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Dow Drops as Economy Remains Unstable; O.J. Simpson Awaits Sentencing After Being Found Guilty in Las Vegas Trial; Presidential Hopefuls Gear Up for Round 2 of Debates
Aired October 06, 2008 - 10:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: First Monday in October. This hour, the Supreme Court begins a new session. We check the key cases on their dockets.
And financial boomerang. U.S. crisis impacts world markets. Now Wall Street feeling Europe's pain.
It is Monday, October 6th. I'm Heidi Collins. You are in the CNN NEWSROOM.
Buckle up for another wild day on Wall Street. A live look at the big board. You can see down 300 points.
We want to get the very latest from CNN's Susan Lisovicz standing by at the New York Stock Exchange.
Hey, Susan.
SUSAN LISOVICZ, CNN CORRESPONDENT: Hey, Heidi.
Well, we're seeing another massive selloff week, coming off the worst week on Wall Street since the terror attacks of 9/11 and the bears aren't done. No question about it. We've seen something that we can simply call contagion. That is credit marketing tightening across while the global economy is slowing down. A loss of confidence in financial institutions across the globe. And we've been seeing basically from the east marching west, we have seen a big, big selloff.
Asian markets, European markets, Russia's market was halted repeatedly. We got reports that Brazil's market has been halted. When you see markets that have stopped trading, you're talking about frequently double-digit losses. And what we're seeing here is the Dow down more than 300 points right now and hovering close to the 10,000 level. The (INAUDIBLE) first reached that level in March of '09, but actually had come -- actually had gone down to that level several years ago, four years ago. But what we're seeing is a selloff. And the right now, advancing stocks getting clobbered by declining stocks by a 12 to 1 margin. That is pretty pervasive negativity that we're seeing in the first 30 minutes of trading, Heidi.
COLLINS: Well it is. We can't deny it. That's for sure. We'll learn more about it. Susan Lisovicz, we sure do appreciate that. In fact, while you were sleeping overseas markets tanked. Throughout the night, markets across Asia saw big losses. Japan's Nikkei index closed down 4.25 percent. Hong Kong's Hang Seng index slid down five percent. Numbers also way down in Europe. At times investors in England and Germany saw markets plunged more than five percent.
In Russia, trading on both the stock indices has been suspended after shares fell more than 15 percent. The reason for the free fall is two-fold, falling oil prices and rising concerns over Washington's bailout plan.
This hour on Capitol Hill, Lehman Brothers goes under the microscope. House committee members wanted to take a closer look at what caused the legendary investment house to go bankrupt and what the effects are today. That collapse three weeks ago helped trigger alarm over the nation's financial crisis.
The nation's banking crisis and the battle for one of its casualties at the center, Wachovia. On either side two rival bidders fighting for control. Citigroup says it will appeal. A court ruling that favors Wells Fargo. Both companies are trying to strike a deal with the troubled bank. And whoever wins control of Wachovia and it's 3300 branches would immediately catapult into the top tier of U.S. retail banking.
The bailout and your payout. When should we start seeing some benefits of the newly passed rescue plan? Well CNN's senior correspondent Allan Chernoff is in New York with the answer to that.
Everybody wants to know, when do I see something happening that's good?
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Yes, we're all wondering that Heidi. You know, it would be wonderful if the bailout plan was a silver bullet. Unfortunately that's not the case at all. In fact, a source from Washington told me last week that it's going to take at least four weeks to get the program up and running. It is very complicated, that bailout is. In terms of figuring out what price the Treasury should pay for those so-called toxic securities, the mortgage-backed securities that have taken down so many banking institutions. The bailout is not going to be a quick fix, it's going to take time.
So meanwhile, the Federal Reserve is again taking out some major action here. First of all, the Fed is saying that it will dramatically boost the amount of money available for banks to borrow. And, this is really noteworthy. The Fed is going to be paying interest banks on the reserve that they are required by law to leave with the Federal Reserve. So this is going to give a real boost to banks.
I spoke to Ray Stone of Stoner-McCarthy, a very well respected credit analysis firm. Ray said this is the first time he's ever seen anything like this in his career. And he's really impressed that the Fed is taking this dramatic action.
COLLINS: Wow, all right. We'll be watching that very closely as well.
Allan Chernoff in New York for us. Thank you.
Final notice now. If you plan to vote November 4th, you could be running out of time to register. We'll get to that in just a moment. But I want to make sure we make note. Because we've been watching very closely all day long and actually for several days now, the big board. Dow Jones industrial averages has gone below 10,000. You see that mark, 9,988. We are down about 35 minutes into the trading day by 331 points. So what's it all mean? We will be bringing that context to you throughout the show. In fact, while we have Allan still standing by, Allan, let's talk about that a little bit. Haven't seen this in a while.
