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CNN IN THE MONEY
Newspapers in Bad Shape, Oil Prices Low and Expected to Get Lower
Aired January 20, 2007 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN CORRESPONDENT: U.S. military is reporting the crash of an American helicopter northeast of Baghdad today. The military says all 13 people on board were killed. No word on the identities or what caused the crash.
Long expected now official, Senator Hillary Rodham Clinton announces on her website that she is running for president in 2008.
On Republican side conservative Senator Sam Brownback of Kansas is also throwing his hat into the White House ring. Momentarily he will be making an official announcement and holding a press conference this hour.
We'll update your top stories at the bottom of the hour. Now time for IN THE MONEY.
ALI VELSHI, CNN CORRESPONDENT: Welcome to IN THE MONEY. I'm Ali Velshi. Coming up on today's program frozen food. From cold snap to heat waves, America is facing extreme weather this winter. We are going to look at who is paying the price.
Plus paper tigers, newspapers are hurting. Both ad sales and circulation fallen. We will find when the print is on its way out.
And the next best thing to a crystal ball, see if you agree with an experts take on where the stock market is headed.
Joining me today two veterans of business news, Jen Rogers and Stephanie Elam. Who know a great deal about one of the big stories this week, but not from experience, it is about the price of oil and gas. You guys are both here. I take it you don't drive much.
STEPHANIE ELAM, CNN CORRESPONDENT: I do drive occasionally, but not enough. I don't own a car because we don't really need it here. And I am usually thankful because if you look at what gas prices are doing. But gas prices have retreated some, people don't seem to be caring about it and I think it is because they are a little gun shy at this point. They are expecting gas prices to go back up.
VELSHI: Oil is $50 a barrel almost. This is as low as it has been. And can you image 18 months ago when we heard it was $50 a barrel we were all excited. Look at high oil is getting. Now we are relieved.
JEN ROGERS, CNN CORRESPONDENT: I know. You know what gets me though it does not take them very long to raise prices at the pump when it is almost $80.00, but now it is $50 at the gas station. It just comes down a little bit.
VELSHI: Prices come down about $14 or $13 in the last month of oil, price of gas, 10 cents.
ROGERS: That really make makes me mad. I want to see it come down the same amount.
ELAM: I think it angers a lot of people who are there actually driving, especially people who have those huge commutes in a lot of places, when they commute in places like San Francisco but they live far out, outside of the bay, say Dublin. For those people that is really a big deal.
VELSHI: There were some people saying that the bad news about this is that back when it was $3 a gallon for gas, people really thought about saving conserving, getting smaller cars. Back at $2 --
ROGERS: Yes. Make it work, under $2. That is psychologically a big deal.
VELSHI: A lot of it is because of the weather that we have been having. Mother nature has had some pretty wild mood swings this winter. I'm kind of getting used to that up here in our corner of the country. But a sudden cold snap shocked places like southern California this week that is sending waves through the local economy. Greg Hunter has that story.
(BEGIN VIDEO CLIP)
GREG HUNTER, CNN CORRESPONDENT (voice over): These frozen oranges may lead to some chilling prices for consumers this winter. California officials fear that up to three quarters of the state's citrus crop has been destroyed by this week's cold weather.
GOV. ARNOLD SCHWARZENEGGER (R) CALIFORNIA: We don't really know exactly what the financial damage is yet, but we know that it is probably close to, just the citrus industry alone, close to a billion dollars.
HUNTER: Some California citrus growers say the market may not recover this year. Richard Pidduck has an 80 acre lemon and avocado farm in Santa Paula he says the freeze has already cost him hundreds of thousands are of dollars in lost crops.
RICHARD PIDDUCK, CITRUS GROWER: This avocado instead of being guacamole for some nice customer somewhere in country who is going to be on the ground and maybe feed a bear or one of my dogs.
HUNTER: The growers have been using every method they know to save their crops.
PIDDUCK: Many areas that temperature just goes a little bit too low, or the wind machine, the helicopters, the irrigation systems and they can't bring that temperature up enough to save the crop.
HUNTER: It's simple supply and demand, with less fruit available; this $1orange could end up costing you $2.
CESAR HERNANDEZ, ASST. MGR, GARDEN OF EDEN: Like maybe 50 percent to 100 percent increase.
HUNTER: The last time California was hit by such a deep freeze was in 1998. Prices for naval oranges jumped 40 percent. These days many suppliers get their citrus from other countries, like Brazil, helping to offset higher prices caused by such a freeze, but even with high prices, some consumers won't change their produce shopping habits so quickly.
UNIDENTIFIED MALE: I will probably still buy it but maybe not in the amount that I normally do.
HUNTER: Officials and growers say it's too soon to tell just how bad the damage is. How many crops were lost and whether the cold has harmed the citrus trees, not just the fruit that grows on them.
