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American Morning

America Recovers: Andy Serwer of 'Fortune' Magazine Answers Viewers' Financial Questions

Aired October 12, 2001 - 09:44   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.
PAULA ZAHN, CNN ANCHOR: With the FBI's warning of another possible terrorist attack, and retail sales dipping and wholesale prices rising, you are probably wondering what in the heck the stock markets are going to do today. That's when we turn to Andy Serwer, "Fortune" magazine, for information on that, and we're going to move on to your questions.

Quick reaction to the numbers, and then we'll move on the individual questions.

ANDY SERWER, "FORTUNE" MAGAZINE: Yes, the numbers, the inflation number is kind of surprising and shocking actually that it's up a little bit. And the retail sales are down, it's distressing, but maybe not that unexpected.

ZAHN: All right, time to put you on the line right now. Our first question comes from Mark from Missouri. He says, "My mother is retired and has had most of her money in her High Income Corporate Bond funds since the mid 1980s. They still produce a nice income, but have been hit on the principal side the last few years. Do you see them coming back in the future?"

SERWER: I'm not sure why the bonds have been hit on the principle side, Mark, because interest rates have been coming down, so that surprises me a little bit. However, if you're locked into a nice yield like that, I would just stick there and not move it around.

ZAHN: All right, next question from Ruth Snider of Norfolk, Virginia. She says: "Is peace not a major component of a robust market? How then might the current state of affairs affect the possibility of a bull market run?" That's a good question.

SERWER: Yes, it is a good question, Ruth. And you know, a lot talk about the markets going up during times of wartime ,when the guns start firing, the stocks go up, and that's true, but ultimately, you do need peacetime for the economy to really kick into gear. Just think about the past 10, 15 years. The 1990s an incredible time of peace and an incredible time for the stock market.

ZAHN: All right, Susan Finch, or Finch Susan, as this note says asks the next question of you. I think it's probably the other way around, but you never know. Sorry, Susan, if we flipped it around. "Do you think that the interest rates on the home loan are going to drop anytime soon? Is there any special interest rates for military, active duty?"

SERWER: OK, interest rates have dropped. I think they will continue to drop a little bit as the economy continues to weaken, and as far as special rates for the military, usually there are. You've got to check that out a little bit, especially with banks and insurance companies, like USAA.

ZAHN: And are they significantly better than the average consumer might get?

SERWER: Yes.

ZAHN: So there really is an incentive to go dig a little bit and find out more about that.

Roy Blanchard is our next questioner. "Is it a good market for selling your home now? We are in the $2 million range" -- boy, a lot of people would like to be in that range -- "Is it a buyers market or a sellers market?"

SERWER: Roy, I've got some bad news. It's not a great time to be selling your house right now.

ZAHN: Particularly an expensive home like that.

SERWER: Right, exactly, particularly an expensive home. I don't know where you live, but it's not a great time. It is more of a buyer's market than a seller's market, but we haven't really tested that quite yet, but not a great time.

ZAHN: All right. Bill Rogers has the next question for you: "I am at the low end of the scale, mid-income person, and I have accumulated $18,000 to invest. Is mutual funds still the best bet over a regular savings account?" Good for Bill.

SERWER: Yes, well, that's nice you saved that money, Bill, but I've got to tell you that the rates on the saving accounts right now are just anemic, because interest rates have come down so far. It's kind of scary to get in the stock market. Maybe what you might want to do is put half in cash and half in the stock market. I would recommend a diversified mutual fund with that small an amount. I know it seems like a lot to you, but relatively speaking, you want to be safe and diversified a little bit.

ZAHN: Yes, and just a quick thought on mutual funds in general, because over the years, the rate of performance, has it exceeded the average of the average stock on the...

SERWER: Well, it hasn't actually. That's a good point, Paula, and what you really should do is look at an index fund that matches the stock market, and that way you've got low fees, and you won't trail the market, you won't feel bad if your fund has gone down. You've got to really be wary of tech stocks that everyone has been pouring into over the past couple of years. Don't get caught in that trap.

ZAHN: Fine job, Andy Serwer, expected no less of you.

SERWER: Rapid fire.

ZAHN: Yes, it was very good, and you had some very good questions out there, so keep them coming. We will even use them next week if we couldn't get to them today. And you're welcome to refresh them next Friday at this time.

SERWER: Great.

ZAHN: Thanks, Andy. Have a good weekend.

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