CHERNOFF: Yes, we have not seen it in a while. You know, it takes a while to get confidence going. This crisis is all about confidence. The credit market now is really determining what's going on. The credit market hasn't shown that much improvement. We've seen overnight losses in Europe, in Asia. We've seen European central banks and Treasuries rushing to the rescue of their financial institutions. That doesn't instill confidence over here. Plus you have the added recognition that there's really virtually no doubt at all that we are now in a recession and the question is, how deep will it be? I hate to give you all this bad news --
COLLINS: I know.
CHERNOFF: But this is the reality that we're dealing with. Wall Street is recognizing it. Investors now are recognizing it. So they're basically getting ready for that ride into a tough recession potentially here. And that's what we're seeing reflected in the stock market. That's why it's taking a tumble right now.
COLLINS: Yes, and when we talk about that word confidence, I mean, I know we've been hearing it an awful lot. But that is the main thing. Because when there is confidence, people then spend their money. We keep using this number. The two-thirds of consumers you know basically fought that stock market. They have something to do with it. And something to gain by it. So when they see those numbers go down, what does everybody do? Reels things in.
CHERNOFF: Heidi, there's an old saying on Wall Street, don't try to catch a falling knife.
COLLINS: That hurts.
CHERNOFF: And that's basically where the stock market seems to be right now. It's just a falling knife. It's very dangerous so the buyers don't really have the courage to step in just yet. And what we need in order for the market to really recover is what's called capitulation. Now we may have seen that we saw that. It may have appeared that we saw that last Monday, but apparently not just yet.
COLLINS: I think everybody knew that was temporary, though.
CHERNOFF: Yes, when the selling is exhausted at that point, then buyers -- smart buyers will be able to step in and start bidding prices back up. COLLINS: All right. Well, we're watching closely. Once again, just pointing out to you the Dow Jones industrial average is now below 10,000. You can see for yourself. 35 minutes, 40 minutes into the trading day. Off the market by about 323 points. Now it's above 10,000. Anyway, we're watching it closely. Allan Chernoff, sure do appreciate that.
Back now to the election. Final note notice, in fact, if you plan to vote on November 4th, you could be running out of time to register. Deadline set this week in 24 states and the District of Columbia, among those with deadlines today, the highly contested states of Ohio, Pennsylvania, Virginia, and Florida.
Taking center stage now, Belmont University, a private liberal arts school in Nashville. That's where Senators McCain and Obama will be squaring off tomorrow night. The debate will be a town hall- style event with the candidates taking questions directly from voters.
Republican Senator John McCain spent the weekend in Arizona getting ready for round two of the presidential debates. He is expected to make a quick campaign stop at Albuquerque, New Mexico, today before heading to Nashville.
Running mate Sarah Palin already on the move already this morning in Florida. You saw that here, responding to the critics of a recently televised interview.
(BEGIN VIDEO CLIP)
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: There's some interest in what I've been reading lately. And I think that this comes from -- it's a result of probably less than successful interview that I had recently with kind of mainstream media. No, no, no. You know what, in response to critics after that interview, what I should have told them was I was just trying to keep Tina Fey in business. Just giving her more information.
(END VIDEO CLIP)
COLLINS: Palin there referring to the actress who does that dead-on impression on "Saturday Night Live," in case you haven't seen it.
Senator Barack Obama in Asheville, North Carolina before moving on to Nashville. CNN's Jim Acosta is following that campaign.
So what's happening there now, Jim?
JIM ACOSTA, CNN CORRESPONDENT: Heidi, right now, Barack Obama is at a very nice resort here in Asheville, North Carolina he is prepping for tomorrow night's debate with John McCain. We heard some of the themes that were touched on at Barack Obama's event yesterday that the Senator will likely bring up tomorrow evening.
One of them, if I can just jump off of that conversation you just had with Allan Chernoff about the bailout package. That certainly is coming up a lot during Barack Obama's events. He talked about it in North Carolina, in Newport News, Virginia on Saturday. And he is going right after John McCain. Reminding voters what he feels is John McCain's record on deregulation in the banking industry. Policies that Senator Obama said led to this crisis.
And another thing that came up over the weekend is that things got a little negative, as we've been hearing over the last 24 hours. And Senator Obama seized on a quote that a McCain campaign spokesman gave to the "Washington Post" in which that spokesman said they would like to turn the page away from the economy and to personal issues. Well Barack Obama took exception with that yesterday saying this is no time to turn the page on the economy.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: We are facing the worst economic crisis since the Great Depression. And John McCain wants us to turn the page on talking about the economy?
(END VIDEO CLIP)
ACOSTA: So there you have it. Barack Obama not planning on turning the page on the economy. While they are not cheering down this economy. And certainly not cheering on this financial crisis. Senator Obama plans on making this his issue number one if you want to call it that. Over the next 24 hours, we're likely to hear a lot about it during tomorrow night's debate. Heidi.
COLLINS: All right. CNN's Jim Acosta for us in Asheville, North Carolina. Thank you, Jim.
Tune into the debate right here on CNN. We are front and center from Belmont University in Nashville with the best political team on television.
