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YOUR MONEY

Your Information, Our Business; Hack My House; Smartphone Wars; The Business of Being Ashton Kutcher; Money is Bigger in Texas; A Summer Swoon; Black Borrowers Face Discrimination; "American Dream vs. American Reality"

Aired August 17, 2013 - 09:30   ET

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


CHRISTINE ROMANS, CNN HOST: Big brother is watching you and so are Chinese hackers, identity thieves and tech companies.

I am Christine Romans, and this is "Your Money."

Technology is marching forward but security is sometimes left behind, in a rush to create gadgets, manufacturers are leaving security holes that hackers can use to attack you and your family.

And then there are the companies that you trust your data too. You don't pay for Facebook or gmail, but those companies are selling something, they're selling you. Their computers scan their data to build a user profile. Advertisers use those profiles to target their ads and the more that they know about you, the more they pay.

Consumer groups were outraged this week after Google filed a legal motion earlier this summer and in it Google's lawyers referenced a 1979 Supreme Court ruling that says, "A person has no legitimate expectation of privacy and information he voluntarily turns over to third parties." Now Google's chairman told me the company is just trying to help you.

(BEGIN VIDEO CLIP)

ERIC SCHMIDT, EXECUTIVE CHAIRMAN, GOOGLE: You get to choose not to give us this information, but if you give it to us, we can do a better job of making better services for you.

(END VIDEO CLIP)

ROMANS: Facebook want your personal information to target content and ads for you?

So why is the U.S. government looking over your shoulder?

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And America is not interested in spying on ordinary people. Our intelligence is focused above all on finding the information that's necessary to protect our people and, in many cases, protect our allies.

(END VIDEO CLIP) ROMANS: I want to bring in Rod Beckstrom. He's the former director of the National Cybersecurity Center.

Rod, is the message here that we shouldn't put anything sensitive in e-mail or online that there is no expectation for privacy in what we do in a very technology-driven world?

ROD BECKSTROM, PRESIDENT, THE ROD BECKSTROM GROUP: Anything you put online is definitely at risk. I will say that. You can make some choices that are better than others to try to protect your privacy, but yes, if you are e-mailing online, you are taking the risk that that content can be disclosed.

ROMANS: So we've all done it. We scroll through pages and pages of terms and conditions to use new software, a new device. And we click accept. That is what happened to Kyle in an episode of "South Park." Listen.

(BEGIN VIDEO CLIP, "SOUTH PARK")

UNIDENTIFIED FEMALE: What are you going to do to us?

UNIDENTIFIED MALE: Everything that you agreed to in the iTunes conditions.

"KYLE": We didn't read them.

UNIDENTIFIED MALE: Right, who just agrees to something they don't read?

(END VIDEO CLIP, "SOUTH PARK")

ROMANS: We get the point. A lot of people do that.

Rod, we hear a lot of buzz every time Facebook or Google changes its terms of service, but so far there has been no mass user revolt. What would it take to push users over the edge? Because they do it for convenience, quite frankly, and they don't have a lot of other choices.

BECKSTROM: Sure. Yes, I'm not sure what is going to push it over the edge. There are three categories of people, those that don't know what is going on in this new connected world, those that do and feel comfortable with all the data that's been gathering on them, and there is a growing minority that is pretty concerned about what they sense is a violation of their privacy.

ROMANS: All this outrage this week over that Google story, I have to tell you, this is what the Google statement was to us, "We take our users' privacy and security very seriously. Recent reports claiming otherwise are simply untrue. We have built industry-leading security and privacy features into Gmail. And no matter who sends an email to a Gmail user, those protections apply."

Do you think the Google criticism was overstated this week? BECKSTROM: I think, you know, people need to understand what companies are doing and make their own decisions. For some people, it's a problem. They don't feel comfortable with that and other people may feel very comfortable sharing everything with a company. So it really depends on the perspective.

ROMANS: Depends on the perspective, and there is always that phrase, caveat emptor. If something is free, you should know that someone is trying to make money. There is always a business model.

