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tv   Real Money With Ali Velshi  Al Jazeera  September 9, 2014 7:00pm-8:01pm EDT

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on store shelves. some of of his famous characters, the biographer who did research on his life found the stories. i'm david shuster. "real money" with ali velshi starts right now. i eye ♪ ♪ as president obama prepares to unveil his strategy to fight the islamic state group tomorrow night on national television, the focus is on countries in the middle east that critics argue sometimes help and sometimes hurt. i am taking a look at one of those countries. also, one of the few bank regulators to get it right during the recession tells me how getting rid of corporate taxes in america would make us all richer. why apple's new watch is like wearing your wallet on your wrist. i am ali velshi. this is "real money."
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this is "real money." you are the most important part of the show. 2w50e9 me or hit me up at >> president obama is lobbying congress to support his international coalition to defeat islamic state insurgents who are wreaking havoc in iraq and syria. >> that's the group that claimed it beheaded two american journalists working in syria last month. tomorrow night, the president will try to explain and justify his strategy in a prime time speech. now, we already know that the administration began reaching out to dozens of countries to help take on the insurgent group. as we have done on this show, we are going to continue to pay special attention to the flow of funds and to countries that are accused of financing militants. a hearing was held on capital hill focusing on hamas and the states that support it. in the coming weeks, i will take
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hard looks at those states. one is qatar. it finances al jazeera. so i will start there. a tiny state on the persian gulf. it has faced withering criticism. it denies lending support to islamic state fighters. it's been singled out over qatar's quote permissive te terrorist financing. they are unapologetic calling it representative of the palestinian resistance. hamas, as you know, is designated a terrorist o by the united states and israel. in 2012, the qataris pledged aid though rebuild gaza after a prior conflict between israelis and palestinyangs. as i mentioned, i will be looking at other countries,tie, saudi arabia, iran and others accused of financing terror. tonight, i begin with qatar. one of the experts who spoke before that congressional panel
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about hamas funding is stephen cook, a senior fellow for middle east teno on for an relations. he said qatar is consistent with a populist approach to the regionto whose goal is to establish independent from powerful neighbors, likely saudi arabia. this is interesting that it's not just that states might support a group whose interests th they share but state support of militant groups may serve broader geopolitical needs like influence in the region. >> i think that's exactly right. there may be people within qatar who share hamas's world view, but broadly speaking, it strikes me that the government of qatar, which has been, i think, somewhat less than circum expect in the way it used money around the region that includes helping militant groups but i think in this case in particular, the goal here has been for qataris
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to buy influence around the region and demonstrate policy index from their neighbors, notably saudi arabia. both had different views. the qataris have sought to place themselves in a broader populist position in the region, and i think there is no denying the fact that there is support for hamas, at least support for resistance againstitionis's occupation and in regard to the gaza strip. >> when you take that thesis, does that same thesis apply to turkey or saudi arabia or iran in their support of militant groups? is it also as much to do with regional influence as it is to do with a particular movement? >> well, it's different in all of these different cases.
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iran is an easy case. i think iran is the one country in the region that is most deeply involved in funding militant groups. turkey is also somewhat different it has become more deeply involved with hammats over the course of the last 10 years or so in an odd way, the ruling party in turkey, which tn has not been violated but the ruling party sees itself in hamas, in the struggle against elite's in turkey. they see the struggle against israel and other countries in the region. in saudi arabia, it is more about this big geo political game and struggle the way the saudis look at it in the way it views these conflicts as particularly a sectarian as sunni versus shiia. there are different motivations for each of these countries in
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the region in where the money flows. not all of them have total control over the money given the fact that there are their sibtsz donate to chair at this and other groups who do funnel money to some of these groups. >> the united states and israel both have complex relationships with qatar. qatar is home to a major u.s. base from which actions in afghanistan and other parts of the middle east are based and will likely be based in the future. until 2008, but they haveh had relationships nast. qatar has had a role in the past as a mediator of sorts. they am negotiated the release after hostage. where we see treasury condemning qatar for a perm missive environment, we have seen the president thanking qatar for its help on various matters. tell me how you weigh that.
