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YOUR MONEY

Russian Bear versus Five-Year Bull; Home of the Future; The Surveillance Economy; The Business of Being Matthew McConaughey; Banks Just Say No Pot

Aired March 8, 2014 - 14:00   ET

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


CHRISTINE ROMANS, CNN ANCHOR: Elephants, bulls and bears, oh my.

I'm Christine Romans. This is YOUR MONEY.

The elephant in the room is this raging bull market. It is a Russian bear. Tomorrow marks five years since stocks hit financial crisis lows. A quick check of your 401(k) lets you know where we've come since there.

But can the record run continue? Potentially standing in the way, a slow jobs recovery, Europe on the verge of a trade war, America bowing to impose costs on Russia for its intervention in Ukraine, and yet another week, another record for the S&P. Investors clearly saying they don't believe Russian President Vladimir Putin will retaliate against U.S. sanctions.

Richard Quest is the host of "QUEST NEWS BUSINESS" on CNN International, Harvard University Professor Ken Rogoff is the world's foremost financial crisis expert and the former chief economist for the International Monetary Fund and a friend of the show.

Guys, Russia's stock market, it took a big hit this week so did its currency. A tough start to the week for the ruble.

Richard, investors, the Obama basically betting Putin got a taste of what's to come. Right? If he fights U.S. sanctions, international sanctions. Maybe the market will accomplish what diplomacy can' here. What do you think?

RICHARD QUEST, HOST, CNN'S QUEST MEANS BUSINESS: I don't think the market as such. I think the external pressure will give pause for thought, but here's the point. The president -- President Putin knew exactly what he was doing, and he knew exactly what the reaction would be. The best form of pressure will come, yes, with the market. Yes, with threats to the Russian economy, but when Russian oligarchs and -- and Putin's cronies, when they say start saying to him --

ROMANS: Yes.

QUEST: -- now you're causing us trouble, now were-- we were worried.

ROMANS: I mean, it's remarkable. There are a lot of people were saying that first day of this week when the stock market there got hit in Russia, how could Putin keep going forward when he's hurting maybe himself.

Especially he owns a lot of the problem.

ROMANS: Right. Right. I mean, he is worth less today, I -- I would bet than he was last week.

Ken, let me ask you this. So American investors don't seem to be concerned about Russia. You know, American investors don't seem to be worried about kind of slow jobs growth. I mean, jobs are growing but not really gangbusters. Record high for stocks. What's going so right here?

KEN ROGOFF, PROFESSOR, HARVARD UNIVERSITY: Well, I think that first of all on Russia, investors just think that they'll come to their senses, that they'll work something out.

ROMANS: That Putin can't be that --

(CROSSTALK)

ROGOFF: Well, he can be, but they'll work out some sort of deal and it won't destabilize things. I mean it could. It could. I think as far as growth, there's been this weather, and frankly the latest job numbers were a little better than I guessed. I would --

ROMANS: So if we hadn't been in the polar vortex, if the polar vortex hadn't settled on top of us, maybe we would have had a really good jobs number?

ROGOFF: Maybe. We don't know. We won't know until the spring. And the last few months were not great but this I think was better than people expected, but the stock market was going up before that. I think Europe's been stronger. The European Central Bank had a higher prediction for their growth than we thought.

So there's been some stability in the global economy and the weather is bad, but I don't think it's undermining.

ROMANS: Europe is just coming out of recession. I want --

QUEST: This is what is happening. We are talking on the edge of the cliff, and the problem with the Russian crisis and the Ukraine crisis is that this is exactly the sort of incident, crisis. You have an accident. Somebody fires something they shouldn't have.

ROMANS: That's right.

QUEST: And before long --

ROMANS: The margin is too --

QUEST: You fall over. And that's what's really worrying about this.

ROMANS: Let's talk about the --

ROGOFF: Absolutely. Absolutely. Because it's not like we have a lot of padding.

ROMANS: Right. Right.

ROGOFF: If something goes wrong. And we're not prepared.

ROMANS: Let's talk about the energy side of this equation because American officials on a call this week were asked very clearly about, what about the energy implications if Russia decides to either withhold natural gas or oil supplies?

