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CNN Live Today

Interview with Andy Serwer

Aired July 01, 2002 - 13:15   ET

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


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Well, the accounting problems at telecom giant WorldCom could go back as far as 1999. The company tells the SEC it is reviewing its books for two additional years for more possible irregularities. Meantime, chief investigators and officials from three states are taking action to end conflict of interest after the corporate abuses they've seen on Wall Street.

(BEGIN VIDEO CLIP)

ELIOT SPITZER, ATTORNEY GENERAL, NEW YORK: By requiring our money managers to scrutinize corporate operations, we will be able to encourage greater internal controls, or discover wrongdoing earlier, or at least reduce the risk that our taxpayer and pension fund dollars are not invested in companies that are doomed to fail.

(END VIDEO CLIP)

PHILLIPS: So how do you protect your mutual funds from conflicts of interest and corporate abuses? Joining us now, Andy Serwer of "Fortune" magazine. Hi, Andy.

ANDY SERWER, EDITOR AT LARGE, "FORTUNE": Hey, Kyra, how are you doing?

PHILLIPS: I am doing all right. Why don't we talk WorldCom? I mean, stock has started to trade again, right?

SERWER: Yes, but barely. I mean, this stock is now trading for pennies. Remember, it hadn't traded for about two days. The last trade was 83 cents. It is now trading for about 6 or 7 cents, is telling you, the market thinks this company is going to go bankrupt.

PHILLIPS: Then you have got Martha Stewart. Throw her into the picture here, and how it's affecting everything.

SERWER: Absolutely. The Martha Stewart case continues to unfold, again, suggestions that her story is not adding up with her stock broker's, and she may be facing more -- or, charges. She hasn't been charged with anything yet, but it is certainly on the tip of everyone's tongue on Wall Street, and creating an environment where people are very nervous about investing. Again, the market is down this morning. So it is just an environment that is not really friendly for investors. PHILLIPS: All right. We are going to talk more about investors and nervous investors in a moment, but before we get there, just real quickly, these internal audits that are going on, no doubt these auditors are just getting the fear of God put into them. So other high profile companies, are they getting really nervous?

SERWER: They really are. I mean, we've seen some situations over the past couple days that are truly remarkable. General Motors having to deny that it has accounting improprieties. Same thing with Clear Channel, which is another huge company. It owns many, many radio stations in the United States. Also EDS, you may remember them. That's Ross Perot's old company. There are people who are suggesting they've got problems. And these companies are having to defend themselves, the stocks are going down. It's truly an ugly, ugly environment, and it's one where investors have to be careful, and it is one where the auditors really have to check and double check that executives are telling them the right information.

PHILLIPS: OK, so I'm an investor, and there is only so much I can follow-up on. I go to see my stockbroker. What the heck do I do?

SERWER: Well, I would ask your stockbroker, first of all, are there any names that you are concerned about? Are there any stocks that I own that have been in the news lately because of some of these scandals? If so, I would say forget it. Get out of them. You just want to sleep at night. You don't need to get these things.

The other thing, what is so difficult, people want to pull all their money out of market right now and put it into cash. You know, it's not really a great idea, because you are supposed to be buying stocks when they're low, and selling them when they're high. Right now, the market is clearly lower than it was two years ago. It's so interesting. It is a real paradox of investing. People were very happy about putting money into the market in March of 2000, yet that was exactly the wrong time. Now, they are very reluctant to put money in. It could be the right time. Clearly, the market is going to be higher ten years from now than it is right -- than it is today. Go ahead.

PHILLIPS: What about folks that can't wait ten years, though, Andy, maybe someone who wants to retire next month and they are just in the hole?

SERWER: Yes, I mean, that's a very good point. You really have to look at where you are, what stage of life. If you really need to buy a house. And if that's the case, well, then it makes more sense to put money in cash, to take some money out of the market at this point. If you really need that money six months from now, and you are really concerned about it shrinking even more, there's a very good chance that could happen in this stock market.

PHILLIPS: Andy Serwer, I know will be talking many times this week. Thanks, Andy.

SERWER: Thanks, Kyra. Bye bye.

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