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CNN Live Today

Interview with Tom Gardner

Aired July 11, 2002 - 13:35   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: For the fourth straight day, corporate stocks are taking a beating. For the first time in months, the Dow Jones Industrial Average began the day below 9,000, and it is still heading downward. At the start of the day, the Dow had lost 566 points for the week.

Joining us now to talk more about this slump, investment adviser Tom Gardner of the Motley Fool -- Hi, Tom.

TOM GARDNER, THE MOTLEY FOOL: Hi, Kyra.

PHILLIPS: Where is your hat?

GARDNER: Well, you know, I thought I am not going to wear my hat any more until we see some changes to the stock market and how it works, make us feel good as investors.

PHILLIPS: You're protesting. Yes, really. Well, what do you think, is anything going to work? I mean, is this just not going to turn around for the long haul? Is it going to be a long haul?

GARDNER: Well, it could be a long haul until the market turns around, but I think what investors are looking for is some change to the system now that actually restores the trust for us as investors. I think a lot of individual investors are saying, I don't really have a voice in the process here, so why should I take a stake in the process, and until they feel that changes, they are probably going to look to real estate, and actually putting money in CDs and money markets, which is a terrible option for long-term investments, but the safest option right now for a lot of people who just don't trust the system.

PHILLIPS: Yes, we are getting a lot of e-mails, and the majority of people here are saying, I'm keeping it in my savings account, I'm keeping it in a money market account. It is not a good thing to do, is it?

GARDNER: You know, we are getting overwhelmed with e-mail at the Motley Fool also. We talk to 20 million investors each month, and I will say that the one thing we are hearing from people is, until there is a deterrent against white-collar crime in America, you know, I just don't know if I trust the system.

And I think that's the number one thing on people's minds. It may not be necessarily, Hey, send these guys who are pleading the Fifth to jail, I mean that's a disgrace in itself that they are pleading the Fifth. But you know, how about making sure that the system works in the future to put people behind bars who are taking advantage, and playing football with our money. I mean, when we see our money being played football with, we just pull it back.

And unfortunately, you are right, Kyra. The first option for some people is to put it in CDs, but I really think long-term, you don't want to bet against the U.S. economy. It is just, do you really want to invest in some of these companies that have a lot of debt, that have SEC investigations surrounding them, and then have auditors that have been compromised, the referee has been compromised, and I think for a lot of people, the single best bet, if you are going to invest in the stock market, and we think you should be over next 10, 20 years, is just to buy an index fund, and buy the total U.S. stock market.

PHILLIPS: All right, Tom, a lot of people are angry, saying that they are losing their money, and this catastrophe has happened because of all this corporate corruption. But let's go back a little bit and look at Nortel, Cisco, I mean, so far, there hasn't been any corruption that has been linked to these companies, and they have tanked out. So is it really corporate corruption, or is this something that has just been happening for a really long time, and this is just another big whack?

GARDNER: You know, I think there is blend of both, Kyra. I think, when you look at the companies that have a tremendous amount of debt, those companies have had to -- they fear their interest rate on future debt going up. So those are the ones that begin fudging their performance. You see companies like WorldCom with $20 billion in debt or more. You see companies like Enron, hiding tremendous amounts of debt. So I think the first thing as an investor in stocks is, you want to steer clear of those companies with debt.

But there still are a lot of great businesses out in America. It is just, we really fed on technology in the late 1990s. We forgot that there are great discount stores like Wal-Mart and CostCo. We forgot that a company like Starbucks continues to serve $4 cups of coffee to people who want to stand in line for it, and Starbucks' stock is up 50 percent since September. So, I think there are great companies out there to invest in, for someone who is going to look around. But you have to avoid companies with debt, and I think you have to avoid companies that aren't selling directly to us as consumers, because if you can't see their business up front, you can't really know how well it is doing, and that has been true for -- anyone who invested in Enron, were you ever buying anything directly from Enron? Most of us didn't have that exposure.

PHILLIPS: That is a good point, and of course, coffee is going to do well. Come on, no one is sleeping, so we have to drink the coffee in the morning to stay up because we are so stressed out, Tom.

GARDNER: You know, Kyra, I just want to make sure that you are not having more than two cups a day. I just don't think that is good for any of us. PHILLIPS: Hey, actually, I have cut out caffeine, thank you very much. It made me too hyper. Tom Gardner, Motley Fool. Thanks, Tom.

GARDNER: Thanks, Kyra.

PHILLIPS: OK. Don't forget, that's his new book, "What to Do with Your Money Now." And see, he is still wearing his hat, I'm telling you. It is going to come back.

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