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American Morning
Five Digit Dow
Aired December 12, 2003 - 08:07 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.
BILL HEMMER, CNN ANCHOR: The five digit Dow, music to the ears of so many investors right now. The crossing of what is considered a psychological barrier showing now that investors think the economy perhaps again is on the firm road to recovery.
This was the scene yesterday, the Dow Jones Industrials, the Dow 30, anyway, finished above 10,000, 10,008, in fact, the first time since May of 2002.
The question today, can it last?
A good one.
Lauren Young, personal finance editor for "Business Week" here to talk about the stock market's fortune and what it may mean for everybody across the country.
Nice to see you.
LAUREN YOUNG, PERSONAL FINANCIAL EDITOR, "BUSINESS WEEK": Nice to see you.
HEMMER: Welcome back here.
YOUNG: Thank you.
HEMMER: It's been some time, although you were here yesterday, right?
YOUNG: Two days ago.
HEMMER: I think it was -- yes, two days ago.
Psychological, how much psychology is involved right now in this?
YOUNG: Big time psychology. You know, it's a barrier. Ten thousand, it's a number. We fixate on it. And it adds something called the wealth effect, where people start to feel wealthier. They cross this barrier and they think things are good.
HEMMER: You know, this is your business, but you say people are talking about stocks again. It kind of feels like 1998, doesn't it?
YOUNG: It definitely does. And, you know, even my own father, who's been sitting on the sidelines in cash, he keeps asking me should I be getting back in, should I be getting back in? I'm hearing it a lot from investors. So it does, you know, we've had this great run up this year. But remember that the Dow is 30 stocks.
HEMMER: Yes.
YOUNG: And they're 30 very big blue chip companies. It's not representative of the overall stock market.
HEMMER: So not to be misleading, what you want to watch is the S&P 500 and see which way that index goes.
Has that moved the same percentage gain as the Dow 30?
YOUNG: No, it hasn't. The S&P has not gained as much as the Dow in the period that we've seen the Dow, you know, fall and come back up again. So we really do want to be watching the S&P 500 in the weeks, months ahead.
HEMMER: Yes. Well, I hope your father is watching right now because we're about to get to your tips.
Buy mutual funds.
YOUNG: Yes.
HEMMER: We've heard that for a long time.
YOUNG: Yes, and I told my father this last night, too. Mutual funds, you know, there's been a big scandal. Investors don't care. They put $68 billion into funds in the past three months. So no big deal there. But it's a great way to stay diversified and have a professional stock picker doing it for you.
HEMMER: Number two, take your time getting back in, invest slowly. It takes discipline to do that when you see profits like we have in the last month.
YOUNG: Yes, it does. You don't want to make the mistake of putting all your money in the market right now because it's going to be bumpy in the months, years ahead. Do it every month, $50, $100 a month. That's the best way to go.
HEMMER: Number three, look overseas.
YOUNG: Yes.
HEMMER: Why? If we're doing so well?
YOUNG: You know what? Overseas markets are actually growing a lot faster.
HEMMER: Where?
YOUNG: Particularly in Asia. Mainly China and India. We're seeing growth of 10 percent there. Their economies are really expanding and there's a middle class that's emerging and they are spending.
HEMMER: Well, number four, take advice from a professional.
Where do you get that?
YOUNG: Well, you really want to talk to a professional financial adviser. One organization I like is the National Association of Professional Financial Advisers, NAPFA.
HEMMER: OK.
YOUNG: They don't do commissions. It's just fee only. Also, a certified financial planner, the CFP Board. I think we're putting up the Web sites there. Check those out, napfa.com and cfp.com.
HEMMER: Yes, and laurenyoung.com. Is it not fair?
One other thing you said, quickly, here. You say in the first year of recovery, smaller businesses do better and in the second year, what does better then?
YOUNG: That's right. Actually, the first year of recovery the small companies do better because they're much smaller and they can really turn on a dime.
HEMMER: So are you looking there now or are you looking to the bigger companies?
YOUNG: No. No. Small company stocks are up about 40 percent this year and they've done incredibly well. They've definitely done the best of anything. Next year the smart money is saying go midcap. Go to the medium sized company and the larger ones because especially with the falling dollar, they're getting a benefit. Their goods are cheaper overseas so people can buy their stuff and, you know, stock up.
HEMMER: Good to see you, Lauren Young.
YOUNG: Nice to see you, Bill.
HEMMER: Have a good holiday, OK?
YOUNG: Thank you.
