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CNN Live At Daybreak

Interview with David Buik

Aired July 04, 2002 - 05:09   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.
CAROL COSTELLO, CNN ANCHOR: Well, the scandals on Wall Street are certainly having an effect not only on our own markets, but on overseas markets, as well.

Joining us to talk about the impact of the markets is David Buik from Cantor Index in London.

Good morning.

DAVID BUIK, CANTOR INDEX: Good morning, Carol.

COSTELLO: Tell me what the general reaction on the euro market is to the scandals on Wall Street here in the United States.

BUIK: Well, first and foremost, could I just send greetings from everybody in the United Kingdom to everyone in the United States for a very, very peaceful day, and a happy one, as well.

But to go on to the issue at hand, there is obviously great concern about corporate governance and corporate integrity because it has a domino effect. Ever since the Clinton administration during the '90s when Silicon Valley and Alan Greenspan really dominated the world economic scene and did a fantastic job.

Needless to say, share prices got up to gargantuan levels, with massive P/E ratios which, frankly, the profits that came out from corporates couldn't possibly sustain.

Even if you like at it now, the average P/E ratio in the Dow is about 26 times earnings and in the Standard & Poor's 500, which, in our opinion, is a greater reflection on the U.S. economy, it's over 40.

They still seem, in comparison to the United Kingdom and the rest of Europe, very, very high. But we have been dominated by the U.S. economy for more years than I care to think about. And that is a tremendous compliment to the United States.

But as you can imagine here now that when we see problems with corporate governance and integrity, we look at ourselves, and also the companies, both in France, Germany and the United Kingdom. And now the finger of suspicion, of course, has started being pointed in the direction of a number of companies. They may all be false allegations, but nonetheless, they have a very worrying effect and they undermine the market. And needless to say we've seen catastrophic drops in the level of all European bosses in the last two or three weeks.

COSTELLO: What would Europeans like to see the big wigs on Wall Street do to restore confidence in the market?

BUIK: Well, I think there's two or three issues here, Carol.

First and foremost, I was delighted to hear that President Bush is going to address the nation on Tuesday about corporate governance and about accounting procedures, because it does need world leadership to stamp its authority on proceedings and stop this drip, drip effect of no confidence, because without the support of global stock exchanges, you get unemployment and you eventually end up with a high level of economic downfall, which could end up with anarchy. And therefore the restoration of confidence is of fundamental importance.

World leadership in this level is extremely important.

The other thing that comes to mind is that those people who have worked in the United States over the years have often felt that chartered accountants or accountants have been very much second class citizens and the world of business has been very much dominated by the law, which is understood by many in America to be the largest industry available.

So I think we need as much responsibility to come from them as we do from the accounting procedures to bring everybody to book who's behaved in an inappropriate manner and to get the show back on the road.

COSTELLO: Well, we have the same hopes you do, then.

Thank you very much, David, for joining us live from London this morning.

BUIK: A great pleasure.

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