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there are areas where they are unhelp follow-upful and areas where they are incredibly helpful. the existence of the air pace from which the u.s. has conducted both wars in iraq and afghanistan and increasing operations in iraq and perhaps in syria in the coming days and weeks and months is essential to the u.s. military. as you point out, the qataris have beg at times rather progressive when it comes to israel. it was al jazeera that broke the taboo of having are in israelis on television in the arab world. there was an israeli trade delegation in qatar. the countryries are investing in the israelsi soccer league particularly in jer uselum.
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there are different aspects. this is what makes it difficult for the u.s. to wash its hands of qatar. the idea of abandoning the air base f it would happen t would have to happen over a very long period of time. at the moment, given the current realities of the international situation in the middle east, it seems unlikely that the united states would take such a drastic step. we are going to have to live with the qatari relationship with organizations like hamas. i think the trick is to our advantage. they helped to relief the pressure on hamas. the trick for american diplomats and officials is to use that relationship to apply pressure on hamas. >> this is specific to qatar's relationship and turkey's relationship to hamas. when it comes to islamic state, these are different
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relationships. in fact, qatar, while it's very transparent with its relationship with hamas is pretty straight up about the fact that they do not support islamic state. do you believe that? >> i think that evidence is thin, based upon one statement by a german intelligence official who has been walked back. >> is not to say there aren't qataris who support the islamic state. but it doesn't strike me there is any support that the government supports the islamic state. when it comes to turkey, i think there has been an effort of the turks to turn a blind eye to extremist groups using turkish territory to engage in warfare against the assad regime left without an american or western about intervention, the turks very early on in the conflict came to the conclusion that the best way to inflict pain on assad was to allow these groups
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to operate. i think they have come to learn over the courts of the last three yea three years this was perhaps not the wisest policy in the world. >> you bring up an interesting point. the concept of wealthy donors supporting these militant groups versus government supporting the militant groups. the u.s. treasury pointed out two people who have -- they have named two people who they say have been able to operate in this loose financial environment that allows the support of terrorists. they didn't say they acted to behalf of the qatari government. is this an important distinction or not? >> i think it is an important distinction. i think it's worth emphasizing and repeating that there is a distinction here there is that is often lost in the policy debates here in washington. i think that the is remedy is in live rajjing the economic power and might of the united states's financial estimate system to pressure these individuals or groups from funneling money to these militant organizations,
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but it bears repeating up until now, there is no evidence these governments, themselves in the case of the islamic state are funding or as a policy are funding this organization. hamas is very different. >> yes. >> as you pointed out, there was a $400 million investment flu 20012. there has been some discussion after $300 million investment in hamas as well. those are open and clear policies. >> stephen, i want to be clear. you are with the counciling sub sill on foreign relations which has not received money from any of the entities we have talked about. >> that is correct. >> stephen cook, we will talk more because i want to talk as i mention today my viewers about the other countries in greater detail about turkey, saudi arabia and iran and you are a great source for us. stephen cook is a senior fellow at the council on foreign relations. coming up, i will tell you why the u.s. economy may never
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return to what we thought was normal before the great recession. time it companies are keeping if oil offshore while they wait for the until cost of oil to rise. i will tell you if that makes any sense at all. those stories and more as "real money" continues. keep it here. hey, jennar fuzz mike troober munny sling...
