stimulus will tell you that, this is evidence that all of the money we are pumping into the economy is working. The question is how long does that last? And will it lead to job creation. Another point Ali, the numbers may show economic growth, but most job losses and foreclosures means most Americans well they might be feeling something else. Did I make it?

VELSHI: You did make it. You made it with seconds to go, mere seconds to go. I do know, Christine, this is making me look bad. I didn't quite get it all. Could you do it one more time because that was excellent?

ROMANS: I talk fast. I just talk fast.

VELSHI: Look. It's actually important discussion and you did give us a good setup for this. I think we should talk about it a little more.

ROMANS: All right. Well there's definitely the disconnect. Let's talk about that. Because we still have the unemployment merging toward 10 percent. Christina Roamer, the president's chief economic advisor said that frankly it's highly likely it will make 10 percent. We still have millions of homes that will be foreclosed on this year, there's even this shadow foreclosure number people keep talking about, the millions of homes the banks aren't even counting yet. Because they are hoping maybe something will turn around for people, that they will start paying their bills again.

Let's bring Chrystia Freeland; she is the managing editor of the "Financial Times." And Mickeline Maynard she is the author of "The Selling of the American Economy" how foreign companies are remaking the American dream. So when the economic data points in the right direction. You know Chrystia when are people going to feel the turn around? I think a lot of people say of great the economy is growing, mine isn't.

CHRYSTIA FREELAND, MANAGING EDITOR, "FINANCIAL TIMES:" Well, I think that is right. I'm afraid that feeling is going to last for some time. For one thing, jobs are always a lagging indicator, so the last thing that improves is the job number. But in addition to things like cash for clunkers, that you pointed out have kind of flattered the GDP numbers.

The other thing that's been going on in this last quarter is a replacement of inventories. When the credit crunch happened, the financial crash happened people stopped ordering. We saw this big replacement of inventories. The shelves are empty. Stock rooms are empty. We just saw a big surge of people restocking. You only have to do that once. So I think that these numbers were robust, that's great. No one would have hoped for them to be worse. But I think it would be wrong to feel that we are out of the woods and everything is going to be moving again.

ROMANS: What I keep saying is it feels like the economy is recovering, but not recovered. We hope it's recovering. But we still need to see more to be sure.

MICHELINE MAYNARD, AUTHOR, "THE SELLING OF THE AMERICAN ECONOMY:" We are down to a very, very deep trough on it. You have to remember that there's another unemployment number, which is the under employed people the people who stopped looking for work and that's at about 16 percent. Even if the large number stays at 10 percent, which is horrible. You have a larger number of people got part time jobs or others. That is not giving us much buying power.

VELSHI: Hey Christine, you know I have been traveling around all sorts of places. I'm in Houston right now. Where things are better than they are in many parts of the country, Texas is doing better and is likely to do better than much of the country. I think the issue here is you and I talked about it earlier this week.

That is that on one sense, we have to have that all American quality of optimism, understanding that things are not getting worse and they are starting to get better as we measured through GDP. On the other side it's very dangerous for us to be out of touch with those people who you have seen and you have talked to about it in the streets of America. I have talked to when I was out on the CNN Express for whom the house may still be disappearing or the job may still be disappearing or isn't coming back as Micheline said anytime soon. That's the difficulty.

This recession is like a truck that you were setting on the sidewalk. Garage door opened, truck drives over you and now that recession truck is moving back into the drive way and you may still be lying there. This is the time for you to get out and see if there is something you can do in terms of a career or in terms of a home that can help you benefit from the recovery and not stay without.

ROMANS: Ali, two words you used that are really important, optimism, this economy runs on optimism, consumers run on optimism, but also, realism. We have to be realistic about what's happening. Let's talk about housing. This is something, we live in this. How are things looking on the housing front? Looking up depending on what data you look at.

New home sales fell 3.6 percent in September. That was the first decline in six months. The same time, median home prices rose 2.5 percent to $204,800. This, as foreclosure rates is easing in some of the hardest hit cities, even from very high levels, I will say. You can see them in yellow right here. These are areas that have been real hot spots, but starting to improve slightly. But then the foreclosure crisis is expanding to these new areas. These places in red, which saddening we are seeing 120 percent increases in foreclosures. Here, I go back to this idea again, Micheline you know that is the housing market recovering, but not recovered? Are we repairing damage, but we haven't restored things?

MAYNARD: What has happened is prices have gone so low. That people with money who can invest in housing are creeping back into the market. But there are more foreclosures. I live in Michigan. There's going to be another round of cuts at the automakers, white collar jobs. Everyone is bracing for the second bubble of housing foreclosures.