One of the ideas the vice presidential candidates hashed out at their debate was a troop increase to stem the rising violence in Afghanistan. Would it work in Iraq, would it work in America's other war? CNN's Barbara Starr is live for us now at the Pentagon to answer that question.
Good morning to you there, Barbara.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Good morning, Heidi.
Well, you know, the war in Afghanistan really has been has become one of the central issues in this campaign amongst all of the candidates. It started out that Iraq was the main topic, but it really has shifted to Afghanistan with a lot of talk about the need for more troops there. The commanders want more troops. Both candidates say they will send thousands of more troops to the war in Afghanistan, but it's now raising the question, is Afghanistan going to be the new surge? And in last week's vice presidential candidate debate, it was a pretty hot topic. Have a listen.
(BEGIN VIDEO CLIP) SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: The commanding general in Afghanistan said today that the surge principles used in Iraq will not -- let me say this again now -- our commanding general in Afghanistan said the surge principle in Iraq will not work in Afghanistan.
PALIN: The surge principle, not the exact tragedy, but the surge principles that have worked in Iraq need to be implemented in Afghanistan.
(END VIDEO CLIP)
STARR: So what's the real bottom line here? Well, the commanders on the ground say they don't deal with the Republican issue debate. They don't deal with the Democratic debate. What do they need on the ground? They want about 20,000 more troops but they are calling it a surge because they say on the ground is just not more troops. They need economic aide, reconstruction, rebuilding, working on the Afghan government stability to take over the problems in that country. It sounds an awful lot like what we've done in Iraq and what did prove to be helpful. But the commanders are saying, Afghanistan is not Iraq. Don't call it a surge.
COLLINS: Very, very different. All right. CNN's Barbara Starr, thank you, Barbara.
High court in session. Justices beginning their new term right now. We're going to be focusing on one high profile case.
(COMMERCIAL BREAK)
COLLINS: Court is in session. The fall term of the Supreme Court gaveled in this hour. Among other things the justices will be looking at efforts by drug makers and tobacco companies to limit consumer lawsuits. Right now, the court is tackling whether smokers can use state laws against false advertising to sue.
Well the cigarette level has light and low tar.
And one of the court's high-profile cases this term involves whether a religious group can put a monument in a city park. CNN's Kelli Arena is joining us now from outside the Supreme Court.
It looks like it's pretty loud there behind you, Kelli.
KELLI ARENA, CNN JUSTICE CORRESPONDENT: It sure is. the first day of the new session. You've got your typical people who are out here. Praying for the Supreme Court, protesting. You know, you've got your pro-choice and pro-life folks that are out here. But as you said, one of the big cases that the court will be tackling does involve this small religious group in Utah who wanted to build a monument in a public park. The city government said you know, thanks, but no thanks. And the issue here is free speech versus government control.
(BEGIN VIDEOTAPE) ARENA (voice-over): They gather inside a pyramid and practice the right of mummification. This small band of worshippers call themselves "Sama."
UNIDENTIFIED FEMALE: We believe that all religions are correct to those who are in them.
ARENA: Their philosophy is based on principles known as the seven aphorisms, core beliefs about creationism. It's a message they would like to share.
UNIDENTIFIED FEMALE: Anything that broadens your perspective has got to be a positive thing.
ARENA: The group, which has about 20 members, wants to donate a monument to the city of Pleasant Grove, which is near Salt Lake City, but the offer was refused.
ARENA (on-camera): This monument has been here nearly 40 years. They want to put their monument with their seven aphorism right where I'm standing. To them the issue was simple. If you allow one religious monument, you've got to allow another.
(voice-over): The mayor of Pleasant Grove says this is not about religion. He says the Sama monument just didn't fit in.
MAYOR MICHAEL DANIELS, PLEASANT GROVE, UTAH: This park is dedicated the to the history of the people, the founding of the city, and significant people that have lived and contributed to the community.
ARENA: The city contends it has a constitutional right to choose which monuments are erected.
JAY SEKULOW, AMERICAN CTR. FOR LAW AND JUSTICE; The idea that because we have a 10 Commandment monument that now you must take the seven aphorisms. That would mean the Statue of Liberty, you would have to take the Statue of tyranny if somebody proposed it.
ARENA: But the Samam say that like it or not, they've got a right to build their monument. Thanks to the first amendment.
UNIDENTIFIED MALE: We're talking about a public park. If we're talking the front lawn of the city hall where government unquestionably controls and limits speech, that would be different.
(END VIDEOTAPE)
ARENA: There are thousands of ten commandment monuments put up by private donors around the country in public parks. But believe it or not, we've never gotten a very clear message from the Supreme Court on what's constitutional and what isn't. Yes, amazing, right?
Let me show you, too, what's going on here. I know that you guys can hear the noise. I want to sort of involve you on what's going on here. You have obviously all the time, whenever you have a Supreme Court in session there are protesters. But today being the first day usually brings out more than usual. You've got people who are here on the issue of abortion. Of course, a big issue that the court may someday have to contend with. You've got people in the front with pieces of red tape on their mouths protesting. Some are praying for the Supreme Court justices.