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why would you store oil in a vessel, a championship? >> the market is telling you to do that. we are in a situation now here at the end of the summer, the demand for gasoline gasoline is now greater going into the refinery maintenance season so demand for crude oil is low at this point. what we are seeing is weak prices in the stockmarket. >> that's the lack of demand and the over supply is weighing on the front end of the curve. so a very profitable strategy now is to buy oil today at the spot price with these depressed prices, put it into storage and put it on a danger and go out on the futures curve on the ice and sell that offsite oil, contract a delivery in three, four, five
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months' time at a higher price. as long as theprice you are buying today and the price you are locking in to sell it is greater than your storage cost, i.e. how much is it going to cost you to store it in a tank or pay for that ship every single day, it's a nice trade to make and risk-free at this point. so the underlying theme here, ali, is you can only do this when you have very weak demand, very weak economy globally. the last time that is when we were in this situation is at the financial meltdown that began in 2008, 2009. this was a very profitable trade for oil traders back then and, hence, it should be depending on if we get that further inversion in the curve could be, again, another very good profitable trade for traders, but it also could be a tell-tale of that of future economic would hes might be around the corneres might be around the corner. under normal circumstances, the price for oil on the spot market
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that you can buy today and stick on your ship if you have one is higher than what it will be typically in four or five months. in normal circumstances, this wouldn't be a good trade? >> and you couldn't do that trade because you do not have a cost to care. at commodity market should be in that form as you said, prices should be more expensitch today and cheaper as you go out into the future. co commodities are consumed in the spot market. when you have the spot market trading at a premium, that's a tell-tale there is a lot of demand out stripping supply. now, the reverse of that with the stock price falling so far below the future price, what's that telling us? it's telling us that supply is outstripping demand at this point. bottom line is he have too much oil. i will buy it, stick it on a tank, sell it down three or four months into the future and continue to do this until this arbitrage opportunity closes.
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>> let me ask you this: we traditionally have not been the big producer of oil in america that we are today. we are getting oil and more oil with the fracking boom. the refineries? are used to a different kind of i am. they are not used to the oil we are fracking does that play into this at all? >> it's a wonderful situation at this point. right now over the past 10, 15 years, the u.s. refinery industry has invested billions of dollars to upgrade refineries to process a medium or heavy sour crude oil, much less expensive than the lighter crude oil produced in north dakotdako we have a situation in the united states where we are gear today maximized a lower-priced, lower quality crude oil but with the frac and boom in back
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bakken, it's easy to refine that is we've got too much of that. don't have enough of that cheaper oil, the heavier sour crude oil. we are in a situation now where if we were -- and we should be allowed to export crude oil. here would be exporting crude oil of higher quality, higher cost and buying back in reverse a lower quality, lower-priced crude oil. we would be exporting caviar, buying back tuna fish. >> that's a win for the industry and the consumer. >> welete like eating tuna fish. stephen, thank you for joining us stephen schork is the editor of the schork report. >> next year, the 6th year an vis reof the lehman brothers, seen as a catlist of bringing the world to economic collapse. we have talked about whether the weak recovery from the great recession represents something
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called a new normal when economic growth stagnates and puts further strain on middle class americans. james galbraith says the concept of normal no longer has meaning. tonight it's an ideas we have heard before. he wants to challenge a set of economic principles he argues failed to help us predict the financial crisis. galbraith is the son of the famous harv vard professor of economics who served in the ad minstrations of four american presidents and wrote four dozen books. but today, we are talking about a book by james galbraith, the end of normal, the great crisis and the future of growth. james is also a professor of government at the university of texas at austin and he joins me now from campus. congratulations on the publication of the book, james and an important book it is. we asked this question all the time about the normal. you are saying you challenge
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that assumption but i want to start with this. you challenge the idea that our economic principles and the way we study economics is correct. you are saying that the way we think about it is what prevented us from understanding that we were going to have this great recession in the first place 6r789s i would argue our concept of normal was framed by the post-war period, the bulk of the statistical history and basis of models. it's reasonable that we have moved past that period. we have to think about at a time more difficult situation we face. >> you have got in your book the four horsemen of the end of growth. the new normal is not going to be about the growth that we had befores you talk about a choke chain, the kind of thing you
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would use to hold back a leashed dog to get ahead. explain this to me. driving up prices. >> that's, in part, what happened in 2008, 2009. for the u.s. in particular, that's been mitigated somewhat in the last five years by the enormous rise of natural gas through fracking. and that definitely had a stabilizing effect on the u.s. economy. what we don't know is how long it will last and, of course, it doesn't really cut at the question of oil, which is another different story and still a very major fuel. >> you have joined us today on the announcement of the release of the iphone 6 and a new watch that is coming out from apple and we are so excited about technology.
