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ERIN BURNETT OUTFRONT

Stock Market Up; Political Tactics; Prostitution Ring

Aired February 21, 2012 - 19:00   ET

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


ERIN BURNETT, HOST: A big day for the markets, the Dow passing 13,000. Will it be lucky or not?

And a week to go until the Michigan primary, Democrats kneeling before the altar of Rush Limbaugh, that's right. We'll explain.

And dramatic testimony in an Alabama courtroom, did a man really murder his wife on their honeymoon?

Let's go OUTFRONT.

Well, good evening, everyone. I'm Erin Burnett. OUTFRONT tonight that Dow crossing 13,000 for the first time since May 2008. Now OK, we're still short of the all-time high which was 14,164, but we have come a long way, baby, a long way from the bottom, like we have doubled. That is pretty incredible and also pretty incredible the surge since President Obama took office. The Dow is up 63 percent since Inauguration Day. Now that ranks him fifth in presidential history after 1,127 days in office, FDR, Calvin Coolidge, Bill Clinton and Dwight Eisenhower have better market records.

But the president's market record is important because the Dow matters psychologically. You'll see that 13,000 headline everywhere and it's also important because of this. A lot of Americans are invested in the stock market. According to Gallop, 54 percent of Americans own stocks through their pensions, 401(ks), or IRAs. The market is not just for the very few. Still the question is whether the largess will last? I went to the New York Stock Exchange today, and traders only clapped half-heartedly when the Dow crossed the 13,000 level.

In fact even though I've spent a lot of time down there, I had to ask to confirm that the clapping was actually in honor of the milestone. Trader after trader kept telling me the rally lacked enthusiasm. It was just drifting upward without conviction. It was in a word one trader used, lame. All right now lame it may but that doesn't take away from the fact that the market has risen so much since the financial crisis, but a rally needs enthusiasm. It needs as we all do a (INAUDIBLE).

Peter Kenny is managing director of Knight Capital. Peter good to see you. So I was down there today, which was pretty neat. I'm going to talk about it later in the show. It's my first time down there in a long time and yes, there was not a lot of enthusiasm. What is your view on if we can find a (INAUDIBLE) for this market rally? PETER KENNY, MANAGING DIRECTOR, KNIGHT CAPITAL: Well, I think you know if you stop to consider that we are up 23 percent in roughly a quarter and a half, the market has moved with great sponsorship, great leadership, large cap, tech, financials. It's -- the underpinning has been surprisingly strong. The GDP numbers, employment improvement, there's been a lot to support the market both in terms of the macro story and in terms of earnings.

Earnings season has been quite (INAUDIBLE) strong over the last two quarters and has been so far in this quarter, largely beating expectations with the guidance fairly positive, so with that as a backdrop and considering that though many people are invested in the market, 54 percent, the number that you mentioned previously, there is still quite a bit of cash on the sidelines. And if you can see a pullback in the cost of energy, a pullback in the cost of what the geopolitical represents, you could see the surge of capital into the market.

BURNETT: And let me ask you that question, because some of the numbers we're going to share in a moment are pretty stunning. People making $75,000 or more in this country, 87 percent of you who are watching in that category likely own stocks in some form or another. Half of Democrats own stocks. Sixty-four percent of Republicans own stocks. Would you tell them though right now, Peter, to put more money in the market, because I mean the problem is, is it always feels like regular people we get excited when the market moves up and we buy and then the lame rally drops off?

KENNY: Oh boy and that is an old adage, you know the retail investor very oftentimes is a contra indicator and very oftentimes retail investors are motivated by numbers, by the enthusiasm of a 13,000 for example. I would say this, getting into the market is a process. You never throw all of your eggs into the basket at one time, ever.

BURNETT: Yes.

KENNY: And you never exit the same way. You scale into positions, and you lighten up on positions in a very methodical manner. That way you manage risks and you can really manage your overall portfolio. It's a question of scaling in and scaling out. So 13,000 is attractive. If you see energy drop, if you see geopolitical concerns lower in terms of risks (INAUDIBLE) risk profile and if you see --

BURNETT: Right.

KENNY: -- Greece continue to mend, that story continue to mend you could see when they come to the market, but it's never a good idea to put all your eggs into basket at the same time.

BURNETT: All right. Well Peter Kenny thank you very much. We appreciate it and of course geopolitical issues referring in part to Iran and we have much more on that in a few minutes because there were some real news out of Iran today. But here's how the logic goes. A good market means people feel like the economy is going in the right direction, whether they're invested in it or not and people who feel that way will spend a little bit more money. They might hire and well they actually drive the economy in the right direction and that could deliver the 2012 election to President Barack Obama. But the president did not celebrate quite yet. His reaction to the market news was cautious.

(BEGIN VIDEO CLIP)

BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: Our recovery is gaining steam. Our economy is getting stronger, so we are headed in the right direction and the last thing we should do is turn around and go back to the policies that weren't working in the first place. That is why it's so important for us to stay focused and Congress to continue to do the things that the American people want to see done in order to improve the economy.