Greg Hunter, CNN, New York.
(END VIDEO CLIP)
VELSHI: For more on the winter's extreme weather and who's paying the big of the price we're joined by Michael Greenstone, he is a 3m professor of economics at M.I.T. and specializes in environmental economics.
Professor, thank you for joining us. We got the deep freeze in California, and the workers affected by that. We've got too much snow in the Rockies, I guess that is good for the ski resorts, bad for people trying to getting to and from those ski resorts when airports are closed and we have no ski resorts running in the northeast's by now that it's cold, I suppose they are selling more gloves and scarves. Are these all just a bunch of isolated economic things or is there going to be some effect in the end?
MICHAEL GREENSTONE, 3M PROFESSOR, M.I.T: No I think that is an excellent question and the extreme weather certainly creates winters and it also creates losers, which you just highlighted. Over the short period of time, there are people who are winners and people who are loser, but over long periods of time, maybe many months or many years, these extreme events have little effect.
One example that I like to think about, home construction with very bad weather, home construction kind of grinds to a halt. But over, say, the course of, you know, 18 months or 24 months, one month of bad weather isn't really going to change the number of houses that get built. So there can be short run affect, on the positive and negative side but over the long run there aren't very -- the impacts are not very large.
ROGERS: What if it isn't about the short run right now and it could be a long-term impact of something along the lines of global warming? Of course, here in the northeast, there was beautiful weather in January, that was what was on a lot of people's minds is that, is this a taste of possibly what's to come? GREENSTONE: This is, that kind of a parable for what will happen is there is permanent climate change. The difference is that the people who win and lose in the short run with extreme weather, their losses will actually be or gains will be smaller when you have permanent climate change. The reason is, that people can undertake all kinds of adaptations in response to permanent climate change, but they can't in response to short run changes. One example that I think helps drive home that point is on the first day where there's snow on the ground, there's lots of accidents and even car fatalities, but then actually statistically people should have shown that on, say on the fifth snowy day of the winter season there is nowhere near as many accidents. The reason the people have learned to drive more cautiously when there's snow on the ground, and it's exactly those kind of adaptations that mean that short run extreme weather that we're having now, kind of overestimate what the changes would be in a climate change.
ELAM: Michael, I was sitting here thinking about it. The first time I wore my really big coat here was in January, which is very weird for New York, and, of course, I was rather happy about that. It made me think of, felt guilty of the polar bear, the ice caps and it is not enough. I starting feeling like this is a bigger change than what it seems. But I guess the bigger question is, a, do these little fluctuations really have an effect overall and if so, do cold snaps cause more damage than, say, hot streaks? Which one is more damaging?
GREENSTONE: Yes. So I think that's an open question, as academics like to say that is a question that needs more research. And that's you know, good for me.
ELAM: I can tell you it's good.
GREENSTONE: But, no. Exactly I think that's the right way to think about it. Climate change is going to create some people who are going to win and some people who are going to lose, and you have to do a very careful accounting to figure out the net impact of that. I have cousins who live in Minneapolis. They're dying for climate change; there is nothing that could happen better for them.
ROGERS: We are all moving there.
VELSHI: Does this conversation bore you that every day on the news we going to -- we can't just tell you that the weather is good, or bad or unusual, we will give you every last iota that we can about the effect of this. What you're telling me it's, in the end it evens out? It is a little more balanced than it appears to be, watching this channel and others, you might get the impression this is not just a new trend, the news likes to talk about the weather?
GREENSTONE: Well, I don't think you want to completely gloss over that it has real impacts in the moment it's happening. And so imagine -- I ride my bike to work. First thing I do is go to Weather.com and try and figure out if I should put, if I should wear gloves and my fleece or if I can just go in my t-shirt and so I think you know if I go in my t-shirt on a really cold day I will pay for that. VELSHI: I guess we're doing some service. Professor Michael Greenstone thanks so much for joining us. It's been an interesting conversation.
GREENSTONE: Thank you.
VELSHI: Professor Michael Greenstone is a professor in environmental studies at M.I.T.
ROGERS: All right. When we come back, muscle cost money. The president's plan for Iraq would make the war even more expensive. We'll look at the price tag and some alternatives.
PHILLIPS: us, in the running or out to pasture? Wal-Mart has a history of the bull market stock. Find out if it's still living up to its reputation.
And see if an ethanol sipper can perform like a gas-guzzler. Our segment called "What Works" is coming up.
VELSHI: Well President Bush is sending more than 20,000 additional troops to Iraq. Many Democrats and a number of Republicans in the new Congress don't support this move, but they may be powerless to do much about it. Lawrence Korb is a senior fellow at The Center for American Progress and he is here with his take on the whole thing, Lawrence thank you very much for being with us.