FREELAND: The other thing Christine is to go back to your phrase of recovering, but not recovered. I think we have to reset our expectation of what recovered looks like. The sort of go, go years at the beginning of this decade were false. They were fueled by fake money.

ROMANS: Well people keep saying when are we going to get back to normal and I keep saying we don't want to go back to that normal. That normal wasn't normal.

FREELAND: Right, it's going to be a new normal. And I think for the United States, that new normal is going to be slower growth and less consumer spending. Because the world economy needs to be rebalanced with the U.S. consumer not going into the red in order to be the engine of the world economy.

VELSHI: I will say one thing. You said it last week Christine, and I will say it now, with the exceptions of some states like Michigan, like Arizona, like Florida, like Rhode Island and some others, this home buyers credit that comes to the end in a month. The low interest rates that we have got and as Micheline said the homes that are being sold, and continued to be sold in distressed sales and foreclosures, the low prices this may go down as one of the best times for people with money and available credit in some markets to buy a house.

FREELAND: Are you buying a house, Ali?

VELSHI: I'm in the market. I am definitely buying a house. I truly think for my purposes, this is one of the best times I have ever seen. Interest rates are as low as we are likely to get in the next 10 to 15 years.

ROMANS: Make sure you have money in the bank to pay that down payment 20 percent plus.

VELSHI: In some cases, they want 30 percent.

ROMANS: That is right. You can show that you have six months of mortgage payments that you are going to have after you close and you have a good, good credit score.

VELSHI: It used to be nerdy to want six months or eight months of any kind of expenses in the bank. People would say what are you talking about? We live paycheck to paycheck. The banks if you have good credit and you do have some money down, they will give you a mortgage but they are going to make sure you can pay that mortgage. They don't want to go through this mess, again and frankly I don't blame them.

ROMANS: Ali, nerdy is the new black.

All right. Next, the United States needs China's money. China needs America consumers to buy their products. Sounds like a win-win for everyone right? So why is this relationship a little strained?

(COMMERCIAL BREAK)

ROMANS: The United States owes China hundreds of billions of dollars. More than any other, the relationship between the U.S. and China is vital to the financial interest of the world. The math is simple; China buys $70 billion worth of U.S. goods each year. And we import nearly five times that much from China. What China buys from the U.S. is our debt. China is the largest foreign holder of our government debt. That means we need a strong Chinese economy to fund our deficits. That is why U.S. Commerce Secretary Gary Locke headed to China this week to try to pave the way for a smoother relationship in the future. CNN's Eunice Yoon has the story.

(BEGIN VIDEO CLIP)

EUNICE YOON, CNN CORRESPONDENT (voice over): U.S. Commerce Secretary Gary Locke never considered himself much of a pitchman, but today in China, he is one. The former Washington governor is hard selling American products at the Sam's Club in Hung (ph) Joe.

GARY LOCKE, U.S. COMMERCE SECRETARY: Including Washington State apples and almond rope candy, which is a candy that I can eat all day long.

YOON: The Chinese-American position pitch is part of a visit designed to reinforce a shaky economic bond between Washington and Beijing.

LOCKE: Here is an opportunity for China to work with the United States to become leaders of the world.

YOON: Is it true you weren't coming?

LOCKE: No, not at all. Not at all. The president and I, very much believe in free trade. That also means fair trade. To have a really good trading system, you have to have rules.

YOON: Do you think that China is a fair trading partner?

LOCKE: As the trading relationship matures, with any country, there will always be disputes. Sometimes, they are very technical. But you know when you look at the relationships between brothers and sisters, the relationship when you are really small and young, might be very simplistic. But as the families and the children get older, they get into more complicated issues.

YOON: The global economic crises has raised tension and with a trade imbalance between the two nations. So far this year for every $5 of goods sent from China to the U.S., only $1 has gone the other way. This is the American product section everything sold here is food. These are apples from Washington, oranges from Florida, but the vast majority of the food sold at retailers like this, come from China. How do you get more Chinese people to buy American products?

LOCKE: I think there's a great hunger and thirst for American products, weather consumer products and cosmetics to medicines and of course technology. China has done so much to modernize and to raise the standard of living for its people. American companies offer so much by way of products and services. YOON: How does the strategy of selling products to Chinese consumers help the American worker and beyond that how does it address trade imbalances?

LOCKE: Whether it's medical devices, water pollution control devices to clean water, all these things create jobs for American companies and American workers and also raise the standard of living for people around the world. That's the type of mutually beneficial trade I wish to pursue.

YOON: A message he hopes the Chinese will take home.

