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CNN Live Today

Interview With Charles Payne

Aired July 22, 2002 - 12:18   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.
(JOINED IN PROGRESS)

CHARLES PAYNE, FOUNDER & CEO, WALL STREET STRATEGIES: ... Bell South and missed their numbers by a very wide margin. That's putting a lot of pressure on the telecommunications industry. And of course, when the Baby Bells start to miss, you know that that means they are going to cut their expenditures or some of their cap ex expenditures, for instance, and that's a very long and wide food chain that really disrupts a lot of tech and telecom stocks.

KYRA PHILLIPS, CNN ANCHOR: All right. Well, let's talk about making money right now. How do we make money right now, while we are in this situation? I know a lot of people are pulling their money out, they are saying that's it, I'm done, I'm selling. But actually, it is not an all -- how would I say it, not an-or-none choice. Am I saying that properly? I mean, once you're in, you've got to stay in and you've got to ride it out, right?

PAYNE: Well, you have to ride it out, but you know, I have a lot of pet peeves about what's going on in the stock market. And one of the things is that investors learned this market the wrong way. They learned from a mutual fund mentality, which means you only go long in diversification. It means, you have different types of equities long. Some people think diversification means bonds.

But you know, if you really want exposure to this market, and it's kind of late now, but you should have had some shorts. You could have played puts in this market. And I know it probably sounds foreign to 90 percent of the folks watching this show, but really, it's not that hard to do. It's not that hard to learn. And certainly, if you have all of your money in the stock market, you owe it to yourself to learn a lot more about what's going on.

Unfortunately, we are learning it the hard way right now, most investors, and they are only learning the negative aspects of the market.

PHILLIPS: Now, let's look at -- let's say you've got a well- diversified portfolio of stocks. Let's say over a 20-year period, if you have that time to wait it out, doesn't that usually end up benefiting you better in the long run than these safer alternatives that everyone keeps talking about?

PAYNE: Well, you know, I think that a safer alternative at this point is an oxymoron. There really isn't anything that's safe out there, per se. Obviously, balance is important, but also I think you probably -- and you know, I'm sort of rare from a lot of the people that probably will come on this show. I do think that you have to try to time the market a little bit, not necessarily pick the tops or bottoms, but know that when the market has had an extraordinary run to the upside that perhaps the gravy train could come to an end. And know that when the markets have an extraordinary move to the downside, that it creates opportunity.

So right now, unfortunately, for most investors, selling is -- it's too late to do that, it's too late really probably to go short, but they shouldn't give up on the stock market, because obviously from here, the gains could be substantial. But I think the rally to the upside, it's going to be a lot more selective, and you're going to have to do a lot more homework than last time. It's not about throwing darts next time around.

PHILLIPS: Well, companies are meeting earnings expectations, aren't they?

PAYNE: They are meeting their earnings expectations, but to put it in a proper perspective, most of these expectations have been ratcheted down a lot over the last six months. Furthermore, you know, we are talking about companies beating Wall Street's earnings expectations, but seeing revenue down 15, 20, 30, 40, 50 percent. So you know, it's sort of like a bittersweet victory. Sure, they came in ahead of real low estimates to begin with, but in the reality of things, their revenues are down from the year-ago period.

PHILLIPS: How about those interest rates? Are they going to stay down? It's such a great time to refinance.

PAYNE: They are going to stay down right now. You know, of course, Greenspan, he has been grappling with the stock market. Now, he has to deal with the possibility of a housing bubble. Later in this week, we get some new housing data. It's going to be very important. It could really decide how this market ends the week.

But he is really finding himself in a real tough predicament right here, because he's dealing with the meltdown in the stock market. And really, the only engine that we have had for the last year in our economy has been housing. So you know, I think you're going to see interest rates continue to stay at these levels.

PHILLIPS: All right. And the only way you can make sure that your money is gone forever is sell. So, hey, why not take some risks, I guess, right?

PAYNE: Well, you know, listen, one of the things that's interesting is I have spoken to investors all year long about shorting the market, about buying puts. And the first thing that most of them say is, well, that's risky. You know, I think it's risky to buy a stock at $50 a share and watch it go down to $1.50. You know, this whole mentality of sticking your head in the sand has not worked. Now, of course, everyone is angry, confused and bitter, and whenever the stock market starts making the headlines of your local newspaper, you know that perhaps it's going to make some sort of a short of shift.

So I would say if you are in some sort of cash or if you have any cash available, don't be intimidated by the stock market. Go out there and do some work, do some research, and find the opportunities, because the economy is not that bad off, although if the market were to continue to crumble the way it's crumbling now, it could have some sort of an impact on the economy.

But as it stands to date, I think we're OK, and the stock market probably will start to turn, although the Dow looks like it's starting to freefall here. Technically, your next support is 7400. If we get some sort of real climatic drop-off like that, then I would be an aggressive buyer.

PHILLIPS: And you bring up a good point, the difference between a strong economy and this declining stock market. Charles Payne, thank you so much.

PAYNE: Thanks.

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