LAWRENCE KORB, SR. FELLOW, CTR. FOR AMERICAN PROGRESS: Nice to be with you I.
VELSHI: I remain puzzled as to why the White House is moving ahead with the strategy, because for all of this 100 hours and Congress pushing these first six bills though, most people think they got elected because of Iraq. This White House is moving in a direction that seems opposite to what the American public seems to want?
KORB: Well there is no doubt about it. And it's going to be difficult for Congress to use power of the purse to stop it, because by the time they get the bill for it, the troops will already be there.
VELSHI: What's that bill going to be 21,000 troops? This surge.
KORB: Well basically if you take a look at the whole year in Iraq this year it's going to cost us about $170 billion, which is about $14 billion a month. This extra surge will add about $1 billion a month to that. In other words, without that it would have been close to about $13 billion. Now it's going to be $14d billion, at least, and don't forget this is only through the end of the fiscal year, which is the end of September, and all of these troops will not be in there until May, and so the bill, if you keep them there, the next fiscal year even more.
VELSHI: You hear these murmurs around now, that the Democrats are controlling Congress and they really want -- some people want them to do something about this. What can they do? If it's not budgetary, it is not appropriations what can the Democrats do, if they want to do, answer their voters and try and put a lid on this?
KORB: Well there are a number of steps that they can take and add them to the supplemental request, which is going to come up here sometime later this month, or early February. The first thing that they can do is, they can put a lid on the president recalling reserves. Again, the law says only up to two years consecutively. So a lot of these people off a while, but they are going to try to get them back again. They could stop that, because the guard and reservists are supposed to replace the active duty troops who are being sent in now.
They could ask the president to send up national intelligence estimate, which was promised last summer about whether Iraq is in a civil war. They can also ask the president to certify that the war in Iraq is not undermining the war on terror which was part of the original resolution in 2002 and then finally they can condition further funding on the Iraqis meeting the milestones that the president has talked about.
VELSHI: But to be clear, the president has the ability to spend certain money already without having to worry about whether Congress allows it to?
KORB: Well what happened is, that Congress before they adjourned put a $70 billion bridge fund in to fighting Iraq this year. So the president can use that --
VELSHI: That is his credit line?
KORB: Basically it is. Then he's going to come in with the estimates another 100 for the rest of the fiscal year.
VELSHI: Now, we should let our viewers know, you were also a former assistant secretary of defense. Your view is that all of the troops in Iraq should be as you in the industry call it redeployed, pulled out. Then what?
KORB: Basically you want to redeploy them out of Iraq. Leave enough in the region that you could protect our interests, if Iran, for example, should invade or become a haven for al Qaeda. And do it over the next 18 months, because that's the only incentive you have to get the Iraqis to make the political compromise as necessary to stop this civil war. You could put a soldier or a marine on every street corner in Baghdad, but until they make the political compromises, balancing the power of the central government and the provincial government, sharing the oil revenues, protecting minority rights, it's not going to make any difference.
VELSHI: Lawrence Korb it is a pleasure to talk to you, thank you for being with us on the show.
KORB: Thank you having me.
VELSHI: Lawrence Korb is a senior fellow with The Center for American Progress and he also a former assistant secretary of defense.
Coming up after the break, we are going to find out whether the chips are down or up. We are going to look at Intel and some of the week's other big Wall Street movers.
Plus, they're light, they are portable and they never crash. Newspapers may be old-fashioned but they've got they've got their advantages. We'll look at who's killing them off.
And we want to hear what you think about the show. So drop us a line our address is INTHEMONEY@CNN.com.
VELSHI: Well it was a bit of a mixed week for stocks. There was some very familiar tech companies grabbing most of the headlines. No one knows it better than Susan Lisovicz. She is at the New York Stock Exchange with all the big news. Wasn't exactly the best news for those tech stocks Susan.
SUSAN LISOVICZ, CNN CORRESPONDENT: Well you know it depends how you read it, of course. Ali you know it better than I do, in fact. You know Apple, Intel, IBM all reported earnings this week that exceeded the consensus estimates on Wall Street, but for some reason, investors expected better things going forward. Whether it was Intel, which makes computer chips or semiconductor chips that are the brains of the operation, where its profit margins are coming down, or Apple, the fact that its Mac computer sales are slowing even as the iPod sales are exploding, or IBM with the cautious forecasts they all found a reason to sort of hit the stocks hard this week.
So I think the expectation were a little hard but I think it should also be pointed out that the first three months of the year are not typically a very strong month for tech companies.
VELSHI: This is the price you pay Susan when you have got Dow's at records every day; you have Nasdaq at six-year highs. I mean that's what happens. These companies have to deliver, they have to deliver really well and they have to say that the future looks extremely bright. Otherwise you get punished a little.