Eunice Yoon, CNN, Hung Joe.

(END VIDEO CLIP)

ROMANS: Excellent report from Eunice. Let's bring back Ali Velshi from Houston. Chrystia Freeland managing editor of the "Financial Times." And Micheline Maynard author of "The Selling of the American Economy" how foreign companies are remaking the American dream.

Micheline let's start with you, I guess. And this whole issue the Chinese are buying our products. They are coming here and they are investing. But it's complicated relationship. Where do we stand a year after the recession when it seems like China is on the rise and the U.S. is still really struggling?

MAYNARD: We have to have China to buy our debt. That is just the basic issue and then there's another issue here that seems a little inconsistent with the whole battle over Chinese tires. That kind of came out of nowhere.

ROMANS: Explain to our viewers what that is. It's a spat against Chinese tires and now poultry apparently.

MAYNARD: Well, the Chinese tire issue is that American rubber workers say that Chinese manufactures are sending cheap tires here sort of an echo of Japanese cars in the 1970's and '80s and they are costing jobs in the tire industry. Now I have covered the tire industry and wrote a big story about them for "Fortune" Magazine a few years ago. The tire industry has problems of its own. China is not really their issue.

Their issue is that auto sales have plummeted. When you used to sell 17 million cars and now you are selling 10 million, there's four tires on every car that means a lot fewer tires. The tire industry issues are not necessarily caused by China. But the rubber workers raised the issue and the president acted. It surprised a lot of people.

ROMANS: Why didn't he use it as the issue? A lot of people will say that it is raising tensions at a time that's pretty difficult and careful diplomacy economically.

MAYNARD: It's a quick issue. It is an issue that affects American jobs; the unions would say 5,000 jobs that have been lost to the Chinese. Look at the reasons for it; it doesn't seem to be there.

ROMANS: So it's tension at this point. There's always tension between siblings as the Commerce secretary would seem to call it, how serious is it?

FREELAND: I think the U.S.-Chinese economic relationship is the most important economic relationship in the world. President Obama's trip to China next month, I think is going to be the most important foreign trip that we see between now and the end of the year.

ROMANS: Is it like going to the banker saying we have our economic house in order and will be able to pay them back?

FREELAND: Well partly but I think it's important to also realize that banker is not necessarily dealing with the U.S. and frankly with the world on what the rest of the world might see as the fairest of terms. I think that it goes much deeper than trade wars over specific goods like tires where really U.S. tire makers might not be in the strongest position.

What the Chinese have done, and going back to the sibling metaphor, is they are acting in the world economy as if they are a toddler with a very weak currency. They have effectively pegged their currency to the U.S. dollar. So when the U.S. dollar decreases in value, which it probably should, the Chinese currency decreases in value too. And that is a problem, not just for the U.S., because it means U.S. exporters can't export to those Chinese consumers as effectively. But all the Asian countries around China are saying, hey, that's not fair.

ROMANS: Ali.

VELSHI: You know what I think what you outlined before we went to Eunice's story, and Eunice did a great job with the Commerce secretary in outlying. This is a mutually important relationship. The fact is the U.S. does need China to continue to provide inexpensive goods to the U.S. But at the same time, it does need China to develop as a consumer society and buy more of the U.S. goods. It also continues to need foreign buyers of U.S. debt while we have been getting into so much more of it. So, the simplistic view of being protectionist and keeping cheap Chinese goods out of America is not going to solve the problem. We need a bigger, more holistic view of this whole thing more to the direction of what Chrystia was pointing out.

ROMANS: We have trade rules and the trade rules need to be followed. We all need to be playing on the same field otherwise, it's just not fair. Especially when you are in a global recession, suddenly those things start to be very chafing.

All right, we'll talk about this more. Find out also who is cashing out of their 401(k) s and if that is a good deal.

Plus, 20 and 30 something, listen up the AARP is already looking for you.

(COMMERCIAL BREAK)

ROMANS: All right, welcome back to YOUR MONEY. Ali Velshi is in Houston. Chrystia Freeland is managing editor of the "Financial Times." She is here with me. Micheline Maynard is author of the "The Selling of the American Economy." How foreign companies are remaking the American dream.

Some headlines for you. Want to get your thoughts nearly half of all U.S. workers who lost their jobs last year cashed out of their 401(k)s. Younger workers who even more likely tapped their 401(k)s and most financial advisors will tell you to never do this unless you absolutely must. Why?

