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New U.S. Sanctions against Syria; U.S. Calls on Syrian President to Leave; Dow Falls 300 Plus Points in First Minutes; U.S. Says Syrian Leader Must Go; Dow Drops 500 Plus in Early Trading; Dow Plummets in Early Trading
Aired August 18, 2011 - 09:59 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Straight to Secretary of State Hillary Clinton as the President of the United States just came forward moments ago calling for the resignation of Syrian president Bashar al Assad.
HILLARY CLINTON, U.S. SECRETARY OF STATE: Torturing opposition leaders, laying siege to cities, slaughtering thousands of unarmed civilians, including children. The Assad government has now been condemned by countries in all parts of the world and can look only to Iran for support for its brutal and unjust crackdown.
This morning President Obama called on Assad to step aside and denounce the strongest set of sanctions to date targeting the Syrian government. These sanctions include the energy sector to increase pressure on the regime. The transition to democracy in Syria has begun and it's time for Assad to get out of the way.
As President Obama said this morning, no outside power can or should impose on this transition. It is up to the Syrian people to choose their own leaders in a Democratic system based on the rule of law and dedicated to protecting the rights of all citizens regardless of ethnicity, religion, sect, or gender.
We understand the strong desire of the Syrian people that no foreign country should intervene in their struggle. And we respect their wishes. At the same time, we will do our part to support their aspirations for a Syria that is democratic, just, and inclusive. And we will stand up for their universal rights and dignity by pressuring the regime and Assad personally to get out of the way of this transition.
All along, as we have worked to expand the circle of global condemnation, we have backed up our words with actions. As I've repeatedly said, it does take both words and actions to produce results.
Since the unrest began we have imposed strong financial sanctions on Assad and dozens of his cronies. We have sanctioned the commercial bank of Syria for supporting the regime's illicit nuclear proliferation activities.
And we have led multi-lateral efforts to isolate the regime from keeping them off the human rights counsel to achieving a strong presidential statement of condemnation at the U.N. Security Council.
The steps that President Obama announced this morning will further tighten the circle of isolation around the regime. His executive order immediately freezes all assets of the government of Syria that are subject to American jurisdiction and prohibits American citizens from engaging in any transactions with the government of Syria or investing in that country.
These actions strike at the heart of the regime by banning American imports of Syrian petroleum and petroleum products and prohibiting Americans from dealing in these products. And as we increase pressure on the Assad regime to disrupt its ability to finance its campaign of violence, we will take steps to mitigate any unintended effects of the sanctions on the Syrian people.
We will also continue to work with the international community because if the Syrian people are to achieve their goals, other nations will have to provide support and take actions, as well. In just the past two weeks many of Syria's own neighbors and partners in the region have joined the chorus of condemnation.
We expect that they and other members of the international community will amplify the steps we are taking, both through their words and their actions. We are heartened that later today the U.N. Security Council will meet again to discuss this on-going threat to international peace and stability.
We are also working to schedule a special session of the United Nations Human Rights Council that will examine the regime's wide spread abuses. Earlier this week, I explained how the United States has been engaged in a relentless and systemic effort with the community pursuing a set of actions and statements to make crystal clear where we all stand and generating broader and deeper pressure on the Assad regime.
The people of Syria deserve a government that respects their dignity, protects their rights, and lives up to their aspirations. Assad is standing in their way.
For the sake of the Syrian people, the time has come for him to step aside and leave this transition to the Syrians themselves. And that is what we will continue to work to achieve. Thank you all very much.
PHILLIPS: All right, it happened. First, we had talked to you about the sanctions. Now we -- it is official. The president of the United States, we received a statement just about 20 minutes or so, now Secretary of State Hillary Clinton coming forward holding the official news conference calling for Syrian President Bashar Al-Assad, the Syrian president to step down.
Making the point clear it all centers around, as she says, the slaughtering of unarmed civilians, including children, during those pro-democracy rallies in Syria. OK. Also, developing story or the breaking news story that we've been following since half past 9:00, and that was the opening of the markets.
And look at that. The numbers continue to slide to the negative territory. Dow Industrials now down 440 points. We're going to continue to follow the markets for you and what it means to your wallet.
In addition to these developments that are continuing to happen out of Syria. Do you want to go to Alison Kosik or Zain Verjee first?
OK, Zain, stay with us. Alison Kosik, let's start with you. Bringing up the big board, Dow Industrials down 453 points now. We suspected this was going to happen. It's not getting any better as the minutes tick on, an hour and a half in.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, about --
PHILLIPS: Half an hour in, 30 minutes in now.
KOSIK: Half an hour in. We are seeing the losses on the Dow, Kyra, accelerate a bit. What's spooking the markets? More talk of recession.