LISOVICZ: Right, but then again you have the worrywart whose say, well, as January goes, so do the rest of the year. We have had pretty good news and the markets taken a few hits sometimes even when there's good economic numbers; oil prices have been coming down substantially. And the earnings as they start to trickle in aren't bad at all.
VELSHI: Susan, I was over at the Detroit Auto Show we're talking a lot about cars this show. Some news out of Toyota. Normally the news out of Toyota is all fantastic. This time not so great.
LISOVICZ: Right. Toyota has a recall in the U.S. More than half a million vehicles opinion these are Toyota Tundra pickups as well as its Sequoia SUVs. Toyota's concerned about its quality control. On the one hand you have analysts saying look Toyota is wrapping up its production, it is making more cars and it is selling more of them. The recalls will increase. On the other hand one of the reasons why Toyota has been able to take market share away from Ford and GM and others is because of its reputation for the highest quality.
So this is something that concerns Toyota. It's not saying how much it will cost them, but, of course, these things will be repaired free of charge. By the way, the recalls involve faulty components that could make it difficult to steer, and steering is important when you're driving a car.
VELSHI: That's key. Susan always great to see you.
LISOVICZ: Like wise Ali.
VELSHI: Susan Lisovicz at the New York Stock Exchange.
Well coming up on IN THE MONEY, movers and shakers, we are going to tell you how to defrost your stock portfolio.
Also ahead, yesterday's news. See whether it's time to write the obit for the newspaper business.
And tough meets tender. We'll hear from Nissan's Carlos Ghosn about building a car that is fun to drive and easy on the planet.
WHITFIELD: Hello. I'm Fredricka Whitfield, now in the news. A U.S. military helicopter crashes near Baghdad killing all 13 onboard. The military not revealing the identities of the victim or what caused the crash.
Testing the water, Senator Hillary Rodham Clinton says she is forming an exploratory committee for the Democratic presidential nomination. Her Web announcement this morning says I'm in and I'm in to win.
Also throwing his hat into the ring, Kansas Senator Sam Brownback he just announced his candidacy for president becoming the first Republican to officially enter the 2008 presidential race.
(BEGIN VIDEO CLIP)
SENATOR SAM BROWNBACK, (R) KANSAS: To use perhaps a poor Kansas analogy but today my family and I are taking the first steps on the yellow brick road to the White House. It's a great journey. I'm declaring today my candidates for president of the United States.
(END VIDEO CLIP)
WHITFIELD: Meantime, President Bush talks war strategy with two top aides, Secretary of State Condoleezza Rice and Defense Secretary Robert Gates. Filled the president in this morning on their recent trips to combat regions.
Meantime, coming up at the top the hour, our legal team analyzing the case against accused Missouri kidnapper Michael Devlin. Now back to IN THE MONEY.
ROGERS: Have you been ignoring the stock market ever since the dotcom bubble burst? Well, if you have, you've missed quite a run-up for the Dow over the last several months. Some of the winners from the past few years, though, may not be good bets anymore. Hugh Johnson is the chairman of Johnson, Ellington Advisers and he joins us now to talk about the shift going on in the markets.
Hugh I have a question for you about Wal-Mart. Last bull market, if you recall, a chunk of Wal-Mart stock, you would have been sitting pretty this time do you think it is a good thing to hold on to?
HUGH JOHNSON, JOHNSON, ELLINGTON ADVISERS: Myself no. First of all, it is not a good bull market stock and if we assume the bull market's going to continue, that's not one you want to own. The second thing, of course is Wal-Mart has changed its stripes. It's no longer a cyclical, consumer cyclical stock; it is now more of a consumer staple stock. That's number one.
Number two, it's really not posting really impressive performance on its earnings, even for sort of steady grower or consumer staple. So a lot of reasons not to own it. Most importantly, though, on a relative performance, if the stock's not doing well and when it's not doing well, don't try to fight the tape, so to speak. Avoid it.
ELAM: So Hugh, we've seen oil drop, we've seen the Dow hit records over and over, we see the Nasdaq at a high level, haven't seen since six years ago. What do you think is in store for 2007 as far as the markets are concerned?
JOHNSON: Well I think things are going to be positive. I mean lets face it the trends are positive, the outlook for economy is getting better which means the outlook for earnings is getting better. So I think it is going to be a positive environment.
But also keep in mind things are starting to slow. I think the economy will be slower in '07 than in '06. Earnings growth will be single digit, not double anymore. In those conditions the stock market might go up but the gains in the stock market are likely to be single digits, something to 7 to 9 percent. And believe me we're at a stage where you've got to be on your toes, because things could go wrong.
VELSHI: Hugh, back in the days when the gains were going to be 15, 20, 25 percent, we've had those, it was easy what you did with your money. When it going to be single digits that mean it makes sense to diversify and it makes some sense to take some chances in other places. What's the philosophy that the average investor, not the person who spends their day watching the ticker, the philosophy the average investor should go in to this year with in terms of their portfolio?