Well the taxes and penalties. If you cash out, say you are a young person, you are 25 years old, and you cash out $5,000. Empty out your 401(k), you are looking at about $3500 after taxes and fees. That might not seem like to much; well I am young what ever. But look at this, a long term worker faces a potential loss of $75,000 in all of those decades of tax deferred incomes. When Americans are ready to save money, is this a huge step backwards?

VELSHI: Yes.

ROMANS: You think so, Ali?

VELSHI: Yes. Unfortunately, unless you need to pay your mortgage or your rent or your debt or eat, the idea of doing this is a bad idea. I remember being out there saying as bad as it looks, most people only decide to do this after they have taken the worst losses in their portfolio. It's not like most of these people did this in November or December of 2007 after markets hit their highs. Most people did this after the markets were absolutely tumbling. It's such a sad, bad situation. I really, really hope people will take some time because you are not going to study something about investment psychology and things that you need to do to invest. If you haven't done it now, you're not going to get down to doing it because we just passed the most urgent time you are likely to ever face.

ROMANS: Ali wrote a book about this. The first thing about getting your money back is don't throw it all out. For young people, it really affects young people. I'm just going to take it out.

MAYNARD: I hope young people hear, time and time again. The earlier you can put money in a 401(k), the more you have in the end. If you wait for your 30s you get a little bit less, 40s and 50s. The more you can sock away in your 20s, that's the best time to do. Just forget about it, put blinders on. Don't think about the money.

ROMANS: Here is what I want Chrystia to answer. This headline for you. Everyone trying to get young people to save these days. Even the AARP, they are getting a new website. The AARP targeting folks in their 20s and 30s. It's easy to get people to start thinking long term when they are facing retirement, but how can you get people to manage their money wisely at a younger age? I think it's a smart idea.

FREELAND: I think it's a very smart idea. One way maybe you can get people in their 20s and 30s to start thinking about managing their money wisely is have the worst economic recession after the great depression. I think the kids going out into the job market for the first time I think they could be really different from us, from people who were able to get jobs when there were a lot of jobs around. We could have a generation that's more frugal, more prudent.

ROMANS: Ali, is it 20 something. Do you feel like the AARP shouldn't be looking at people so soon?

VELSHI: I think this is brilliant. Chrystia they are different from us, but they are different in a couple other ways. The recent graduating or the new graduates.

ROMANS: They are unemployed.

VELSHI: They are smarter. They have more access to information. They don't have themselves to blame. I remember when I was out on the CNN Express on college campuses, one of the things that I heard from people is that they don't feel responsible for getting us into this recession and frankly they weren't. So they can go out in with this idea that can I now having learned the biggest lesson that anybody learned financially for the last 75 years, go out there, access the information on the web that I got and actually make some smart decisions? Absolutely yes. I just don't know that a lot of people think to go to the AARP. I know their website is called something different, if the AARP can get out there to the social network sites and connect to young people, we can tell them about a brilliant idea.

FREELAND: I think the other thing which young people are thinking and should be thinking, they are worried that they are going to pay for the sins of their parents and grandparents.

ROMANS: Yeah.

FREELAND: Because once the recovery becomes solid, you are going to have particularly in the U.S. a real need for a tight, tight fiscal house. The government is going to have to pay off the debt.

ROMANS: It means higher taxes?

FREELAND: Higher taxes and dealing with all the entitlement spending. Higher taxes and actually less spending on day-to-day programs.

ROMANS: That all equals standard of living.

All right. Speaking of someone's standard of living. Bernie Madoff has a very quick change. His victims lost more than $19 billion to his Ponzi scheme so tangled we may never know the true extent of the damage. To date about $500 million has been returned to the victims, with $1 billion more hopefully recovered it on the way. Bottom line, a lot of these victims are older and for the most of it, if not all this will be the story that will not have a happy ending for these people.

People who now thought they were going to retire on this money and couldn't. Another interesting thing, there are according to the court appointed trustee, almost half of these people actually aren't victims. Because over the lifetime, they took out more money than they put in.

MAYNARD: The other issue with this, is even from when Mr. Madoff was sentenced, the trustee is finding more money. It was $13 billion at the beginning when he was sentenced and now the number is up to $19 billion. There could be easily more lost money to be found. That means more claims. It also means that people have to wait. They will be frustrated and they will be angry. Even more over the whole situation.

ROMANS: What a great discussion. Thank you so much. Micheline Maynard, "The Selling of the American Economy" is here book. How foreign companies are remaking the American dreams. Thank you so much. Also, Chrystia Freeland from the "Financial Times." Thanks Chrystia.

Of course, the globe trotting Ali Velshi is going to be your travel agent. We promise you the best advice on cheap airfare you will find anywhere.

Plus, how the internet could catch the swine flu. Hmm, that's next.

