Return to Transcripts main page

American Morning

America's New War: Markets Drop Precipitously

Aired September 17, 2001 - 10:16   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.
LOU DOBBS, CNN ANCHOR: Andy Serwer of "Fortune" magazine is also with us, and I'd like to turn to you, Andy.

We've got this environment. It's awfully -- no, it's impossible to make anything of a market in the first hour of trading. But we have just gone below the previous decline of 585. We're now down 628 points.

What is your sense what we can expect here, Andy?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, you know, Lou, it's anyone's bet at this point. The trading strategies are all over the place, so we do know that a drop of 1,100 points in the Dow would prompt a one-hour halt in trading at the NYSE. We're a ways away from that, and it's hard to imagine we would hit it. Although, I should say, again, who knows at this point.

You know, I spoke with Michael Price, who's a legendary trader, and he suggested that, he thought the Dow might be up at the end of the day. Hard to believe at this point, Lou, but you and I both know how dramatically things can shift, even an ordinary type of day, and this is no ordinary day.

DOBBS: Exactly.

And, Christine, as we look here, about 623 points off on the Dow, what's your thought? Are we going to see a bounce around here, or is the direction set? How's that for putting you on the spot.

CHRISTINE ROMANS, CNN CORRESPONDENT: Yes, thanks, Lou.

I think the direction is set for today. I think 600 points is something that's very difficult to overcome in the very first few minutes of trading here. Traders were saying the path of least resistance was lower even before this tragedy on lower Manhattan. So now this evidence only inspires the sellers here today. We have to just see if it remains an orderly market. A lot of people are telling me over the past few days, nobody makes money in a panicky market by selling; you make money by keeping your long-term view, and they say, just as they did two weeks ago when people were worried about the market at a three year low for the S&P 500, know value on your stocks, know what your long-term view is, and don't deviate from that for short term reasons? DOBBS: We are watching some huge blocks in both Bank of America and Home Depot, large blocks going over in GE. Now those are highly liquid stocks, a lot of shares. What do you make of them?

ROMANS: Well, it's to be expected. With the market closed four days, you have a lot of buying and selling, the daily kind of stuff that mutual funds do. As well, those are very highly liquid stocks. GE remember came out and warned on this quarter taking 4 cents of its number, because it expects an insurance company it owns to lose the money because of this World Trade Center bombing. So a warning from GE, a big dog on Wall Street, one of the big stocks traders like to buy. It is the most actively traded stock here. No surprise here.

DOBBS: Andy, let me put you on the spot as well. You think the direction is set?

SERWER: Yes, I agree. I think it's going to be hard to overcome it. I think anyone who thinks we will end up in the plus territory may be dreaming.

Lou, just a point here, the largest Dow drop in point terms was 617 April of 2000. So just to give you a sense of how substantial the drop is today, and you know, we could break that mark of course easily.

PAULA ZAHN, CNN ANCHOR: I would like it jump in with all three of you, Lou and Christine, as you talk about some of these stocks that suffered some major drops. It makes one wonder, if some of them were overpriced to begin with.

DOBBS: That's a great point, Paula. Did you hear that, Christine? Paula was asking, if perhaps these stocks were overvalued to begin with. And, I will give you a first Christine's answer, then I will answer, if I may, Paula.

ZAHN: Sure, go ahead.

ROMANS: Well, this market, by earnings guidelines was definitely overvalued to begin with. But a lot of the stocks are trading there 52-week lows, and some folks are telling me that with so much negativity already built into these stocks, there might not be much more to go on the downside.

ZAHN: Paula, if I may jump in here quickly and answer that question, at least my perspective. When we talk about overvaluation, that's always subjective, and the market makes the determination ultimately. The market is making a very important determination today. I think your point, Paula, is exact. We still haven't had the full correction in some of these values, and you put that into today's activity, and see further weakness. This is not a simple reaction. But the one thing, and I truly believe this, markets are never ever wrong, and this market, however it ends, whether it ends, as Christine suggested, down from here or even a remote possibility perhaps, but still a possibility higher. The market is really working, and that's what's good of it. ZAHN: All right, just one last question for Andy who sits beside me, with the market down 580 points now. What about gold? What are we hearing about those trades?

SERWER: Well, you know, gold has been way up the past couple days, getting to that magical $300 price. It hasn't gotten there yet. It is around 290. But it has been a real bugaboo. Whenever we see panic, whenever we see turmoil, the price of gold goes up, and of course it's been up, but it's really not a great long-term strategy over the past 20, 30 years. The price of gold has gone absolutely nowhere, and for people who are thinking of selling stocks and buying gold, I would suggest that it might be more prudent to sit on the sidelines.

One other point I just want it make, Paula, and Lou sort of touched on this too a little bit, I think what we are forgetting here, one thing we may have forgotten is the markets are working. That was a huge concern, that there would be disruptions -- the telephones wouldn't work, the computers wouldn't work. Sure the market is down, but it is orderly. It is working. There are no malfunctions. A few stocks haven't opened, but that happens all the time anyway, and so I think we really should be thankful that the system is back.

ZAHN: Thank you so much, Andy.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com