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The Jobs Market, Financial Regulatory Reform, Gold Rush of 2009; Consumer Protection; Surge in Shoplifting; Microsoft Banning Xbox Users
Aired November 15, 2009 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: Desperately searching for jobs. The president tells America creating jobs is his job one as he heads to Asia where millions of American jobs have already gone.
Party like its 1849. The rush is on. Is it fool's gold or a golden opportunity?
And why your lousy golf swing is not only embarrassing, but could destroy the environment. It's tee time.
YOUR MONEY starts right now.
(END VIDEO CLIP)
ROMANS: Welcome to YOUR MONEY. The president, in his words, trying to break the back of this recession as he heads to Asia. The economy is stabilizing but unemployment is soaring.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It's important that we don't make any ill-considered decisions. Even with the best of intentions, particularly at a time when our resources are so limited. But it's just as important that we are open to any demonstrably good idea to supplement the steps we've already taken to put America back to work.
(END VIDEO CLIP)
ROMANS: The latest step, a presidential jobs forum in December to figure out how to get jobs growing as the economy recovers. We're joined by CNN senior political correspondent Candy Crowley, the host of "CNN'S Quest means Business" Richard Quest and Prof. Peter Morici from the University of Maryland School of Business.
Peter, let me ask you first, what can a presidential jobs forum do that the president's daily economic briefing can't?
PETER MORICI, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: Actually I don't think a great deal. He has already had a job summit with very much the same players, and they gave him the stimulus proposals along with Nancy Pelosi's caucus in the house that he has now. Unless, he wants to gain changer he is going to have to go to different people all together. ROMANS: Let me ask you, Candy, about the politics of this. The president himself said that people are desperately searching for jobs. The numbers bear this out. It is incredible. Long-term unemployed, 5.6 million people. The long-term unemployed so dangerous because when that many people are out of work for more than six months, it becomes much more difficult to get back into the economy. The under employment rate, 17.5 percent. There are six people looking for every job opening. What's at stake here for this president?
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: They are devastating numbers to those on the streets looking for jobs or those who have given up looking. They're also devastating politically depending on the timing. And the timing, as we now look at this and as politicians look at this, is about 2010 and those elections where all of Congress and half of the Senate -- I'm sorry, a third of the Senate will be up for re-election. So there is the political side to this.
Having said that, I also think that the president is under the sort of competing pressure because even as there's all these signals that they're going to put more money into the economy, that the jobless rate is really their sticking point here because it's the one thing that Americans really do get. You can talk about GDP growth all you want, but the jobless rate people understand instantly, but he's also getting pressure on the money side.
So that's why I thought that clip that you played was so interesting because he said both, well, of course, government isn't the answer for everything and we don't want to, you know, just throw money at it, but it's really important. So he's got these two competing things politically that he's going to have to try to balance.
ROMANS: So, Richard, the president is heading to Asia where we clearly have a lot of things we want to talk to our bankers and our friends and our allies in Asia about, but do you think the president will come away with any breakthroughs, any developments, anything that he can say to the American people this has helped us in the United States?
RICHARD QUEST, CNN HOST, "QUEST MEANS BUSINESS:" No, I don't, frankly speaking. What he's going to come away from is visiting countries that are the only engines of growth in the world at the moment, especially, of course, China, and the other nations of Southeast Asia. For instance Singapore, which, of course, went very heavily into recession but bounced back just as fast. It was a true v- shaped recovery in many of those countries.
He's also going to realize that the U.S. administration's unofficial, unstated, unwelcome policy of allowing the dollar to sink is having disadvantage effects elsewhere in the world. So he goes into these APEC and these other meetings with the strongest, if you like, stick and the weakest words.
ROMANS: Let me ask you something, Peter, because we're talking about the weak dollar and how maybe Washington has stepped back and allowed -- isn't complaining about a weak dollar. It's helping our exporters and maybe it's helping this whole idea of global rebalancing, but the trade deficit numbers would suggest that we still have some old structural problems. Am I right?
MORICI: Well, absolutely. The deficits on oil, which is traded in dollars, so exchange rates don't help, and with China, which pegs its currency -- there's been no fall in the value of the dollar against the Chinese Yuan in 18 months. Those don't change. As a consequence, the trade deficit can't be helped with the devaluation we have had, and that's why so many Asian countries are upset. As their currencies rise against the dollar, they become even more disadvantaged against China. If we get any movement from China, it would be to appease them but it won't be enough to make a difference.
ROMANS: Peter, you say that the road to job creation in this country depends on our relationship with China. What should the economic agenda for this president look like?