JOHNSON: Your are right play it a little bit on the safer side of things. The way you do that, I don't think it's necessarily important to reduce your exposure to stocks quite yet. Because the trend is still positive. But maybe you want to own more larger companies than smaller companies. Larger companies tend to be less risky, tend to be less volatile. Another thing you might want to do is make sure you have some exposure to the safer sectors of the market, like utilities have been performing well.
I mention consumer staples. Wal-Mart's not one of them, but there are some other consumer staple, companies that will do well in a single digit environment and don't forget, buy stocks with dividends. Dividends will count in 2007.
ROGERS: How closely do you need to be watching what's going on with the Fed at the end of the month? Is this meeting going to be a snoozer, don't need to pay attention here at all or need to keep your ears perked up?
JOHNSON: Now you've got to watch the Fed, because the economy numbers are looking better than expected. There are members of the Federal Reserve Board of Governors voting members that have expressed their concerns about inflation. One of the big things that could go wrong this year is the Fed could be seduced by worries about inflation and raising short-term interest rates too high. I don't think there are going to do that in January, I don't think they are going to do that in March and I don't think they are going to that in May. But you have to be worried about it. Watch Federal Reserve policy. They can't raise short-term interest rates. They could really trip us up if they do.
ELAM: And when you look at the fact that we see the Nasdaq up obviously it is very tech heavy there, do you think that techs are making a comeback. Like this is a good time for you to get into it or do you still just need to be cautious?
JOHNSON: A perfect example of a sector that does well in a bull market. Not only consumer cyclicals, like autos and retailers, but also technology does well in an on going bull market where the economy's doing OK. But be careful. If things go wrong and you're overexposed you'll make a mistake. You know you mentioned diversification before. That's so very important. Have all ten sectors and if you can own technology, make sure it's no more than 15 percent of your portfolio tops.
VELSHI: Hugh, quick question for you. Because probably there isn't a long answer to it's. Airlines, are you interested?
JOHNSON: Airlines. Not a chance. And the reason is, they're obviously extraordinarily volatile, very high-risk. You want to own them when they're coming out of their trough period, financially, but that's not a level of risk that I'm willing to assume.
ROGERS: Thank you, Hugh Johnson. The chairman of Johnson, Ellington Advisers. Thanks for getting us off on the right foot here in the New Year.
ELAM: All right. Thanks Jen. There's a lot more to come here on IN THE MONEY. Up next, small print. The "Wall Street Journal" has lost a little heft. And that is one sign of an industry under pressure. We will look at the future of the newspaper business, and back to school. Find out how a former teacher from Boston wound up bringing education to students in Africa.
ELAM: This week CNN's very own parent company, Time Warner laid off more than 250 employees in its print division. The cuts are a part of a growing trend throughout the print media business. So are we really headed towards a day when newspapers go the way of the record player and if so, how will journalism look if Americans turn to the Internet as their main source of news? Joining us now is "Washington Post" media critic Howard Kurtz, who also host "Reliable Sources" right here on CNN. Thanks so much for joining us.
HOWARD KURTZ, MEDIA CRITIC, "RELIABLE SOURCES:" Sure.
ELAM: All right. So here's the question. Are we looking at a time when basically everyone forgets about newspapers altogether and we're all going to the Internet or some other way of getting our information? What do you think?
KURTZ: The news has been so depressing I'm thinking of going in to blogging full-time. All the arrows are headed south. Circulation is down, including at this paper. Our advertising revenue is down, all of those department stores that used to advertise in the paper, make them fat; half of them have gone out of business. You can put ads on Craig List for free; it is hard to compete with free. But I still love ink on paper. It is hard for me to accept, as great as the Internet is and as much as we all love surfing it, that there won't be some place for the old-fashioned newspaper.
ROGERS: You talked about craigslist and ads for free, but what about free papers? You know everyday when you get on the subway, there are at least two guys trying to hand you a free paper. Is that a trend we're going to see more of in the future?
KURTZ: The short answer is, yes. The "Washington Post" for example the free commuter tabloid has gone up in circulation from 125,000 to 200,000. While circulation for the normal paper, the paper you have to pay 35 cents for is down. But the problem is, that that's a short truncated thing filled with very short stories and what's good about newspapers? Why should we worry about saving them? Because they do reporting. They gather facts. They give texture and context and history and all of that, they offer, too often, indulge I think is part of our problem, but I don't think that, you know it's hard to read a long story on a computer screen. Your eyes glaze over after a while.
VELSHI: Howard it is Ali, good to see you again. You know Stephanie was talking about going the way of the record players. You know these record players are back for the high-end, the audio files who feel like digital music is too compressed and they really need to hear it the original way. About four people have high-end record players. You talk about going to blogging, you have blogging, you have Podcast, and you got breaking news alerts. Nobody goes to the newspapers for classified or for stock prices anymore. What is it? Is it the analysis?