(END VIDEO CLIP)

BURNETT: All right Reihan Salam and Jamal Simmons join us, two of our three musketeers -- a third coming up in a couple of moments. Jamal let me start with you. Politically, should the president be embracing this more, hey I'm the fifth-best president, and you know that is pretty good --

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: I'm number five.

(CROSSTALK)

BURNETT: I'm number five. Mombo (ph) number five is good. Sixty-three percent since he took office, or is he hesitant because he doesn't want to be linked to the markets which somehow might mean Wall Street?

SIMMONS: Yes, you know the president is in a good place, but it's a t-r-icky, tricky place because there are so many different pitfalls. This Dow number could go up. It can go down. He does not want to be held captive to it. He's got to stay focused I think on what people are focused on, which are jobs, economic growth, the numbers that really move people's real lives and getting caught in the Dow Jones number every day is really kind of a tough spot politically.

BURNETT: Reihan, there's one interesting thing though, because you know you all have talked so much about how Independents are 40 percent of the electorate, and they're going to deliver the election and with the Republican candidates going very far to the right, right now, it would seem this is a sweet time for Obama to come in and try to grab them. Fifty percent of independents own stock. That is a very stock-heavy group.

REIHAN SALAM, COLUMNIST, "THE DAILY": Yes, absolutely --

BURNETT: Should he be doing something, using this to try to get them? SALAM: Well, you got the core point, which is the wealth effect. When people perceive that their 401 (ks) are growing they are likely to spend more. And that is to my opinion is kind of a scary thing about the state of the economy, because basically people's savings are actually going down. Right after the crash savings rates went up. Now they're going down. We have this consumption-fueled mini boom that's happening right now --

BURNETT: Yes.

SALAM: But the problem is that the stock market is really decoupled from the state of the real economy. Corporate profits are higher than they've been in 60 years, but wages and salaries --

BURNETT: Hiring is not. That's right --

SALAM: Exactly -- exactly --

BURNETT: And that is a big problem --

(CROSSTALK)

BURNETT: -- which maybe was the point he was trying to make there, Jamal, but Reihan let me ask you this.

SALAM: Yes.

BURNETT: The wealthy, a lot of them have become very frustrated with the president and maybe he does not worry about their votes, but does sort of a thing make some of their frustration with him go away, deliver him a lot of those wealthy Democrats who weren't going to vote for him, now maybe they will?

SALAM: Absolutely. You were talking about the 75,000 K -- the 75K voters plus. Those were very key to the Republicans in 2010, because a lot of them who voted for Obama in 2008 thinking oh you know he's not going to raise our taxes. This is a good solid moderate guy, and then said wait a second, I don't think so. Now, when they see their 401(ks) getting bigger and bigger, that is exactly the kind of thing that's going to defang that opposition, and that sense that Obama is a radical or whatever else.

BURNETT: Jamal, should he adjust his tax rhetoric at all or not?

SIMMONS: No, I think he's actually in the right place. You spent today -- today was kind of like old home day for you, Erin. You were down back in your old haunts (ph) --

BURNETT: Yes.

SIMMONS: -- so you probably were around some folks who may be a little bit more conservative in general so they may not believe (ph) the Obama voters, but when you look at the broader measure people who make over $200,000 a year tend to be more likely Democrats these days than they do Republicans. Now when you get much higher than that, you may see more people come back to the Republican, but they don't mind the tax rhetoric, because people actually feel like they are not paying as much as maybe they could pay --

BURNETT: You think people at 200 don't mind the tax rhetoric?

SIMMONS: Oh I think -- I think if you look at the latest poll -- there's a poll out the other day it talks about people who make over $200,000 who say they don't mind the president talking about this. Something like 60 percent of them, I mean it's a big number, so the president is not in as trepidatious of space as one might think by making this argument.

BURNETT: Maybe that's the 200 to the 250s, because it's the over 205's, right that it's going to go up -- interesting point. Reihan, here's my question. What does this mean for the people who are going to run against him? Because it would seem like jobs are coming back. The market is going up. The president, as Jamal says, I think fairly is in a pretty sweet spot right now.

SALAM: Yes, it is very, very awkward, because the thing is that you actually have a compelling message to say that there is something wrong with the economy in which the stock market is really decoupled from the fate of a lot of working and lower middle class Americans. The problem is that is not a way in which Republicans have been connecting. Mitt Romney is not very good at speaking to the turmoil facing working and lower middle class Americans --

BURNETT: Absolutely.

SALAM: And frankly he doesn't really have lots of policy solutions that speak to that constituency. Those are voters who I think are right now either drifting to Republicans on cultural issues or they're Democratic voters very solidly.

BURNETT: All right. Well thanks very much --

SIMMONS: The other danger -- real quickly -- the other dangers for the Republicans is they can't be in the position of talking down the number. When these good news -- numbers happen they've got to walk a fine line and not look like they're rooting for defeat here.

BURNETT: All right, thanks very much to both of you.

OK, well, Democrats, are they doing dirty tricks to skew the results of the Michigan primary? And again, are the Democrats kneeling at the altar of Rush Limbaugh?

And Dominique Strauss-Kahn answering questions about a prostitution ring in France and his involvement and in New Orleans they're partying tonight, 13 million ways Mardi Gras could be helping you.