The latest coming from Morgan Stanley saying that the U.S. and Europe are dangerously close to another recession within the next year. Morgan Stanley also lowering its global growth outlook for this year and next.
What's Morgan Stanley blaming? It's blaming policy mistakes meaning lawmakers here and in Europe. They didn't act fast enough to get a handle on these debt problems causing a loss of confidence both the consumers and with businesses.
An important caveat I just want to make here, Morgan Stanley says we're close, but it still does not expect a recession to happen. Still that headline really grabbing investors, sending them to the exits and the Dow now down 469 points. Kyra --
PHILLIPS: OK, Alison Kosik, still watching the numbers for us. Appreciate it. Now our other breaking news story and that is coming out of Syria. The president of the United States issuing a statement, you just heard from Secretary of State Hillary Clinton calling for the resignation of Syria's President Bashar Al-Assad.
Zain Verjee joining us out of London. Zain, critics though coming forward saying, what took so long? I mean, for weeks and weeks we've seen the video, even, you know, the video that's gone viral on the internet, showing the brutal crackdown of unarmed civilians there within Syria.
ZAIN VERJEE, CNN INTERNATIONAL ANCHOR: Well, the U.S. has come out and said Bashar Al-Assad must go. They have done it unequivocally and formally, which really increases pressure on the regime.
What's important here, too, is that the U.S. hasn't just come out alone and done it. You've got the U.N. that's going to be talking about Syria today. You've got France, Germany, and the U.K. just moments ago coming out and saying Bashar Al-Assad has lost legitimacy and he needs to face the reality.
So it's important that the U.S. is acting in lock step with the rest of the world and really isolating Bashar Al-Assad. Analysts I've spoken to though says Syria doesn't really care what the U.S. has to say here.
These sanctions will bite, but it's not going to be enough for him to shift his policy. What's important here they say and what we're hearing out of the White House today on Syria is this is also a message to the Syrian people, the U.S. is with you and also a big encouragement to the opposition, as well.
Will Bashar Al-Assad stand down because of the U.S.' statement? Unlikely.
PHILLIPS: Zain, another question for you as we continue to follow the markets here. I know you're following the markets, as well, overseas and the international reaction. Dow Industrials continuing to tank now in negative territory of 502 points.
Zain, as we watch these numbers and as you've been following the breaking news out of Syria, as well, you know, what is -- could -- is this going to be the type of situation where Moammar Gadhafi, where Bashar Al-Assad, as you pointed out, doesn't care about this call for resignation, doesn't care about these sanctions and will fight until the bitter end?
VERJEE: It's really unpredictable. Throughout the Arab spring and the situation in the Arab world, we just don't know how things will shake out. And that's actually what makes it so dangerous and has an impact on global politics and geo politics and the markets as well.
I think we should just also keep in context here too. Why does Syria matter to the U.S.? Kyra, Syria is literally in the middle of the Middle East. So if Syria goes down it really is going to reverberate throughout the region.
Syria is also a very important player in any future peace between Israel and the Arab world. Syria backs Hamas and Hezbollah, which the U.S. designates as terrorist groups. The U.S. has been trying for a long time to cut off the relationship between Syria and Iran.
Iran is Syria's only buddy. Lastly, if Assad goes and Syria goes down, there's a danger that there could be a great level of destabilization in the region, more so than we're seeing and many say that's not good for U.S. security there.
PHILLIPS: All right, Zain, we will keep talking about it. We've got Ali Velshi wired up to talk more about the Dow dropping. Ali Velshi, negative -- it's now hit negative territory, 507, now 511. I mean, this is brutal. This is --
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes. PHILLIPS: This is -- we knew it was going to be bad. Just looking at what's coming across the wires, as well. All the investors, the pictures from Wall Street, it's those images of everybody, you know, the head on the hand, like OK, what the hell are we going to do?
VELSHI: Yes, Kyra, I don't know if you can hear me. I can't hear you anymore, but I'll tell you what's going on here. We've got -- we have a number of things that have come together. I spoke to you half an hour ago about this Morgan Stanley report that came out that said that world growth, economic growth was slowing and that there was a greater chance of a recession.
We already went into Asian markets and European markets overnight and we had already seen lower markets. That accentuated that and then at 8:30, we got a jobs report. This is a weekly unemployment benefits report. That was lower than we expected. That was higher than we expected.
More people filed for unemployment claims last week than we expected. Only by a smidge, and this is the important thing to understand, Kyra. There is nothing that has happened today that is a whole lot of a surprise from what we knew.
We knew growth was slowing around the world. We knew Europe has problems. We know the United States has growth problems. We know we're not going gang busters on unemployment. Got some more weak housing data out. We're in this market.