Hey, Rod, it's so nice to meet you. Thank you so much.

If our online lives are being tracked they are at risk of being hacked, that's no surprise, but what is going on in your home is vulnerable too.

CNNMoney's Laurie Segall joins us now.

Hi, there.

LAURIE SEGALL, CNN CORRESPONDENT: That's right, Christine. It almost reads like a movie script. A hacker tapped into a home wi-fi network (inaudible) a baby monitor and watched a 2-year-old in her bedroom -- I kid you not. It happened this week to a family in Texas.

Are you freaked out yet? Well, it's not just baby monitors that are at risk, your home could actually be hacked too, if you are not careful.

(BEGIN VIDEOTAPE)

SEGALL (voice-over): Imagine your 2-year-old daughter sleeping and an outsider watching her through the baby monitor. That's what happened to a family in Texas this weekend. They discovered the problem when they heard a man yelling at their toddler, reading her name off of her bedroom wall.

MARC GILBERT, FATHER: So he said "Wake up, Alison, you little (inaudible)."

SEGALL (voice-over): The Gilberts believed their device was hacked.

GILBERT: It felt like somebody broke into our house.

SEGALL (voice-over): Someone kind of did. And as home automation becomes increasingly popular, there are more and more ways to hack your house, and many devices that are vulnerable.

DANIEL CROWLEY, SECURITY RESEARCHER, TRUSTWAVE: I can tell the bear (ph) light, please unlock the door.

SEGALL (voice-over): That's a hacker, literally unlocking your door. The smart lock is connected to a device that enables you to control your home appliances from your phone. Daniel Crowley, a security researcher, found a flaw in that device. CROWLEY: I actually run code on the bear (ph) light and compromise it, just set up a backdoor, or I can control any device hooked up to it.

SEGALL (voice-over): In a world full of these devices that let you do everything, from flush your toilet to turn on your lights through your smartphone, a hacker can make your house feel haunted.

DAVID BRYAN, SECURITY RESEARCH, TRUSTWAVE: Basically, what I can do is open up any of these rooms that have been configured or associated with this device, and control them, either turning them on or turning them off.

SEGALL (voice-over): Sound like something Casper would do? These security researchers found an issue with this Inseon (ph) hub that enabled them to take control of the devices connected to it.

A similar vulnerability was found in a children's toy. This toy rabbit has a camera that syncs with an app on a parent's mobile device. Designed for keeping an eye on your kids, but someone else could, too.

JEN SAVAGE, SECURITY RESEARCHER: That traffic, I was able to capture and then pull from it a URL, which was the direct video feed, and as long as the access token was still valid and had not been expired yet, I could watch that video feed indefinitely.

SEGALL (voice-over): Inseon (ph) has fixed the issue identified by these researchers. Bear (ph) Light stresses that a hacker requires an insecure wi-fi connection, and they say the majority of their users have secure Internet connections.

The makers of the baby monitor and the toy rabbit did not immediately respond to CNN's request for comment.

As for ways to stay safe, always put a strong password on your Internet connection, keep your software up-to-date and never click on links from strangers.

(END VIDEOTAPE)

SEGALL: And, Christine, when it comes down to it, had this family ,when it comes down to the baby monitor, had they updated their software, this would not have been an issue. But let's take a step back. How many times do you look at a baby monitor and say, oh, I have got to update the software in my baby monitor? This is just a whole new reality that we're beginning to face.

ROMANS: Right. OK. Strong passwords, secure Internet connection most important things in all this.

SEGALL: Absolutely. Absolutely.

ROMANS: Thank you so much.

SEGALL: Thank you. ROMANS: We all know Steve Jobs was a brilliant tech entrepreneur, but did you know the man playing him on the big screen, he is no dummy himself.

(BEGIN VIDEO CLIP)

ASHTON KUTCHER, ACTOR: The sexiest thing in the entire world is being really smart.

ROMANS (voice-over): No, you are not getting punked. More on the business of Ashton Kutcher, next.

