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American Morning

Getting 'The Savage Truth' About the Markets

Aired July 18, 2001 - 09:02   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: Well there are lots of new economic numbers that could shape the day on Wall Street today in measuring housing starts, consumer prices and corporate earnings. And next hour, Fed Chairman Alan Greenspan testifies on Capitol Hill. That's all.

Joining us now to talk about all that -- all of that is going to affect your bottom line is Terry Savage. She is the personal finance columnist for the "Chicago Sun-Times" and the author of "The Savage Truth on Money," which was, I believe, picked as one of the 10 best money books of all time, is that correct?

(CROSSTALK)

TERRY SAVAGE, "CHICAGO SUN-TIMES": When it came out a year ago, yes, Leon.

HARRIS: Something like that.

SAVAGE: But you know, those Savage truths go on forever, and we are seeing some of them as we see these earnings reports which is -- that it's basically a giant game on Wall Street this week.

HARRIS: All right. So what do -- what do you make of all that?

SAVAGE: Well, it is -- it's beat the numbers week. And I think a lot of people wonder why all of a sudden companies report earnings and then there'll be weeks and weeks of no earnings reports. It's because at the end of every quarter, companies tally up their books and announce how well they've done. The first half of this year, many companies fell short of what the analysts had expected.

I think analysts didn't realize business was so bad this winter and spring, nor did company management. So now instead of getting disappointed by these earnings, the companies have been guiding the analysts' estimates. It's a little mating dance that Wall Street plays. And today and this week, we see how well they've done in guiding what the analysts should be predicting about how well the companies did.

HARRIS: Well, we're looking at the futures numbers right now and they are all down -- well not really, really big ways -- big numbers going down but they are going down. Is that what you would expect at this particular point? SAVAGE: Well, it's very interesting. Earlier this year when analysts and management were not prepared for the slowdown, missing the earnings estimates by as little as one penny could result in a big decline in stocks, 10, 15, even 20 percent. Now most of the numbers we've seen yesterday and yesterday after the close and today were pretty much on target. They've even learned how to beat the estimates by a penny or two.

But then the analysts said, well, your earnings were OK but the sales forecast for the future might not be so good so even though you made your earnings last quarter, we're a little worried. And that happened with companies as diverse as Apple Computer last night, Intel. And earlier this morning, even AOL Time Warner, parent company I know of CNN, reported actually earnings that exceeded the Street's targets by a penny or two but then worried about the future. So I think it's just an excuse for a little bit of a sell-off at the opening.

HARRIS: Yes, OK, well that's what we're going to wait for then. You're going to stick around with us this morning and -- for a while. We're going to come back with you some more after the markets get open in about 25 minutes or so from now. So, Terry, stand by.

SAVAGE: Right, Leon.

HARRIS: You folk do the same as well.

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