(COMMERCIAL BREAK)

BURNETT: And turning now to Arizona where CNN is hosting what could be the final Republican debate tomorrow. A week before the state's primary a brand new CNN/ORC poll shows Mitt Romney and Rick Santorum statistically tied there. Romney at 36 and Santorum at 32, that is within the poll's margin of error. Michigan is always -- also going to the polls next Tuesday. Liberal blog the "Daily Kos" is taking a page out of pigs are flying, Rush Limbaugh's playbook.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I want him Hillary to stay in this, Laura. This is too good a soap opera. We need Barack Obama bloodied up politically and it's obvious that the Republicans are not going to do it, and don't have the stomach for it.

(END VIDEO CLIP)

BURNETT: All right that is Rush in 2008 calling for Republicans to vote for Hillary Clinton in Texas, a state like Michigan that has an open primary. Well (INAUDIBLE) some say operation chaos as Rush Limbaugh called it had a lot to do with it. Now "Daily Kos" is urging Democrats to vote for Rick Santorum in Michigan saying "the longer this GOP primary drags on the better the numbers for team blue." The question is will this have an impact in Michigan? Joe Johns is OUTFRONT in Detroit right now. Funny how what goes around comes around, Joe.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Yes -- yes, you know it is funny about this thing. I talked to a number, several Michigan Democrats who have heard about this thing today, but it is really in the buzz stage, so I can't, if you will, sort of gauge just how many people are actually thinking about doing it. And when you talk to Democrats about an idea that is just in its formation stage, you get a lot of different opinions.

I think the consensus is that it is both good and bad. We talked to "Daily Kos" today, and their opinion is, look, it is a serious idea, and their idea basically is to extend the Republican nominating process as long as possible, make Mitt Romney spend a lot more money than he has already spent.

But I've got to tell you, Erin, the other thing is -- talked to one Democratic analyst today who said in his view, this is a cynical idea. He called it unethical, and he said sort of an attempt to game, if you will, the presidential nominating process, and even went as far to say he thinks that the White House ought to step in and ask "Daily Kos" and others not to do it. So it is generating some controversy, but not sure just how far it's going to go at least just yet -- Erin.

BURNETT: Interesting, John Avlon is here as well. John, I mean you know in 2008, I mean I know the "Daily Kos" is making a joke -- a joke, you know but in 2008 you saw conservative turnout, what up seven percent --

JOHN AVLON, CNN CONTRIBUTOR: Up seven percent --

BURNETT: In fact this when Rush Limbaugh called for this and Hillary Clinton did win.

AVLON: That's right.

BURNETT: This can turn an election.

AVLON: It could. I mean look every vote counts. We learn that over and over and over. Iowa ended up being 34-vote margin. Maine was 194 I believe, so look, every vote counts and in an open primary, there is no barrier to entry especially in a year where this is the only game in town.

BURNETT: Yes.

AVLON: So I mean look it is a cynical idea. You can argue it is unethical and it's fascinating to see the way that you know the folks on the far left and the far right sometimes echo each other very explicitly right now.

BURNETT: Joe, what is your feeling on the ground talking to people because we know everyone -- you know we are all talking about wow Mitt Romney has to win or can he really afford to not win. What are you hearing? Is the momentum -- who has got the mo right now?

JOHNS: That is anybody's guess, and I'll tell you I'd really like to see a good solid poll on the ground out here. I can tell you watching Mitt Romney he is pushing very hard here. He's making some steps that he hasn't made before specifically talking a lot about the social issues now. He did that today. It looks like this campaign is taking the threat here very seriously, because you know, if Mitt Romney can't win in the state he once called home, where can he win? That is what the question is going to be.

AVLON: Yes. No, it's not just trying real hard to double-down, Michigan is must-win. You know you've got Mittmagedon (ph) if he does not win Michigan --

BURNETT: Can I -- did you coin that right here?

AVLON: There you go.

BURNETT: All right.

AVLON: I give it to you as a gift.

BURNETT: I'm applying for a trademark right now, on the record John Avlon.

AVLON: But in all seriousness, I mean if he can't win his father's home state, where his father was governor, this would explode the electability inevitability (ph) arguments. And you're already hearing a lot of party meandering (ph) say look, if Mitt does not win Michigan, we are going to begin the full panic mode and start looking for someone else, so this is -- this is very, very, very high stakes. Some primaries count more than most. This is one of them.

BURNETT: When are we going to know, John, if -- I mean obviously the "Daily Kos" saying right now. Buzz -- in the buzz stages --

(CROSSTALK) BURNETT: But -- all right, say that this does happen, and say that it moves in a couple of points and it's a couple of point margin, will we know that right away how many Democrats -- voters -- is that something that we won't necessarily know for sure ever?

AVLON: Well, we'll have to look at the exit polls.

BURNETT: Yes.

AVLON: I mean presumably people will be doing it with a sense of gonzo pride. You know --

BURNETT: So they won't -- they won't lie --

AVLON: -- intentionally --

BURNETT: -- about their party affiliation --

AVLON: Presumable not. I mean there is no barrier to entry, and the thing is open primaries are great normally because they give independents like me who want to vote for the person not the party, a chance to participate in the process, but here you've got a situation where the hard partisans are creating the thing they worry about. They're intentionally trying to distort the process instead of getting an ideological (INAUDIBLE) candidate for the other guy.