You and I have done this probably three times before in our entire working history, Kyra, where everything moves the market. There's so much volatility and there's so much going on here. So that's basically the problem that we've got right now.
Investors don't want to be caught holding the bag when something happens to suggest that the world's headed into a recession. This is not an indication, Kyra, that the world is headed into a recession. It's an indication that investors are putting their money somewhere other than stocks.
I should tell you this. People are putting their money into gold. We've seen a brand new record in gold today. Well over $1800, I don't know what it was the last time I checked. Well over $1800 an ounce. You're seeing people put their money into the safety of U.S. Treasuries.
The 10-year yield is now lower than 2 percent, which means the government can borrow money for 10 years for less than 2 percent. That's what you call a flight to safety. That's what you're seeing.
So I hate so say it, Kyra, because it sounds like a lot of what I've been saying in the past. This is a flight to safety. This is people concern about what's going to happen to their money if they leave it in the stock market.
PHILLIPS: Ali, can you hear me now? I know you're having -- VELSHI: Yes.
PHILLIPS: OK, great. All right, stay with me. We've also got Alison Kosik from the New York Stock Exchange. Alison, as you look behind you, give us a feel for the mood, how the reaction has been, what's the vibe?
KOSIK: You know, people have been asking me all morning is this panic? This is not panic. This is fear. You know, when you hear Morgan Stanley coming out, you know, stoking fears about another recession. That causes investors to run for the exits.
You know, also one thing at play here is the volume of trades that are coming through here. It's much lower. There are fewer trades coming through this week. There are a lot of people on vacation. We're kind of back to those normal summer days where not many people are at work.
It's something different than we saw last week where traders and investors actually stayed home from vacation just to keep an eye on their portfolio. So that's also factoring in because when volume is lighter, it causes more volatility. That's why you're seeing these big spikes like we've been seeing.
But one thing I want to point out with this Morgan Stanley note that came out today. Everybody is kind of focusing on this headline. But you have to look at that kind of looks worse than maybe the contents of the report because if you look a little deeper you see that Morgan Stanley went on to say that it sees three reasons why the country would probably avoid another recession.
First of all, the pile of cash that companies are sitting on. Secondly, declining oil prices and the expectation that the U.S. Federal Reserve and the European Central Bank would eventually intervene if the recovery stumbles even more. These are things that we touch on almost on a daily basis.
But what you're seeing today is kind of that knee-jerk reaction to the headline. And also because of what's going on in Europe, their debt problems as well. But a lot of this is knee-jerk and it's fear based on what Morgan Stanley said about a possible recession. Kyra --
PHILLIPS: OK. So, Ali and Alison, Ali, maybe you can weigh in on this. It's like Groundhog Day. You know, here we are again looking at these horrible numbers.
VELSHI: Yes.
PHILLIPS: And talking about, Alison pointed out, we're staying home from vacation to watch our 401(k)s plummet. OK, so for the average viewer who's watching these numbers and they are, as Alison says, it's not panic, it's fear and they're afraid of what's happening to their money. You know, what do people like you and me need to do?
VELSHI: OK. This is - it's a good question, Kyra. I'm just going to take this out because I'm still having audio problems. But let me just answer this question for you. The stock market is here, right?
And over time, unless the world turns upside-down and it's not going to do that. Even if there's a recession, the stock market will go to here. That's what the stock market does over time. But when you zoom into little windows like we're in right now what you see is a lot of this.
It's very frustrating, but ultimately we bounce around for a little while and then something gets fixed and we start to move. This is in the worst we've ever seen, in the great depression, and in the recession that we saw in 2008. That is exactly what happened. No time in history has that not happened. So if you have horizon that allows you stay invested then you reposition, right?
If you had precious metals, you sell some of them because they keep hitting new records and you bring your portion down to whatever it was that you would have invested say 5 percent. If you have emerging markets, you sell and bring it down.
If you have cash, you start to invest it in some of these low areas or you hold on to it until you're feeling a little bit better. But you conduct yourself in that way because you can't influence this.
But remember, there's nothing about this that says this is the one time in history when stocks are going to go just -- they're just going to go down. Volatility is always what it looks like.
In 10 years when we pull it back or we look at 50-year chart, you won't even see this blip. But right now it's all we see, which is why everybody is focussing on it. Kyra --
PHILLIPS: OK. Ali, stay with us. Alison, stay with us. Dow Industrials down 474 points. Continues to remain in negative territory. We're going to keep talking about what that means for you. What it means for your money and what we could see going forward. We're going to take a quick break. More from CNN NEWSROOM straight ahead.
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PHILLIPS: OK. We're talking about your money this morning. We're not going to stop because what we're seeing Dow Industrials tanking right now negative 432 points.
