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Many Expect Stock Markets to Come Around

Aired July 16, 2002 - 14:01   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: If you're just now checking on your stocks today, you probably think it's an average, even a quiet, session. The Dow is down a bit, the Nasdaq is up a bit, no big deal.

This morning, though, the Dow plummeted more than 230 points, and took its time digesting a rosy outlook from Fed chief Alan Greenspan. The normally circumspect Greenspan was downright bullish when he went before a Senate committee.

CNN's Kathleen Hays is live from D.C. with the details -- Kathleen.

KATHLEEN HAYS, CNN FINANCIAL CORRESPONDENT: Hi there, Kyra. Well, and given the carnage we have seen in the stock market lately, what seems like unending stream of corporate scandals day after day, you might have thought that the chairman might be little bit defensive, maybe even hint, as some on Wall Street thought, of a cut in interest rates. Nothing doing. As far as Greenspan is concerned, the economy is on track. In fact, the Fed's forecast for growth this year is even stronger now than it was as recently as February.

He doesn't have his head in the sand, either. He knows that the fallen stock prices makes us less wealthy, and maybe we are going to spend a bit less, but basically he continues to believe that the economy is going to just keep on growing.

And you know, as I said, he's not just basing his forecast on some need to talk Wall Street into feeling better at this point. As far as consumer spending goes, he notes that low mortgage rates and rising home prices are giving us the incentive to refinance. That puts more money in our pocket. We take some equity out of our homes. Even in tough times, people keep on spending.

For businesses, he notes that previously high levels of excess inventories, too much stuff on the shelves, no need to produce. That condition is pretty much gone, another reason for businesses to start investing again. But he notes that the breakdown in corporate government -- governance could, at some point, erode business confidence. He points out that business is based on trust, and that's why falsification and fraud are so damaging, damaging to our free market system of capitalism. And in fact, he says that when you see an instance of failed government, it is an instance of a failed CEO.

Mr. Greenspan, under tough questioning, stopped short of saying, We need new laws. He basically thinks the structure is pretty sound, but he does think we need stiffer penalties, maybe even criminal penalties for corporate fraud. Again, the buck has to stop at the CEO. The CEO has to be the one who puts things right, helps get the trust of investors back on track.

It's comforting, though, I think, that based on, we have to figure, some pretty sound analysis. The chairman of the Federal Reserve does not think that the recent falling stock prices is going to pull the economy down into a double dip recession, as some economists on Wall Street have forecasted.

Kyra, he remains, again, clearheadedly optimistic.

PHILLIPS: He always is. Kathleen Hays, thank you so much.

All right. Let's go live to the New York Stock Exchange. Take a look at the board right now. Here is the numbers. Right now, the Dow down 77, boy, what a switch from yesterday when we were at negative 400 something. Right now, negative 75, not nearly as bad as it was yesterday.

Now, if it is any consolation, brokers are suffering too in this wild and crazy climate, and CNN's Brian Cabell is live from a Charles Schwab office in Atlanta with a little evidence of that. He tells me he has even got his portfolio in his pocket -- hi, Brian.

BRIAN CABELL, CNN CORRESPONDENT: How are you doing, Kyra?

Listen, if Alan Greenspan's remarks had any effect on investors today, we certainly haven't seen it at this particular Schwab office. Most of the people we talked to didn't know about his remarks, and don't know anything about what he said today, and most of the people we have talked to have been very confident about the economy. However, we have found one dissenter, just walked in a little while ago, C.J. Pinajian by name.

You are concerned about what has been going on.

C.J. PINAJIAN, INVESTOR: Yes, I am. In the short run, I am concerned. I think the market has a bit of a no confidence vote out there for the common man. People work hard for their money, and I don't think they're interested right now in throwing into a market that they're just not quite sure where the money is going.

CABELL: What about you? Are you throwing money into the market?

PINAJIAN: Not right now. No, I am not.

CABELL: What are you doing with it?

PINAJIAN: I am keeping it, basically, in CDs and money markets, just for the short term, just to see what happens, and when things turn around a bit, I will jump back in.

CABELL: You are concerned about accounting at some of the bigger firms. PINAJIAN: Absolutely.

CABELL: What needs to be done?

PINAJIAN: Well, unfortunately, I'm one of the common men, so I can't exactly say. But, it sure appears that the big salaries and the stock options they're getting are just too much, and are taking away from people's retirement basically.

CABELL: Thank you very much.

PINAJIAN: You're welcome.

CABELL: Let's talk to the other side of the spectrum now. Ali Oruc, another investor who has been here for a good part of the day. Mr. Oruc, you're a little more confident about things, correct?

ALI ORUC, INVESTOR: Yes. I have been confident because a market isn't static. It could go up and down, up and down, and if you can't take hit, don't get in the kitchen.

CABELL: You are retired. What are you doing with your money right now?

ORUC: I'm just trading, I'm not investing. I'm trading -- you may call day trader.

CABELL: Have you lost much money over the last two years?

ORUC: No, no, no. Not really.

CABELL: Staying even, more or less?

ORUC: A little bit better than staying.

CABELL: All right. And when do you think the market will turn around?

ORUC: I think -- give market another six months. The earnings coming out, earnings going to be much better than first quarter, second quarter earnings going to be much better. So that will give confidence to the people.

CABELL: OK. Mr. Oruc, thank you very much. So Kyra, there you have it. We have point, counterpoint here at the local Schwab office in northern Atlanta. Most of the people, I should say, have been very confident. Most of the people are keeping their money, at least that we've heard from, are keeping their money in the market -- back to you.

PHILLIPS: All right. Brian Cabell. Thanks so much.

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