This year especially, you know, it being an election year, the Supreme Court very much, you know, in voters' minds. There is a very good chance that the next president of the United States could actually name as many as three justices.
COLLINS: Right.
ARENA: You know, to this court, which could radically change, depending on who gets in the White House, could radically change the face of this court and the direction that it's been going in.
COLLINS: All right. CNN's Kelli Arena, our Justice Correspondent outside the Supreme Court this morning. Thanks to the live look there, Kelli, on the first day. We sure do appreciate that.
The Palin investigation goes forward. Some of Alaska's governor's staff will give statements on her firing of a state official.
(COMMERCIAL BREAK)
COLLINS: Quickly I want to show you these two pictures, somewhat confusing though. To the left you see earlier, that is when the Dow Jones industrial average dipped below 10,000. That's the first time that has happened. It was about I believe about 30 minutes into the trading day it happened here. And then to the right, those are the current numbers right now. So down even a little bit lower. About 357 points to the negative. Nasdaq S&P 500 down as well.
Global markets down as well. And oil prices down as well. Speaking of, again, there's a live look for you of the big board. Oil prices, though, are continuing to fall. That would ordinarily be some pretty good news. But the reason oil prices are falling is anything but good.
CNNMoney.com's Poppy Harlow has our "Energy Fix" from New York this morning.
A lot of people say, oh, yes, oil prices are down. Because they know that usually means gas prices, too. However, not usually, always, I should say, a good thing.
POPPY HARLOW, CNNMONEY.COM: Yes. You know, Heidi, it's funny. Because this summer people were literally praying at some gas stations for lower gas prices. Well gas prices are down, oil prices are down big time. But what is causing that is a major, major concern this morning. We saw oil fall $4 to below $90 a barrel. The first time we've seen that since the month of February. That is down really, Heidi, now nearly 40 percent from the peak we saw in July when oil was above $147 a barrel. A lot of people were talking about $200 oil. The good news, as I said, your gas prices are down now for 19 straight days.
AAA says the national average is now $3.50 a gallon. That's down 15 percent from the high we saw in July. Sadly, though, Heidi, the reason for this sinking price in oil and gas is the weak, weak global economy -- Heidi.
COLLINS: So I mean we're talking supply and the demand again.
HARLOW: We we're talking supply and demand exactly. We're back to fundamentals. I talked to an oil trader this morning who said when we saw oil above $100, that was not based on supply and the demand. Now this is what is happening. We're talking about how high oil prices can hurt the economy. We just talked about that. It can work in reverse, too, where the economy affects the oil prices we're seeing. That's what's going on today. And that's what's been going on for the past few weeks.
It takes a lot of energy to produce and ship a product, right? When there's weak demand for those products, the demand for energy involves the making and transporting them that falls. Now oil traders are telling us as the economic woes spread there is concern the demand for oil around the world will fall.
Again, good news for drivers. Good news for people that need to heat their homes this winter. Unfortunately though allow the economy it's very bad news for everyone. We don't know how long that's going to last. The advice to take away here today, enjoy the lower prices for now. Maybe fill up your tank. Prepare though for higher ones when the economy recovers. We're on top of the oil prices. The stock market is moving fast. Heidi, it's all on CNNMoney.com.
COLLINS: Yes. It seems that there's a little area where it's just right. And then people can benefit. Well, hopefully with can find that little space. We sure do appreciate that. Poppy Harlow.
From sports star to celebrity outcast. And now a convicted felon. The journey of O.J. Simpson.
(COMMERCIAL BREAK)
COLLINS: Another day, a new round of money concerns. Sliding on Wall Street, markets are down sharply this morning. That's for sure. Overnight, international markets suffered big losses, and this hour on Capitol Hill, Lehman Brothers goes under the microscope. House Committee members want to take a closer look at the bankruptcy and what the effects are today. Meanwhile a battle for a casualty of that financial crisis. At the center of it all, Wachovia. On either side, two rival bidders fighting for control.
Jurors in O.J. Simpson's robbery trial say they relied mostly on audio and video evidence to find him guilty, rather than witness testimony. Simpson is now in isolation, awaiting sentencing in December.
CNN's Kara Finnstrom looks back on the rise and fall of O.J. Simpson. (BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: Guilty.
KARA FINNSTROM, CNN CORRESPONDENT (voice-over): A stunned O.J. Simpson listened as the verdicts were read. Guilty on all 12 counts, including kidnapping and armed robbery. Simpson could face life in prison.
YALE GALANTER, SIMPSON ATTORNEY: He's, you know, extremely upset, extremely emotional. But it is something that was expected.
FINNSTROM: Yet at one time, few would have believed how Simpson's life would play out. Simpson first showcased his incredible talent in college, wracking up awards like the Heisman trophy. Then in the NFL playing in six pro-bowls.
Off the field --
O.J. SIMPSON, RETIRED NFL PLAYER/ACTOR: Hey I saw a kid in Minneapolis fight once, in Cincinnati.