KURTZ: Why should people read papers, in other words?
KURTZ: For one thing, take it on the subway and even in to the bathroom.
VELSHI: Take care of; take your iPod and the bathroom, too.
KURTZ: I guess that's you. Newspaper companies are finally belatedly waking up to the fact that they have to go digital, that they have to have good websites, and pod casts all that. One of the reasons I'm blogging. But at the same time, one of the reasons that circulation is going down, we're giving it away for free. Anything you read in the "Washington Post" or the "New York Times" you can go online and see it there. Here's the thing. When you go online I feel like I don't get the full diet. I feel like I just get the ice cream and the cookies.
You click on things but when you turn pages of newspaper, sometimes you see stories you can't know you'd be interested in and you spend some time reading that. There is a certain serendipity factor. Maybe this makes me old-fashioned. Younger ones don't have time for the paper, my teenagers read all the news online, but I still think maybe a niche product, but for people who want more depth and more texture and more length and the big staffs here, we have experts who cover the Pentagon and science. It's hard to support that kind of staff --
ELAM: Exactly. That's exactly the thing I was thinking about, Howard. Because I'm listening to what you are saying, we know people 30 years and younger aren't in to papers. You're nostalgic. That's what you do, makes sense. But when we are looking at profitability here, are the newspapers actually bringing in money? At the end of day they're businesses.
KURTZ: The thing that nobody focuses on. Newspapers are still very profitable. Clearly they've taken a big, fat hit, but you have these companies like Tribune, witch put itself up for sale, and Knight Ritter, which is now out of business. They weren't satisfied with 15 or 18 percent profit margins, which in most industries the stockholders would go crazy. They want 25 percent profit margins. So it is not that newspapers aren't making money it is that they have to figure out a way to transition in to this new world.
When you give it away for a free online because people don't like to pay for things online, the advertising revenue from these banner ads on your computer screen just won't support the several hundred people takes to put out, for example this newspaper. Something has to give. Either people want at least the quality journalism the newspaper still provide either they're going to have to pay a few cents or a few dollars to get that online, or we're going to have to find our way to do it with a lot fewer people, which I think will be a blow to serious journalism.
ELAM: All right. Howard Kurtz. Thanks so much for joining us.
KURTZ: Thank you.
ELAM: Howard Kurtz, media critic for "The Washington Post" and he also hosts "Reliable Sources" right here on CNN.
VELSHI: When I said people take iPods in the bathroom, I was just speaking hypothetically.
ROGERS: Yes right.
ELAM: Yes right.
VELSHI: The North American International Auto Show is rapping up in Detroit this weekend. I took a trip out there to check out the latest and the greatest, and found out it isn't all about style and design in the auto business. It's this week's "What Works."
(BEGIN VIDEO CLIP)
VELSHI: Toyota understand that Americans like their rough and tumble cars. This is the rugged FJ. But what this company understood maybe before other automakers did is that with gas prices doing what they've been doing in the last year, fuel efficiency might actually be the way of the future.
Carlos Ghosn doesn't run Toyota but he does run a car company. Actually, he runs a couple of car companies. Nissan and Renault. By almost every measure he runs them well. Ghosn arranged for me to test drive Nissan's brand new hybrid electric Altima on the streets of Detroit. You drive or I drive?
VELSHI: You tell me. It's your car. He rode shotgun.
CARLOS GHOSN, CEO, NISSAN: The more you use a car and the more the fuel price goes up the more you are going to be likely to save money by buying a hybrid car.
VELSHI: But more than fuel efficiency car buyers are crying out for competitive and stylish vehicles. General Motors chief Rick Wagoner knows that. Most industry watchers think Toyota is about to steal GM's title as the world's biggest automaker.
RICK WAGONER, CEO, GENERAL MOTORS: Nine out of ten people who know the auto industry well have suggested that Toyota will be the number one carmaker. I think the one was you who said that's not likely to be true.
WAGONER: What I said is that we don't plan to give that up without a fight.
VELSHI: That fight includes a big push on the fuel efficiency front. A collection of cars which average more than 30 miles per gallon and the largest selection of vehicle which is can one on ethanol, fuel made from corn, not crude oil. But Nissan's Ghosn thinks ethanol may turn out to be too expensive for the U.S.
GHOSN: What is the cost of transformation of corn in to ethanol and the cost of ethanol? If this causes (INAUDIBLE) if not, remain marginal in the U.S. market.
VELSHI: So if not ethanol, then what? Hybrids? Plug-in electric cars or something else?
GHOSN: It may happen that the U.S. will adopt one particular technology, Europe will remain with another technology, Japan or Asian country will go for a third technology.
