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American Morning

Terry Savage on Greenspan and the Markets

Aired July 18, 2001 - 09:31   ET

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

LEON HARRIS, CNN ANCHOR: We've got to check other financial matters from corporate earnings to consumer prices, Wall Street is watching the numbers today and so is our guest, "Chicago Sun-Times" personal finance columnist and author, Terry Savage joins us again.
Thanks for sticking around, Terry. All right, now that the markets have actually started trading in New York right now. Any expectations right now?

TERRY SAVAGE, "CHICAGO SUN-TIMES:" Well, no surprise. The futures markets are down and so we will see the actual stock prices down at opening.

Again, it's not so much the earnings that's reported as the outlook for the future, which is a little bit of disappointing. Plus, stronger-than-expected growth in the economy. Consumer prices, though not up as much last month as they were in May, still higher than analysts had expected. Housing starts a little bit stronger. Now you think that's great news about housing.

HARRIS: Yes.

SAVAGE: It means consumers are still spending. It is good news It's what's keeping the economy from plunging into a recession. Yet there's a fear that today, Alan Greenspan will look around and say, "Oops, a whiff of inflation and consumers seem to be doing all right. Maybe we're not going to cut the interest rates again." That's exactly what the Street is really watching today.

HARRIS: And is that exactly what you're expecting him to say today?

SAVAGE: No, I think that he'll keep it is a secret. We have some more reports out before they meet again. We'll have tomorrow. We'll have leading indicators. We'll have another peek at consumer sentiment. They things seem to change almost weekly, certainly from month to month. And I think the Fed will wait until the last minute to make a decision on another rate cut.

And then the question is, will that one be the last cut? And of course, Wall Street loves lower interest rates. So we're all hoping that he'll cut again.

HARRIS: All right, at end of the day, if I have to ask you which one do you think would make out better, stocks or bonds? What do you think that it will be? SAVAGE: That's a tough one. I don't think you can paint off stocks in the same brush. I think there are enough stocks that have backed off here, that there's certainly some opportunities to buy. And don't forget, if interest rates go up, bond prices will fall. So bonds are not always the safe haven. When rates go up and you could buy a $1,000 bond with a much higher interest rate, nobody will give you $1,000 for your lower interest rate bond. So please don't think they're equal -- that bonds are safer than stocks.

What I would like to say to people who are getting those 401(K) statements is, just stick with your plan. Look, if these earnings reports will change next quarter. What you're trying to do is invest for the long term.

HARRIS: I'm glad that you got that one word in there about the 401(K)s. I wanted to ask you about that. We're going to take off right now. Thank you for sticking around with us this morning. Terry Savage.

I want to advise folks that as we said, Alan Greenspan's comments will begin hopefully in about a 28 minutes or so. And our Lou Dobbs of "LOU DOBBS MONEYLINE" is joining us for coverage of that. So make sure you stay tuned.

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