(COMMERCIAL BREAK)

ROMANS: Billionaire activist-investor Carl Icahn has never been shy and now he's discovered Twitter. Quote, "We currently have a large position in Apple. We believe the company to be extremely undervalued." That's Apple CEO Tim Cook today, and for Icahn, that's a $1.5 billion investment.

Apple stock soared this week in the wake of the tweet heard around the investment world, Apple shares trading above $500 for the first time in a very long time. The stock has been climbing back from a low of $390 a share back in April, still well off the highs. Investors still worrying the company just isn't innovating the way it used to under that legendary Steve Jobs, who passed away nearly two years ago.

So skepticism shared by Oracle CEO Larry Ellison (ph) among others, who called Steve Jobs irreplaceable.

(BEGIN VIDEO CLIP)

LARRY ELLISON, CEO, ORACLE: We will not be nearly so successful because he is gone. He was brilliant. He was our Edison. He was our Picasso.

(END VIDEO CLIP)

ROMANS: But Picasso's main value is (inaudible) age where Apple's operating system has been losing market share to Google's Android, that's Google's operating system which runs on devices from Samsung HTV and Google's own Motorola division, among many others.

Androids are often cheaper than iPhones, which means Apple is losing out on a huge customer base. That's the buzz around a possible low- cost iPhone that could be announced as early as September.

So Apple is poised for a comeback. But the grandfather to the smartphone isn't.

Remember these? That's right. Just five years ago, BlackBerry had more than half of the smartphone market -- today 2 percent, lagging way behind its rivals. The company's new BlackBerry 10 operating system is designed to appeal to consumers, but so far it hasn't caught on the way the company hoped. Now BlackBerry says it could be put up for sale. So what would it be selling? A loyal user base, a reputation for security and patents which could be worth $1 billion by themselves.

All right. Apple has changed our lives in the past and with the movie out this weekend, everybody is interested in the business of Steve Jobs, but what about the business of the actor playing Jobs? The business of being Ashton Kutcher.

(BEGIN VIDEOTAPE)

ASHTON KUTCHER, ACTOR, "STEVE JOBS": I would like to introduce you to the iPod.

ROMANS (voice-over): Ashton Kutcher's latest job? Portraying Steve Jobs on the big screen.

KUTCHER: He is a hero of mine. I admire him.

ROMANS: But playing the role of a brilliant tech entrepreneur is hardly acting. Kutcher is a very involved and very successful tech investor. He studied biochemical engineering at the University of Iowa. But biology of a different sort led Kutcher to drop out, leaving the lab for the runway.

Fame soon followed. Despite prominent roles as good looking but dimwitted in "Dude, Where's My Car?" and "That '70s Show," Kutcher is no dummy when it comes to startups. He recognized the value of Twitter very early, and in a very public race, Kutcher beat CNN and became the first Twitter user to get 1 million followers.

Today he pushes his investments to more than 14 million followers. Kutcher was part of a group an early investors in Skype, an Internet calling service. Back then it was valued at $2.75 billion. Two years later, Microsoft bought Skype for more than triple that. Now Kutcher backs some of the most buzzed-about ventures, Foursquare, Airbnb, Flipboard, Path and more. He invests through his own venture capital fund, Agrade. And the onscreen airhead is laughing all the way to the bank. He is the highest paid actor in television raking in an estimated $24 million last year for his work on "Two and a Half Men," not to mention top dollar endorsements like his deal with Nikon.

From Hollywood hottie to Silicon Valley superstar, and now the lead role playing the iconic Steve Jobs, the business of being Ashton Kutcher is --

KUTCHER: Oh, yes.

(END VIDEOTAPE)

ROMANS: All right. They say everything is bigger in Texas. And when it comes to the money sports teams make, it's true. Here's the score.

(BEGIN VIDEO CLIP)

ROMANS (voice-over): Dallas Cowboys, the most valuable team in the National Football League, according to a Forbes list out this week, the team is worth $2.3 billion thanks in part to a 25-year $500 million deal it struck with AT&T back in July for the naming rights to its stadium.