HEMMER: OK. All right.
Bye-bye.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired December 12, 2003 - 08:07 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: The five digit Dow, music to the ears of so many investors right now. The crossing of what is considered a psychological barrier showing now that investors think the economy perhaps again is on the firm road to recovery.
This was the scene yesterday, the Dow Jones Industrials, the Dow 30, anyway, finished above 10,000, 10,008, in fact, the first time since May of 2002.
The question today, can it last?
A good one.
Lauren Young, personal finance editor for "Business Week" here to talk about the stock market's fortune and what it may mean for everybody across the country.
Nice to see you.
LAUREN YOUNG, PERSONAL FINANCIAL EDITOR, "BUSINESS WEEK": Nice to see you.
HEMMER: Welcome back here.
YOUNG: Thank you.
HEMMER: It's been some time, although you were here yesterday, right?
YOUNG: Two days ago.
HEMMER: I think it was -- yes, two days ago.
Psychological, how much psychology is involved right now in this?
YOUNG: Big time psychology. You know, it's a barrier. Ten thousand, it's a number. We fixate on it. And it adds something called the wealth effect, where people start to feel wealthier. They cross this barrier and they think things are good.
HEMMER: You know, this is your business, but you say people are talking about stocks again. It kind of feels like 1998, doesn't it?
YOUNG: It definitely does. And, you know, even my own father, who's been sitting on the sidelines in cash, he keeps asking me should I be getting back in, should I be getting back in? I'm hearing it a lot from investors. So it does, you know, we've had this great run up this year. But remember that the Dow is 30 stocks.
HEMMER: Yes.
YOUNG: And they're 30 very big blue chip companies. It's not representative of the overall stock market.
HEMMER: So not to be misleading, what you want to watch is the S&P 500 and see which way that index goes.
Has that moved the same percentage gain as the Dow 30?
YOUNG: No, it hasn't. The S&P has not gained as much as the Dow in the period that we've seen the Dow, you know, fall and come back up again. So we really do want to be watching the S&P 500 in the weeks, months ahead.
HEMMER: Yes. Well, I hope your father is watching right now because we're about to get to your tips.
Buy mutual funds.
YOUNG: Yes.
HEMMER: We've heard that for a long time.
YOUNG: Yes, and I told my father this last night, too. Mutual funds, you know, there's been a big scandal. Investors don't care. They put $68 billion into funds in the past three months. So no big deal there. But it's a great way to stay diversified and have a professional stock picker doing it for you.
HEMMER: Number two, take your time getting back in, invest slowly. It takes discipline to do that when you see profits like we have in the last month.
YOUNG: Yes, it does. You don't want to make the mistake of putting all your money in the market right now because it's going to be bumpy in the months, years ahead. Do it every month, $50, $100 a month. That's the best way to go.
HEMMER: Number three, look overseas.
YOUNG: Yes.
HEMMER: Why? If we're doing so well?
YOUNG: You know what? Overseas markets are actually growing a lot faster.
HEMMER: Where?
YOUNG: Particularly in Asia. Mainly China and India. We're seeing growth of 10 percent there. Their economies are really expanding and there's a middle class that's emerging and they are spending.
HEMMER: Well, number four, take advice from a professional.
Where do you get that?
YOUNG: Well, you really want to talk to a professional financial adviser. One organization I like is the National Association of Professional Financial Advisers, NAPFA.
HEMMER: OK.
YOUNG: They don't do commissions. It's just fee only. Also, a certified financial planner, the CFP Board. I think we're putting up the Web sites there. Check those out, napfa.com and cfp.com.
HEMMER: Yes, and laurenyoung.com. Is it not fair?
One other thing you said, quickly, here. You say in the first year of recovery, smaller businesses do better and in the second year, what does better then?
YOUNG: That's right. Actually, the first year of recovery the small companies do better because they're much smaller and they can really turn on a dime.
HEMMER: So are you looking there now or are you looking to the bigger companies?
YOUNG: No. No. Small company stocks are up about 40 percent this year and they've done incredibly well. They've definitely done the best of anything. Next year the smart money is saying go midcap. Go to the medium sized company and the larger ones because especially with the falling dollar, they're getting a benefit. Their goods are cheaper overseas so people can buy their stuff and, you know, stock up.
HEMMER: Good to see you, Lauren Young.
YOUNG: Nice to see you, Bill.
HEMMER: Have a good holiday, OK?
YOUNG: Thank you.
HEMMER: OK. All right.
Bye-bye.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
