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CNN Sunday Morning

Interview With Robert Robbins

Aired July 21, 2002 - 08:51   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.
MILES O'BRIEN, CNN ANCHOR: Market jitters will likely jump a notch or two as Wall Street opens tomorrow. So, what can we expect? For some insights, we turn to Robert Robbins, an independent investment strategist joining us from Grand Rapids this morning where he's vacationing. Of course, we've ruined his vacation by making him to get up early for this. We're sorry about that, but what the heck. Robert, good to see you.

ROBERT ROBBINS, INVESTMENT STRATEGIST: No problem. Glad to join you.

O'BRIEN: All right. I don't see your crystal ball. Maybe it's just out of frame.

ROBBINS: I don't have one.

O'BRIEN: I invite you to look into it now and give us a sense of what lies ahead and what we should do -- or maybe more precisely what we shouldn't do?

ROBBINS: I'll try my best. First of all, I think we need to understand as best we can what is the problem here. The problem here is trust in corporate America, especially accounting. Enron, WorldCom, Tyco, and then on Friday, Johnson & Johnson, the manufacturer of band aides and baby bottles turns up to have a manufacturing problems in their plant that may have caused 141 blood disorders among people around the world.

So that is the problem. How is that problem going to play out? Why are investors reacting this way? Well, they're afraid that any company that they have in their own holdings might be the next Enron, Tyco or WorldCom. Well, that is not very likely, but there still will be a few of them, and they are going to be falling fast, and the dominoes are going to be falling fast over the next few weeks, because we can see the silver lining on these storm clouds and imagine the sunshine afterward.

August the 14th, corporate executives are going to have to take an oath that their financial statements are accurate and complete to the best of their knowledge and belief. Otherwise, in the future, if they are not, they are going to face jail time for perjury. So we are going to have the best accounting and the best quality of earnings we have ever had, with potentially the best stock market valuation we've had in an environment where we don't have a lot going wrong right now. The economy is recovering, and inflation is very low and probably going lower.

O'BRIEN: All right. But trust is a very difficult thing to earn, and it can be gone in an instant, and that is what has happened here. And people, do you think as of August 14, everybody is going to wake up and suddenly trust those corporate titans who have been fleecing us?

ROBBINS: Well, you know, bull markets don't go up 50 percent overnight, but this is going to be a truth serum for corporate executives in that sense, in their financial statements, and that trust will be rebuilt overtime. But you will find, I think, that you won't -- you just won't see the kinds of shenanigans that have gone on for decades with companies, and we'll get back to realizing the great, you know, values and perspective of long-term investing, and that is that the stock market has been by far the best place to be of any investment category over long periods of time. Better than real estate, far, far better than bonds, and incredibly better than money market accounts and CDs.

But you've got to stay in and ride, you know, the roller coaster to some degree and be willing to not make the huge mistake that I think too many people are making nowadays and walking into their brokerage firms and saying "get me out, I can't stand it anymore." Well, if you have to to meet financial obligation, you have to. But if you don't, you don't. The best buying opportunities in U.S. history are all made in environments of fear about stocks and deep disappointments.

O'BRIEN: All right. So you're inviting our audience to fly against the face of all the bad news, which is a hard thing to do, and start buying. What should they be looking for?

ROBBINS: Well, I think, you know, people should be orienting themselves to high quality, diversified growth and value stocks.

(CROSSTALK)

ROBBINS: Blue chips. Well, yeah, blue chips. I would recommend that the broad numbers of people invest in the average stock market blue chip, and then they can probably sleep a lot better at night and not be faced with wondering whether their company is going to so easily go bankrupt.

O'BRIEN: You know, I don't want to put you on the spot and ask you for names, but are there sectors that you favor and should we be looking to price to earnings ratios? What is the key to finding those good values in the blue chip world?

ROBBINS: The best values probably will be in the stocks that tend to hold up the best in this bear market decline, or are naturally hurt for a brief time within long-term out-performance trends, companies that do better than the market average over the long-term. An example might be Citigroup, for example. Owns Salomon Smith Barney, the brokerage firm.

Naturally, you know, the brokerage business has gone way down in this bear market, but it will come way back if we have the kind of bull market that I think can happen. The last 20 years, bull markets have seen a 50 percent rise over one to three years. So, the financial service companies, of course, benefit from a long-term, more stable economic environment that we tended to have in the last two decades with the Fed's anti-recessionary policies and a much smoother economy and much lower inflation.

I think we'll see financial service stocks do great. I think any of the growth areas and health care and technology long-term will be good. People think technology has just been terrible and it's the end of the world for technology, but technology stocks are above where they were and outperformed since the bear market low in 1998. They just got overvalued. They went up between four-fold approximately, 350 percent. So they've come almost all the way back.

O'BRIEN: All right. I suppose one good piece of advice you can give in technology is to try to at least understand what the company does before you buy it, because that is where a lot of people got burned. They didn't even know what they owned.

ROBBINS: People need to know what they're buying. Yes, they do. They need to do some work on stocks.

O'BRIEN: All right. Robert Robbins, an independent investment strategist, normally here in Atlanta, up enjoying the cooler climes of Michigan this weekend. Thank you very much for taking time from your break to be with us.

ROBBINS: Thank you. My pleasure.

O'BRIEN: All right.

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