The New England Patriots are the second most valuable franchise at $1.8 billion, followed by the Washington Redskins, the New York Giants and Houston Texans.

Texas is also king of the college game. The University of Texas at Austin rakes in the most cash for its merchandise, according to the collegiate licensing companies. It's the eighth year in a row the Longhorns have taken the spot. Alabama, Notre Dame, Michigan and Kentucky round out the top five.

And finally, football is coming back to Los Angeles, well, arena football that is, and the L.A. Kiss will start playing in 2014, and the rock band Kiss backing the team along with some other investors. And it's affordable. Season tickets start at just $99. You have to provide the face paint.

All right. Up next, after back to back triple digit losses, what is behind the pullback in stocks?

(MUSIC PLAYING)

(COMMERCIAL BREAK)

ROMANS: A summer swoon. This year we saw back to back days of triple digit losses in stocks, so what is troubling them? We're getting close to September, the time many think the Fed will begin the taper, the same Septaper -- that's when it slims down its bond buying purchases. Last week U.S. jobless claims fell to the lowest level since October 2007. That gives the Fed room to taper.

But we have also got very weak consumer spending signals from some big retailers, like Walmart and Macy's. Add to that news from companies like Cisco, the world's number one's Internet router maker, that business is soft. That speaks directly to business spending, all of this hitting confidence at a time when markets are up big for the year.

Mohamed el-Erian is the CEO of PIMCO.

Maggie Lake is my friend and the anchor of WORLD BUSINESS TODAY on CNN International.

Mohamed, I want to start with you. This little market pull back, bond yields are at two-year highs, and what should retail investors, our viewers, my viewers, what should they make of what happened this week?

MOHAMED EL-ERIAN, CEO, PIMCO: They should put it in the following context. The equity market has come a long way, as you mentioned. Not on an absolute basis, but relative to the Europe and the emerging world.

And it has done so based on two things, one, this notion that the Federal Reserve is our best friend and will continue to support the markets, and second, on the notion that no matter how sluggish the economic conditions are, companies can continue to be very profitable.

Last week we got warning signs on both. On the first one the Fed continues to signal that it will taper its support. It will take its foot off the accelerator, not just because the economy is healing, but also because it's worried about the consequences, the collateral damage, of its experimental policy.

And we got two very important signals out of Cisco and Walmart, as you mentioned, that the corporate sector is starting to have a more difficult time. So people should be more careful because there's also a lot of uncertainty coming up in September.

ROMANS: So being more careful of September, the Septaper on the calendar.

So is there a big reset in expectations happening now as we get closer, especially jobless claims the lowest since 2007. That shows health in the labor market. That's what Ben Bernanke had said, when things look good in the labor market again, we'll be able to stop supporting the economy so much.

MAGGIE LAKE, CNN CORRESPONDENT: And that should be a good thing. We should feel good about the fact we don't need to be on life support anymore. I think that people are a little bit concerned about how things are going to go with the Fed because we're in unprecedented territory.

We have never seen this. But I asked the same thing. People are sitting on very big gains, very big profit gains.

If you're a money manager, you want to lock in those gains. You don't want to turn around to a client and say, oh, right, actually, we lost money. And that's what I heard from a trader this morning. People are booking profits, closing out these long bullish positions they've had.

They are not initiating new selling. This is not a wave of new sellers coming into the market. It's people being a little cautious and saying I'm going to book that so I still look good at the end of the year.

ROMANS: I have been hearing some bulls say they still have targets for the S&P 500 well above here, but they were looking for some kind of a pause or a pullback, Mohamed, because they said you can't go up straight all the time. Markets go up and markets go down. That is the truth here.

We talk about the taper though. It means a return to the fundamentals. Stocks, bonds, the market will react based on the fundamentals of the U.S. economy, not based on all this money the Fed is pumping into things.

What do those fundamentals look like to you?

EL-ERIAN: They look like the economy continues to heal, but it's nowhere near escape velocity. It's not validating the prices that are already in the market.