And Ali Velshi, Alison Kosik, and now we have Paul La Monica from CNN Money with us to talk more about this. So Ali, let's start with you. Today, what has happened, particularly -- in particular, today?
VELSHI: Right.
PHILLIPS: I mean, it's rooted in the European banking system, these fears that are coming forward, right, because looking at its debt, the Federal Reserve looking at its debt crisis, how it's going to impact our banks now, which of course has all investors completely freaked out. VELSHI: Yes.
PHILLIPS: -- about their money.
VELSHI: Yes. So, look, on a daily basis it's something, right? If we didn't have a major report come out this morning from Morgan Stanley talking about the economy, we probably would still have seen a down market because markets are down in Asia and in Europe. But then Morgan Stanley came out with a report, which will probably look similar to the reports we'll see over the course of the next few weeks, basically saying we are downgrading the expectations for how much global economies will grow over the course of the year.
We expected that would likely happen, but finally someone has done the math and said it's going to be downgraded. They also said the case for the world going into a recession or a double dip has increased. They still don't think it's base case, but it's increased.
Now, remember, I want to take you back to 2008 when we used to talk about markets that did this. There's one key difference. Back in 2008, no matter how well diversified you are, everything went down. People really did take their money out of the market and may have kept it in safe storage in cash.
This is not the case here. Today you see a market that's going down fairly substantially. We've even seeing some recovery on the Dow. But you are seeing money going into gold, for instance, which hit a new record.
And you see money going into U.S. treasuries, the 10-year note now yielding or paying an interest rate of less than 2 percent. So when more people want to buy them, the demand goes down. You have to pay less interest on those and so the interest rate has come down. That is really, really historic.
I mean, we're now talking about people just saying, I don't know what's happening in the market, so I'm pulling my money out. I just want to make that distinction, Kyra, because that's not the same as people saying everything is going to hell in a hand basket.
They're saying I don't know what the next economic report is going to do to the market and I don't want that volatility. Logical decisions about what to invest in do not make sense this week. They didn't make sense last week. They may not make sense next week.
So this is just people pulling their money out until they get a sense of who is growing, who is not growing and who is going to get the world out of a recession, if anybody. Kyra --
PHILLIPS: All right, Paul La Monica, when can we get some sort of sense of who is doing well and not so well and then we know what to do and eliminate a lot of the fear?
PAUL LA MONICA, CNN MONEY TEAM: Unfortunately, I think it's going to take some time, as Ali mentioned. There's a lot of confusion, uncertainty is the word of the day, it seems. You know, all the past month or so now.
You know, you have to look also at the economic reports in the U.S. I don't think that this sell-off today is just about Europe and Morgan Stanley report. We had jobless claims going up again. That's not a great sign since everyone knows the employment picture is pretty bleak here right now.
You had consumer prices also, a key government report on consumer prices was much higher than expected in July, a lot of it due to gas prices. And that's got a lot of people worried.
The economy is slowing and at the same time consumers paying more for goods, maybe it's not really inflation in the classics economic 101 sense, but tell that to a consumer going to the grocery store and gas pump and paying higher prices.
It doesn't matter if it's not real inflation if you will. That I think that's spooking a lot of people right now.
PHILLIPS: All right, stay with us, guys. Alison Kosik, we'll talk to you right after the break from the New York Stock Exchange. Dow Industrials down 466 points at 10:21 Eastern Time. We'll be right back.
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PHILLIPS: I know what you're all thinking, what do we do? Stocks right now sinking, Dow Industrials down 442 points now as we look at the big board there, but our CNN Money team is on it. We've got Ali Velshi. We've got Alison Kosik and also Paul La Monica.
Our Richard Quest is now getting seated. Alison, I promised our viewers we get straight to you right after the other side of the break. I asked you this moments ago, how does it feel there?
You say you don't get a sense of panic. Just a tremendous sense of fear right now as you look over your shoulder and watch what's happening there on the floor of the New York Stock Exchange. KOSIK: Exactly. I just talked with a couple of traders and you know what they tell me that they're just not seeing anything good come out about the U.S. economy. Paul La Monica focused on this a bit.
You know, we had a bunch of economic reports coming out today. Jobless claims figures, they rose. That is certainly spooking the markets, that we're not seeing much improvement in the jobs market. We've got a regional manufacturing report. That's signalling that we're in contraction mode.
That's not the direction that you want to go in if you're in a recovery. We also got home sales numbers. They're down 3.5 percent. The housing market still stuck in the doldrums. And for most of us, for many of us, our homes are really where we have big chunk of our investment locked up.
When you see that the value of our homes going down and the fact that we can't put our homes on the market like we used to, that could also hurt confidence as well. The good news is that the loss is on the Dow are holding steady at 425, the Dow down 425 points.