MORICI: We absolutely have to one way or another rebalance trade with China. China sends us five times as many exports as it buys in products from us. That has to change. That's why China grows at 10 percent and has all the jobs growth and the United States grows at less than 3 and is losing jobs all over the place. For both countries to prosper together, the Chinese have to buy from us and sell a little bit less.
ROMANS: You know, Candy, let me ask you about what the president can bring back for constituents. I think there's no question that his timed announcement before he left to Asia to tell the American people, look, my job one is your job and we're working on this, we really are, as he heads to Asia. What does he need to bring back here?
People are really concerned about the jobs situation, and, quite frankly, the U.S. has been humbled by the financial crises. China is growing very, very strongly. We have everything to ask for and really nothing to offer.
CROWLEY: And I agree with Richard that the likelihood of some major break through or some major thing that the president can bring back here and say to the American people is here is what I've done, and this is going to create x amount of jobs are minuscule. So what the president has done before he left and that announcement of a jobs summit in December and what I suspect he will do and how he will sell this summit will be we are paving the way for the better relationships -- remember this is sort of his inaugural trip to this region of the world as president and say I am paving the way so that we can have better trade relations and it will make both of us stronger and the economy.
I think it will be more how he presents it at the end of the trip rather than something that he actually has. This is going to be sort of international spin, if you will. Not untrue. Supposedly he is building better relationships with Japan, better relationships with China, et cetera, but the idea that he would come back with something more that's palpable I don't think is there. I think he's going to have to do it as he did the jobs summit, which is I'm working on it, I care, I know it's a problem.
ROMANS: Richard, wrap it up for us real quickly. China growing gangbusters, maybe 8 percent economic growth this year even if those numbers are communist optimism and it is 5 percent growth. It's still much better than the United States. Why and is there something for the president and his economic team to take from what's going right in China right now?
QUEST: Well, it's a completely different economy. It's got different structures, different ways of working. It's a command economy.
ROMANS: You can order your banks to lend, for example, which they have.
QUEST: Well you know you can't make the comparison at all between what China is doing and what the United States is doing. Just keep in mind, there needs to be this rebalancing of the global economy. That's a wonderful idea. The difficulty is how to actually do it and what's worrying is this year we've had two or three leader summits; we have had numerous g-20 finance ministers. They've talked and talked, they've put the fire out, but they really don't know how to actually rebalance the global economy without it all ending in tears and a gnashing and wailing of teeth.
ROMANS: And that is true and I think you are right they don't agree and they don't know how to do it and when the people do think they know how to do it they don't all agree.
Candy Crowley, Peter Morici, Richard Quest from CNN's "Quest means Business," thanks everybody.
Up ahead, everything you need to know about the gold craze and how you can cash in.
ROMANS: This week Connecticut senator and chairman of the powerful Senate Banking Committee, Senator Chris Dodd introduced his version of financial regulatory reform, Here is what that bill looks like, it's 1136 pages of sweeping reform. Here are some of the highlights for you. It strips power from the Fed taking away consumer protection responsibility in banking over sights. That leaves the Fed smaller if you will and in charge of monetary policy and little else. Now Dodd wants a super regulator to oversee all banks and banking-like institutions. This will take the place of the office of the Comptroller of the Currency and the office of the Thrift Supervision and it would take over banking oversight from the Federal Reserve and the FDIC.
And Senator Dodd would create two other agencies, an agency to oversee and break up companies that are so important to the world economy they become as we now know it too big to fail, and another agency, a Consumer Financial Protection Agency that would oversee bank products, these are things like mortgages and credit cards, the things that you and I use every day. It's a dramatic proposal, some elements at odds with the White House. Other elements already opposed by the banking industry. Senator Dodd laying down his marker for what reform should look like. Candy Crowley and Peter Morici are still with us. Stephen Leeb joins us; he is the author of "Game Over." I want to start ladies and gentleman with what Senator Dodd said is so important about why they need this big reform now.
(BEGIN VIDEO CLIP)
SENATOR CHRISTOPHER DOBB, (D) BANKING CHAIRMAN: The financial crisis exposed a financial regulatory structure that was the product of historic accidents, one after another over the past 80 years. Created piece by piece over decades with little thought given to how it would function as a whole.
(END VIDEO CLIP)
ROMANS: Well, here is my question for you, Candy Crowley, because Chris Dodd has been on the Senate Banking Committee for I think 26 years. He's now the chairman of that committee. He also did sign on to a very important legislation in 1999 that essentially broke down depression era barriers for banking so that some of these banks could get as big as they are today.