You know Russia is a huge supplier to the world for energy. Talk to me a little bit about how Russia is the gateway to energy to Europe and what could -- not a lot of margin for error on that either.

QUEST: It's really very simple. You have Russia. You have Ukraine. We'll look at map. Makes it clear. You have Russia, you have Western Europe, Eastern Europe, and you have Ukraine and the lines go through Ukraine, and Russia can turn off -- Gazprom can turn off the caps that will not only hit Ukraine because it gets -- transpayments, but also Western Europe, and some countries, Finland, Belarus, Germany, all the way down --

ROMANS: Right.

QUEST: They can get up to 60 percent, 70 percent, 80 percent of their gas from Russia. So yes, there is a -- but the other side, of course, is Russia switches off the taps.

ROMANS: And they don't get paid.

QUEST: They don't get money and Russia's economy needs -- is not in a particular healthy shape at moment.

ROGOFF: No, they're not, either. They depend tremendously on this money.

ROMANS: Right. Right.

ROGOFF: So it's sort of mutual deterrence here.

ROMANS: And senior administration officials this week said -- they called the economy fragile in Russia. They said Russia has already felt the cost of its actions. The U.S. is determined to impose more costs and an official making it very clear that they've worked 10 years with the Europeans to try to figure how to diversify their energy flows and will continue to do so. Does that mean our energy?

ROGOFF: Well, eventually our energy, but they are very vulnerable in Europe and that makes some reluctant to be quite as aggressive on this as we are. But, you know, as Richard has said, they get all their money from this, and so the Russians aren't in a position just to stop their bank roll going either.

I think this isn't just about Crimea, it's not just about Ukraine, but where will we draw a line? Where will there be a bright red line? And I think we could lose from peace dividend over this in the long run.

ROMANS: And that's why this is just the beginning of the story.

QUEST: And I -- I've got a dirty little secret to tell you. The United States doesn't have natural gas that you can export to Europe.

ROMANS: Oh, but, Richard, that's down the line. Down the line.

ROGOFF: Down the line.

(LAUGHTER)

ROMANS: Down the line.

Richard Quest, thank you so much. Nice to see you, Ken, as well.

For more stories that matter to YOUR MONEY give me 60 seconds on the clock. It's "Money Time."

(BEGIN VIDEOTAPE)

ROMANS: Hold the clock. Chipotle Mexican Grill says global warming may raise ingredient prices and that could force the chain to cut back on salsa and guacamole.

The great American gun grab rolls on. Smith & Wesson says handgun sales jumped 30 percent last quarter, but the FBI said total gun sales have fallen from their peak last year.

New Target for hackers. Your bank's ATM. 95 percent of ATMs in the U.S. run Windows XP and Microsoft is killing tech support for that system. April 8th. If banks don't update it soon, ATMs could become a hot spot for cyber criminals.

Siri wants a ride. Apple is connecting six major automakers with a new iPhone platform. It got a text screen and buttons on the steering wheel that activate Siri, Apple's voice command system, plus texts, Apple maps and music streaming.

SAT gets a re-do, back to the 1600 point scale. No calculator on parts of the math exam, and free prep from the con academy. The essay section, that's now optional.

(END VIDEOTAPE)

ROMANS: There are a lot of good, no, great, things in these SAT test changes but those free prep test services from the Con Academy, that is a nod to this fact, and it is a fact. The richer the family, the better a student does on the SAT. This chart of 2013 SAT scores compared with family incomes. Yet another powerful example that this is one America, but two economies.

It's the house of the future and the future is now. Step inside the home that protects your kids, cooks your breakfast and makes sure you are not stuck in traffic.

Your exclusive look at a home that would make George Jetson jealous. Next.

(COMMERCIAL BREAK)

ROMANS: The next big thing in the digital world, if you blink you may miss it. But don't worry, the moment you step out of bed, the house of the future is watching you and making sure you don't miss a thing.

Our own Laurie Segall got an exclusive look inside.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Welcome to the home of the future.

LAURIE SEGALL, CNN MONEY TECH CORRESPONDENT (voice-over): From the moment you step out of bed. In this house everything is connected by smartphone. It's owned by tech entrepreneur Matt Mullenweg, an investor in SmartThings, the company responsible for all the technology.