FINNSTROM: -- Simpson parlayed his charisma into an acting career and piled up endorsements. Simpson was a full fledged celebrity when in 1994, his former wife, Nicole Brown Simpson, and her friend Ronald Goldman, were murdered. Simpson was charged in both deaths. And the nation was riveted watching him flee in a white Ford Bronco.
What followed --
JOHNNIE COCHRAN, SIMPSON'S DEFENSE ATTORNEY: If it doesn't fit, you must acquit.
FINNSTROM: -- is often called the trial of the century.
UNIDENTIFIED FEMALE: ... not guilty of the crime of murder.
FINNSTROM: More than half the nation watched the verdict, and everyone had an opinion.
Two years later another judgment, this time in civil court. A jury found Simpson libel for wrongful death, awarding $33.5 million, most of which has not been paid. Simpson then largely disappeared. But he couldn't keep clear of the spot light.
Ironically, the Las Vegas verdicts came on the 13-year anniversary of his murder acquittal. Goldman's father talked with CNN.
VOICE OF FRED GOLDMAN, RON GOLDMAN'S FATHER: We're absolutely thrilled to see that the potential is that he could spend the rest of his life in jail where that scumbag belongs.
GALANTER: Defending someone like O.J. Simpson, everybody already had a fixed opinion about him. And it's troubling, it really is. FINNSTROM: Kara Finnstrom for CNN, Los Angeles.
(END VIDEOTAPE)
COLLINS: Defense attorneys say they will appeal the verdicts against Simpson and are asking that he is released on bond while awaiting that appeal.
John Jr. Gotti in a federal courtroom this hour in Tampa, Florida. He is accused of being involved in everything from cocaine trafficking to murder conspiracy. Crimes allegedly committed 20 years ago. Gotti has pleaded not guilty. His lawyer called the charges an epic quest, pointing out that federal prosecutors have failed to convict Gotti of anything in three previous trials. Meanwhile, Gotti returned to New York.
They dug up some bones. The FBI on Long Island searching for victims of a mob hit. Turns out the bones belonged to a dog. An informant reportedly told investors (sic) two members of the Colombo crime family and a Pace University student were buried there had in the mid-90s.
In New Jersey, a reminder that crime knows no bounds, not even a cemetery. In Newark, police have added a new beat -- a graveyard surrounded by crime.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Just the comfort of knowing that somebody is here to look after us.
UNIDENTIFIED MALE: Everybody is now long gone, and nobody really knows anything. So by doing these traces, we find more about where my family came from.
(END VIDEO CLIP)
COLLINS: Police are now escorting people as they visit the graves of loved ones or search for family ties.
Rob Marciano, still very much alive over at the severe weather center, bringing us the very latest on the weather maps.
And hey, it looks pretty calm. Kind of nice there.
(WEATHER REPORT)
COLLINS: All right. Rob Marciano, thanks.
I don't know if you've seen this video yet, Rob. But look at this. In Sudan, day turns to night. Massive sandstorm as it bears down on our i-Reporter. He captured these images of what he said looked like a mountain of sand. A friend had called him from a nearby city to warn him of the approaching storm. And thankfully he taped it for all of us to see. So when the weather does become the news, remember to send us your i-Reports, if you can do it safely of course. Just go to ireport.com, or type ireport@cnn.com right into your cell phone.
In northern California, 10 people are dead after a casino-bound charter bus flipped over last night. Eleven other people in critical condition this morning. Investigators now looking at why the bus ran off the road and slipped into a ditch. Several people were thrown from the bus as it flipped over. Crews spent much of the night looking through the tall grass for any more victims.
A change of heart in the abuse of power investigation of Governor Sarah Palin. Seven Alaska state employees have agreed to give statements in that investigation. A state legislature is looking into weather Palin abused her office in the firing of a commissioner.
Alaska senator Ted Stevens returns to a Washington courtroom this morning to face corruption charges. Last Thursday a federal judge rejected a defense motion to declare a mistrial.
Check out our Political Ticker for all the latest campaign news. Just log on to CNNPolitics.com, your source for all things political.
Managing your money in today's struggling economy not necessarily an easy thing to do. Are you bullish with your bucks, or making the same choices as a year ago? A snapshot from the heart of Bush country.
(COMMERCIAL BREAK)
COLLINS: Another quick look for you at the big board there. Dow Jones Industrial average is now down about 485 points, sitting well below that 10,000 mark that we have been watching for. Right out of the gate this morning, I think we went down immediately 280 points. And Susan Lisovicz is standing by watching those numbers with me.
And boy, I don't know, we're back to that whole maybe we should just cover one eye.
LISOVICZ: Or both eyes. Keep your blinders on. Remember we're long-term investors, Heidi, we'll be working for some time.
But, you know, it was one year ago this week that the Dow Industrial hit their all-time high. Can you believe that? How quickly time flies and how sentiment changes. That was 14,164. The Dow now well below 10,000. That was a milestone that the blue chips first reached in March of 1999. It went below that level four years ago, as well.