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in fact, if you look at the best performing stocks of the last few years, they are far and away technology stocks. many of them, the most common names up in the hundreds of % and yet when we talk to the grateful thinkers in this country about technology, some really resupposed minds, they warn us of one thing. this is up ending labor as we know it. you think of it adds an engine of growth. it makes people rich but does not employ more people. >> i think that's correct. there are two things going on. one is the technologies lower the could nst of capitol so it less money it and resources to do a certain amount of investment and they save massively on labor. in the wake of the crisis, what happened is the businesses who had laid off workers because they had to in the great fall of demand basically examined their business models and asked themselves, can we do this in a less expensive way? they find technological solutions and don't hire the workers back. >>, i think, is what we are
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observing. we have had a very big fall in the ratio of employment to population in the united states. >> that's partly aging of the labor force, but it's also partly -- excuse me -- it's also partly this neck logical effect. >> that's just a fact that this technological revolution is different from the ones that we experienced in the 20th century which actually did create a lot of employment. >> in a few moments, i am speaking to sheila bear, the former head of the regulator that managed the banks in this country. i think she happened to have done a very, very good job during the financial crisis. but you mentioned your fourth horstman is the fallout of financial fraud. explain that to me. >> i am a great admirer of sheila behr, in fact. i can't overall the regulation, the supervision of the banking sector from the 1990s through the 2000s was unquestionably a great disaster. >> has left us with, we saved the banking instittushingsz but
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they are fundamentally shells of what they once were. they are not in the business of creating new businesses we don't have the financial structure that we would need to deal with the employment question going forward. >> james galbraith, i have done a disservice to you distilling your book into four bullet points which is why our viewers need to read the book. thank you so much for being with us. james galbraith. >> i think you did a good job. >> thank you, sir. americans are borrowing more money and getting credit a lot easier these days. does that spell trouble dpount tree's? disney? i am talking to sheila bear about that. how the death of mcmansions in america gave rise to houses of a different kind.
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consumers in america are borrowing more money. in july, borrowing had the biggest jump since 2001. over all-american borrowing increased $97% to $3.2 trillion. >> could be seen as a good sign for the economy but a closer look at the kind of loans being issued tells you a little bit of a different story. demand was led by auto and student loans. i guess student loans are a good thing. people are getting education. autos are good, too. you need them for jobs. levelleders have loosened standards. >> has led to questions about whether consumers are at risk of becoming over extended. now, joining me to talk about this is someone who was in the thick of cleaning up the financial crisis, sheila behr, the former chair of the federal department deposit corporation now a senior advisor of pew trust.
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some have argued that this, these car loans constitute some kind of a bubble. i am not sure how that works because when you have a bubble, that's where people's wealth is. people don't use their cars as well. i am not sure if it's a bubble. i worry when i see more loans going out. i don't know what's heat hot, what's cold, what's just right. >> yeah. >> ayotte has boomed. everybody wants to stay away from residential real estate. in the home mortgage market we may have -- terms may be too tight but it is getting a little crowded, i think, in lending, and, you know, we found during the crisis counter-intuitively paid their car loans before they paid their mortgage loans and the ability to repossess a car and make good on your losses if the borrow he were to default.
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the car uses value quite quickly which may or may not be the case with the house. the occ, the office of the comptroller of the currency which leg lates the largest banks did a studork this and sounded some words of alarm. >> getting the loan? >> at the beginning of the recession, they held on to cars longer. this was real demand. i think we need to watch it. i wouldn't say it's crisis proportions, anywhere close to that but it does bear watching. standards have loosened. it's getting crowded. you can make a lot of money doing it. >> banks having got more restrictions put on them. >> that's loan. feeling good about their jobs, feeling good about the credit
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card and then again, we worry. here is my question to you: before we get into the next problem, whose whose responsibility? the brakes? the regulators? all of us? consumers? what lesson did we learn and who is supposed to fix it? >> i notice in the earlier segment, you made me the queen bank regulator. i quaint quite that. head of the fdic. we regulated the community bank and it is fragmented. we have a regulator for the community bank, the holing companies and for the big bangs and investment banks. it does spread around accountability. the dodd-frank through created the financial stability oversight council which brought these together and gave them collective accountability for this. i think that's age important improvement in the regulatory structure. look. it's up to banks to responsibly manage their institutions. regulators should not have to do
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that for them. the first line of responsibility is the banks and the people at the banks making the lending decisions. some are finance companies, too, i might add. it is not all banks doing this lending. >> sure. >> the finance companies, you can find sometimes that the standards,a little bit -- can be a little looser than these regulated institutions where you have examiners looking at the loans. >> i was speaking to deborah right who runs car ver bank in harlem. she told me something that a lot of bankers have told me: it no longer matters because of the reforms, with norths, it no longer manages you have been with your bank for 20 or 25 years generally speaking, they will sell the mortgage shortly after they give it to you. everybody in america with a nort has had that experience where they get the letter to say your servicer has changed, bank has changed. is this a good development or a bad do. ? the one thing we did rely upon was some of us had relationships with bankers? >> right. >> the mortgage is a commodity like oil. >> right. well, not all banks do that.