(On camera): Your home is smart. What can it do? How does it know you're awake?

ALEX HAWKINSON, CEO AND FOUNDER, SMARTTHINGS: Yes. So you can -- it can sense it based on motion or you can of course tell it good morning by hitting the button on the job I'm up and then you can see the house senses it, the lights are coming on in the bedroom.

SEGALL (voice-over): Walk into the kitchen.

(On camera): It started brewing the coffee for you. And the coffee is actually brewing behind me.

HAWKINSON: The coffee is actually brewing now.

SEGALL (voice-over): How is your commute? Your kitchen lamp will tell you. Green means no traffic.

HAWKINSON: You put it near sort of commute pattern and it checks the traffic and then it will tell this lamp to change colors based on the timing of your commute.

SEGALL: Your home can even tell you the forecast. Just open the door.

UNIDENTIFIED FEMALE: The current temperature is 53 degrees.

SEGALL: Smartthings make use of a hub that's kind of like a router. Once you've installed it, it can download different apps on the Smartthings platform to control different devices.

HAWKINSON: Your home becomes programmable in the same way you can put apps on your phone, you can install an app of what type of coffee do you want to have brewed in the morning.

SEGALL: Detect is also being used to keep your kids safe.

UNIDENTIFIED FEMALE: The chemical cabinet has been opened.

SEGALL: And here's a cool one. Your connected home plays your music of choice when you step inside.

It's part of a larger trend of technology moving beyond your smartphone.

(On camera): It's almost like when you look at the app you're texting with your home.

HAWKINSON: Yes, we wanted to make it very intuitive. So to make it easy, people are used to texting with each other and we give your home a voice. It's called hello home and you can say good morning and you can say good night and have it react around you.

SEGALL (voice-over): Good night, home.

(END VIDEOTAPE)

SEGALL: And Christine, it seems so futuristic. But as you can see this technology is actually in some folks' homes. Now in the next years we might see more of it. It's just becoming a little bit more accessible -- Christine.

ROMANS: All right. Very cool. Thanks, Laurie.

It might seem cool for your house to know when you're home, what music you like, your route to work and the traffic on that route, but is it just more information we're giving away? Another crack in the wall of privacy?

I want to bring in Jaron Lanier, he's a computer science pioneer known as the father of virtual reality. He's also the author of "Who Owns the Future."

And, Jaron, what's interesting about you, I'm about ready to give you -- all of your dark secrets away, he started college at age 14. In your 20s you kept goats, he worked alongside midwives, as thank you, one of the parents gave him a car. You drove it right to Silicon Valley.

You're also a musician. You once opened for Bob Dylan. And you know where I learned all this? On the Internet where we know everything, where all of our privacy is gone.

Let's talk about our privacy online.

JARON LANIER, AUTHOR, "WHO OWNS THE FUTURE": OK. OK.

ROMANS: Because this is what we really want to talk to you about.

LANIER: Yes.

ROMANS: You say -- you said last year that last year will be remembered as a tragic year in our digital lives. We made big strides in, you know, 3D printing, wearable devices, but we also learned we're being spied on from all angles. You say we've been tricked and, quote, "The only way to persuade people to voluntarily accept the loss of freedom is by making it look like a great bargain at first."

Have we paid too high a price for all of this stuff?

LANIER: Well, so far we have, but that doesn't mean we can't do better. I mean, the deal we've made is, in exchange for convenience, we'll give up all our information, and we'll get that convenience for free. And the problem with that is it's not real capitalism. It's not a real market, because the other people who are taking our data, the only way they can make money with it, since we're not paying them is by letting third parties pay to manipulate us. So we end up getting certain loan offers, certain bargain offers in these things and --

ROMANS: They say they're tailoring it for us.

(CROSSTALK)

ROMANS: That makes our lives easy and more efficient.

LANIER: Yes, yes, but the thing is that over time the companies -- it's not just companies. It's intelligence agencies. It's banks. Whoever has the biggest computer to take in all this free data.

ROMANS: Right.

LANIER: Can calculate slight advantages for themselves so they take less risk, others take more risks, and that compounds like compound interest, so they gradually concentrate wealth like crazy and gradually opportunity fades away. Like convenience is not the same as wealth.

