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CNN Live Today

Fed Chairman Sees Roses; Wall Street Sees Thorns

Aired July 16, 2002 - 12:02   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: Everybody's got an opinion on the U.S. economy now and the faltering markets, but very few opinions count as much as Alan Greenspan's. The Fed chairman whose stock rarely goes down among business leaders and lawmakers told a Senate panel today the outlook is bright for a full economic recovery. The comments brought a respite in the seemingly daily Wall Street sell- off; but as you can see now, the Dow is still down 47 points.

We're going to head over to Brian Cabell who's here in Atlanta. He's been talking with all those broker's -- all those stockbrokers about, well, what are they investing in, Maalox, or have they calmed down a bit, Brian?

BRIAN CABELL, CNN CORRESPONDENT: I'll tell you, we have been here all morning long, Kyra, and it has been very quiet. In spite of the rough road yesterday on Wall Street and again this morning, it has been quiet. People coming in making deposits, regular routine deposits. There are still investors here.

We have one of them with us right now, Mr. Ali Oruc. He's been -- have you been trading here over the last half-hour or so, sir?

ALI ORUC, INVESTOR: Yes.

CABELL: Are you still buying? Are you concerned?

ORUC: I'm buying and selling. I have some Intel I bought couple days ago. I've tried to sell today because they are going to come out earnings tomorrow. I'm afraid the earnings not going to be as good as, you know.

CABELL: Right. Overall, are you still optimistic about the American economy?

ORUC: Yes. Yes.

CABELL: Why do you say that?

ORUC: Business is excellent. Best business in the world, really.

CABELL: Why is the Dow Jones industrial average plummeting so much? ORUC: Because of the psychology, you know. Because of the so many big companies, you know, their CEOs. You know they had some shenanigan, you know, and psychology's bad. As soon as psychology is bad everybody's going to buy, everybody's going to involve the stock market.

CABELL: Mr. Oruc, thank you very much.

Let's talk to the branch manager here. He sees clients everyday, dozens of them.

Jim Ciardello, why don't you come on over here, sir. What are people telling you?

JIM CIARDELLO, BRANCH MANAGER: Well, obviously investors are naturally nervous and shaken about the decline in the stock market. People are feeling a little angry, they're feeling a little disappointed, in some cases even a little miserable. But with the recent events that have been going on, it's been a normal day for us here. It's been a normal week, last few months as well. Clients are still coming in, they're making deposits, they're trading, they're opening new accounts, they're siting with the investment consultants and getting advice and they still have faith in the stock market.

CABELL: What is the single best piece of advice for the individual investor there?

CIARDELLO: What the individual investor really needs to do right now are three things. They need to really reassess their objectives, they need to take a good look at their portfolio, they need to constantly look at diversifying their portfolio, and right now is a good time to take a look at some of the equities and mutual funds in the account. And if they're poorly rated, now's a good time to possibly sell those and reallocate the funds.

CABELL: Are you telling me people aren't actually pulling money out here over the last several months?

CIARDELLO: No, we haven't seen it at all. I mean people are doing the right thing, which is selling some of the positions that aren't performing well. They sit with our investment consultants at Charles Schwab. We have an equity rating system where we can specifically look at their portfolio, make some specific sell recommendations for stocks that are rated a D and F. And then from there take that money and allocate it in to maybe some new equities as well as some new mutual funds.

CABELL: OK, thank you very much, Mr. Ciardello.

CIARDELLO: You're welcome.

CABELL: So there you have it, two-and-a-half years of a bear market here, but nothing out of the norm here. People are coming in, making deposits, and according to go Mr. Ciardello, they are not pulling their money out, they are still putting it in.

Back to you, Kyra.

PHILLIPS: All right, a bit of good news from there. Brian Cabell, thank you so much.

Well let's check in with CNN financial correspondent Kathleen Hays. She's in Washington.

What do you think, Kathleen, do you agree with that? There's a lot of people that aren't so confident right now.

KATHLEEN HAYS, CNN FINANCIAL NEWS CORRESPONDENT: Well, absolutely. And Federal Reserve Chairman Alan Greenspan certainly noted that in his testimony today. He said that the impact of the steep decline in stocks could linger when it comes to the consumer, could hurt spending. We don't feel quite as wealthy. In fact, a lot of us aren't quite as wealthy. And he knows that this is -- a lot of this is tied directly to the corporate scandals. The more they come, the lower stocks get and that's not going to go away anytime soon.

But the Federal Reserve expects stronger growth now for the year at 3.5 to 3.75 percent than they did in February when they were looking for growth to 2.5 -- just 3 percent. So this increase in the Fed's forecast for growth this year is significant. It shows that Greenspan and his colleagues remain upbeat on the economy.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: The effects of the recent difficulties will linger for a bit longer. But as they wear off and absent significant further adverse shocks, the U.S. economy is poised to resume a pattern of sustainable growth. Our prospects for extending this performance over time can be enhanced from implementation of sound monetary, financial, fiscal and trade policies.

(END VIDEO CLIP)

HAYS: He notes that low mortgage rates are helping us refinance our homes, and we take some equity out, keep spending. Inventories are so low. He says businesses have to start investing and spending again as well.

He does say we should get tougher on corporate CEOs. He's not convinced any laws need to be changed right away. Stiffer penalties should do the job. Make the CEO accountable, that will clean things up.

Back to you.

PHILLIPS: All right, Kathleen Hays from D.C., thank you.

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