VELSHI: One of those technologies may be zero emission hydrogen fuel cell powered cars. But "Consumer Reports" Michael Quincy says, while hydrogen is cheap and plentiful; an it's a long way from being practical.
MICHAEL QUINCY, "CONSUMER REPORTS:" There is an infrastructure built in United States, where every corner there's a hydrogen filling station like there is a gasoline filling station.
VELSHI: Until that infrastructure gets built if it gets built, only demand will push the automakers to go green faster.
(END VIDEO CLIP)
VELSHI: Before we get to carried away with this whole green revolution let me give you a quick reality check. For the last 30 years the best selling vehicle in America? The Ford F series, trucks. By a long shot. So Americans might not be entirely ready to put their money where their mouth is when it comes to fuel efficiency.
VELSHI: I'm taking it neither of you --
ROGERS: On top of it, we live here in New York. We don't really drive much.
VELSHI: There you go.
ELAM: Think about it, it doesn't surprise me. Big cars are still what people like.
ROGERS: Well coming up next IN THE MONEY, the game of the name. AT&T is a phasing out the Cingular brand name.
Find out what goes in to changing a corporate handle and it is time to hear from you as we read some of your e-mails from the past week. You can send us an e-mail right now to we are at INTHEMONEY@cnn.com.
VELSHI: OK, you know all that money that AT&T spent to build up the Cingular wireless brand. Well it was only money and the company has decided to dump the Cingular name and stick with AT&T because it is catchy. Polly LaBarre joins us now to talk about the wisdom of that decision or the lack of there of and a few other famous name changes in history. It is business history at least. Polly is the co-author of the new book "Mavericks at Work." Love your book that I have had a chance to go through.0
POLLY LABARRE, CO-AUTHOR, "THE MAVERICK AT WORK:" Thank you.
VELSHI: OK, so AT&T is this name that has been around for a long time. One might think it is a little stodgy and old fashioned because it has been around forever. Then they come with this cool Cingular little men.
LABARRE: Four billion dollars.
VELSHI: And it is suppose to be cooler, hipper. In now they're getting rid of it.
LABARRE: I think they should take a page from Prince's book and call it the company formerly known as AT&T and just leave it at that. The spin on this, is that it's going to eliminate customer confusion. I don't know about you, I'm totally confused. The one thing that has been happening is that customers will remain confused. What is really puzzling about this, though, is that nothing about this has anything to do with improving customer service, deepening the connection with the customer. Cingular advertises as the network with the least dropped calls. Instead of focusing on dropping the name, they should focus on the dropped calls.
ELAM: What's the point, then? If it's not about making anything better, why do this? Because I noticed AT&T went from AT&T to AT&T.
VELSHI: Big letters.
ELAM: Big letters to small letters, and it is still really an old name. Where at Cingular, I felt like it was really reaching out to more of the younger generation, people are trying to get a phone, like mom, dad, hook me up. Let me have a phone. Why actually does this then if there is no real reason for it?
LABARRE: Again, the business idea is to streamline Bellsouth, SBC, AT&T, Cingular, and all under one umbrella. I don't know if it's going to work. It's not that meaningful. Saying, oh, AT&T is a hit brand now that's lower case. I'm not sure customers are actually going to be fooled by that. I think when name changes really work is when they're connected to a meaningful change that customers understand.
VELSHI: All right. Lets look at some of these interesting ones. 3m, these are ones that we've covered over time 3m.
VELSHI: Altria, which was Philip Morris. Fed Ex went from Federal Express.
LABARRE: Fed Ex was a great one. That reflected what customers were already doing. Taken advantage and ownership of the brand. We call it Fed Ex. They said we'd call it Fed Ex that made sense and no protests.
ROGERS: By the way I'm going by Jen Rogers, all lower case. I mean AT&T though it is a very story name. So I understand it a bit. It could actually work. Is everybody thinking a huge disaster?
LABARRE: I think my basic take on this, if you spend enough money and let enough time go by, people will get used to anything. Look at Verizon. When that name first came out, what are the truth Verizon Company? It was totally ridiculed. Now, it's part of the vocabulary and I think it has to do something with the fact that they actually have superior service or maybe James Earl Jones. Maybe that was the reason.
VELSHI: I wonder if there are people out there who think Bb really stands for Beyond Petroleum. I mean some of these companies get a little carried away with--
ELAM: Well people don't know what the real name actually was. I mean like 3m...
LABARRE: Do you know what IMB was?
ELAM: Yes, but 3m, is great one. Minnesota Monument Manufacturing. No one knows that anymore. We do, just because that's what we've done. I can see while in some places the branding makes sense but it also seems some of these name are just completely made up. So it's hoping that people will buy in to those names.
LABARRE: I think those are the worst offenders. The names that aren't even real words you know, this is the Altria's, the Ventures.