We're seeing investors get out of stocks and go right to gold, gold up about 1-3/4 percent right now. But that VIX index that we watched, that fear indicator of the fear in the marketplace is jumping about 29 percent. Kyra --
PHILLIPS: Ali Velshi, you said that all of this is happening today. As we watch the numbers continue to tank there, the Dow Industrials now down 425 points, that this only makes a stronger case for the whole recession theory.
VELSHI: Yes. Well, it makes two strong cases. First of all, it makes a stronger case for the recession, but that's largely because people are saying it. This is Morgan Stanley coming out and saying what many others have said.
There's a case if we're going into a double dip. Virtually nobody has said -- everything is hedging. Nobody says there's a better than 50/50 chance of going into it. Nobody is saying it's the likely case.
They're just more people saying it's possible that it could happen, but for proper policy intervention by the European Central Bank and by the Federal Reserve. I want to remind you that it is that very intervention, whether you want to call it QE2, which stands for quantitative easing.
Or you want to call it, whatever you want to call it, it's the very thing that Rick Perry said that it would be treasonous if Ben Bernanke were to do it. Now you've -- really you've got the world saying the central banks are the only organizations with the ability quite possibly to keep this economy on sound footing. I don't know if Paul is still there.
But earlier Paul was saying to you we can't discount the fact we got inflation reports. We got a jobless report earlier today. We got a number of reports that were not great. There is no circumstance under which is combination of those three reports all of which we did not expect to be great, would have resulted in a 3.8 percent drop in the markets.
So what you have is an already jittery market and then you take little bits of information that on their own wouldn't cause this kind of a drop and it just piles on. That's the problem because everybody is jittery.
One last piece of information and they say I'm getting out of the market. The net effect here, Kyra, is we're looking at this, it's your 401(k) and you will make spending decisions on the basis of that. You'll sit there and say, you know what, maybe I'm not taking a trip like Alison said, maybe I'm not buying something new.
That's where you have a problem. Everybody is stalling. Everybody is just stopped in their place to decide what's going on. And we don't know what the answer to that is. That's where you're seeing it.
Final point, Kyra, the stock market is a reflection of the value and the earnings of the economies in the stock market. It is unclear that the value of those company or their earnings has changed. So what you're seeing is the bedding in the one place that you can place the bet.
The stock market is not the only indicator of the economy and it is unclear that the economy is universally bad. But this is the thing we get to look at as the -- it sort of feeds the reaction. That's what you're seeing.
PHILLIPS: Richard Quest, another question I'm asking as an investor, where will future growth come from?
RICHARD QUEST, HOST, CNNI'S "QUEST MEANS BUSINESS": And that is exactly the question that politicians now are starting to ask. The real challenge as Ali has just mentioned is that wherever you look, the policy options are simply awful.
You've either got to print money through quantitative easing or you have to run a very high fiscal deficit through government spending. And at the moment, you've got the United States slowing down, you've got Germany, you've got the U.K.
Just putting it into numbers today for you, we've had the main German market, the DAX, down more than six percent this morning. And into the early afternoon.
There is no reason why on this Thursday in August this should be happening, other than as Ali rightly points out, these little pieces of economic news. Because, look, when we had the fall -- when we had the falls two weeks ago, it was based on fear. Now we're starting to get falls based on fact. We know things are slowing down. These asset prices, Kyra, are bearing the burden.
PHILLIPS: Do you think policymakers around the world are simply out of ideas and that just contributes to the fear and the confusion and the lack of confidence?
QUEST: No. I don't think they're out of ideas. I think they're out of ability to perform any of the ideas.
There's a lot of talk in Europe. Every time the European Union, whether it's Sarkozy or Merkel or the European Commission or the ECP, they come together, they talk, they come out with a plan and everybody says it's not bold enough or not strong enough.
And you take the United States, for example. You've got the Fed coming out saying rates lower until 2013. But you've got the two dissenters coming out. You've got Rick Perry coming out.
So, there's a huge amount of noise. But what is seemingly lacking, at least as seen from the market's point of view, is hard action. And that's what they're looking for. Things are going down, not fast, but they are going down.
PHILLIPS: Ali?
VELSHI: Yes, you know, Richard brings up a very big point. And it's something we really have to pay attention to here in the United States. You know, we complain a lot about the stimulus. $800 billion. Did it work, did it create jobs or did it not?
Do you know how much money the Federal Reserve put into this economy? It is in the trillions. The European Central Bank, the Swiss bank, the Bank of Canada, the Bank of Japan, all of these banks over -- the central banks over the years, since 2008, have put trillions upon trillions of dollars to stabilize this economy.