Not a complete surprise here, Heidi. We have seen a massive global sell off. In fact, Russia's trading had to be halted there a number of times. Brazil's market has been halted as well. And really it's a loss of confidence. And we've seen a precarious situation for a number of big financial institutions in Europe, and a number of governments rushing to respond to try to prop them up in what is a loss of confidence. The financial crisis is one thing. A panic is another. What the governments there and here are trying to do is let it get out of hand. The complete emotion. Let emotion drive your investments. But what's happening is we're seeing a big stampede as usual in the (INAUDIBLE). The yield of the three-month Treasury is below one percent. That is considered just about as safe as you can get. Like putting it under your mattress.
Right now the Dow Industrials are down 495 points at 9,819. The NASDAQ is down 121. And oil is down more than $4, below $90 a barrel. That is a good thing. But it's coming out of a lot of distress -- Heidi.
COLLINS: Yes. We were just talking with Poppy Harlow about how that can be good and bad. There's like this little tiny area where the price of a barrel can really be good for both the consumers and those who are selling it.
LISOVICZ: A stimulus, just like another stimulus perhaps. Once it trickles down, every time you fill your gas tank.
COLLINS: Yes, absolutely. So, we're now down 533 points, or so. Susan, we're just going to keep you here for a little while because we want to stay on top of these numbers. And we are seeing a little bit of action from the Fed today. No move on interest rates, but they are making some decisions.
LISOVICZ: That's right. And you know, there really wasn't much response. Like, you know, let's be honest about that. You know, there are a lot of folks thinking that the Fed should step in with a rate cut. And the next scheduled meeting is at the end of the month.
In the meantime, we're seeing a lot of distress here. The Fed continues to become the banker of last resort. Today, expanding the both broadening and expanding the amount of money it is lending to financial institutions in another effort to try to freeze up the credit market.
But, a lot of folks here are hoping that a rate cut will come. And we've had at least a couple of Fed governors speaking today. So, we'll be paying close attention to that. The Federal Reserve also paying interest on commercial banks reserves for the first time. One analyst that I talked to today, Heidi, said you know, optimism is the foundation of courage. Not a lot of people feeling courageous today. We've got about 100 stocks here at the New York Stock Exchange rising. 3,000 to the downside.
COLLINS: Boy, oh boy. All right. Well, we are watching closely. We're going to keep the big board up for everybody now throughout the rest of the program here. Susan Lisovicz, thank you for that.
Want to take a moment to bring in CNN's Ali Velshi who is standing by with more information about this.
Ali, boy, we are down about 572 points now. And it has happened very quickly. The market's been open for like an hour and 10 minutes and we are well below that 10,000 mark.
ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: That's not typical. As you know, Heidi, you and I talk and Susan talks. We talk a lot in the morning. Usually we see these kinds of big moves downward towards the end of the day when we've had some news.
Now, here this is interesting. This is the news that is a carryover from Friday. But, you'll on Friday when that bailout bill passed and the Dow was actually up and ended up, ended the day lower. And then we saw that response in Asian and European markets today and carrying through to U.S. markets.
So what's happening here is as we've discussed, this isn't mathematics. This isn't science. This idea of the health of the U.S. economy is sentiment. And this is negative sentiment that has got people worry that we still have job losses. We saw 159,000 of them on Friday. We still have home prices going lower. And the bailout package, while it was something that the markets wanted, it's not going to solve those problems. And this seems to be a recognition today, in very large form that this economy remains in recession.
But I should tell you that money is made in recessions. People can make money in recessions. There are still companies that do go up. And what Susan and I watch very closely are those numbers. You know, we've got those numbers highlighted on the board. But, it's actually the numbers to the right can which often tell you more of a story. The volume. How many people are buying when a stock goes up. How many people are selling when it goes down.
COLLINS: There's your confidence number, huh?
VELSHI: That's what it is. So, you know, again, this is not what you call -- and the reason I hate to bring introduce new words to this, but this isn't a capitulation. This isn't where people are throwing in the towel and saying, I don't trust this, I can't do it.
There's still money to be made in this market. And for people with 401(k)s, remember that. There's a very different sentiment when people start running from the markets. We've gone below 10,000 for the first time in four years. That had people (AUDIO GAP) a number.
Does any of this fundamentally change the way you should be investing for your retirement, particularly if you're more than 20 years for retirement? Probably not. This is what happens. Markets go down, then they go up again. So again, these steps, even though they're big, 500 points, they're steps. And until we see people running for the gates and not able to get out, we don't -- these things come and go and I wouldn't be too panicked about it.
COLLINS: And hey, Ali, I just want to take a moment to welcome our international viewers.
VELSHI: Right.
COLLINS: Because certainly they are watching us now. And everything is intertwined. What we're talking about, the world markets, the global markets. And when we saw the Asian markets and European markets plunge today as well, explain to people how they are all intertwined.