(COMMERCIAL BREAK)

VELSHI: The holidays are fast approaching. Is it time to buy that plane ticket home or should you hold out just a little while longer for a better deal? Rick Seaney is the CEO of Farecompare.com. We talk all the time, Rick but you actually come down to Houston to be with me in person. Thank you for doing that.

RICK SEANEY, CEO, FARECOMPARE.COM: My family is down a little bit in Houston. This is a great place to be.

VELSHI: You know how to get good deals, because your site Farecompare.com does this. You look, you compare prices.

SEANEY: It's what we do every day, day in and day out. We look at millions of air fairs and tell consumers exactly when to buy and whether or not they are getting a good deal.

VELSHI: All right. Now you and I talked about this over the last several weeks off TV the idea and I've noticed this for the amount I travel, fares appear after the cheapest year in many, appear to be going up a little. Is that true?

SEANEY: Basically we saw a little bit of a bottom in June. So fares were in free fall from November through May, basically the cheapest we have ever seen. In June, we saw a bottom with an air fare hike. We have had almost a half a dozen air fare hikes, real small ones over the past two or three months. And basically the price points are going up as demand has sort of picked up a little bit.

VELSHI: All right. Thanksgiving to Christmas time now to buy or do you wait? SEANEY: Absolutely, you should be shopping right now. You have another week or so to buy your tickets. But you have to get those tickets soon. I like to say every day you wait, it's going to cost another $5. So wait a day, add $5.

VELSHI: OK. Let's talk about the best time to fly. The best -- when to fly if you are looking for good deals, not necessarily in the holidays but when ever you fly.

SEANEY: On any particular day, Tuesday, Wednesday and Saturday is absolutely the cheapest days to fly. In fact, hundreds of thousands of air fare have a rule on them saying these are only good on Tuesday, Wednesday and Saturday.

VELSHI: OK, so those are days you want to fly. When are the best days to buy?

SEANEY: The perfect time to buy typically is Tuesday, a very specific time right after lunch. And that is because airlines typically file sales on Monday night. And then during the morning, they are all matching those sales so you have the maximum amount of cheap seats in the market place just after lunch on Tuesday.

VELSHI: I use web sites and aggregators both when I book tickers. I never know which one is better. Should you be using one of these sites that compares everything, should you be going to airlines sites, how when you are buying a ticket?

SEANEY: Of course obviously you should come to us, we compare them all. The bottom line is without booking fees on online sites, it's flat there. You can do either one. It's good to check multiple sites because nobody ever has the best price every time. .

VELSHI: There are so many different fares on every plane.

SEANEY: They can change millions of time a day every and in theory they can change every time you query them.

VELSHI: All right. Rick knows more about air fairs than people I know. Thank you for coming down to see us. Rick Seaney, CEO of Farecompare.com.

Listen the most reliable cars on the road and despite all you have heard about the quality of domestic American made cars, an American car maker makes the list. We're going to check it out; we'll tell you the most reliable cars out there.

Plus a look at what could be the biggest threat to crash the internet? Coming up next.

(COMMERCIAL BREAK)

ROMANS: All right. Welcome back. I'm joined now by Stephen A. Smith, commentator and journalist. Richard Quest is with us from across the pond, he is host of CNN's "Quest means Business." And Ali Velshi is on the road again for us in Houston. Ali I want to start with you, 650,000 jobs, that's what the recovery office in the White House says, was created by the stimulus, so far. And the White House even goes a little bit further Ali and says if you extrapolate on some of the reporting that isn't in yet about these contracts for stimulus, I think that we have passed a million jobs created by the stimulus and Jerry Bernstein an economist in the White House says we are on track for 3.5 million jobs saved or created.

VELSHI: Of course that is always the dodging part. I don't blame them for using ambiguous language because it is hard to know what has been saved not lost versus created. But you realize, that makes it completely impossible to measure the success of a program when you decide saved or created. I mean it is kind of like gaining weight or losing weight. I may be gaining weight, but I have not gained another 20 pounds by watching what I eat. It's an impossible thing to keep track of.

ROMANS: I get what you mean. Here is the interesting thing, Richard and Ali. And that the White House has to be careful about crowing too much about the third quarter GDP. But they want to say because a lot of people still out of work, but they want to say that the stimulus is what's helping the economy. Are we out of a recession Richard in this country and was it because of the stimulus that we are?