He talks about sort of piece by piece, decade by decade, all of these little pieces of regulatory -- why are we to believe that this time we have the answer if it's actually Congress that helped bring us this way and didn't reform right in the first place?
CROWLEY: Which is pretty much, I think, what the American people are saying, and what Democrats say, what Republicans say at this point is new era, they understood that the regulations did not go far enough or went too far whichever side you're looking at. So -- and also remember that what you're seeing from Senator Dodd is not going to be the final bill. I think what you're seeing from this measure that he supports is sort of as left as the bill will go because it is further left than the house or than the White House is willing to go on these regulations.
The senator is running for re-election, very tough race at this point. So anytime you can get something that gets tough with the banks and with the regulators who were supposed to be regulating those banks and have them complain about your bill, that's probably a good thing politically.
ROMANS: I want to ask Peter and Stephen just quickly, first of all, Peter Morici, do you agree that that bill ten years ago that Bill Clinton signed into law, President Bill Clinton signed into law after much lobbying from the financial services to allow these big banks to get big, do you think it had any role in the crises that we saw recently?
MORICI: Absolutely. In the good old days banks weren't allowed to hold dodgy assets on their books. The banks were separate from the rest of the investment community. A lot of our regional banks Citigroup, Lehman Brothers failed because they held dodgy assets. We have to get those kinds of assets off their books, get them back to making loans and getting repaid.
ROMANS: Do you think that that whole -- the repeal of those depression --
STEPHEN LEEB, AUTHOR, "GAME OVER:" I think absolutely, Christine. I mean the mentality of Wall Street is basically short term, and we have to get away from that.
ROMANS: And politicians, too. The same people -- you look at the list of people who approved of the breakdown of the depression era rules are the people who are trying to fix it now.
LEEB: Right, exactly. We have to get away from this short-term thinking. This country we're handicapped because every two years we have elections and the whole House of Representatives have to be reelected. We need people who can think a little bit longer term and Wall Street thinks short term because they get bonuses based on how they do every quarter. This makes no sense. This was just crying for an accident waiting to happen.
ROMANS: How do we know all these competing different regulations proposals out there now, where t are the unintended consequences? We don't know what is going to be the right thing.
LEEB: No, but you do know that you cannot give bankers, lets say the Federal Reserve which is basically run by bankers.
ROMANS: It is independent from different contracts.
LEEB: It is true but you can't put a bunch of bankers who basically have a very short-term mindset, they're against inflation, all they really care about is controlling inflation, and they made a catastrophic mistake in 2008 by electing to fight inflation rather than to, you know, let the economy go. As late as August of 2008, Christine, a month before we had a catastrophic economic event, the Fed was debating whether or not to raise interest rates. We've got to get that mentality out of the situation.
ROMANS: Let me ask you a quick question Peter, this week the Fed cracked down on those overdraft charges that just have been under so much scrutiny and people are so angry about. This idea that you can get $39 charge just for being overdrawn on your debit card. We found this incredible statistics that Americans spend more on debit overdraft charges than they do on fresh vegetables in this country every year. Think of that. More than we spend on books we spend on these overdraft charges. Was this the Fed trying to reassert its authority over consumer protection do you think?
MORICI: The Fed has three areas of responsibility and it is going to loose consumer protection, keep monetary policy and it hopes to keep systemic risk supervision. It's basically sticking into its feet on consumer protection because that's what it has to give away. It's trying to look like it's a tough enforcer now so all it gives away in the end. ROMANS: Let me ask you quickly, Candy, is this Chris Dodd trying to be a populist outlier? He's at odds with the White House on some of these things.
CROWLEY: He is, and, yes, this is a good time if you're running for re-election to be a populist outlier. On the other hand, Chris Dodd is on the liberal side of the spectrum when you look at the politics and, again, in the kind of counter balancing that goes on between the House and the Senate to come to one bill. It certainly is the place at this point for the Senate side to come up with something more liberal, therefore something that you give away when you sort of come to a bill that might be more sentries.
ROMANS: All right. Candy Crowley, CNN senior political correspondent, also, Peter Morici, Professor at University of Maryland School of Business and Stephen Leeb, author of "Game Over." Thanks everybody.
Next if you're thinking of selling that old gold necklace that lies forgotten in your jewelry box, now may be the time. A look at how much your gold is worth and how you can get cash for it. That's next.