ROMANS: Right.

LANIER: Convenience is not the same thing as opportunity. It's great, but you can't retire on it. And -- yes.

ROMANS: Do you think people know that they are this commodity? That American consumers, or Americans in general, have become this commodity that other people are trying to sell to us, but also to try to use us as data points so they can sell to others? And government, too. Government using us as a commodity. Watching us to see who -- you know what I mean? Like we are just the product.

LANIER: Yes. Well, I've been -- we're talking about it so far from the point of view of an ordinary person who doesn't realize that when they get the benefit of free services, they're also paying the price of reduced lifetime opportunity. They don't get that there's a trade- off. They don't get that it comes around indirectly, but that when you -- when you choose free stuff, you're actually lessening your own job prospects. Even though it comes around through a whole cycle in the economy.

ROMANS: So many look at the security issues from the NSA perspective, and that's one story they talk about, and then they seem -- they don't seem to think that it's connected with the other story, which is look at this great new gadget, look at this new phone, look at this new technology, look at this -- but these are -- this is the same trend but just in different applications.

LANIER: No, there's nothing wrong with the gadgets. I love gadgets. I make gadgets. You know, the problem is where the lotus of control is. So if you give someone else the lotus of control --

ROMANS: And we have.

LANIER: And we have. Obviously it's going to create a concentration of wealth and power.

ROMANS: Can we change it? Can we change it?

LANIER: Totally. And there are a lot of ideas for how to. I don't want us to jump into some idea but there's one I'm exploring that might work which is incredibly simple. Just pay people for their data.

ROMANS: Right.

LANIER: You know what I mean? It's so simple. And sometimes it strikes people as screwed up because if you're getting paid that means you'll also pay. It means you're part of an economy instead of an informal economy of just reputation and barter.

ROMANS: Right. Right.

LANIER: But if you pay and get paid then you get economic expansion and I think more people do well.

ROMANS: So nice to meet you. I could talk to you 25 more minutes.

Jaron Lanier, nice -- thanks for coming up. Appreciate it.

LANIER: Thank you so much for having me on.

ROMANS: What a fascinating perspective.

All right, coming up, a rapidly growing market expected to hit $2.3 billion in sales this year. Quadruple by 2020. Why don't banks want anything to do with it? Next.

(COMMERCIAL BREAK)

ROMANS: The legal marijuana industry has a cash problem. Too much money and nowhere to put it. Sales are surging but banks don't want to touch this business.

(BEGIN VIDEOTAPE)

ROMANS: Seeds, soil, grow lights, blowers. The raw materials to grow pot, but to grow the industry, it takes the oxygen provided by bank accounts, loan, lines of credit. A problem retail marijuana store owners are trying to work around. LINDA ANDREWS, OWNER, LODO WELLNESS CENTER: You know, it would be nice if the banks would work with us. We're figuring out some systems. We've got safes. We don't keep it here.

ROMANS: So far the banks just say no. From coast to coast, bank and credit union trade groups advising their member banks to steer clear of the marijuana business. The president of the Colorado Bankers Association says there's only one remedy.

DON CHILDEARS, PRESIDENT, COLORADO BANKERS ASSOCIATION: It literally is going to take an act of Congress to address this.

ROMANS: The Obama administration recently gave the banks a green light for how to do business with legal marijuana companies. But the banks say, that guidance doesn't go far enough.

CHILDEARS: This light is redder than ever. It actually moved us backwards in terms of banks being able to accommodate the marijuana businesses.

ROMANS: Here's why, first, recreational pot is legal in Colorado and Washington. Medical marijuana in 20 states. And Washington, D.C. But under federal law, marijuana is no different than hardcore illegal drugs like heroin and ecstasy. Second, those new rules from the Obama administration say any bank doing business with a marijuana dispensary must prove the pot never makes it into the hands of children, is never trafficked to another state, is not smoked on federal property, and has absolutely no ties to the drug cartels, among other things.

CHILDEARS: While we don't really care to be doing the government's work for them, the bottom line is, we can't comply with that. There are simply -- there's simply no way that a bank can assert that marijuana isn't going to be used in certain fashion.

ROMANS: Powerful tool of capitalism unavailable to the legal pot industry until the federal law changes.

