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YOUR MONEY

Federal Reserve Announces Continued Low Interest Rates; Some Businesses Optimistic about U.S. Economy; Cristiano Ronaldo's Wealth Examined

Aired June 21, 2014 - 14:30   ET

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


CHRISTINE ROMANS, CNN HOST: Titans of business and the economy defending their realms. I'm Christine Romans. This is CNN MONEY. From the nation's capital to Wall Street to Cannes, France, it was the week of the titans, but titans sometimes have a lot to ask for. Marissa Mayer bombing in an advertising conference in Cannes, France, some of the Madison Avenue crowd taking to Twitter to criticize the Yahoo! CEO's hard sell, yes, at its advertising conference.

Meantime, Mayer, poster child for women in tech, it turns out she has an army of "bro-grammers." The company's internal diversity report finds 37 percent of Yahoo!'s workforce is female. Only 15 percent have tech Johns, and just 23 percent are in leadership roles.

Far from France, GM's CEO Mary Barra grilled again on Capitol Hill for her company's deadly mistake. A skeptical House committee is not convinced General Motors has done enough.

(BEGIN VIDEO CLIP)

REP. MICHAEL BURGESS, (R) TEXAS: When I go through this, it looks like a lot more than 15 people should have been terminated.

REP. JAN SCHAKOWSKY, (D) ILLINOIS: It's not clear to me that any senior level manager has been held responsible for the GM corporate culture that allowed the ignition switch defect to go unaddressed for years.

(END VIDEO CLIP)

ROMANS: Mary Barra wants to focus on the new GM, but lawmakers not yet ready to turn the page. That as Janet Yellen turns the page on the economy. Wall Street cheering the Fed chiefs promise of low interest rates and her upbeat tone on the job market. But as the Fed winds down it's bond buying, we are in uncharted waters, and no one, no one really knows what the taper looks like on the other side.

Three titans all playing defense this week, let's talk about it. Cristina Alesci is "CNN Money's" senior business correspondent. Paul La Monica is assisting managing editor of "CNN MONEY." Christina, let's start with you. First of all, welcome to the program.

CRISTINA ALESCI, CNN MONEY SENIOR BUSINESS CORRESPONDENT: Thank you. I'm happy to be here. ROMANS: Let's start with Marissa Mayer. She's been panned for a

festival for advertisers. Usually these presentations are fun, they're lighthearted, there's a certain tone, a tone she did not take. Check out this audience tweet. "Yahoo! CEO again, am I a sales pitch?" And this one, "Marissa Mayer doing a hard sell on Yahoo!. Know your audience." Ouch. Did she just not understand her audience, or is this is a Marissa Mayer who is not living up to the task?

ALESCI: Clearly, given the results, she's not living up to the task, right. And a lot of investigators on Wall Street are very focused on those results, and time is really ticking on her to deliver those results in the face of Alibaba going public. Remember that Yahoo! owns a large stake in Alibaba. Now, as for her presentation, remember, let's put this into context. She has been criticized for not having a great reputation with Madison Avenue for a long time.

ROMANS: Right.

ALESCI: And earlier this year, she fired the top executive in charge of that relationship, assuming it for herself. And then this presentation at Cannes, it just seems to indicate that she's going to have trouble with Madison Avenue. They're not giving her a very easy right there.

ROMANS: Results, you're absolutely right, the results of the most important thing. A presentation is one thing, but it's easy to be criticized when you're delivering results. Yahoo! is trying to capture cool. That's what they're really trying to do. But you look behind the flashy sort of fashion conscious female CEO, she's had a lot of attention for that. It is a bunch of dudes running the place. It's a bunch of "bro-grammers." Does that hurt what she's trying to do?

ALESCI: From her standpoint, she's got to boost advertising revenue, so she's focused on that. As far as the programmers go, she's got to change that. The problem as you speak to industry sources, as you know, is that there is a limited supply of female programmers, right? Not much has been said about that at all.

PAUL LA MONICA, MANAGING EDITOR, CNN MONEY: To be fair, this is an industry-wide problem. Google has also said their corporate culture is not really one where they are a lot of women. They are even fewer women in leadership roles. At least with Yahoo! you do have the CEO of the company, you look at Facebook, their CEO, Cheryl Sandburg. Google is the company that really is the one that is struggling with that kind of lack of diversity from a gender perspective.

ROMANS: Let's talk about another woman running a big company, Mary Barra, on Capitol Hill, she runs GM. Lawmakers don't seem satisfied with her internal investigation. Company sales, though, are surging. Its stock is up since the recall. Let's talk about Mary Barra for a minute. Has Mary Barra done enough to help GM drive on here?