Now you've got politicians in the United States talking smack about that and saying it's the wrong thing to do. We may handcuff ourselves because the Federal Reserves and the central banks around the world can make instant decisions, and they have access to more money than our governments do. And I think it's something we have to -- voters and listeners -- have to understand that while tough talk sounds great, this could be very, very dangerous tough talk to say that there shouldn't be any central bank intervention.
PHILLIPS: Richard, stay with me. Richard, stay with me. Ali Velshi, stay with me. We've just got to get a quick break in, guys. I promise we'll continue this discussion. This is the only place to be to find out what's happening to your money right now as we watch the markets tank. Dow Industrials down 464 points.
Do go away. We'll continue to tell you what this means for your money, your savings, and what you should do next.
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PHILLIPS: If you're just waking up, if you're just turning on the television, just tuning in, OK, gotcha.
Dow Industrials now down 448 points. Ali Velshi with us. Also, Richard Quest. Guys, you know, how many times -- I feel like we're just going back in time and doing the same thing over and over again. Right when we think everything is kind of getting better, you know, we get word that we're in trouble once again.
And, Ali, just to kind of lay it out for everybody that is just tuning in. Dow industrials sinking because of the various reports that we have seen come out this morning. And it just took a matter of minutes for the numbers to dive.
VELSHI: Yes. It was very strong right out of the gate. Look, we're seeing a lot of volatility. Which means when we see days like this, we see 500 swings to the upside. I should say, we've had a lot more to the downside than the upside. This month has been particularly brutal. And this is another one of these days where -- I call it irrational because generally speaking, the price of a stock should be based on a multiple of how much that stock is going to earn. It's relatively mathematical. At this point, the price of most major stocks that you would hold in your portfolio or in your mutual fund that forms up your 401(k) or IRA, it's not rational, it's not related to how much that company is going to earn.
But here is the new mystery. The new mystery is are they going to earn less than they thought they would because there's a slowdown all over the world? Are your clients in Europe - is a major company's clients in Europe going to buy less? Are those companies' clients in America going to buy less?
This is the new mystery. We don't know how to price stocks. So, the stock market is just about stocks, which is one piece of the economy. The other piece of the economy are housing, interest rates, jobs, the most important piece. We are making very slow progress on jobs, but as we saw at 8:30 this morning, the number of jobs, number of people who applied for first time benefits last week has gone up a little bit from the week before. Just a little bit.
Under normal circumstances, it wouldn't be enough to move the markets just even a tad. But we are so nervous that you are seeing these exaggerated moves, and the attention of the world is now moving to the central banks, European Central Bank, the Federal Reserve here, and the other central banks in the world that say what tools do they have to try and kick up the economy. It's what Richard said, policy tools, that's what they're talking about. Did they lower interest rates? In most cases, interest rates are very low. Can't lower them. What else can they do? Can the Fed print money?
This is where the options are starting to focus on now, Kyra.
PHILLIPS: So, Richard, what do you think? Is that a good idea? The fact that Bernanke has talked about printing more money. Good idea, bad idea?
QUEST: You've got no choice! This is the environment that you're in.
ook, I want to make -- there's one thing that you have to say, and it's uncomfortable to say to one extent. And when you get comments like Rick Perry's and treasonous and the sort of comments he made concerning the Fed and Ben Bernanke, the markets take those sort of comments quite seriously. And they take them with a certain amount of unease.
These are --as the one word again and again and again people are talking about, global economy, particularly in developed worlds, is dangerous. Morgan Stanley talked about it. Other economists are now saying - Christine LaGarde says it's a dangerous time. And anything that creates a crisis of confidence, such as calling the Federal Reserve chairman's actions treasonous or treacherous -- I understand that might be a political point that will to come to play later in the year. But we are standing a very, very difficult time. And frankly, those sort of comments, you can see the sorts of unease it creates.
VELSHI: And if I may, Kyra, here's the issue. Back in 2008, at the end of 2008, when governments didn't really know what was going on, it was the central banks of the world who came together and said, while there is no credit available we will make credit available to each other, to financial institutions, and even to corporations. It was unprecedented in history that corporations could borrow money from the central banks of the world.
Now, what you have today is a political situation in America and all over the world where it is evident that government -- that politics is not coming together to solve these problems. Ideology is keeping people apart. The only hope we have for sensible policy making is at the central bank level, which in most countries is separated and divorced from the political process.
So, when you start putting political strings on the central banking process you start -- this is what worries the markets. If politics are going to dictate what we do, I'm getting out of the stock market.
PHILLIPS: Ok, guys, stay with me.
QUEST: OK - no --
PHILLIPS: Richard, hold that thought! Hold that thought! We're going to take a quick --we've got to make money, pal. Look, the Dow Industrials are down -
(LAUGHTER)
PHILLIPS: -- 460 points.