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some do retain even when they sell the mortgage and most mortgages these days are sold to the government, fannie, freddy going to the government now but many banks do retain servicing and i think that is positive when thing. but on the positive side, it's good for banks with this interest rate environment, we know at some point interest rates are going to be going up, banks making 30 year mortgages, keeping those on their balance sheet exposes them to a lot of interest rate risks. they are going to have 4 or 5% 30-year motts. >> got us in trouble in the s and l days. it's good to have a well-regulated transparent securitization market that allows banks to sell these loans off into the market to long-term investors who can better hold the long-term risk on those low interests rates, but i would like to see more of them retain servicing because i do think it's important to the customer relationship and ultimately good
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for the bank's business, too. >> sheila, you say americans should make a bold move and ban corporate income tax. i am going to ask you how that would work. >> i figured you would. >> and how that would affect ordinary americans. we will do that right after a break. stay with us. >> sounds good. thanks.
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i don't know if i should tell you this: what you are about to hear might have you throwing something at the t.v. screen, or you might think it's brilliant. sheila bair played a key role as the head of the departme. considering the recent outcry over corporations moving overseas to dodge corporate taxes, you might expect her to lead the charge for companies to pay their fair share. not so. not so. sheila bair has written a column where she says: throw out the corporate income tax all together and all of us abowill benefit. it seems counter-intuitive. i don't know if people are throwing eggs at you. what are you talking about, getting rid of the corporate income tax? >> well, first of all, i am imposed to inversions. i don't want to give it away. i think the law is the law and corporations should pay their taxes and not go through contortions. i think in the short-term, we absolutely need to do something
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with inversions, but longer term, i think we need to realize it's becoming more and more difficult to in the collect corporate taxes. it's not a person. it's not a piece of property. it's not a project. it's not something tangible. it's a legal striucture. it's easy to put it overseas. so, yeah, i think longer term, i think the best thing to do is get rid of it. i would replace the revenue. i think there are a number of different ways you can do that: reforming the personal code. if you get rid of corporate income taxes you absolutely should make wage earners like me and the people who primarily get their income from capital gainstion like warren buffett. right now his is about half of mine. >> our system rewards people who invest in companies. >> that's right. they do. they do. >> you get a better deal. if you made 100ed,000 off of investments, your tax rate is lower than if you made it in
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salary. >> absolutely. so we are kind of penalizing work in that. the rationale is because we are already taxing the profits at the corporate level. you get rid of the corporate taxes, no reason not to have the same rate that applies to both wage income and capital gains income. i think there are other ways to make up for the revenue that are easier to collect, a value added tax, most other developed countries, most everybody uses a vat. you need to be make sure it doesn't disproportionately impact low income people. it should cover food and medicine and netsties and perhaps provide some type of credit to mitigate the impact to lower income people who tend to consume more of their pay. but i think where we are fighting a losing battle wir trying to tax an organizational structure. it can easily be repackaged and sent overseas.