LA MONICA: I think she's done enough when you look at Wall Street and the average consumer, even though there is all this outrage about the recall. I mean, let's be honest, I think the congressional hearings, it's a bit of a dog and pony show.

ROMANS: No? Here, in Washington?

LA MONICA: I know in Washington, the circus in the capital, big surprise there. I think Barra's been acting tougher in her public presentations lately. She is taking accountability. The problem, though, is because she was a GM insider, she was there when all the problems are going on, it's going to be very difficult for her to escape the criticism. But as you point out, it hasn't really impacted sales yet. It hasn't really impacted the value, the resell value of the limited cars recalled.

ALESCI: And this could change the game and actually force carmakers to really get serious about recalls.

ROMANS: Last titan, Paul, and the titan is not you. The titan is Janet Yellen, the Federal Reserve chairman. Wall Street loved her messages. Interests rates will stay low, the job market is healing. There were no surprises from her. And boring is better, I guess, when we're talking about the taper.

LA MONICA: Without question I think Yellen had a little bit of the old maestro in her. I mean, a lot of things she said were Greenspan- esque as you really didn't have a clue what she was talking about.

ROMANS: You had to listen to it three times.

LA MONICA: I think that's great. And when you look at the fact that she learned from her key mistake at her press conference, which was, someone asked hear what a considerable period of time for when you might see rate hikes after the taper ends, and she actually put a number on it by saying it could be six months, and Wall Street freaked out. So now everyone tried to goad here into doing that again. And she said a couple times there's no mechanical formula, there's no mechanical formula.

ROMANS: Madam Chairwoman, do not give deliverables. It's nice to see both of you, Paul and Cristina.

LA MONICA: Thank you.

ROMANS: Coming up, is the economy better than you think? The Fed says the job is improving. The S&P 500 at a record high. And FedEx is shipping stuff like crazy. These are all good signs for the economy. OK, so why aren't you feeling it? That's next.

(COMMERCIAL BREAK)

ROMANS: The Federal Reserve says economic growth has rebounded in recent months. That's not to say there aren't a few storm clouds, of course. The situation in Iraq has rattled markets and pushed oil prices to nine-month highs. Inflation is creeping higher. May consumer prices rose at their fastest pace in more than a year. And the housing market could be slowing. Construction on new homes slid 6.5 percent last month. So maybe you're telling me you're not feeling an economic recovery. But when I talk to business leaders, they tell me the economy is better than you think. Just ask Commerce Secretary Penny Pritzker. I sat down with her this week. She says some America's biggest political challenges are also some of our biggest economic opportunities.

(BEGIN VIDEOTAPE)

PENNY PRITZKER, COMMERCE SECRETARY: Immigration to me, it's a moral imperative and economic opportunity, and something that we need to get done. And if you look at the economic opportunity there, estimates are $1.4 trillion positive for our economy, and bring 11 million, you know, individuals out of the shadows into our economy. Think of the impact on housing. Think of the impact on consumer confidence.

ROMANS: Do you think this economy might be a little stronger than we think? Could things be strong than our post crisis psychology will let us admit?

PRITZKER: I think business conditions are pretty good. And frankly, if you look at the situation where we've got -- it's a wonderful time to invest in the United States. Great rule of law, intellectual property protection, stable financial markets, access to capital, an extraordinary workforce, low cost and abundant energy. So we have a lot going for us. But we do have to do some things. We do have to invest in infrastructure. We are at some point -- we're on a trajectory to have 100 million travelers, foreign travelers, to the United States, which also creates good jobs in this country. But we need to have airports that can handle that. We need to have roads that can handle the growth in goods and services.

ROMANS: As a businesswoman, as someone who really understands how business works, is it a good idea to have the government mandate a higher wage? I know the official position of the administration is $10.10. Some workers are asking for $15. From the business owner perspective, is it a good idea?

PRITZKER: You know what's been interesting, I have not heard from any business leader about this issue. So I think there's a recognition that where minimum wage is today is insufficient and that something needs to be done. And I think if -- if you thought about, if you go to $10.10, that's 16.5 million people would benefit from that, 900,000 out of poverty. That's got to be good for our economy.

(END VIDEOTAPE)

ROMANS: All right, let's talk about this. Ken Rogoff is a Harvard University professor and the former chief economist for the International Monetary Fund. And our friend Greg Valliere is the chief political strategist for Potomac Research Group. Ken, the commerce secretary says the economy is better than we think. The Fed is predicting six percent unemployment by the end of the year. Why aren't people feeling it yet?

KENNETH ROGOFF, HARVARD ECONOMIST: Well, because it's been for so long we're not rebounding where we hoped to be. So there's still higher than we're used to unemployment, wages haven't grown that fast. A lot of people are in part-time work, et cetera. ROMANS: It's recovery with a very big asterisk.