RICHARD QUEST, CNN HOST, "QUEST MEANS BUSINESS:" The definition. It's all in the definition. The problem is, yes, technically, you are out of a recession. The last thing any politician wants to be doing is trumpeting a recession has come to an end when they know full well that people are still suffering. I have to tell you on this side of the Atlantic, France and Germany are out of recession, but the UK is still up to its neck. The reality of the situation is, Ali and I agree on this, which is a rare event, so it must be true. The reality is that it doesn't matter whether you call it recovery or recession. Forget the "r" word, use the "s" word, sluggish and slow.

ROMANS: The president had the best economic news of his presidency with third quarter growth and they can come out and say that there are all these jobs that have been created that we will not be able to verify. They have to be just so careful about it. Because people feel pretty rotten Richard.

QUEST: No. Will you get your rose colored spectacles off and look at the numbers? The reality is, there was 3.5 percent growth in the last quarter because of cash for clunkers. If you strip out that good old-fashioned bit of government to the auto industry, the numbers were --

ROMANS: That's what I mean. Richard that is what I mean. What I mean here is that supporters of stimulus, supporters of government intervention are saying it's worked. We were finally able to --

QUEST: It's -- oh, great! It also means that the surgeon didn't kill the patient because --

ROMANS: I like -- STEPHEN A. SMITH, JOURNALIST: Here's the point. Here is the point he's making. I'm going to say it bluntly. They are crooks for crying out loud. .

QUEST: Who's crooks?

SMITH: The politicians. You know who exactly who I'm talking about. If you budget $7.5 billion for cash for clunkers and everything else and it's going to end up costing the taxpayer $15 billion, the reality is that you are spending more money than you have ever budgeted for. Its money that people didn't want you to spend to begin with. It's all bogus. The minute that you said cash for clunkers stops, then all of a sudden you will see people not buying cars, again.

ROMANS: We're going to stay on the subject of cars.

VELSHI: We need our guests to liven up a bit.

ROMANS: Where is the most reliable car? You can guess Asian cars dominate, "Consumer Reports" recent list of the most reliable vehicles and what might surprise you is that the U.S. automaker Ford, also earned a spot at the ranks of the world's most reliable vehicles, and 90 percent of Ford's vehicles earned average or better than average liability ratings. The Fusion and Milan scored high on this list.

New GM models scored pretty well. One-third of Chryslers models still were below average, so here is something for you Ali, how grand loyal are Americans when it comes to buying cars? It brings me to a little roman numeral. 71 percent is the Roman numeral, 71 percent of American consumers say they prefer to buy American-made cars according to Kelly Blue Book. Which would suggest to me Ali, if American car makers can provide stylish, reliable cars that Americans want, doesn't this suggest that they have a willing audience?

VELSHI: Well it does. I think people are duped. If 71 percent of people think that they want to buy an American car they don't know what an American car is and that is a different discussion. But the reality is and you know I'm sure someone after listening to me for the last couple of years might think I have a dog in this hunt. I don't. I don't drive an American-made car. I don't drive all that much anyway. I have been saying Ford is going to be the American car maker of the future. This is a company that didn't take government money. This is the company that saw the writing on the car future wall in 2005-2006. They hired a guy who is going to turn out to be one of the best in the auto industry, Alan Malali (ph) after being one of the best in the aerospace industry and the bottom line is this company, Ford is back to saying quality is job one.

I think they should be rewarded for that. And I think that's what happens. GM is muddling along. It has some excellent cars, there's no question about it but it is a meddlesome company. Chrysler is a mess. The only good thing about Chrysler is that it's going to be such a different company under Fiat leadership. And Fiat has really done a much better job at making cars that people want to buy, that Chrysler might come out and actually bust out of the gate in the next year and a half or so in a much better fashion. But this is what happens when you focus on the problem and you go to solve it, Ford has done that. They have joined the ranks of the Asian automakers and the Germans.

ROMANS: Gentleman before we break up this party, got one more headline I want to talk to you about, and it is swine flu. Wouldn't be a business report without swine flu. There is no doubt H1n1 could take you out of commission. But could it also take down the worldwide web? The government accountability office says this week that if the flu becomes a pandemic, the increasing web user's adults and children logging on from home to telecommuters to search the web could bog down local networks. "The Washington Post" reported that the Department of Homeland Security doesn't have a strategy to deal with overload at intent networks. Richard is this real or is this another Y2K? Remember Y2K?

QUEST: Going to end the world, everything was going to stop. I find this story the most unhelpful of the week. Think about it. They say don't go to work. You have swine flu. Don't log on from home, you might crash the internet. But, don't go to work -- what do you want them to do? It's a flash of infrastructure. It's as helpful as a headache on a Tuesday.

VELSHI: It's basically a subliminal warning to say you can log on to the internet, log on to Amazon and do some Google searches, don't down load video or porn.