BURNETT: All right. Well, it's going to be interesting tomorrow, must-say, must-do? What do you say?

AVLON: Look, Romney has got to make Rick Santorum look small. He's got to make him look not presidential. Rick -- or Santorum has got to get Romney rattled, and make him look brittle and out of touch with middle-class voters.

BURNETT: They are all going to be watching there, Joe?

JOHNS: Yes -- absolutely. I've got to tell you, too, one more thing about the "Daily Kos" piece. It is not just Michigan. You know it is also -- it's North Dakota, it's Tennessee, and it is one more, Vermont. So there are other states that have open primaries, and "Daily Kos" is sort of targeting those as well. It could be very interesting and not just here, too.

BURNETT: All right. Well, it is going to be fascinating to see. Maybe the "Daily Kos" will be a guest on the Rush Limbaugh show and --

AVLON: Kumbaya.

BURNETT: -- history will be made. Thanks to both of you. Join us at 8:00 tomorrow for the Arizona Republican Presidential Debate. John King is there and he will be moderating. As we said, it could be the last Republican presidential debate you'll see. You know how they have been, fireworks.

One year ago he was the frontrunner for the French presidency, but today Dominique Strauss-Kahn known as DSK appeared in a police station in Leol (ph) in France where a mob of journalists waited. The reason well he was being questioned about a suspected prostitution ring which provided women to sex parties that DSK attended. Now DSK's lawyer has said that his client is innocent, and said quote, "I challenge you to distinguish a naked prostitute from any other naked woman."

Well DSK wants to clear his name and he said he actually wanted to be questioned, which is the latest in a string of sexual allegations against the former IMF head. The most notably being last May when a New York hotel maid claims he raped her. That case was dropped. Well earlier I spoke with French reporter Thierry Arnaud and I asked him how much longer DSK might be subject to questioning.

(BEGIN VIDEOTAPE)

THIERRY ARNAUD, SR. POLITICAL CORRESPONDENT, BFM TV: Yes he was brought in at about 9:00 a.m. this morning in an unmarked police car. There is no such thing as a (INAUDIBLE) here in France as opposed to New York so that at least where there had been relief for him. He is being investigated on two counts. First complicity in a prostitution network and number two is knowledge of the misappropriation of company funds, so this is what is being investigated at this point. What our sources are telling us is that this police custody might finish up tomorrow afternoon local time here in France, or so at which point he might be brought in front of a judge, and the judge of course will decide whether to charge him on either one or both of these counts.

BURNETT: And obviously some people in the U.S. easy to get confused, because you say well prostitution is legal in France. Obviously we're familiar with the original defense that DSK's lawyer had mounted which is it is hard to tell a naked woman from a naked prostitute, so how could DSK have known. But could you explain exactly what they could charge him with if prostitution is legal?

ARNAUD: Yes, of course. So what has been happening is allegedly, of course, is there was this prostitution network which is not a very large scale operation, but apparently very well run, very well organized which was based partly in Belgium and partly in this northern French city of Leol (ph) where it was mostly known for providing prostitutes to clients of a luxury hotel called the Carton (ph). Through this network and through a number of intermergeries (ph), acquaintances and friends of DSK a number of these prostitutes were invited to have sex with him while attending so-called parties.

On about ten occasions or so in Brussels, in Paris and in Washington as well -- while of course he was head of the IMF. So while as you quite rightly point out, it is not illegal to pay for a prostitute as such. It is against the law obviously to be part of a prostitution network, and it is obviously against the law as well to misappropriate company funds and some of these friends of DSK allegedly paid the bill, so to speak, with company funds.

BURNETT: Oh, OK. So if the judge decides as you said perhaps tomorrow to charge DSK, if he is then convicted, what might the sentence be? ARNAUD: Well, the maximum sentence he is up for is seven years of jail, and a fine that might go as high up as about $500,000, 300,075 (ph) euros, so this is what is at risk for him, obviously the chances of it going as high as that are remote, but even if he ends up being found guilty with a suspended jail sentence and fine, it will be obviously a terrible final chapter to his public life.

BURNETT: It certainly would. Obviously a man who at one point many thought would be the next president of France. Thierry thanks so much for your reporting.

ARNAUD: All right.

(END VIDEOTAPE)

BURNETT: All right, Iran refuses to let U.N. inspectors into their nuclear facilities. Should the United States be worried? Former Defense Secretary William Cohen comes OUTFRONT.

And the latest developments in the honeymoon murder trial; did an Alabama man kill his wife?

(COMMERCIAL BREAK)

BURNETT: We start the second half of our show with stories we care about, where we focus on our own reporting, do the work and find the "OutFront 5". First up tonight, the Dow Jones Industrial average crossed 13,000 for the first time since May 2008. Now stocks did pull back a little bit so we closed right below that. The Dow ended higher by 16 points. Now this isn't just good news for investors. It's good news for President Obama. Since he has been in office, stocks have risen 63 percent, which ranks him fifth in American history among presidents with the best market return.