VELSHI: Well here's the thing. It's actually partially because of those international markets are lacking confidence that this is happening. And it's not just that they're trading stocks lower. The fact is, when people say is this going to be like the Great Depression, it's different on a number of levels. And one of those levels is that the world is so intertwined, in terms of its trading relationships that the rest of the world would like the United States to continue to be healthy so that they can buy the rest of the world's products.
And when the U.S. looks like it's weakening and people are purchasing less, that affects world economies, you know, just all over the place. Because they can't sell as much to the U.S. So, there's two combined effects here. One is, banks. Central banks, pension funds, hedge funds, big investor firms around the world are crippled by this subprime mortgage crisis because they invested in some of these products that were being sold in the United States. So, they may not have their own mortgage crisis, but they're feeling the effects of this. Second, U.S. consumers are being weakened. And that affects companies around the world. That affects companies around the world that make things and sell them to the United States. So --
COLLINS: Hey Ali, we've got the holidays coming up. What is going to be happening? I mean, this is a huge time, particularly for the United States to be really trying to get consumers out there to the malls, to the stores, even online. Using what? Their credit cards.
VELSHI: Well, Black Friday, right after Thanksgiving is called Black Friday, because traditionally that was the day that retailers had been operating in the red, meaning the not profitably until then. And that was the day that they became profitable.
So, this is the most important time of the year for America's retailers. And it comes at the worst time because now we're looking at a further downturn in the economy. That is very, very dangerous. And there's a cyclical effect there because if we don't think we're going to buy as much this Christmas, companies won't order as much, they won't hire as many part-time workers for season. Those part time workers don't make as much money to buy things.
So, you understand how this becomes self-fulfilling. And that's the place we're in. There's no mathematics involved here. This is self-fulfilling. People are not confident about the economy. That means they might think that they're going to lose their job and that means they spend less. And that ultimately is the bottom line. Combine that with this credit crisis where people lend less money.
So, you have fewer people lending, fewer people spending, fewer people borrowing, fewer people working. That's a recession. The good news is we do come out of this at some point. We do come out of it. Because at some point everybody hits bottom and says, all right, you know what? I'm going to invest in this property. I'm going to build in this city. And that's how we start to grow again.
COLLINS: Just trying to think about when that will be, Ali. So, let us know when that's going to happen and come on back.
VELSHI: We will get through it.
COLLINS: Definitely.
Hey, Susan Lisovicz is standing by. She's on the floor of the New York Stock Exchange. Susan, if you can tell us because you are there, what's the mood? What are you seeing, and what are investors saying there are on the floor?
LISOVICZ: Well, a lot of people are just drained. And they feel pretty much that -- confused I think at this point. Because we're not sure what exactly is going to happen. Did Congress take too long with passing this legislation? One guy told me today, he said, you know, it's as if Secretary Paulson said icebergs ahead two weeks ago and then Congress debated for two weeks as to which direction they should --.
COLLINS: Yes. They're lot of people who think that.
LISOVICZ: Right. In the meantime, Ali has said I think very well, he's articulated that the stock market is just really not the heart of the problem. It's reacting to the credit crisis, to the matter that the credit markets are frozen.
And we had a couple of very good examples of that last week. One is mortgage applications. Weekly mortgage applications last week were down 23 percent. It's not just because people are worried about their jobs. Home prices have become so low that there are people who are interested in buying. They can't always get a mortgage.
We saw auto sales down last month, about 30 percent collectively for the group. Again, sure, people worried about gas prices. They're not buying what Detroit has to offer. But Toyota was in that mix. People are having problems getting access to credit. So, that's on a consumer level.
What about the corporate level? General Electric, which is considered bell weather for the U.S. economy. Makes lightbulbs, makes movies. It has a big financial unit. It's considered very stable, very -- management's always held in high regard. And the company goes to Warren Buffet for cash infusion, basically. At a very good price. What does that tell you, when a company, GE, with triple-a credit rating is basically going to Warren Buffet for a little help.
That tells you the situation in the credit market. And what's happening is the economy is slowing down. And it just makes it worse. Yes, it makes it worse going into the holidays. It makes the situation with Detroit worse.
When companies were about to start hearing companies report their quarterly profits. When companies are having problems, they miss the forecast. They may not expand. They may not upgrade. That may not mean an extra shift. It may mean they might downsize to protect themselves in this cycle. So you see, it just becomes worse. What could have been just a normal garden variety recession becomes that much worse. And one of this things you absolutely need is access to credit.
You know, we're going to get through this. It's just a matter of time. And in the meantime, what you're seeing as you're playing out here, all the distress is playing out in the markets.
COLLINS: Yes. And if people didn't understand it --
LISOVICZ: -- seemingly on a daily basis.
COLLINS: Right. Right. If people didn't understand before how the credit crunch, the credit freeze you know, play into all of this. They are unfortunately going to be forced to see it because we are looking at certainly some of that today.
VELSHI: Hey, Heidi.
COLLINS: Yes, go-ahead, Ali.
VELSHI: I want to just give folks some perspective that they can look at. You know, we sort of tell them the Dow's down 10,000 points. But as Susan was saying, it's kind of a number. It's round. There's no significance to it.