ROMANS: Call it the gold rush of 2009, an ounce of the precious metal is now worth more than $1,100, just for one little itty-bitty ounce. Some say it won't stop there. So what's behind the surge? What does it mean for our economy? What does it mean for your bottom line? It's all about mastering your money. CNNMONEY.com's Poppy Harlow, she asked folks on the street what they think is behind this new gold rush. Take a look.
(BEGIN VIDEO CLIP)
(UNIDENTIFIED MALE): It's way up, correct? Seems like a good investment. I'm not sure of much else though.
POPPY HARLOW, CNNMONEY.COM (voice over): Any idea why gold prices would be going higher?
(UNIDENTIFED FEMALE): Probably because the economy. I don't know. Everyone is trying to sell their gold and make some money.
HARLOW: That is true. What do you think?
(UNIDENTIFED FEMALE): I have no idea.
(UNIDENTIFIED MALE): It's a dangerous sign.
HARLOW: It is a dangerous sign. Why?
(UNIDENTIFIED MALE): Because usually when gold goes up it means that there is something broken in the system.
(UNIDENTIFIED MALE): There's been a lot of talk obviously in the last couple months about the dollar not being the standard for financial trading around the world and there's a lot of concern, I think. We're in -- I think we're in a sea change right now.
(END VIDEO CLIP)
ROMANS: That guy has been watching YOUR MONEY. Tell us what is happening with the price of gold.
HARLOW: They like it if they're selling their gold; they're getting a lot more for it. There are a lot of things as you know Christine, representing safety in uncertain times. The stock market is up; people don't really know what is ahead. Also, the weak U.S. dollar that's making gold and other commodities priced in dollars a better bargain for investors all around the world.
It's also, of course, seen as a hedge against inflation. A lot of long-term inflation questions now. And we're seeing a new trend that I think is so interesting. The central banks around the world buying up gold instead of maybe buying our debt, India is a prime example. The Central Reserve Bank of India bought 220 tons of gold recently.
ROMANS: How do I buy gold? If you're an investor and you want to buy gold, I can't buy a bunch of gold bars or can I buy gold bars?
HARLOW: Wait, you can, and they're doing it. There was a recent article about different stores in London selling gold bars. You can get a huge one if you'd like to tuck under your bed. You can invest in gold stocks or mining companies that have that exposure to gold or gold ETFs or you can sell your jewelry and that's what most Americans are doing. We took this gold necklace, we went to a gold party and we were amazed by what we found. Take a look.
(BEGIN VIDEO CLIP)
(UNIDENTIFIED MALE): That's ten carat.
HARLOW (voice over): It's not a jewelry store.
(UNIDENTIFIED MALE): It's 14 carat.
HARLOW: Or a pawnshop, this is a party, a gold party.
(UNIDENTIFIED MALE): OK. Who has got gold?
(UNIDENTIFED FEMALE): I came, to be honest with you, because I needed cash.
HARLOW: Each piece is examined and the gold content is measured.
(UNIDENTIFIED MALE): How much is it worth?
HARLOW: So what's Grace's payday? Well it all depends on the purity and the weight of the gold and most importantly gold's current market value.
(UNIDENTIFED FEMALE): Grace, $315.18.
(UNIDENTIFED FEMALE): Wow. (UNIDENTIFED FEMALE): And it's collecting dust in the drawer.
HARLOW: But how do you know if you're getting a good price? Michael Gusky, founder of Goldfellow, the company running this party, has been in the gold business for more than 30 years. He says here you'll get 62 percent of the gold's value and warns you should never accept less than 50 percent.
MICHAEL GUSKY, CEO, GOLDFELLOW: Some of the largest companies in this business are paying as little as 18, 20 percent relative to the price of gold.
HARLOW: We were quoted $411for this necklace at the gold party. But we hit the streets of New York in search of a better offer. We're here in the diamond district in Manhattan. We're going to go into some of these establishments. As you see across the street, they all say we buy gold, we buy, and we buy as you see over there. We're going to go in and we are going to try to see what they will give us for this gold necklace. I just wanted to sell the necklace, this necklace but I don't know how much it's worth.
(UNIDENTIFIED MALE): About $500.
HARLOW: About 500 bucks? Thank you.
(UNIDENTIFIED MALE): I'd probably go to $620.
HARLOW: Can I ask how much for this necklace?
(UNIDENTIFIED MALE): $630.
HARLOW: $630 but the lowest offer was still to come. We headed to Canal Street in downtown Manhattan. How much is it worth?
(UNIDENTIFIED MALE): I don't know, you tell me.
HARLOW: You tell me. I have never sold a necklace.
(UNIDENTIFIED MALE): It's like $200.