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>> i can see you. you are in the studio. you can't see me. you haven't seen me. i look pretty much the same as last time i saw. i have the same head of hair, which i have a better chance of growing hair than any of this that you just suggested. ? >> that's probably true. >> income tax reform. is it possible? >> yeah. >> is there some reason why this goes nowhere? >> it's beyond me. corporate tax reform should have been low-hanging fruit for a decade. have we have this uncompetitive rate of 35. none of the big guys pay it. they are 10 or 15% because there are so many loopholes. it's the small businesses, the smaller corporations that don't have the legal staff and the lobbying to be able to get the special exception to pay it
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combined, 53% is my marginal rate. every dollar i make, $0.53 goes to one government or the other. so that's wrong. and i think it does need to be corrected. and, again, we have rich and powerful can get around it. >> a lot of the refrain on the progressive side is tax companies because you are taxing the rich. the refrain on the conservative side is if we had lower taxes, it would just be a lot easier than these contortions. why don't we lower the tax rate? >> lowering the tax rate and broadening the base. no more special exceptions. the broader the base you have for your taxes, no more special senses, you are going to have an easier to collect tax. it's spread out more evenly and fairly. when you get a skewed system like ours where everybody has
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their special exception and others are getting hit with a higher rate that government keeps imposing to pay for the special exceptions, you could get a lot of discontent and more widespread tax non-compliance. so broadening the bates, lowering the top rate, making sure low income people are protected. i really think that's the way to go. and as a lot have people have been saying this on the right and the left for a long time, simpson bowles had a beautiful plan, top out everybody at 25%, the individual, corporate, small business, you could simplify the tax code if you do that, as well. but people, the lobbyists are thick in washington and they have all worked for these special senses and they don't want to give them up. we haven't had leadership in washington to defy this and do what's in the broader public interest. >> from your lips to washington, here is let's hope something happens. sheila bair, thank you for talking to us t the former share of the fdic and senior advisor at the pew charitable trusts.
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>> apple revolutionized the smart phone. i will tell you how it's trying to do the same with the watch and your wallet coming up. plus why houses in america continue to shrink.
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news... ♪ >> apple finally, showed its hand and its wrist today, two new version of the iphone 6, an apple watch and mobile pay. apple's chance to prove it can innovate, introduce products that change the game. it's been feeling the pressure. the company has nn't announce a new product since it launched ipad four years ago. did it succeed? joining me from cupert i & o, california where the announcement was made. jacob ward, our science and
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technology correspondent. jake, the verdict? >> reporter: well, ali, it was pretty exciting for the people. raptuous applause. tough to be apple. you have to deliver something so futuristic as to be manageable. this was the first time that they came through with a new product. >> this has nothing to do with apple. i use their products. i am very impressed. i don't care about new phones. you can't make it thinner, more pixlated. i am not looking for my phone to do anything else unless it massages my feet? >> the phone fatigue was heavy unless they put a laser into it and went to space, we wouldn't have cared but the watch is interesting. it opens up a bunch of new markets for apple. the whole notion of wearable computing, i thought was pretty limited that everything out there right now, no one is going to make out with you wearing google glass but this is the first sort of sex-appeal kind of object they debuted.
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it's a pretty sexy thing. what is interesting is the headin headline is apple pay, smarter than to not call it i paragraph. you parents. no. apple pay is an nfc enabled w wallet replacement system t cased a connection between a credit -- a connection near field communication. it's been around for a while. actually presents in android phones since 2012. what's notable is that retailers are about to upgrade their credit card systems to account for a new kind of credit card that will supposedly ward off fraud and they will receive the nfc signal and transmit it to allow you to make these kind of payments. >> that's the moment apple is taking advantage of. >> i read don't use nfc. bad people can swipe your information. are we past that? is that fearmongering? >> reporter: the theory here is that nfc system will rely on what's called a one-time token system. it's like a check, almost.
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the credit card company gets contacted by your phone. they issue a one-time token that is never used again. >> gets passed without your credit card information passing through the phone. but apple debuting something like this means that hackers across the world, while tim cook was on the sfwhiejd me here were sharpening knives and figuring out how to get into an nfc system. you can bet there will be a test run on this kind of technology now that it's going to be in an apple product that we have never seen before. >> let me ask you: i get in a cab in new york. you have to pay cash. they figured out how to take credit cards. that was the nifty. then they figured out how i could just do a little nfc thing or use an app and pay for it. guess what. i don't use the ladder. i don't need -- it's the same amount of effort to take my phone out of the my pocket and touch it as it is to take the wallet out of the pocket and use my credit card. where is this magnificent growth coming from? what need are we fulfilling?
