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CNN Live Saturday

Signs Of Economic Recovery Are Everywhere: Is It Enough?

Aired December 13, 2003 - 14:16   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.


FREDERICKA WHITFIELD, CNN ANCHOR: Well some U.S. factories are humming, many companies are hiring, the Dow is back above 10,000. Mortgage rates remain low; can the U.S. economy finally get traction on the road to recovery? It's certain to be a critical issue as President Bush tries to get voters to rehire him next fall.
Let's talk to Roben Farzad a contributing editor for "Smart Money" magazine and Robin is joining us from Boston. Good to see you.

ROBEN FARZAD, SMARTMONEY MAGAZINE: Hi, how are you Fredricka?

WHITFIELD: I'm doing pretty good. Let's begin with one economic indicator, the Dow closing up over 10,000. What does that mean for the average citizen?

FARZAD: Well, it makes you want to celebrate at a party like it's 1999!

WHITFIELD: Oh, yeah?

FARZAD: We haven't had the indices; the major indices end up much less in double digits for the past four years. It has been quite a dry run. This makes people feel a lot better. You are going to get your 401 (k) statements, your mutual fund statements; some people see a capital gains distribution. It adds extra confidence to see the Dow above that psychologically important spot.

WHITFIELD: So essentially gives people the confidence to also spend a lot of money? Is that also sort of offering a false sense of security?

FARZAD: Well, the market is a leading indicator. And the market at this point is pricing in a robust recovery in corporate profits, which we haven't seen for the past three years. That is not to say it's the be all, end all source on this economic recovery, but it tells you that the smart money, institutional investors, people with a lot of money to throw around, are pricing in a nice recovery.

WHITFIELD: All right, lets get specific, and talk about some things that really translate for people. Mortgage rates being one, we saw a flurry of activity, of people, refinancing, and perhaps not necessarily buying new, but just reinvesting in what they've got. What about these mortgage rates? Can we look at the new year as perhaps these fairly decent, low mortgage rates staying low, or are we expecting there to be a spike?

FARZAD: Well, the signal from the Fed is that interest rates are going to remain low for a year to intermediate term. But that doesn't tell the whole story. You had Washington Mutual, a pretty big mortgage lender comes out this week, and gives not as great as expected news. You have existing home sales finally tapering off.

The worry here is that rising interest rates, whether due to an economic recovery or worries about the government's deficit and government borrowing, crowding out private investment. The worry there is that that can kind of choke off that market.

But on the flip side, when you have an economic recovery, people feel more emboldened to go out and spend on homes. So the jury's still out.

WHITFIELD: Other ways we spend our money, gas. We saw earlier in the summer, and late in the spring, people were really paying for it at the pump. Now we're seeing an average of $1.50 and a high being $2.40. Can we expect these numbers will taper off?

FARZAD: No, oddly enough, few people have stopped to notice crude oil is at $33 a barrel. And that is pretty close to that worrisome $35 threshold. The economy seems to be moving up in spite of high-energy prices. And it's not just gasoline, you have natural gas prices spiking 50 percent since just Thanksgiving. And that could put a hit on home heating bills.

You have -- you know -- Iraq not coming on online, as quickly as people thought it would, in providing a spark to the economy. If you look back in 1999, the price of oil was almost half where it is right now and that provided a huge boost to that economy.

WHITFIELD: OK, and real quick, what the unemployed want for Christmas, or at least for the holiday season. They want encouragement that perhaps there's might be jobs out there. I mentioned at the top that there are many factories that are humming, and jobs. People are being hired, is that really indeed the case? You think that momentum will carry over into the New Year?

FARZAD: That momentum -- we are starting to see signs of it in kind of fitful spurts. But you were hoping that this recovery and these good numbers this year will lead to employers finally pulling the trigger on those help wanted ads. But if you're unemployed, and if you are worried about your job and your raise not being this year, you won't even buy a $20 DVD player so hoping that works out next year.

WHITFIELD: All right, Roben Farzad, of "Smart Money" magazine, thanks very much, good to see you.