But, you know, when you look at your 401(k), you're looking at in terms of percentage, gains or losses, obviously. So, let's just give you some perspective on percentage gains and losses.
Major markets are down about 30 percent from the highs that they hit last October. In October, we kept on hitting new records every day. We're down about 30 percent from there. About 26 percent from the beginning of the year. So many of you look at your 401(k)s in terms of performance by quarter and from the beginning of the year. So, from the beginning of the year, if you're looking at a 401(k) that's down between 20 and 30 percent, you're not out of whack with the rest of the market. That's one thing to remember.
The other thing is that inflation historically runs at about 3 percent. It's running higher than that substantially this year. Almost double. And the stock market historically returns about 11 percent. That's evened out over a 10-year period. So, somewhere between there is where your earnings should be for a year. So your growth in your portfolio needs to be closer to that 11 than that 3. We're talking about losing the today, for instance, so far, more than 1 percent.
Now, it doesn't sound like a lot. One percent, big deal. Or, two percent. Last week when we lost 777 points on the Dow, you know, that was 5 percent or something of that nature. 6 percent, I'm not sure what the number was. But the point is, you want to be gaining numbers like that in the course of the entire year. To lose that in a day can be very alarming.
COLLINS: Absolutely. And all I can think of --
VELSHI: But, as Susan just pointed out and as we both pointed out, markets go up and down. You buy low and you sell high.
So, this is the wrong time to disengage from markets entirely. I want people to keep that in mind. If you are very worried, consult a financial adviser. If you don't want to pay them a percentage of what you earn, then get one of those financial advisers that works like a lawyer. You can pay them for an hour or two. And even if you don't have that much money, the fact is that guidance for an hour or two. If you want to go to money.com and go to the financial -- personal finance section and go to the Money 101. At least understand where we are. It is dramatic. But it is not an indication that you should get out of markets necessarily, depending on your circumstances.
COLLINS: I have still not heard that from a single solitary person, analyst or otherwise to pull out completely. Just not the right thing to do.
Hey guys, both of you do me a favor. Stick around. We're going to take a quick break and come back. And we're going to keep our eye right there on the Dow Jones Industrial averages. We're back in a moment.
(COMMERCIAL BREAK)
COLLINS: Welcome back, everybody.
We are watching the Dow Jones Industrial Averages -- the big board. We're watching the credit. We're watching the global markets. We're watching it all, because that is the picture we have right now on a Monday morning. Dow Jones Industrial Averages resting at 9,843.
We have been talking with Ali Velshi and we now have Gerri Willis, and Susan Lisovicz is there at the New York Stock Exchange as well.
Gerri, I want to begin with you. We keep talking about this word confidence, we keep talking about how we have a financial crisis, and then also the credit freeze. Do you think people are slowly but surely starting to understand where all of this is going?
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, if I could tell you where all of this was going I would own an island in the Caribbean some place. The thing about markets is you don't know what's next.
Let's have a little context today. Dow moving below 10,000. The first time we came through 10,000 the other way, broke through 10,000 -- 1999. And what was the best selling book from that year? "Dow 36,000," a very optimistic book about where the Dow could go. And just as you have people today talking about how this is the Great Depression all over again, perhaps some of these pundit statements are just not right.
I think individual investors now do a gut check. You've got to just make sure that you continue your plan and not listen to this market noise. A lot of it is driven by fear, frankly. A lot of the professionals fearful here. That's what happens in a market like this. It tends to be driven by emotion. But you can really step back and think through your own plan.
The best moves right now, check your own asset allocation. Know what you're invested in. Make sure you understand what kinds of mutual funds you've bought and what they're invested in. No. 2, take a look at that debt you have on the books. The short-term debt, the credit card debt, that is costing you a lot of money. You want a guaranteed 14, 15, 16 percent return on your money, pay off your credit card debt. And then have some money of the sidelines. You need some emergency savings to put on the sidelines.
Now I have to tell you, if you have more than say 3 to 5 percent of your money in stocks that you're going to -- pardon me -- let me restate. If you have money in stocks right now that you're going to need before three years, five years, in the short term, you want to convert that. You want to be invested in something else. You don't want your short-term money in stocks. You never want your short term money in stocks. That's nothing new from what we have said over and over again.
So again, you just want to think seriously about where am I? Take stock. What do I owe? What is it? Pay down that credit card debt. And start thinking long term. Long term is the way to think right now.
COLLINS: It's the only way to think.
Ali, I know you're coming up at the top of the hour, in just a couple of seconds so I'm going to wrap it up for now.
Again, we're watching the Dow Jones Industrial Averages. Several other numbers out there. The global market as well. But right now, that big board shows us resting below 10,000 -- 9,872.
Guys, thanks so much. Sure do appreciate it.
I'm Heidi Collins. Join me again tomorrow morning starting at 9:00 a.m. Eastern.
And for now, the CNN NEWSROOM continues with T.J. Holmes.