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what question are we answering? >> i think sort of the scale at which apple operates -- right? talking about a company that sold 500 million iphones. they are thinking about rally really simple things to make the transaction easier for you. they consider the act of reaching back and getting out your wallet, they are counting out that number of steps and saying that is limiting our user base. they decided, okay. maybe the phone can be it. that's only three steps. you take it out, you tap t press yes, sir. they they think, taking it out is too much. so the watch, itself, is going to be able to do this kind of payment system. ali, you could fall asleep in the cab, reach over, beep it, yourself, and you would be done. >> that's the kind of simplicity apple is going for. >> i am going to build an app that gives me money, not that accommodates me paying money. every time i walk by somebody. >> ali pay. >> i am let you in on it. you know of you can be an early invest jake ward, a pleasure. the sides of new homes, what it says about america's housing
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market. hi, everyone. i am john seeingenthaler. right after "real money" making his case, president obama meets with congressional leaders laying out his plan to fight the islamic state group. what he is expected to announce to the nation and whether congress and the american people will go along with it. the ray rice case, putting the
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spot light on violence against women. tonight, a look at the global cost of violence at home, in lives and dollars. >> that's coming up right after "real money." we will see you then. >> one of the powerful symbols of america's housing boom and bust is the mcmansion, those oversized homes that became the norm when almost anyone could get a loan to buy more house than they could actually and. the average size of new homes in america has increased every
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decade for the last 50 years, but this year, so far, is a different story. the avenue square footage for a newly built house in the united states has dropped. now, some say the trend of shrinking homes means more first-time home biers are actually buying. others say u.s. home sizes may have peaked. hour big died in your house to be. >> some builders are betting that smaller homes may be their new money makers. >> reporter: in the 1990s and early 2000s, mcmansions, four and 5,000 square foot homes packed into suburban areas tipfied american middle class am bus fueled by no money down loans and a yearning for more. >> robert stubber built those homes. most that he built, however, are in the 2500 square foot range. but his latest project is much more modest. >> this is about what? 2500 square feet? >> no. it is 1,590 square feet.
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>> that's about 1,000 square feet smaller than the average the size of the newly built single family house in the united states today. it speaks to what some say is the changing structure of housing dmanldz. in 1973, the average size after newly built home was 1,660 square feet. as the economy strengthened home sizes grew, bigger faster until this year when it topped out at 2727 square feet. by the second quarter of 2014, average new homes seemed to shrink at 2357 square feet, the typical new american house is now nearly 3% smaller than those built months earlier suggesting new american home sizes may have reached their peak. >> as the housing market rebounds, more first time home buyers have the opportunity to buy a new single family home and they buy smaller homes. so a smaller home may be a great
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sign for a recovering market. >> the percentage of first-time buyers is up from 28% of all home buyers in june to 29% in july. but that still is historically low of. before the recession during the first quarters of 2009, first-timers purchased more than half of all new homes. >> short one there? >> the sides of new houses varies depending upon where in america they are located and reflects the changing fortunate did of each region. for example, in the midwest where robert is building, new home size down 13.6% in the first two quarters of this year. in the northeast, where land is relatively expensive, home sizes fell 6.3%. however, in the south and west, with a region of strong job growth, less expensive land and cheaper prices, up 1.4% in the south and 1.9% in the west. >> if historical patterned hold true, first timers will trade up and buy higher placed homes when
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they are larger. when they do, they will profit from the sale of their first one and have a bigger down payment for the next home purchases. but this pattern may change. national demographic trends suggest shoppers may pay more for location than size. more are moving away from suburbs into downtown areas census data shows between 2012 and 2013, more than 2 million people moved in to u.s. metro areas where real estate is more expensive. many are choosing smaller town homes and apartments of some sort. >> people want to be closer to where the action is in the cities and the urban areas and so trading up could mean just a more desirable neighborhood, even if the home is smaller. >> this is a 3 bedroom, two-bathroom home that we are building for sale. >> all in less than 1600 newly built square feet. a size he is banking buyers are going to snatch up. al jazeera. >> the numbers say house size shrinking. here on "real money" we like to
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check with real people to see if the stats jibe with reality. fernando martinez, his company, caribe homes is devoting time and money to building homes smaller than 2,000 square feet. thank you for being with us. >> thank you very much for inviting me does that jibe with what you are doing? >> it does except i would say what we are doing is first-time home buyers are finally, stepping out a little more comfortable mortgages have become more accessible for them. but they are going in first-time home buyers are going to the smaller homes. we are averaging home, our starting home starts at 17, 1800 square feet where two years ago, we were building a starter home in a different area, better location at 3500 square feet. but we have seen the market starting to change. first-time home buyers coming out. we have adjusted accordingly and we just started in this new project three months ago.