Number two, the Supreme Court will re-consider whether race can be considered when public universities accepts their students. Now this is interesting. The claim was brought on by a student who sued the University of Texas for rejecting her she said because she is white. CNN senior legal analyst Jeffrey Toobin tells OUTFRONT what to expect when the high court hears the case in October and he said quote "Basically it is likely to be the end of affirmative action as we know it."

Number three, President Obama releases a new corporate tax reform plan tomorrow. Now the Obama administration has been under pressure to draft a new plan, but if you're looking for detailed legislation, you may be disappointed. According to Timothy Geithner -- you see him there at the podium -- the treasury secretary -- the plan will be vague on purpose in an effort to find common ground on broad principles between Republicans and Democrats. Mitt Romney is also expected to release details of his own tax reform plan tomorrow. People have been waiting a long time for that and we're all interested to see what is in it.

Number four, Wal-Mart feeling the pinch of low prices. The big box retailer did bring more shoppers into its stores in its quarterly numbers today. But those deep discounts actually meant people didn't spend as much as they did before and that caused the company to fall short of expectations, but we looked through the report, and despite the disappointment here is a highlight. Wal-Mart saw a six percent increase in sales overall.

Well, it has been 200 days since the United States lost its top credit rating, even number, not a number to celebrate, what are we doing to get it back? Well, it might start at the local level like Mardi Gras in New Orleans for example. According to The Mint, for every $1 the city spends on Mardi Gras they bring in $8.45 or just over $13 million and now to Iran where the regime again today raised the ante against Washington and the West. A top Iranian military commander said Iran would preemptively strike at any country it perceives as a threat. Now the warning comes on the same day Iran announced it would not allow U.N. inspectors inside nuclear facilities suspected of developing weapons. Instead they offered to hold discussions about them in Tehran. Now as a reminder the IAEA said back in November, quote, "The information indicates that Iran has carried out activities relevant to the development of a nuclear explosive device."

So, now, the inspector of preemption is out there. There's no access to Iran's nuclear centers. And it comes as Iran has cut off oil supplies to Britain and France, and says it will do so to six other European countries.

So, how is the U.S. responding? Well, this is where it gets really interesting, because we've noticed something here, and it's a very mixed response.

You may remember that earlier this month, "The Washington Post's" David Ignatius reported that Defense Secretary Leon Panetta believed there was s a strong likelihood that Israel would attack Iran this spring. The president of the United States was also very clear in an interview with Matt Lauer.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We're not going to take any options off of the table, and I have been clear that we're going to do everything we can to prevent Iran from getting a nuclear weapon and creating an arms race, a nuclear arms race in a volatile region.

(END VIDEO CLIP)

BURNETT: Iran's deep desire to have a weapon is why Iran's nuclear centrifuges were attacked with the Stuxnet virus, which is credited with setting back the country's nuclear program. It is also why the United States has imposed crippling sanctions on Iran. A source who wrote and implemented those sanctions was talking me through them today. Most of them explicitly designed to target Iran's nuclear and military industries.

On February 14th, and maybe in honor of Valentine's Day, Leon Panetta said he never thought Israel would attack Iran that soon. And here is Joint Chief Chairman Martin Dempsey on Sunday about the most fundamental justification for the sanctions themselves, whether Iran is actually on that path to develop the nuclear weapon.

(BEGIN VIDEO CLIP)

GEN. MARTIN DEMPSEY, JOINT CHIEFS CHAIRMAN: I believe it is unclear, and on that basis, it is premature to exclusively decide that the time for a military option was upon us.

I think that the economic sanctions and the international cooperation that we've been able together around sanctions is beginning to have an effect. I think our diplomacy is having an effect, and our preparedness.

(END VIDEO CLIP)

BURNETT: OUTFRONT tonight, former Defense Secretary William Cohen.

Good to be with you, sir.

WILLIAM COHEN, FORMER DEFENSE SECRETARY: Good to be with you.

BURNETT: So, what's going on here?

COHEN: I don't think there's question that Iran is building a nuclear weapons capability. I mean, you -- we talk about circumstantial evidence. The footprint of guilt can be traced by the searchlight of probability. What is the probability you have a country that would take 18, 19, 20 years to construct a nuclear power capability if it was only interested in producing energy, or building pharmaceutical capability? It's simply inconsistent with probabilities and human experience.

So they are on the way. The question is how far along are they? And I think what's happened in recent days and weeks, the rhetoric has been ratcheted up to the point where we might, in fact, see a precipitous action being taken either by the Israelis or by the Iranians, unleashing untoward consequences. People can't even really comprehend the full scope of what those consequences can be.

So, I think what the administration is trying to do is to ratchet up the rhetoric back.

BURNETT: To walk back from having to strike or something like that.

COHEN: Indeed. And you really can't have it both ways however.

BURNETT: Yes.

COHEN: And if you are going to say that we are intensifying the sanctions, because they are getting closer as the IAEA has said, if you are saying we need more sanctions, that really kind of goes counter the argument now, saying, well, we've been really successful and therefore you would be then faced with the argument, well, isn't it time to back off a bit?

