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CNN Live Today

War and Personal Financial Battles

Aired March 11, 2003 - 10:47   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.


LEON HARRIS, CNN ANCHOR: What about a war's effects to manage our personal spending and saving? A war's effects cut across all areas of personal finance, from stocks to gas prices to jobs, everything else. Knight Kiplinger, who is editor-in-chief of the "Kiplinger Personal Finance" magazine, which dates back to 1947, is with us here in the studio, which is rarity, since you're usually working out of Washington.
Nice to have you with us.

KNIGHT KIPLINGER, KIPLINGERFORECASTS.COM: Nice to be with you.

HARRIS: Let's talk about these different categories, starting first of all with stocks. And of course everything really depends upon whether a war goes well, or whether there will be any negative surprises. What do you think? What would you be looking for?

KIPLINGER: I think the stock market is going to break this three year consecutive decline and post positive gains this year, breaking that three-year slide. I see the Dow finishing in mid-8000s by year's end. I think everybody who wants to get out of the stock market pretty much has gotten out. It's notoriously difficult to predict a low, but volume is very low right now. The alternative uses of capital, depressing low bond yields on treasuries and corporate bonds, money market funds, CDs paying barely 1 percent, stocks win default. I think when the overhanging uncertainty of this geopolitical situation is behind us, I think stocks will rally to the mid-8,000 range, 10 or 12 percent higher than right now.

HARRIS: Does that matter whether it's a long war or long period of uncertainty like this, whether we're talking weeks, months? What do you think?

KIPLINGER: I'm presuming a short and successful deposing of Saddam Hussein. I'm not make any preassumption about the length of reconstruction period, which will be much longer. But I think the anxiety is one of delay, suspended animation, and I think a resolution in Iraq will give American business quite a boost.

HARRIS: OK, now here is one question very close to the hearts of those listening, what about the job market? What do you think? Right now, we've been seeing the numbers of unemployment going up, and staying up it seems.

KIPLINGER: I think unemployment is going to hit 6 percent, 6.1 percent and probably stay at that level well through the end of this year. As business recovers, businesses are slow to hire. Rehiring generally lags the beginning of a strong recovery. Businesses are enjoying their better sales, their better profitability and they're reluctant to add the staff they have laid off. So I see joblessness staying around 6 percent for quite some time.

HARRIS: Is that number going to be affected at all by the news of the airline industry having some problems?

KIPLINGER: We're seeing continued layoffs in a lot of business sectors, and business will be slow to rehire, unfortunately.

HARRIS: All right, now the first impact that many people are going to will feel through all this, will be is there any big changes in gas prices. We're already seeing gas prices climbing already. How high do you think they'll go? How long do you think they'll stay that high?

KIPLINGER: I think petroleum prices will spike, maybe hit $50 a barrel. Right now, OPEC is pumping flat out. We've got trouble in Venezuela. We've had a very cold winter, meaning refineries are shifting from gasoline to fuel oil to meet that supply. I see gasoline prices kissing a national average of $2 a gallon, which we're not at yet, but a national average of about $2.

After a successful conclusion in Iraq, we see petroleum prices falling to $25 or $22 a barrel by the end of the year. And remember, President Bush is going pump from the strategic petroleum reserve like crazy as soon as the conflict begins. That will moderate gasoline prices for a while.

HARRIS: For folks who are looking for advice right now to find some way to hedge against some of these negative effects, what would you suggest?

KIPLINGER: I don't think there is any way you can bulletproof your personal finances, but long-term investors should look at the more attractive pricing of stocks, equities right now. Bonds are at great risk of losing value over the next two years, as interest rates gradually rise in a strengthened economy. Bonds are not the safe haven people think they are right now. For the long-term investor, stocks is where they want to be.

HARRIS: Knight Kiplinger, always a pleasure to have you.

KIPLINGER: Thank you very much.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired March 11, 2003 - 10:47   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: What about a war's effects to manage our personal spending and saving? A war's effects cut across all areas of personal finance, from stocks to gas prices to jobs, everything else. Knight Kiplinger, who is editor-in-chief of the "Kiplinger Personal Finance" magazine, which dates back to 1947, is with us here in the studio, which is rarity, since you're usually working out of Washington.
Nice to have you with us.

KNIGHT KIPLINGER, KIPLINGERFORECASTS.COM: Nice to be with you.

HARRIS: Let's talk about these different categories, starting first of all with stocks. And of course everything really depends upon whether a war goes well, or whether there will be any negative surprises. What do you think? What would you be looking for?

KIPLINGER: I think the stock market is going to break this three year consecutive decline and post positive gains this year, breaking that three-year slide. I see the Dow finishing in mid-8000s by year's end. I think everybody who wants to get out of the stock market pretty much has gotten out. It's notoriously difficult to predict a low, but volume is very low right now. The alternative uses of capital, depressing low bond yields on treasuries and corporate bonds, money market funds, CDs paying barely 1 percent, stocks win default. I think when the overhanging uncertainty of this geopolitical situation is behind us, I think stocks will rally to the mid-8,000 range, 10 or 12 percent higher than right now.

HARRIS: Does that matter whether it's a long war or long period of uncertainty like this, whether we're talking weeks, months? What do you think?

KIPLINGER: I'm presuming a short and successful deposing of Saddam Hussein. I'm not make any preassumption about the length of reconstruction period, which will be much longer. But I think the anxiety is one of delay, suspended animation, and I think a resolution in Iraq will give American business quite a boost.

HARRIS: OK, now here is one question very close to the hearts of those listening, what about the job market? What do you think? Right now, we've been seeing the numbers of unemployment going up, and staying up it seems.

KIPLINGER: I think unemployment is going to hit 6 percent, 6.1 percent and probably stay at that level well through the end of this year. As business recovers, businesses are slow to hire. Rehiring generally lags the beginning of a strong recovery. Businesses are enjoying their better sales, their better profitability and they're reluctant to add the staff they have laid off. So I see joblessness staying around 6 percent for quite some time.

HARRIS: Is that number going to be affected at all by the news of the airline industry having some problems?

KIPLINGER: We're seeing continued layoffs in a lot of business sectors, and business will be slow to rehire, unfortunately.

HARRIS: All right, now the first impact that many people are going to will feel through all this, will be is there any big changes in gas prices. We're already seeing gas prices climbing already. How high do you think they'll go? How long do you think they'll stay that high?

KIPLINGER: I think petroleum prices will spike, maybe hit $50 a barrel. Right now, OPEC is pumping flat out. We've got trouble in Venezuela. We've had a very cold winter, meaning refineries are shifting from gasoline to fuel oil to meet that supply. I see gasoline prices kissing a national average of $2 a gallon, which we're not at yet, but a national average of about $2.

After a successful conclusion in Iraq, we see petroleum prices falling to $25 or $22 a barrel by the end of the year. And remember, President Bush is going pump from the strategic petroleum reserve like crazy as soon as the conflict begins. That will moderate gasoline prices for a while.

HARRIS: For folks who are looking for advice right now to find some way to hedge against some of these negative effects, what would you suggest?

KIPLINGER: I don't think there is any way you can bulletproof your personal finances, but long-term investors should look at the more attractive pricing of stocks, equities right now. Bonds are at great risk of losing value over the next two years, as interest rates gradually rise in a strengthened economy. Bonds are not the safe haven people think they are right now. For the long-term investor, stocks is where they want to be.

HARRIS: Knight Kiplinger, always a pleasure to have you.

KIPLINGER: Thank you very much.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com