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>> how st. has that changed the next of homes you buy? you still build some at the higher ends, the largeeer square footage but building more smaller houses? >> well, what we are trying to do to make affordable housing, which is what we are trying to achieve here for our first-time home buyers is that the properties or the lots are not as large, but we are maximizing by either going with a vertical with a two-story and being able to give them a product that they need. the home that you build, whether it's 1500 square feet or 1700 square feet is going to cost you the same. it depends the location in which you paid for land that's going to make a difference. >> that's a good point. let's talk about you and how you stayed in business. obviously, it's great for you that those first-time home buyers that we have been worried about, finding a lot of young people live with their parents longer, not getting out, not forming houses. you made it all the way through the recession and the housing
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downturn which in florida was so much worse than it was in many, many parts of the country. some of your family members decided they don't want to be in this game anymore. tell me how you made it through. >> well, we -- our business consisted of my father and there was four boys including myself. my father had since passed away and the four boys, my three brothers, have told me, fernando, we are done. we will be investors. you go ahead and continue. so, i, myself, and my brother-in-law, mario aguilar, on which was the general contractor during the boom and helped us build all of the the homes said, no. i am too young. we need to continue. so we have started building. so you have an idea: 2005 we, as a private company, a small company in every since of the word, we sold, built and closed 743 single-family homes. >> and since then? >> and since then, in the last
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two and a half years, we built 50 homes. >> wow. all right. well, i hope that business comes back for you fernando. great to talk to you. >> thank you. >> we will visit with you again and hopefully by the time i am with you again, you will have told me about the 250 homes that you have built. fernando martinez, be principal at caribe homes joining us from florida. he is the former president, by the way, of the builder's association of south florida. we were just talking about the recession. it was six years ago this month that lehman brothers collapsed and set in motion the worst financial crisis since the great depression. we just saw how that played out for fernando. how far have we come since then? to hear people around the world tell it, things are dim. pew research surveyed about 49,000 neim 44 countries, pretty comprehensive. whether it's developed currents trees or emerging markets, there is a common it theme: 60% is the immediamedian in the world their country's economy performing poorly. 69% aren't satisfied with the
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way things are going in their country. now, there are exceptions. the chinese are the most optimistic in the world about their economies. the greeks are the most pessimi pessimistic. there are some standouts. russians saw a big jump in satisfaction with their country's direction. ditto for the united kingdom. the survey was taken last spring, months before the ukraine crisis escalated. in the united states, by the way, 58% of people surveyed said the economy isn't doing well. more than half. >> matters lots for a lot of reasons. but perhaps the most important is that this is a country that more than any other depends upon consumer spending for 2/3 of all economic activity. >> that's why we will continue to watch all of the signs of where consumer confidence is heading five years after the end of the great recession. that's our show for today. i am ali velshi. thank you for joining us.
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>> hi, everyone, this is aljazeera america, i'm john seigenthaler in new york. making the case, president obama makes his plans to take out islamic state. a former taliban insider said that he knows why. making changes, one month since police shot and killed michael brown, and why ferguson is pushing for reform. shining the light on domestic


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