HARLOW: Two hundred bucks. $200 bucks, that was my offer in there, and I said is this a fair price, fair market value? He said, yes, a very fair price.
(END VIDEO CLIP)
HARLOW: I don't think so. Then I told him I'm a reporter and that I work for CNN Money and he said let me recalculate. That's actually $550. Christine, lesson learned, we held onto our necklace. You have to haggle. You have to know what you want. That full story is on CNNMONEY.com.
ROMANS: I love it. Shop around.
HARLOW: Shop, shop, shop. ROMANS: All right. Worried about the national debt? If you think it means the U.S. is turning into a charity case, there's something you can do about it.
Plus find out why golf balls, of all things, could be a huge threat to the environment.
ROMANS: All right. Welcoming back economist Stephen Leeb and bringing you now New York One anchor Pat Kiernan. He's the face you wake up to in the morning in New York City to get the news and what you might not know about him he is an accomplished business journalist, as well.
Gentlemen, let's start with the Senate making news this week with a big push about consumer protection. It got us thinking, take a look at this. More than 94 million people in the country currently own a mortgage. Or the mortgage owns you depending how you look at it. Twenty eight percent of those say the terms of their mortgage somehow turned out to be different than they expected.
Pat and Stephen, do we need to educate these people or protect them? What's going on? What's the biggest difference here is it regulate or educate?
PAT KIERNAN, ANCHOR, "NY1:" I guess the answer is both. There needs to be regulation that covers the most egregious acts that a lender might put into place, but people don't know enough about their financial situation in any case, not just mortgages, credit cards, how much you should be saving, what you should do for retirement. That really needs to be a goal, not only in school, but ongoing. Financial literacy is a big thing we don't do well.
ROMANS: I had finances in the public schools. Taught me how to balance a checkbook that's about it.
LEEB: I think I agree with Pat we do have to regulate and we do have to educate, both of them are very important. But if people want to rip you off, they can do it. You had a story, Christine, on gold; I thought a very, very good story, on gold parties. You have these people turning in their gold jewelry and getting 40 or 50 cents on the dollar.
I mean you can't be educated about everything, there do have to be tougher regulations and I really do believe if you went back 50 years and you signed a lease for let's say an office, you'd be looking at a two or three page document. Now you have to go through here, you need a lawyer, you need this, and you need that. There should be a move towards simplicity so that we really can educate people, but you know you had I think Dodd's bill, 1300 pages. Who can read this?
KIERNAN: You are right if the legislation focused on plain English and simplicity then it's easier to educate people. Because we don't have to take personal responsibility for these things. LEEB: There's no reason to have all these crazy terms, et cetera. We can make things a lot simpler and I think we would have a much better country for it.
ROMANS: All right. This number right there, we are going to show this number coming up, that is our outstanding national debt, more than $11 trillion.
KIERNAN: Barely fits on that giant screen over there.
ROMANS: So many numbers we run out of time trying to say it all ought. You will be happy to know that can make a tax deductible contribution to pay it down. That is right if you think we're a charity case in America, you can do something about it. Will you reach into your pocket -- a little known 1961 law allows you to make a tax deductible charity donation to the national debt. Would you do it?
LEEB: If I had money to save, OK. If anybody has money to save, I think that is the last place I would look to save it.
ROMANS: Me to.
LEEB: I think I would invest it, I might buy gold to be honest with you, a little bit of silver, some stocks, anything. Even spend it helps the economy. There are so many better ways of helping this economy than making a donation to the national debt.
ROMANS: I have been saying the food bank. You can help your fellow man at a food bank more than you can by throwing 100 bucks into that pile of the abyss.
KIERNAN: But we have a crippling debt problem that we don't realize. At least most people don't realize how much trouble we're in because of that. This isn't the answer.
ROMANS: It would be -- if we really wanted to do this and think of the national debt as a charity case, if we all write a check for $39,000, we could pay it off.
KIERNAN: But do you know what the problem is, in addition to not having the $39,000, you have no assurance they're not just going to spend it again.
ROMANS: That's true. You can do more at the ballot box than you can with the checkbook.
LEEB: There's something serious here, too, because by spending or saving that money you do more to create growth in the country and if you get growth, really legitimate growth that will take care of the national debt. If you give these people money, they're not necessarily going to invest it in alternative infrastructure, alternative energy infrastructure. They're going to --
ROMANS: All right, guys, two things I have no control over, the national debt and also my golf swing. This tiny little golf ball looks harmless here, right? Well, unless you get hit in the head, of course, with it. But apparently that's not the only harm that it can inflict.