SMITH: I thought I was on CNN, not comedy central. This is hilarious that is number one. Number two and more importantly, I got bad news for y'all. I'm a witness to this. I have been home this week and I can't get on the internet.

VELSHI: You have to pay your bill.

SMITH: My bills are paid. Don't go there. Don't go there. I'm just saying, you know, it's very, very difficult getting on the web this week. Maybe they planted a virus. It's been very, very difficult.

ROMANS: They have planted a virus all right. We have all been sniffling around here. All right. Stephen A. Smith, thank you so much. Richard Quest, CNNs "Quest means Business." And Ali Velshi, stick around everybody.

Up next, climate change and some food for thought. A huge way you can shrink your carbon footprint and all it takes is a fork.

(COMMERCIAL BREAK)

ROMANS: Global warming, some say, is due in large part to the way we eat. Yes, not the way we drive, the way we eat. So could reversing the global climate crisis simply be a matter of making better choices about what's on the other end of your fork? Annia Lappe is author of the fourth coming book "Diet for a hot Planet" and co- founder of the Small Planet Institute. Fascinated by this. Last week, one of the authors of "Superfreak Nomices" came by and said you should eat kangaroo and not beef. What's on your plate makes a difference for your own carbon footprints? Is it true? ANNA LAPPE, CO-FOUNDER, THE SMALL PLANET INSTITUTE: It really is. And as you say I think it's not something a lot of people have thought a lot about. But the livestock sector alone is responsible for 18 percent of the global warming effect. Just to give you some sense of how important it is, it's 5 percent more than transportation.

ROMANS: Wow, more than what we drive.

LAPPE: More than what we drive, more than what we fly.

ROMANS: What's interesting in that is as middle classes grow in a very popular countries like China and like India, and other places. More and more people reach for meat as they get more wealthy as a society. Which would suggest to me that's one of the reasons why you're going to see this continue to be a problem.

LAPPE: That's true. One of the things we can do as Americans is look at what it is that we are eating here. We eat, on average, four times as much meat and dairy as the rest of the world.

ROMANS: When you are with the shopping cart and you are going down the aisle, think about meat and dairy.

LAPPE: So it is about really thinking about what are some green choices to make for your plate. We know what those are and happily those green choices are also healthier choices. So it is things like choosing fruits and vegetables, cutting back like I said on meat and dairy. If you eat meat at every meal, maybe cutting back one meal.

ROMANS: I'm not sure that is not popular with the meat and dairy lobby. So you are not saying give it up, you are saying be responsible with your purchases.

LAPPE: And it's not just about what we do in our supermarket as you said, it's also what we do as citizens. It's about what kind of policies that we support and what kinds of things we want our elected officials to do. So as we talk about a green energy policy we can also be talking about a green food policy.

ROMANS: What about the buy local movement, sustainability, organic. You see all these labels when you are going to shop and the marketing makes it sound like it's a good thing for your health. How do you know?

LAPPE: Good question. I think it can be overwhelming. All of these things are aligning. So that choosing local and sustainable like I said is also good for the climate. One of the best things that I suggest for people to do is go to the heart of local and organic and climate friendly foods to like your farmers market is a great place to go. Everything you can get there is good for you and good for the climate.

ROMANS: You have seven principles. I want to go through these seven principles because I think they are really great. Reach for real food. You say steer clear of processed foods. Put plants on your plate that is going green, finding green. Don't panic, go organic. Lean toward local, finish your pees, what does that mean?

LAPPE: That one is big one; you know we waste so much food. The average American wastes $600 of food a year. So personally if you are cutting back on how much food you waste and you are really trying to eat all those peas on your plate, you are going to do a lot for the climate, too.

ROMANS: Send packaging packing. Bring your own bag to the store and this is something we all do. I do this when I remember, bring your own packaging.

LAPPE: Sure, and also think about do you need bottled water, when it comes out of your faucet for free.

ROMANS: We have seen this a lot. Millions of gardens planted and people want control over their food. Anne Lappe the book is called "Diet for a Hot Planet" and it comes out in April 2010. So you know maybe get on a waiting list now. Thank you so much.

LAPPE: Thank you.

Holiday retailers are getting geared up. It's only Halloween weekend. Yes, that's right, the holiday. We're already talking the holiday. Sales were down sharply last year. The forecast aren't very bright, that could mean giant sales, deep discounts the larger stores. What about small shops who don't have a corporate cushion to fall back on? Some are realizing they are going to have to team up to survive. CNN's Allan Chernoff has the story.