FARZAD: Thank you for having me.

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 December 13, 2003 - 14:16   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDERICKA WHITFIELD, CNN ANCHOR: Well some U.S. factories are humming, many companies are hiring, the Dow is back above 10,000. Mortgage rates remain low; can the U.S. economy finally get traction on the road to recovery? It's certain to be a critical issue as President Bush tries to get voters to rehire him next fall.
Let's talk to Roben Farzad a contributing editor for "Smart Money" magazine and Robin is joining us from Boston. Good to see you.

ROBEN FARZAD, SMARTMONEY MAGAZINE: Hi, how are you Fredricka?

WHITFIELD: I'm doing pretty good. Let's begin with one economic indicator, the Dow closing up over 10,000. What does that mean for the average citizen?

FARZAD: Well, it makes you want to celebrate at a party like it's 1999!

WHITFIELD: Oh, yeah?

FARZAD: We haven't had the indices; the major indices end up much less in double digits for the past four years. It has been quite a dry run. This makes people feel a lot better. You are going to get your 401 (k) statements, your mutual fund statements; some people see a capital gains distribution. It adds extra confidence to see the Dow above that psychologically important spot.

WHITFIELD: So essentially gives people the confidence to also spend a lot of money? Is that also sort of offering a false sense of security?

FARZAD: Well, the market is a leading indicator. And the market at this point is pricing in a robust recovery in corporate profits, which we haven't seen for the past three years. That is not to say it's the be all, end all source on this economic recovery, but it tells you that the smart money, institutional investors, people with a lot of money to throw around, are pricing in a nice recovery.

WHITFIELD: All right, lets get specific, and talk about some things that really translate for people. Mortgage rates being one, we saw a flurry of activity, of people, refinancing, and perhaps not necessarily buying new, but just reinvesting in what they've got. What about these mortgage rates? Can we look at the new year as perhaps these fairly decent, low mortgage rates staying low, or are we expecting there to be a spike?

FARZAD: Well, the signal from the Fed is that interest rates are going to remain low for a year to intermediate term. But that doesn't tell the whole story. You had Washington Mutual, a pretty big mortgage lender comes out this week, and gives not as great as expected news. You have existing home sales finally tapering off.

The worry here is that rising interest rates, whether due to an economic recovery or worries about the government's deficit and government borrowing, crowding out private investment. The worry there is that that can kind of choke off that market.

But on the flip side, when you have an economic recovery, people feel more emboldened to go out and spend on homes. So the jury's still out.

WHITFIELD: Other ways we spend our money, gas. We saw earlier in the summer, and late in the spring, people were really paying for it at the pump. Now we're seeing an average of $1.50 and a high being $2.40. Can we expect these numbers will taper off?

FARZAD: No, oddly enough, few people have stopped to notice crude oil is at $33 a barrel. And that is pretty close to that worrisome $35 threshold. The economy seems to be moving up in spite of high-energy prices. And it's not just gasoline, you have natural gas prices spiking 50 percent since just Thanksgiving. And that could put a hit on home heating bills.

You have -- you know -- Iraq not coming on online, as quickly as people thought it would, in providing a spark to the economy. If you look back in 1999, the price of oil was almost half where it is right now and that provided a huge boost to that economy.

WHITFIELD: OK, and real quick, what the unemployed want for Christmas, or at least for the holiday season. They want encouragement that perhaps there's might be jobs out there. I mentioned at the top that there are many factories that are humming, and jobs. People are being hired, is that really indeed the case? You think that momentum will carry over into the New Year?

FARZAD: That momentum -- we are starting to see signs of it in kind of fitful spurts. But you were hoping that this recovery and these good numbers this year will lead to employers finally pulling the trigger on those help wanted ads. But if you're unemployed, and if you are worried about your job and your raise not being this year, you won't even buy a $20 DVD player so hoping that works out next year.

WHITFIELD: All right, Roben Farzad, of "Smart Money" magazine, thanks very much, good to see you.

FARZAD: Thank you for having me.

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