Take a look at these numbers. We like this segment so much we're giving two roman's numerals this week. Any idea what they represent? "C" to "M." They're the number 100 to 1,000 years, and they're how long it takes for this little lovely thing to decompose naturally because it's made of rubber and zinc filling inside and that golf ball litter problem brought to the surface literally when a group of scientists in Scotland scoured the waters of Lockness hoping to find evidence of the prehistoric monster, but instead on the bottom of Lockness they found hundreds of thousands of golf balls.
Here in the U.S. by the way apparently some 3 million balls are lost or discarded every year.
KIERNAN: You finish a round of golf and say I lost two balls today, so did everybody else.
ROMANS: Think about how many golf balls are out there at the bottom of lakes and streams around America.
LEEB: You know Christine I think there's a serious point here though because there's a kind of complacency. One of the ingredients in this golf ball is zinc and we can recycle zinc, and we're running short of a lot of valuable resources, and we don't have that much zinc in the earth.
ROMANS: Stephen Leeb is always the natural resources guy. No matter what the story is he has the natural resources angle. I would only say, I mean everything we use takes years to degrade; I mean the amount of diapers that for example my household goes through in a year. There are probably a lot worse things in the environment.
KIERNAN: It's the sheer quantity that's the issue, right?
KIERNAN: And the notion that it's lost, you're trying to hit it as hard as you can and it goes away and you never see it again.
ROMANS: I love this idea of Lockness scientists finding hundreds of thousands at the bottom. No monster just a big number of golf balls. All right. Stephen Leeb, Pat Kiernan, thanks, guys.
Next, why an age-old product has a whole new look and a whole new following. Chances are you use it too.
And Pat Kiernan has a surprise story for you. In fact it is a surprise to me. But if Pat is into it, I want to hear about it. Find out what it's all about.
KIERNAN: I will rule the network.
ROMANS: That's next.
(COMMERCIAL BREAK) ROMANS: All right. Economist Stephen Leeb and "NY1" anchor Pat Kiernan are back. A new report found a surge in shoplifting. Store theft jumped 8.8 percent in the last year to more than $42 billion dollars. And guess what you pay your share too whether you are honest or not. An estimated $435 per family is higher prices to cover the loses. The thieves are shoplifters and crooked employees. The most snatched products, perfume, cosmetics, razor blades, and small leather items and electronics like iPods, cell phones. The year before retail primes were up just 1.5 percent so do you think the jump is a direct result of the recession? I wonder.
KIERNAN: I think it's what we can assume, 8.8 percent in one year is a huge increase.
ROMANS: You could assume that companies are keeping a much closer track of their inventory because they are -- like they know every single penny that's walking out of there.
KIERNAN: So much of it is giant retailers that already have that --
ROMANS: And it is a problem.
KIERNAN: Loss prevention program in place.
ROMANS: I mean these big retailers they know that some of the stuff is going to walk out the front door. They build it into their numbers.
KIERNAN: But they also build security and this has got to be troubling. Because at a time when they can least afford it, they are seeing this --
ROMANS: When the economy is really bad, you need perfume and you don't want to pay for it.
KIERNAN: I worked retail 20 years ago when I was going to school and you would see that they would target the items they knew were easiest to remove from the package and carry.
LEEB: Christine, picking up on what you said about keeping better track of inventory. It could also be that they're spending less money on surveillance. They're cutting costs back and I really think that's probably part of it, it has to be part of the answer. Pat said speaking of new technologies, Amazon doesn't have this problem. You know, we have technologies around that are pretty good at spotting and taking pictures.
ROMANS: That's a good point because think of all the retail jobs that have been lost. If you think as a retailer that you're going to lay off a few people whose job it is to kind of keep an eye on things, that could be a very, very good point.
LEEB: I think that's probably it. Some of these proposals about putting shoplifting in jail, this would cost us much more money. I mean, we need to spend probably more money on surveillance and maybe incentivize retailers for spending money on surveillance.
KIERNAN: And you look at a model like Amazon using UPS or FedEx to deliver, at that point the package is tracked every step of the way so the employee theft isn't much of a problem because it's either bar coded in Amazon's warehouse or it is bar coded every step of the way on the UPS truck.
ROMANS: All right. Pat we've got 90 seconds. You have a story you're bringing to us. Complete surprise, something that got your attention this week.
KIERNAN: So my beef this week has been with Wal-Mart. Wal-Mart announced after this stampede where a guy got killed on Long Island last year, they said that what they were going to do was put a number of steps in place to prevent these sorts of incidents, and their solution was, well, we'll just open the stores on Thanksgiving and then we won't have the rush at 5:00 a.m. I know they had to do something about the dangerous situation, but can't we just have a day off? One day all year where the retail pie doesn't get cut up in any way and everybody just gets to spend the day with their family.