BURNETT: Well, because it would seem to be consistent if indeed it's not just rhetoric -- which it appears what you are saying, it is just rhetoric. But if it's not just rhetoric, then something's changed. Then the sanctions, themselves, would not seem justifiable. Certainly, none of these other strikes and things that had happened, whether it'd be the computer virus or other things targeting nuclear facilities either.

COHEN: I think the sanctions have been effective, and I think it's really important that we continue to intensify them. And if we don't -- and if don't get the Russian and the Chinese support, then I think the possibility or probability of military action moves very close to the center of the table, and I don't think that most people don't want to see that take place.

BURNETT: Right.

COHEN: I think the Israelis don't want to see it take place nor the American people.

BURNETT: And I think that would be extremely clear, that nobody would want that, and looking at recent experience of what has happened and Iran is a vastly different place than that, but what are the options?

I mean, you had Secretary Defense Panetta and President Obama meeting behind closed doors. I know they have put forth a plan obviously to Congress of how they would go ahead if they had to -- can they surgically strike without having a broader conflict?

COHEN: I think the short answer is no. This is not a surgical strike kind of event. You would have to have multiple strikes over a fairly significant period of time to do the kind of damage that needs to be done if --

BURNETT: And they would strike back?

COHEN: Well, they're not going to go gently into the good night. They are going to strike back with asymmetric types of warfare. They could call upon Lebanon to rein down on Tel Aviv with rockets. You could have the launching of missiles coming out of Iran. I mean, this could spread quickly to the entire region.

That's why we have to continue the approach I think that President Obama has taken. Let's continue the sanctions, let's intensify them, let's bring the Iranians back to the table on our terms and not on theirs.

BURNETT: Do you think that the outcome of this may be, and I know I always ask this question, but it seems when you look around the world, there are a lot of countries with nuclear weapons that aren't necessarily supposed to have them, India, say, comes to mind, and they have them.

Is it more reasonable if nobody wants a full war which nobody does, that you would say, look, Iran is become to nuclear, let's deal with that?

COHEN: Well, you could have a situation where you defer Iran from using nuclear weapons.

BURNETT: So, they get one, but deter?

COHEN: Here's the problem if Iran has nuclear weapons, I think it's very clear, Saudi Arabia will go next. They will think that they need them, and then you have other countries in the region that will need them. And so, you're seeing the proliferation of nuclear weaponry.

That means at some point at point will have a better chance of getting their hands on nuclear materials and blowing up one of them either in the United States and Europe and Israel, in the region. That's danger involved.

And so, we want to see a control of the spread of nuclear weapons, not yield to the pressure to have other countries pick them up.

BURNETT: All right. Secretary Cohen, thank you very much. Appreciate your taking the time.

COHEN: Good to be with you.

BURNETT: All right. A bride and groom go on the honeymoon, and he came home alone. But did he murder her?

And we are in the middle of the one of the warmest winters ever. Could global warming be saving the economy?

(COMMERCIAL BREAK)

BURNETT: We do this at the same time every night, our "Outer Circle," where we reach out to sources around the world.

And we begin tonight in Afghanistan where massive protests took place outside Bagram Air Base today, after it was reported that religious materials, including the Korans, were burned there.

Military officials say the materials were removed from the library of the detainee's center, because they had extremist inscriptions on them. But they still apologize for the improper disposal, calling it an honest accident.

Nick Paton Walsh is covering the story and I asked him what United States can do to resolve this.

(BEGIN VIDEO CLIP)

NICK PATON WALSH, CNN INTERNATIONAL CORRESPONDENT: Erin, there's not a huge amount the U.S. can do at this point. They tried to be transparent about how this mistake happened, intercepting communications from prisoners that were written in these religious texts. They explained it was a mistake, sent to the wrong waste disposal. They've issued apologies from the commander of NATO and the U.S. secretary of defense.

But at the end of the day, they're going to have to wait to see what the Afghan reaction will be in the days ahead. There have been furious protests about this sort of thing before and even the new guidelines issued by NATO today may not stop that from happening. Misinformation spread very fast in Afghanistan. We may see in the days ahead further instances like this -- Erin.

(END VIDEO CLIP)

BURNETT: Nick, thank you.

And now, we go the Syria where the food supplies are running short as the security forces continue their crackdown against anti- government protesters. Syrian-state media is responding, saying reports of food shortages are, quote, "lies". Opposition forces say over 100 people were killed across Syria today, including 10 children. And CNN cannot independently confirm those numbers.

But Arwa Damon is one of the few reporters who has witnessed the humanitarian crisis firsthand. And I asked her how bad it really is.

(BEGIN VIDEO CLIP)

ARWA DAMON, CNN CORRESPONDENT: Erin, even the distribution of food supplies has to happen under cover of darkness to avoid detection by government forces. And these are food supplies that are rapidly dwindling.

In the neighborhood of Baba Amr, the head of the humanitarian office was saying they had less than a week's worth of food left. There's not been any sort of resupply when it comes to food for more than two weeks now. But they have managed to gather. They have salvaged from people's homes or from shops that have been bombed.

But people are increasingly crying out, saying that if they do somehow manage to survive the shelling, they could possibly starve to death -- Erin.