(BEGIN VIDEO CLIP)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice over): Kelly DelRosso and her father Jim are trying to be optimistic about the upcoming holiday shopping season. Like many small independent retailers, the months of November and December can make or break their home furnishing business.

KELLY DELROSSO, CO-OWNER, SEMPLICE: The holidays were rough last year. It's been a difficult year. People are not shopping for sport anymore.

CHERNOFF: Main Street USA have lost a lot of its hustle and bustle to shopping malls, big box stores and discount super centers. All competing for fewer shop and dollar. To stay in the game, Kelly teamed up with 60 independent stores in Mount Claire, New Jersey. Some of which are her direct competitors. She says they have to think like mall store owners to survive.

DELROSSO: It's such a big message nationally. If stores get together and realize that, you know what, if your neighbor closes on the right and left, you are on an island.

CHERNOFF: She built a website, sent out fliers and coupons, got on face book, and linked up with a 3/50 project, a national buy local movement. Thousands of independent retailers in communities from Arizona to Alabama to Illinois have joined on, too. DELROSSO: We're not telling consumers to stop going to big boxes or to stop going to chains and franchises. Because it's unrealistic. It's about remembering that not all things have to come from a big box.

CHERNOFF: And that some say is important not just to retailers, but for cash starved communities as well. According to a recent study for every $100 spent in the independently owned stores, $68 goes back to the community through taxes, payroll and other expenses. If that same $100 is spent in a national chain or big box, just $43 stays local. Kelly and Jim DelRosso are hoping shoppers in their town get that message.

DELROSSO: The sense of community has been unbelievable. There are so many customers that walk in and say I'm here to shop local.

CHERNOFF: The DelRosso's and other local retailers hope that message carries them through a crucial holiday season.

Alan Chernoff, CNN.

(END VIDEO CLIP)

ROMANS: All right. Social networking was inescapable. We will tell you how it could follow you into eternity.

(COMMERCIAL BREAK)

ROMANS: All right. We're back with Stephen A. Smith, commentator and journalist and our friend Richard Quest, host of CNN "Quest means Business." And Ali Velshi joins us live from Houston. Ali, what is that?

VELSHI: This is a Houston Rockets blazer.

ROMANS: What?

VELSHI: I was at an event last night and I was talking to a guy who was wearing this thing. I asked him if I could borrow it. So he took it off, he is a little bit larger than me. I thought, why not? Stephen is going to be here. I thought I would pay a little homage to you as a sports guy.

SMITH: Ali, do you know --can you name any player on the Houston Rockets?

VELSHI: I happen to like sort of a more defensive guy like Chuck Hayes, myself. Their first home game is this weekend in Houston. I think they are going to score more touchdowns than they did last year.

SMITH: Oh, lord.

ROMANS: Here we go. We are going to have Stephen A. Smith on the economy and Ali Velshi on sports for the rest of the program.

SMITH: That will work. That bright red jacket might distract everybody.

ROMANS: All right. Guy's one last story for you gentlemen. It's out of this world, literally. Facebook will memorialize profiles of the deceased if the family or friends request it. The profiles from beyond will no longer have contact information; they won't pop up on your suggestion box. Has social networking finally gone too far or is this the memorial of the future?

You know, Richard Quest, I have to tell you, I keep getting a friend request from somebody named painter tinker. I don't know who that is. It's our producer, Ben Tinker's deceased dog. Is this gone too far? There he is.

QUEST: I think an inquiry needs to be held as to how the dog died. More importantly, you have to get to grips. This is no different to a memorial in the newspaper and putting something on a tombstone. It's modern day tombstone. If you are sad and sick enough to want to do it, do it. It says a lot about how you lived your life if afterwards, your memorial is on Facebook.

VELSHI: It doesn't take any space up; it doesn't occupy any real estate. Why not? If they are home with h1n1 and it's apparently going to crash the internet, but the bottom line is I think it's fantastic. It's the future. It's inexpensive, it's free. Why not?

SMITH: I agree with Ali. The key line is when it says if their friends and family request it. Now, if somebody was doing it arbitrarily, but, if the loved ones have the desire to do it, memorialize somebody, I don't have a problem with it. It's a wave of the future.

ROMANS: Gentlemen thank you so much. Stephen A. Smith, Richard Quest, Ali Velshi in the red Houston Rockets jacket.

Thanks for joining us for YOUR MONEY. You can follow Ali and me on Facebook and twitter at Christineromans and at Alivelshi. Make sure you join us every week for YOUR MONEY, Saturday at 1:00 p.m. Eastern and Sundays at 3:00. Also log on 24/7, CNNMONEY.com. Nice to see you.