VELSHI: Somebody has to!
PHILLIPS: Somebody's got to make some money, because if we don't have corporate profits, we are going to really be in trouble. So, hold on, guys. We're going to go to Alison Kosik from the New York Stock Exchange just after the break. We've got our entire CNN Money Team working on this news.
All about your money. We'll be right back. (COMMERCIAL BREAK)
PHILLIPS: All right, our CNN Money is still on top of the breaking news. Dow Industrials down 472 points. Ali Velshi and Alison Kosik with me right now.
You know, Ali, you know, we were kind of laughing before we went to break about, hey, we've got to take a commercial, we've got to make money. But in all seriousness, you're talking about what we're seeing here. Kind of raises the case, right, for a recession and the only way to prevent a recession is corporate profits.
And if you look at companies across the board and all the various balance sheets, I mean, they're not doing so badly. I mean, we're in a completely different environment business-wise than we were two years ago.
VELSHI: Yes. You're right. A, they're not doing so badly. B, they can borrow money. Again, I want to remind people why this is not 2008. In 2008, nobody could borrow money, including companies with great credit ratings. And that money was expensive.
Right now, money is cheap. The yield on a ten-years note in the United States, the benchmark bond against which your mortgages are set is two percent. Under two percent. A mortgage, a 30-year fixed mortgage, under four-and-a-half percent in the United States if you have good credit.
So, there are a lot of indicators that are actually not bad. Here's the thing, Kyra. We've been talking for a few weeks, ha, is there a possibility of a double-dip recession? Now, all of sudden, Morgan Stanley comes out with a reporter that said, there's a possibility of a double-dip recession, not the main case, but there's a possibility.
So, now, we react to the facts that somebody was reacted to the fact that we've been talking about it.
You and I have had this specific conversation I would say three years ago, Kyra, I'd say we've done it before that, where we know that this becomes self perpetuating. And until it stops, until some big hedge fund around the world or a group of people, all of a sudden, collectively say this is really undervalued. I need to get in.
And I'm having those conversations with investors, professional investors and individual investors who say, what do I buy right now?
So, we're not -- this is not capitulation. This is not people saying I'm completely gone. This is extreme volatility. It's a razor thin edge but that's the difference right now, Kyra.
PHILLIPS: Talk about value. Let's talk about gold and what that --
VELSHI: Yes.
PHILLIPS: And, historically, if you look at what's happening with gold, we know a what that means.
VELSHI: Yes. Well, gold is this hedge against inflation. It's a hedge against the U.S. dollar going down. But I have to remind people, gold still has a value. So, right now, we're looking at gold above $1800. I'm just trying to check what the last price was for gold. Here it is -- $1820 something.
ALISON KOSIK, CNN CORRESPONDENT: eighteen twenty-one, Ali.
VELSHI: And gold is -- gold is still something that you have to sell at some point. It can still go down which is why the safest, most cautious money is going into bonds of actually into cash. We did a report on Money.com that people are buying more safes, like people are actually holding on to cash.
So, it's this flight into something.
But, Kyra, it's important to remember that there is money going into different places. So, it's not a complete wash.
KOSIK: Ali, you make a good point. You make a good point because in this case, this time around, it's different from 2008 where it was more of a crisis of liquidity. We're not seeing that -- we're not seeing that today because of what you were just talking about.
You know, corporate America is flush with cash. And Richard had pointed out this before. You know, I think, Kyra, you asked him, you know, what's it going to take to get this economy moving? And he said, well, it's going to have to be the Fed or the central bank stepping in.
But they've already done that. They've done that twice. They poured trillions of dollars into this economy. And look where it got us. It got us to this point where we're watching the Dow plunge this much. We're watching this litany of economic reports come in that are downbeat, to say the least -- on manufacturing, on jobs, housing.
(CROSSTALK)
KOSIK: I really --
(CROSSTALK)
VELSHI: You're right. But remember where we were.
KOSIK: I really question whether the Fed --
VELSHI: From 2009, the beginning of 2009 to now, to today, if you invested in March of 2009 to today, you are up by 50 percent or more -- 50 percent. So the Fed thing did work for a couple of years. It seems to have worn off at the point.
So, I guess -- all I'm saying is we need to keep those options open. I agree with you. I don't think it's decided that we need the Fed or central banks to step in. We do need them in Europe.
I don't know if it's decided. But it did work.
PHILLIPS: All right, guys, we're going to continue this discussion.
KOSIK: We've got inflation moving hotter as well, Ali. That's a factor, as well.
VELSHI: That is true.
PHILLIPS: OK, guys.
Energy prices, they're going back down. But that's not a bad thing.
OK. Guys, we're going to talk more. Quick break. It's 10:48 Eastern Time. Dow Industrials down 461 points.