ROGOFF: Absolutely.

ROMANS: And people feel that asterisk and know it's not a typical recovery.

Greg, Secretary Pritzker called immigration reform, you heard her say it, a moral imperative, and economic opportunity. The House Majority Leader Eric Cantor, he lost his primary bid in a shocking defeat largely because he was painted as pro-amnesty for illegal immigrants. So I ask you, this optimism I'm hearing from the administration on immigration reform, is it warranted?

GREG VALLIERE, CHIEF POLITICAL STRATEGIST, POTOMAC RESEARCH GROUP: No, I think it's not warranted at all, Christine. Here's the bottom line of what happened in my opinion after Cantor. The Republicans are not sure they have totally suppressed the Tea Party insurrection. We have another big race next week in Mississippi. But until they're sure of it they have suppressed the Tea Party, they're not going to do any compromising with Democrats or the White House because they feel this would portray them as weak among the base.

ROMANS: Economists yesterday called Washington a content-free zone for the next two years. Do you agree? Are we risking a content-free zone? Or is this president, Greg, able to add to his economic agenda?

VALLIERE: I don't think it's content-free because there are some darn big issues that are coming up. There's the highway trust fund. There's a lot of budget issues, there's tax extenders, and there's a really big one at the end of the March. That's the debt ceiling that has to be raised. And already people are talking in a very confrontation way about that.

ROMANS: I refuse to listen to you say the words "debt ceiling." I can't even go there yet. I'm going to pretend I didn't hear that.

VALLIERE: I'm sorry.

ROMANS: Ken, let me ask you about Janet Yellen. She said inflation is evolving in line with the Fed's expectations. But if you're look at the grocery store where you're buying your hamburger meat for this weekend or the gas tank, what you're paying there, these things are rising. A little inflation good for the Fed's point of view but not so good for people whose wages aren't rising.

ROGOFF: Absolutely wages are still soft. I think Janet Yellen is trying to project that we're going to keep interest rates low. The Fed is saying things are going to be much better. But they have been wrong again and again and again. They've been too optimistic. And I think they want to be very careful, and she's trying to project that, in one way saying inflation, we can live with that for now. We're not going to raise interest rates just because inflation is picking up a bit.

ROMANS: Guys, let me ask you about this week, two senators, a Republican and a Democrat proposed raising the federal gas tax. That hasn't changed since 1993. You heard the secretary of commercial Pritzker talk about infrastructure. The gas tax funds the highways. Does this go anywhere?

VALLIERE: All you need to know about this, Christine, is that the two senators who proposed this are not up for reelection until 2018. So they don't have to worry about getting reelected this fall. People who do worry about it are almost entirely opposed to any kind of new tax. And what we've seen in Iraq and gasoline prices going even higher I think makes a tax increase virtually impossible.

ROMANS: Ken Rogoff, Greg Valiere, nice to see both of you. Have a great weekend, guys. Thank you.

ROGOFF: Thank you.

ROMANS: Coming up, the crisis in Iraq is going to cost you at the gas tank, just in time, of course, for your summer drive, your summer vacation. So I'm going to tell you how high prices might go. That's right after the break.

(COMMERCIAL BREAK)

ROMANS: No question when there is turmoil in the Middle East it almost always plays in energy prices, and that is happening right now. Let's take a look at what's happening in Iraq. You can see already this year a major oil pipeline has been shut down. You can see the advance here of ISIS within some 37, 35 miles of Baghdad. You can see some of these oil fields have been taken over by the Kurds now. Some have been taken over by ISIS. There is a major refinery that has been completely encircled by ISIS. And you've got some of the major international oil companies taking some of their personnel out of the country.

Iraqi officials tell us the southern oil-rich and exporting part of the country is safe for now. But this is a major oil producer, a major oil producer the world thought would be producing more oil in the next few years, so this causes real concern with energy prices. And here's what it looks like. These are oil prices so far this year, actually from this spring, just this month you've got oil prices up four percent. When oil prices rise, gas prices rise. Last year in June, we were paying about $3.60 a gallon. May, this spring, already higher than that, $3.64. Today, about $3.68. That is the most expensive June for gas in six years. And if the unrest keeps up, you're talking about $3.86 potentially for the price of gasoline that you're paying.

Now, the world needs crude oil right now, no question, but alternative sources of energy may be the future. In London, engineers are changing the energy landscape. The region's windy weather is helping the city farm a massive source of energy. CNN's Rachel Crane takes us there.

(BEGIN VIDEOTAPE)

RACHEL CRANE, CNN CORRESPONDENT: This is the London Array. It's the world's largest offshore wind farm. And this is what it helps power. The farm has 175 giant wind turbines capable of generating enough electricity to power 500,000 homes, and it's quite possibly the answer to London's growing energy needs.