And that's why there's a sense, as you said, that if we get a correction, if prices become less artificial, that will attract the considerable amount of cash that's still on the sidelines. That's why people are saying you need a correction in order to continue the rally, as strange as that may sound.

(CROSSTALK)

ROMANS: Do you need what we need -- we'll see more of a pullback in stocks here?

EL-ERIAN: I think that's certainly a risk. Remember what's been pushed back to September. It's not just whether the Fed will taper. We have the debate about the debt limit. We have the debate about whether the government will continue to function.

In Europe we have a very important German election. In Japan we have real concern as to whether they're going to deliver on what they called their third arrow. So there's a lot of uncertainty that the market has pushed back into September-October, and people are saying, you know what? With all the gains I have made so far, let me book some profits here.

ROMANS: What is your assumption on interest rates? Because the irony there is if it gets really crazy in Washington, then the world starts rushing into treasuries again for a safe haven. So it's kind of -- I don't know, what's your anticipation for what all that would mean for interest rates here?

EL-ERIAN: So interest rates are responding to three different things. One is less Fed support, and that's why interest rates have gone up over the recent few weeks.

Second, there's an outflow of money from bond funds because people are worried that bonds may not be as safe.

And then, thirdly, we've had some economic healing. We believe that at this level of interest rates, the market is attractive again as long as you remain in shorter maturities.

So up to seven-year treasuries, in high quality municipal bonds, and in high quality corporate bonds, but be careful of the long end and be careful of low quality issuance.

ROMANS: All right. You heard it here directly from Mohamed el-Erian. Thank you so much.

Maggie Lake, nice to see you.

Thank you, Mohamed.

Coming up, a win for Paula Deen in the courtroom, but is she winning back her big-time sponsors? Find out next.

(COMMERCIAL BREAK)

ROMANS: Qualifying for a loan is tough no matter who you are, but a new study suggests it's tougher if you're black. Researchers study applicants to prosper.com who were encouraged to submit pictures. They found black borrowers were 25 percent to 35 percent less likely to get funding than white borrowers with similar credit.

And for other stories that matter to YOUR MONEY this morning, give me 60 seconds on the clock. It's "Money Time."

(BEGIN VIDEO CLIP)

ROMANS (voice-over): Move over America; China needs more fuel. China set to become the biggest importer of oil later this year as the U.S. produces more of its own.

Europe's long recession is officially over. The economy grew by 0.3 percent in the second quarter. That's the first growth since 2011.

Paula Deen might be winning in court but she's not winning her empire back. After admitting in court to using a racial slur, Deen lost her contracts with The Food Network, big name sponsors, and her cookbook publisher. Now that a judge has tossed out racial bias claims in a pending lawsuit, sponsors are still steering clear.

Only 74 percent of American women are in the workforce. That's barely budged in the past 25 years, and trails behind other developed countries.

Will you still like the way you look without George Zimmer. Men's Warehouse released its first commercial without the "I guarantee it" guy. The company dropped Zimmer this summer in a very public feud.

Another ad from JCPenney has moms up in arms. Parents say it promotes bullying because it features a kid eating alone, thanks to the clothes he's wearing.

(END VIDEO CLIP)

ROMANS: All right. This is why I call them my little cost centers. Every year the U.S. Department of Agriculture breaks out what it costs to raise a child from birth to age 18.

In 2012 that total cost, ready for it -- $2,410.80. That includes food, health care, clothing, transportation, even toys. What it doesn't include: college. Number is up about 3 percent from 2011.

At the same time workers' wages aren't keeping up. And many of the jobs lost in the recession have been replaced by lower paying jobs. I'm going to look at that factor and how the American dream is becoming a very different American reality for many of us. That's going to be later today on a brand new YOUR MONEY at 2:00 pm Eastern.

And it's the new Netflix hit everyone is raving about, "Orange Is the New Black." Have you seen it yet? Have you? Have you heard people talking about it? Two of the stars talk about being on that hit show. It's all about women in prison. That's next on the CNN NEWSROOM.