(END VIDEO CLIP)

BURNETT: All right. Arwa, thank you.

Well, a dramatic day in the murder trial of an Alabama man accused of killing his wife while they were honeymooning in Australia in 2003. This honeymoon is back in 2003. But this has been going through the courts.

And Tina and Gabe Watson were scuba-diving in the Great Barrier Reef when Tina drown. And prosecutors say this gruesome picture which you probably have seen before is Tina's lifeless body at the ocean floor.

An Alabama attorney general says Gabe turned off Tina's air supply and held her underwater. The motive he says was cashing in on a life insurance policy. Now, on the stand today, Tina's sister and the couple's Australian dive master appeared and he testified that Tina did not get proper instruction before getting into the water. Her father reportedly walked out of the court room in tears after the medical examiner showed autopsy photos.

Now, Gabe Watson pled guilty to manslaughter in Australia in 2008.

Following the trial closely, CNN legal analyst Sunny Hostin and contributor Paul Callan.

Great to have both of you with us.

So, let me ask you this, Sunny. The dive master testified that Tina did not have appropriate instruction. Does that hurt the prosecution's case?

SUNNY HOSTIN, CNN LEGAL ANALYST: Well, I think it could, because it shows that perhaps someone else is really responsible for her death, right? This was just an accident and had she been properly instructed, she could still be alive. And so, I think that's certainly could, you know, help the defense a bit, but it could also help the prosecution a bit, because he was supposed to be the trained experienced diver, and he apparently waived the right to have that course. And so, the prosecution is going to shift the fault on to Gabe Watson, because they think they have their guy.

BURNETT: And this is an interesting point, Paul, because we've all heard about how Gabe was trained, and then his attorney came out front. I want to play the quick sound bite from that in a moment. But when he came OUTFRONT, look, that was years and years before. So, he really went through a course 10 years before, has he really know what he's doing, a lot of that would waive that because we don't want someone going down with us, you know, trying to make the case that he wasn't this trained guy everyone says.

PAUL CALLAN, CNN LEGAL CONTRIBUTOR: Well, I think that's very true. And everybody who knows scuba diving, even in the United States, you know, you go to a local YMCA, you take a course, you dive in the pool, you get your certificate, and you go to the Caribbean and maybe it's five years later. So, now, all of the sudden, you're an experienced diver.

You know, the diving company was criticized and fined actually for negligence in the way they handled the diving situation, and that plays right into the defense of the case, that this was an accidental death and not an intentional murder.

BURNETT: A lot of people, though, here -- well, he plead guilty to Australia. What is that about? How can that not affect this?

Here's what his lawyer told me about why that happened.

(BEGIN VIDEO CLIP) BRETT BLOOMSTON, GABE WATSON'S DEFENSE ATTORNEY: He didn't plead guilty to taking her life. He pled guilty to being a bad dive buddy. And the highest courts in Australia determined that he did nothing intentional to cause her death. He just simply made a split second decision to leave her and to get help at the surface.

(END VIDEO CLIP)

BURNETT: So, essentially, what you are all saying, that kind of inexperienced thing worked. But he's also saying a time served should also apply.

HOSTIN: That's right. I mean, a bad dive buddy. He is supposed to be this experienced diver and what he does is to go up instead of going down. I mean, that doesn't make a lot of sense to me. But I am a bit troubled that he pled guilty to negligence, pled to manslaughter, and the jury has heard about that.

You know, many people would say, myself included being a former prosecution, I don't know if I want that information in there. I don't even know if I need the information, because on appeal, if he gets convicted, we are going to hear about the fact that this extremely prejudicial information came in. I don't think they did need it. He left her on the bottom of the ocean.

CALLAN: Here's what troubles me about this whole thing and a lot of people are going to say he is a creepy guy, and, then, you know, some evidence today that came in that would support that.

BURNETT: Yes, I'm going to play that in a second.

CALLAN: All right. This is a 23-page decision from the Queensland supreme court in Australia, all right? Not a single word says this was intentional. You know what they say, they say it was accidental death in 23 pages. The prosecutor wanted a five-year sentence, he could have asked for a life sentence under Australian law. They say this is a tragic accident.

Now, where does Alabama turn around and say intentional murder? The crime happened in Australia and even the Australians don't think it was an intentional murder. I think that's where the problem is in this case.

HOSTIN: Well, the Supreme Court here disagrees with you, right? The Supreme Court of the United States found that you've got two different jurisdictions, especially you have foreign jurisdiction.

BURNETT: You are a U.S. citizen.

HOSTIN: You are a U.S. citizen, you get tried here.

CALLAN: You can retry. But the facts are the fact s, and they're not going to change from Australia to the United States.

CALLAN: Well, let me -- you used a word creep. This is the testimony of Amanda Phillips, and for you, those viewers out there, that was Tina's best friend, about an awkward moment that she shared with Gabe, the man, of course, here on trial at his wife's funeral.

(BEGIN VIDEO CLIP)

AMANDA PHILLIPS, TINA WATSON'S BEST FRIEND: She looks very pretty in that outfit. And he said, well, at least her breasts look perky.