(On camera): What's the legal risk for a bank allowing a pot dispensary to open up a checking account, get a line of credit, you know, a loan?

PAUL CALLAN, CNN LEGAL ANALYST: Well, the risk is that if they're a federal bank, they could lose their charter. They could also be prosecuted under a variety of federal regulations that have to do with money laundering. They have to follow these regulations very carefully, and there's a great risk with an all-cash business like a marijuana business.

ROMANS (voice-over): All cash, and nowhere to put it, an increasing safety risk and quandary even the attorney general has noted.

ERIC HOLDER, ATTORNEY GENERAL: Huge amounts of cash, substantial amounts of cash, just kind of lying around with no place for it to be appropriately deposited. That's something that would worry me just from a law enforcement perspective.

ROMANS: Thousands of stores. Millions of plants. More than $2 billion in sales, but not a bank account to put it in.

(END VIDEOTAPE)

ROMANS: So who's going to take the risk? Smaller local banks? Credit unions maybe? The National Cannabis Industry Association tells us a few banks in Colorado are exploring the idea. Insiders say, now, some dispensaries are getting bank accounts, but they're not telling anyone where, but most banks, they just say, no.

The mystery will soon be solved on HBO's "True Detective" but the real mystery is how its star went from dazed and confused to romantic comedy king, to best actor. The business of being Matthew McConaughey, next.

(COMMERCIAL BREAK)

ROMANS: Millions will tune in for tomorrow's finale of "True Detective" on HBO. Its star, Matthew McConaughey, received a lot of attention for his role as Detective Rustin Cole. He also just won his first Oscar. But he wasn't always known for great acting and edgy role. Here's how he turned a rom-com career into a best actor brand.

(BEGIN VIDEOTAPE)

ROMANS: Matthew McConaughey has gone through a renaissance of sorts. Call it a McConnaissance. Getting more attention and wearing more clothes. McConaughey 's breakout role was in the cold classic "Dazed and Confused."

MATTHEW MCCONAUGHEY, ACTOR: That's what I love about these high school girls, man. I get older, they stay the same age.

ROMANS: He acted in a wide range of movies in the '90s.

MCCONAUGHEY: Welcome to my world.

ROMANS: And hit it big with the legal drama "A Time to Kill."

MCCONAUGHEY: A great man always come out, you know.

ROMANS: In the 2000s, he became the king of romantic comedy with box office hits like "How to Lose a Guy in Ten Days" and "Failure to Launch."

MCCONAUGHEY: Is that a problem?

ROMANS: Now some say he might be the best actor around showing off his skills in edgy, challenging roles in films like "Magic Mike."

MCCONAUGHEY: But I think I see a lot of law breakers up in this house.

ROMANS: And "Wolf of Wall Street." And with "Dallas Buyers Club" McConaughey won his first Oscar.

MCCONAUGHEY: Ain't nothing out there that can kill Ron Woodruff in 30 days.

ROMANS: Altogether his movies have brought in more than $2 billion worldwide and he's worth an estimated 75 million bucks. Now he's taking on TV, drawing a lot of attention for his role in HBO's "True Detective."

MCCONAUGHEY: I ain't stupid.

ROMANS: McConaughey is also taking his endorsements to the left level starring in this Dolce and Gabbana ad directed by Martin Scorcese and pushing his own line of clothes named after his motto.

MCCONAUGHEY: You just got to keep living, man. L-I-V-I-N.

ROMANS: Part of those clothing sales go to his Just Keep Living Foundation, a nonprofit pushing high schoolers to lead healthy, active lives. He's also an advocate for animals, rescuing dozens of stranded pets after Hurricane Katrina.

Later this year the leading man will star in the Christopher Nolan film "Interstellar". He says his career is just heating up.

MCCONAUGHEY: I'm still on the approach.

ROMANS: The business of being Matthew McConaughey is --

MCCONAUGHEY: All right, all right, all right.

(END VIDEOTAPE)

ROMANS: Tomorrow night's episode of "True Detective" will be McConaughey's last. He says if there is a season two, he won't be in it.

Thanks for spending your Saturday smart with us on YOUR MONEY. Have a great weekend. "CNN NEWSROOM" starts right now.