MIKE O'HARE, GENERAL MANAGER, LONDON ARRAY: We expect about 900,000 tons of carbon dioxide to be saved per year that would otherwise be put into the atmosphere. That's about equivalent of just under 300,000 car a year taken off the road.

CRANE: Approximately 8.3 million people live here. And by 2031, that number is expected to climb to 10 million. A growing population means a growing need for energy. London, one of the most historic cities in the world, knows that in order to keep up with future energy demands they need to update and diversify their energy portfolio.

O'HARE: It's really about how to get a more cleaner future, reliable energy sources? And that's really what the London Array is about, is moving from that old coal, gas, nuclear, to more renewable offshore winds.

CRANE: The U.K. is one of the world's leaders in offshore wind power. There are over 1,000 turbines dotting the waters. These things are massive. Each turbine is larger than the London Eye. And it takes a little as a 10-mile-per-hour gust to spin these. Until recently, the array was said to expand by possibly 50 more turbines, but construction was halted to save a rare breed of bird called the red- throated diver.

O'HARE: They're a rare species of bird in the U.K. and they come down in the winter and they feed there.

CRANE: The fear is that the construction of the second phase would displace the birds.

Is that a bit of a disappointment that it's not in the near future four?

O'HARE: I think as an engineer, I always like to build things, so of course I would like things to go ahead. But having said that, you've got to be realistic. I want these off shore winds because I care about the environment.

CRANE: The future will present more obstacles than a bird. But one thing is certain -- more of these means more of this.

(END VIDEOTAPE)

ROMANS: Another fixture in a city of tomorrow, drones. "CNN MONEY" got a look at a drone that's delivering drugstore items in San Francisco. But these airborne delivery men are still in testing. The future of flying pharmaceuticals will depend on Congressional approval. Head to the new CNNMoney.com for the full story on that. You'll also find the latest in tech, luxury, and markets.

Coming up, the World Cup, king of social media. Billions of people around the world obsessing, and its most popular player could be spending time on the sidelines. But that shouldn't hurt his business ventures. We're going to open up Cristiano Ronaldo's wallet next.

(COMMERCIAL BREAK)

ROMANS: The U.S. men's national team plays Portugal tomorrow. Hey, it's good for business. Many Americans won't be at work on Sunday so there's fewer lost hours of productivity for the big game. But Portugal's star player Cristiano Ronaldo might not be as productive as usual. He's battling a knee injury. Even if he doesn't score goals on the field this weekend, oh, he's scoring plenty of cash off of it.

(BEGIN VIDEOTAPE)

ROMANS: The World Cup is finally here, and being Cristiano Ronaldo, arguably the biggest star of the biggest sport in the world, is very big business. Now the most bankable soccer star, Ronaldo made his name at Manchester United where he reportedly brought over $238,000 per week. That made him the highest paid player in team history.

CRISTIANO RONALDO, FOOTBALLER: I think I'm not bad.

ROMANS: But he became the most expensive footballer ever when he moved to Real Madrid, a transfer worth $132 million. He's currently signed to a five-year, $206 million deal.

RONALDO: A lot.

ROMANS: Ronaldo won soccer's highest individual award last year for the second time. So go ahead and ask him who's the best in the business.

RONALDO: I think it's me.

ROMANS: He's been named the most marketable soccer player. He has a Nike deal worth millions, plus deals with Samsung, Armani, Toyota, and many more. Ronaldo brought home $28 million in endorsements last year. Add that to the $52 million he made on the field. That's $80 million bucks, making him the second highest paid athlete in the world.

RONALDO: Definitely, yes.

ROMANS: Ronaldo's brand has made him the sport's most famous star. He's known a stunning 84 percent of the world's population. That's according to sports marketing company Repu-Con.

RONALDO: We are famous, and we have to deal with that.

ROMANS: He's the most liked athlete in the world with almost 85 million thumbs up, and has nearly 27 million Twitter followers. He started his own line of underwear, his own magazine, even his own museum. But for all those accomplishments, Ronaldo has yet to win a World Cup for Portugal. He's hoping the business of being Cristiano Ronaldo is the best in the world.

RONALDO: I live like a dream.

(END VIDEOTAPE)

ROMANS: And 84 percent recognition around the world, unbelievable. Thanks for watching "CNN MONEY." You can find us every Saturday at our new time, 2:30 p.m. eastern. You can find us online all the time at CNNMoney.com. You can reach me, follow us @CNNMoney, follow me @ChristineRomans. Let me know what's working in your personal economy and what's not and what you'd like to see here on the program. We're all about the money news that matters most to you. Have a great weekend, everybody.