(END VIDEO CLIP)

HOSTIN: Who says that? Who says that? And it's important for this jury to hear that because I think many people just find it really difficult to believe that someone would kill his wife 11 days into their marriage. I mean, they really in a honeymoon phase. They don't even know enough about each other to dislike each other.

So, if he did this intentionally, he has to be creepy, he has to be someone that acts out of bounds and how out of bounds does it get when he talks about perky breasts at a funeral.

BURNETT: In your wife's casket.

BURNETT: He's a creep. He's as creepy as it gets. But you know something? That doesn't make him a murderer. And you got to prove that beyond a reasonable doubt, Sunny. And I think, I don't know what this jury is going to be, but I think it's a tough case to get a conviction.

HOSTIN: We can agree to that. I think it's a tough case as well.

BURNETT: All right. Thank you very much to both.

CALLAN: All right.

BURNETT: Well, now, let's check in with Anderson.

Anderson, what's coming up on "A.C. 360"?

ANDERSON COOPER, HOST, "A.C. 360": Hey, Erin. We are keeping them honest tonight. More on Syria, firsthand reporting and firsthand video of the lies being told by the Assad regime.

We're going to speak to Marie Colvin in "The Sunday Times" in London, who's really now the only Western journalist in Homs. She witnessed a growing toll inflicted by the relentless bombardment, including the death of a 2-year-old child. The little boy named Adnan (ph) from shrapnel injuries. We're going to will have more on this little boy's death.

Also, ahead, we are going up close in the battle for baby Veronica. Her biological father signed a waiver consenting to her adoption by a couple, but then changed his mind. Baby Veronica's future now hinges on a little known federal law, the Indian Child Welfare Act.

We have all that, and tonight's "Ridiculist" and a lot more at the top of the hour, Erin.

BURNETT: All right. I'm curious about that. Thanks very much, Anderson.

Well, it was pretty bright and sunny today in a lot of places around this country, and that could have meant an extra $400 for you. We will explain.

And the Dow cracks 13,000, and we are caught looking at someone's bottom. That is tonight's essay.

(COMMERCIAL BREAK)

BURNETT: So the numbers are in. Last month was officially the fourth warmest American January on record, with an average temperature of 36 degrees. I mean, that's 5 degrees warmer than usual. That is a huge difference.

Warmer temperatures mean consumers have been using their heat a lot less. And that brings us to tonight's number, 30. That's the percentage the average consumer saved on their energy bill this winter because of the warmer weather.

Now, works out to anywhere between $200 to $400 the average person is saving just on heating their home. Now, with natural gas inventories, almost 40 percent higher than they usually are, prices hit a 10-year low last month.

Now, this hasn't really been talked about, but it is important. It's huge for our economy. It means people have more money to spend on other things that drive growth.

But the warm weather isn't good news for everybody. Snow cover across the country down more than 50 percent, sales of skis, goggles, wax and gloves are down about 10 percent from last month.

Now, surprisingly, not affected the sale of parkas, insulated winter coats like the North Face, Columbia and moose knuckles are hot fashion items right now. And even with no snow, parka sales are up more than 4 percent because people like the moose knuckles.

All right. Well, on the day the Dow hit 13,000, I was at the stocks exchange. We'll get to the bottom of that in tonight's essay.

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BURNETT: So today, I went to the floor of the New York Stock Exchange. I was there for an event with the former First Lady Laura Bush and 14 Egyptian women who were talking honestly and off the record about women's rights in Egypt. Now, it was an eye opening experience and a story we're going to spend more time covering in the days ahead.

But it was also bittersweet for me because I haven't been to the stock exchange since the day my friend and for years, my co-anchor, Mark Haines, died. And I know almost everyone watching is unfortunately at some point felt the way I felt today, the moment when a memory of a person who has died just overwhelmed you, and you're aware of one thing -- an emptiness.

Even the metal pipe that Mark sat on outside the building for a smoke break every day was empty.

But it turns out Mark was watching today and in true Haines style, he didn't want sadness, he wanted credit.

So, I'm giving Mark credit for the Dow hitting 13,000 today because I know he wanted to remind me of something he was extremely proud of. That is his bottom.

(BEGIN VIDEO CLIP)

MARK HAINES: I will step out on a limb here.

BURNETT: Hold on. We've been waiting for this.

HAINES: I think we're at the bottom, I really do.

(END VIDEO CLIP)

BURNETT: The soon to be infamous Haines bottom was March 9th, 2009. Mark said the market had bottomed and it had. It closed on that day at 6,547. And it hasn't looked back. It has nearly doubled since the day Mark made that call.

I want to emphasize, on that day, it was really hard to make that call. People were terrified, people were saying is it Armageddon, is the market going to go to zero? Or are we going to have anarchy? It really were.

So, it took a lot of courage. That's the kind of guy Mark was.

So, who knows where the market goes now. But like all the traders that I was lucky enough to see again today, I thought of Mark when the Dow crossed 13,000. I remember the last time it did, Mark and I had little hats. And I can say this, I hope that the Haines bottom lives forever, one record that will remain forever unbroken.

Thanks so much for watching.

"ANDERSON COOPER 360" starts now.