We are watching your money as the Dow plummets just after 9:30 at the opening bell. We're keeping an eye on the numbers, your money, and what you should do next as an investor.
We'll be right back.
(COMMERCIAL BREAK)
PHILLIPS: OK. It's 10:50 Eastern Time. Just ten minutes before the top of the hour.
And if you have been watching your money since the opening bell at 9:30, you can see it is not good news. We are still in negative territory, an hour and a half into it.
Dow Industrials down 434 points. We got our entire CNN Money Team working every angle, from overseas with our Richard Quest to our Ali Velshi right here, Alison Kosik at the New York Stock Exchange.
And I'm now being told we're going to get Carter Evans from the NASDAQ just on the other side of the break.
Stay with us. More breaking news on what's happening to your money, straight ahead.
(COMMERCIAL BREAK)
PHILLIPS: Hi.
We continue to follow our breaking news. Dow Industrials down 434 points.
As soon as the opening bell rang at 9:30 Eastern Time, we saw the marks tank. It has got gotten any better. We are still in negative territory.
We haven't had a chance to go over to the NASDAQ yet.
Carter Evans is joining us live from there.
Carter, what are you talking about at this moment?
CARTER EVANS, CNN CORRESPONDENT: Well, you know, I tell you. The NASDAQ is actually fairing the worst of all the major indices right now. Charts of how things are looking.
This is the Dow, down 3.8 percent. You see that big drop right off the top. Here's where we are now -- down about 432 points.
The NASDAQ, though, off 4.4 percent, down 110 points. It's a much bigger percentage drop than the Dow or the S&P 500, which is down 4 percent or about 47 points.
We have seen a lot of selling, of course, right off the top. But I want to show you one green spot behind me. Unfortunately, this green is not good news.
This is the VIX. It's commonly known as the fear gauge. It's a measure of fear in the markets. It is up, Kyra, almost 30 percent today.
PHILLIPS: So, Carter, let me ask you. You know, we've had a few up-days in the market. Has everybody just forgotten about that? Is this -- you kind of wonder why that can't have some type of impact as well?
It's so easy to look at the negative but we have had a few up days.
EVANS: Right. And you've got a mix of people in the markets as well. You've got people that are scared, who may be calling up their financial people and saying, I can't handle this anymore.
But then you've also got the big institutional investors who still have to do their jobs. Of course, they're answering to their clients but also trying to make the best moves.
You know, we have big gains. Sometimes you want to cash in on those while you can. Now, we've seen a lot of those ups and downs the last week or so.
Nothing fundamentally though about our situation has really changed. Of course, there is fear about what's going on in Europe right now, certainly. But what it is is the fear of the unknown.
Other than that, the corporate earnings we're getting in are still really good. Lots of companies still holding their value as far as the amount of cash they have and as far as the amount of business that they have currently. Nothing has changed fundamentally to those companies in the last couple of days.
So, what you're seeing is fear driving the market.
PHILLIPS: And that's a point well made.
Richard Quest, is that that is the one way we are going to prevent a recession. And that's corporate profits. The balance sheets do look good at the companies. But I want to ask you, European markets also not doing well, we should point that, as we are watching ours, you are watching yours.
EVANS: Right. Yes, let's go ahead and see --
RICHARD QUEST, HOST, CNN INTERNATIONAL'S "QUEST MEANS BUSINESS": Yes.
PHILLIPS: Richard, go ahead, Richard.
Carter, stay with me.
Go ahead, Richard.
QUEST: Yes. And thing I would say about corporate profits just to round that out. Yes, corporate profits are doing very well and they are on the balance sheet and they have to decide what to do with the money, which is why you're seeing some companies return to shareholders through shared buybacks and you're seeing others doing some M&A activity.
But there is a weakness that is now starting to create or come into corporate profits that is also causing somewhat of a concern.
European markets, let me tell you roughly where we stand. The worse of the markets, I'm afraid, is in Europe at the moment. The FTSE is off 4 1/2 percent. The DAX in Frankfurt, 5 1/2 percent. The CAC is off the best part of 5 percent.
So, Europe is being pummeled, absolutely pummeled. It opened up badly. It never recovered.
The reason is Euro zone debt problems. I think seeming inability of European officials to get on top of it.
PHILLIPS: All right. Richard Quest, stay with us. Thanks so much. Carter Evans at the NASDAQ. We appreciate it.
Our entire CNN money team on the story.
You heard Richard -- the numbers are tanking in Europe. Well, look at our numbers, Dow Industrials down 447 points. What it means to you, your money, your investments, what you should do next. We're going to stay on this story.
We'll take a quick break. More from the CNN NEWSROOM straight ahead.
(COMMERCIAL BREAK)