ROMANS: I'm totally with you. I think the last couple of years if anything that we've learned is that the whole big crazy rush for a flat screen is just -- that's so bubble. That's so 2003. Isn't it nuts? To be thinking that and to hear the retailers talking about these are going to be the sales, we'll be open up 24 hours, all night long. Wait a minute, folks, we are drowning in debt. We are all drowning in debt.
LEEB: The last thing you want to over encourage is the spending just like you're saying. That's what got us into this trouble. That's why we're still in trouble. We have way too much debt, and making us spend money -- incentivizing us to spend money on Thanksgiving, I totally agree with you.
KIERNAN: Wal-Mart is not the first to do this.
ROMANS: That's right.
KIERNAN: But Wal-Mart sets an example. I think it's unfortunate that they're expanding their Thanksgiving opening, not just the 24- hour super centers, but every store.
ROMANS: I agree. All right. Stephen Leeb, Pat Kiernan good story Pat.
A product that lost favor over the years is getting a new life. How do you take a staple from your great grandma's medicine cabinet and make it relevant for today's consumer. We found a 143 year old company marketing its same old-fashioned product to a new discerning crowd.
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ROMANS (voice over): What's flowing through this tube? Witch hazel, produced by the American Distilling Company since 1856, in the early day's wood from witch hazel shrub was harvested with horses and distilled the old fashioned way. Today it's still harvested near East Hampton, Connecticut, where witch hazel grows wild. But it's distilled in this high-tech facility. The mission of the owner, Ed Jackowitz. His son credits him with the first important renaissance of this family company.
BRYAN JACKOWITZ, V.P. AMERIAN DISTRILLING & MFTG: His vision was to be the best in the world of manufacturing witch hazel.
ROMANS: American Distilling is doing well, selling its witch hazel in bulk for other brands. Everything from facial cleansers to hemorrhoid creams. Then son Bryan joined the company eight years ago. He set out to transform the company's own old fashioned witch hazel brand into something fresh and modern. Same product updated image.
B. JACKOWITZ: We are the best in the world at producing this product and now our goal is to be the best in the world at marketing this product.
ROMANS: First stop running the old image past today's consumer.
B. JACKOWITZ: When we showed them the package, they said I don't want to put that on my face. That doesn't look like a skin care product.
ROMANS: The look changed, so did the language. It's no longer astringent it is now a pore perfecting toner. And a new ad campaign reflects the new branding.
B. JACKOWITZ: We've realized double digit growth for almost every year since I have been here. The future that I envision for this company is really expanding the team of people that we have for marketing and sales, bringing more professionals in and really adding more fuel to the fire.
ROMANS: The company plans to build a new warehouse bringing this 19 century health and beauty staple to a 21st century beauty regimen.
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ROMANS: Get ready get set shop. Three questions every shopper should ask themselves before buying anything.
And he's the baron of bulk, the sultan of super size, the king of we get it. Ali sits down with the CEO of Costco next.
ROMANS: By now America is known for his culture of spending and overextending, and as the holidays approach retailers working hard to get to you spend your money. Three questions to ask before you part with a dime. Ask yourself do I need it? If not, don't buy it. Second question, can I afford it? Really can I afford it? If you can't pay it off right now with cash, put it down. Third question, will this purchase make my family better, smarter, or more prepared for that future? All right. Costco is the big box retail chain that offers discounted prices to members. For those of you looking to save some money on everything from food, toiletries, TV sets, jewelry, the third largest retailer of the country with over 400 warehouse-style stores spread out across the U.S. Our own Ali Velshi met up with Costco's CEO at the opening of a new location right here in New York to gauge how consumers are coping with hard economic times.
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ALI VELSHI, CNN CORRESPONDENT (voice over): In terms of choice, when I come to Costco, if I am looking at a particular product you don't typically have ten versions of this. If you want to buy this, I have to buy it in this size and this packet. There's not a great deal of choice within categories. Explain that to me. Do your shoppers not want that?
JIM SINEGAL, CEO, COSTCO: We try to engage in a process of pre- selection. We try to go and find what's the best value in this product. In this case, we think the 1,000 pack is the best value. That is what we are going to show our customers. Any savings that we are able to generate we pass on to the customer. That is one of the major tenets of our business, if we get a good deal from the supplier our customer is going to get a good deal.
VELSHI: And that is working for you?