VELSHI: All the consulting companies, the accounting companies, consulting arms became something, Monday, the Price Waterhouse Coopers for a few weeks was New Monday or...
LABARRE: At least those are words. It's an offensive idea that we're not creative enough to come up with actual words.
VELSHI: Invent new ones.
ROGERS: How many people do you think they paid a lot of money to come up with these names?
LABARRE: Hundreds of thousands of dollars.
ROGERS: I think it's kind of insulting to the customer, you know to not even have a real word. It's an idea that focus groups are going to determine the future of your company. I don't think a focus group ever determined the future of anything. That's really the problem here. VELSHI: Next week, we're going to tell what you CNN stands for. Polly good to see you again. Thank you for being with us. We've never said it, I think in 30 years.
ELAM: I don't remember the last time I heard it.
VELSHI: Cool News Network. Here's a name that you know. Oprah Winfrey recently spent $40 million to open an academy for girls in South Africa trying to build a school like that is out of the reach for most of us. In fact it is out of the reach of all but just the super rich. If you could build a school in Africa for a fraction of the cost Oprah paid?
In today's "Life after Work" one woman is pursuing that goal in retirement and already has two schools to show for it.
VELSHI (voice over): The African country of Mali, one of the poorest places in the world. Life expectancy is only 48 years. But to Judy Lorimer, Mali is a place of hope.
JUDY LORIMER, VOLUNTEER, SAVE THE CHILDREN: It just shows you that you can make a difference, even if it's just a little at a time. When they started, literacy rates, 20 percent. Now 69 percent the kids in the district are in school.
VELSHI: The drumbeat of Africa began calling more than a decade ago while Lorimer was a kindergarten teacher in a Boston suburb.
LORIMER: I'd started taking drama classes because of a course that I had taken called Africa through the Arts, and after I started dancing, I decided to go to Senegal in '95 to learn more about the culture there. Just sort of took off.
VELSHI: Lorimer was soon making regular trips to Mali, the trips inspired her to sponsor a child from the country and it changed her retirement plans.
LORIMER: I knew that I wanted to do some volunteer work to save the children. They had built classrooms and nearly all of the 205 villages in the district. So I offered to go in 2004 as volunteer. They accepted.
VELSHI: Lorimer spends much time raising money in the United States for the school building and she goes to Mali twice a year to check on the progress.
LORIMER: They can build a school in under three months for under $25,000 including furniture. Oprah spent $40 million on a school for 152 kids. And that would build 1,600 three-block classrooms in Mali. What Oprah doing is great, but $40 million is a little excessive, when you can build a school for $25,000.
(END VIDEO CLIP)
VELSHI: We will be right back with more IN THE MONEY. Stay with us.
ELAM: Now it's time to read your answers to our question as whether you think American cars are as reliable at Japanese cars.
Alan in California writes, "I have had both American and Japanese cars and there has been no difference. I've been driving a Saturn for five years and have had absolutely no problems with it, even though "Consumer Reports" rates that model as lackluster. I think the news media reports too favorably on anything that's not American."
VELSHI: You know Saturn's aura was the car of the year first time, Saturn was a GM company, and their truck the Silverado won the automobile of the year at the auto show. First time ever that GM's got both of those.
ELAM: People do seem to really like the Saturns. People who have Saturns are big...
VELSHI: I saw it; I can't say that it is anything but lack luster but it seems to be reliable and good value. Doesn't float my boat, but --
Well Tony in New York has another take. He says, "I think the American auto companies have proved that they can build as reliable a car as the Japanese. What they haven't been able to do is undo the damage of 25 years of shoddy workmanship. They have no one to blame but themselves."
VELSHI: I got to tell you email completely disagrees with yours.
Dan in South Carolina says, "Sorry but the answer is, duh. Japanese vehicles are much more reliable. At one time I loved Fords, and that was because I was a mechanic and they accounted for 80 percent of my income." It is entirely possible that there were a lot of Fords in Goose Creek, South Carolina.
ELAM: Can't be mad at Dan for keeping it honest, reason why.
VELSHI: Do you think American cars are less reliable?
LABARRE: No. Not necessarily. I prefer the subway.
VELSHI: There you go.
ELAM: We're not --
VELSHI: It almost always works.
We do appreciate all your emails. Please send them to us. Next weeks email question of the week, "Will the stock market rally continue or is it safer to invest elsewhere?" If you feel like you have some inside information you don't want to share with everybody else just email that one directly to me. But actually for most you send it to INTHEMONEY@CNN.com.
Visit our show page at CNN.com/inthemoney. And that is it for this show. Thank you for joining for this edition of IN THE MONEY. We are going to see you back here next week Saturday at 1:00, Sunday at 3:00. Thanks to Stephanie, Jen and Polly see you next week.
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