SINEGAL: Works for us very well.
VELSHI: The concept of just taking the fork lift and sticking the pallet on to the shelf and not having displays might imply to someone more of a value proposition then they wanted. It might even appeal to not a high end shopper. Yet, your shoppers don't actually skew low income.
SINEGAL: As a matter of fact, just the opposite our typical member in the U.S. has a household income of about $77,000 compared to the U.S. average of $56,000. So generally speaking our customer is a higher end customer. The major portion of our clientele are businesses, people who own and run businesses are always at the top end of the demographic scale.
VELSHI: Let's talk a little about the economy. You obviously touch a lot of people in this country; a lot of people come into your stores. What do you sense in terms of what they are buying and how they are buying?
SINEGAL: There's no question that the trends have changed. Customers are looking for private label products. They are compared to compare a private label to the national brand and make a choice where there's a substantial savings. Customers are choosing, perhaps, instead of a 47 inch television set to get a 40 inch or 37 inch television set. They are more judicious. Jewelry is not as big a factor as it was a year ago prior to the downturn. We are seeing certain categories that have changed. That's what the consumer is doing. They are being a lot more cautious about what they are buying. VELSHI: Unemployment is high. You take some pride in how you pay your workers and making sure they earn a fair wage. Does it transfer into a conversation that we are having across the country about people and wages and jobs?
SINEGAL: Well it works for us. It may not work for someone else, but it does works for us. We think, if you accept the fact we have a reputation for being a low cost provider of merchandise, then you say we are paying more than anybody else in the retail business and you are making a profit, we must be more efficient and there must be greater productivity which would suggest that when you hire good people, provide good jobs, and good wages and good careers, you will get better productivity and good things will happen in your business.
VELSHI: Lets talk a little about something that is in the news right now, and that is CEOs of big companies earning what some people in America think is too much money, grossly too much money. I know you have taken a stand on this in the past; you had an opinion on this.
SINEGAL: Well, you know, the first is that I'm probably not the best example because I'm a founder of the business. I have made a lot of money on my holdings in the stock, OK. Probably, comparing me with a typical CEO is not fair. They are going into a position where they have to earn a bigger salary. Having said that, some of the obscene wage packages that have come out are bad and I think they are the wrong signal. I think it's wrong for CEOs to make 400 and 500 times what the person on the sales floor or on the factory floor is making.
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ROMANS: X box is playing a whole new game. But this one is reality, find out why Xbox is banning 1 million x-box live players and if you or your child could be on that list.
ROMANS: Richard Quest is back with us from London, he is the host of CNN's "Quest means Business." We got to see this about pirates before, now it is a different kind of pirate making the news Richard. Microsoft reportedly banning one million Xbox live users. Microsoft claims that modified their game systems to be able to use pirated versions of the games. Xbox live allows those gamers to play along, download games. The key part of playing the Xbox so now the company it the suspensions could range from a day to the dreaded lifetime ban. All right, Richard. Is it fair or unfair?
QUEST: And there you have the conundrum in a simple sentence, I don't know. On the one hand -- on the one hand, I am furious. Who is Microsoft to tell somebody what they can and can't do with something that they have already paid for? If they want to fiddle with it, it's up to them. Then on the other hand, I worked for a company to make contacts. I realize it's a huge piracy issue. On balance, there's something that sniffs strongly about Microsoft's heavy handed view.
ROMANS: What do you think? Sniffs strongly how? Do you think that this is a revenue challenge for the company? That in the end, it could be losing money and that's why it gets a little high and mighty?
QUEST: No. Absolutely that's the reason, no question about it. It just -- look, I talked to x-box and I talked to experts and I have read the statements and they all say the same thing. At the end of the day your x-box consul will work. You cannot connect to x-box live. They are not saying that your investments are gone down the toilet. But I was talking to one of these people yesterday, who actually has had their x-box bound. I was expecting them to be up in arms and freedom of speech, you name it. I expected all that. He said in the on to me, I knew the rules, I broke them and now I'm paying the price.
ROMANS: Interesting. All right. Richard Quest the very poplar story, banned for life by Microsoft. Richard Quest, CNN's "Quest means Business." Thanks Richard.
Hey, thanks to all of you for joining us and following YOUR MONEY. You can follow Ali Velshi and me on Facebook and Twitter at Christineromans and at Alivelshi. You can join us every week for YOUR MONEY right here on CNN, Saturdays at 1:00 pm Eastern and Sunday's at 3:00. You can also log on 24/7 to CNNMONEY.com.
Have a great weekend everybody.