Return to Transcripts main page

CNN Saturday Morning News

Reporters Notebook

Aired July 20, 2002 - 09:33   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: The white-knuckle ride continued on Wall Street this week. It's left many investors reeling, wondering just what to do.

(BEGIN VIDEO CLIPS)

UNIDENTIFIED FEMALE: It's very frustrating, but I just -- you know, you have to just think long term and recognize that this is just, you know, a very unique time, and often unpredictable. So you just have to keep going.

UNIDENTIFIED MALE: When you have your retirement money in there, you see it just, you know, slowly but surely dropping off, you're concerned about it, and you wonder, and OK, how long is this going to continue?

BILLY JOEL, MUSICIAN: And I think they have a good reason to be scared, you know, it's not just the market fluctuation, it's also what's going on with these big companies. Everybody's got questions about this. I think there needs to be a good accounting of what's really going on.

(END VIDEO CLIPS)

O'BRIEN: Now, I know you're scratching your head, going, That guy looks familiar. Yes, that was Billy Joel. We just ran into him on the street, and there he was. He shared with us his opinions.

For those of you who are still invested in the markets and trying to ride out the storm, we are joined by a panel of Wall Street watchers and Washington watcher to take your questions.

Kelly Wallace from the White House, she had a cup of coffee on us. Send us the bill.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: It's right here. Starbuck's, exactly.

O'BRIEN: Ahh, Starbuck's.

WALLACE: Ahh.

O'BRIEN: Little product placement there. CNN Financial News correspondent Christine Wallace -- Wallace? Christine Wallace? It's Christine Romans. I'm going to have to take our writer to task on that. Christine, I know who you are.

CHRISTINE ROMANS, CNN FINANCIAL CORRESPONDENT: You need some coffee, Miles.

O'BRIEN: Listen, where do you get your coffee?

ROMANS: Across the street.

O'BRIEN: You a Starbuck's person? Across the street. Oh, I know that place, yes. It's a good spot.

And Jim Ellis from "BusinessWeek" magazine. Coffee drinker, Jim?

JIM ELLIS, "BUSINESSWEEK" MAGAZINE: No, Miles.

O'BRIEN: Not -- no coffee for you.

ELLIS: Too strong for me.

O'BRIEN: Do you use tea? Too strong for you, OK.

Let's get to the e-mail, shall we?

And this one, this is the base -- most basic of all questions, it comes from Suzi May in Vernon, Vermont. "Between November of 2001 and April of 2002, the stock market seemed to be OK, and then went downhill. What happened? And why did it take Bush so long to realize it?" I'm paraphrasing her a little bit, I think there was a typo on there.

Kelly, let's start with you. Maybe Suzi missed the whole little Enron deal, but maybe we should remind people the big picture here.

WALLACE: Yes, and I'll let Christine and Jim talk sort of the nuances of the market. Certainly obviously after September 11 the market went down, of course concern of the terrorist attacks. And then we saw it go up, but of course, Miles, as you said, you had the Enron debacle, then you had WorldCom, and you started to have a string of these accounting scandals and questions about corporations, were they cooking the books?

And that started to erode investor confidence in the market. So we saw the markets start coming down.

In terms of the Bush administration's reaction, well, it was after Enron when this White House a few months later came forward with some proposals to try to help shareholders. After WorldCom, when the president was talking a lot tougher, obviously, Miles, the administration very, very concerned about the markets.

But what the president will try to do, we are told, is keep going out there, talking. He believes the fundamentals of the economy are strong. He's trying to get that message out to the everyday consumer. O'BRIEN: Christine, it seems as if Mr. Bush's statements thus far have not been a salve to the markets. Why not?

ROMANS: Well, they haven't, because this has all been unfolding in front of investors' eyes, one thing on top of the other. And at this point, there's nothing that can wash away the uncertainty. Even comments from Mr. Bush, even Mr. Greenspan, even some of the top Wall Street strategists.

They always say, you know, Miles, the thing that Wall Street hates the most is uncertainty. There's so much uncertainty out there right now. Investors don't believe analysts, they don't believe corporate managers, they don't believe auditors, they don't believe that the U.S. economy is recovering, and they don't believe in corporate profits.

And so there's not a heck of a lot of reason to step out and buy stocks.

And think about this, everyone. What were you doing in June 1997? That's where the S&P is sitting right now. And a lot of strategists are telling me they expect the S&P to lose more, maybe down to 775, 763. That would be half of what it was in March 200, when it hit its all-time high.

So it's a pretty...

O'BRIEN: Ouch, ouch, right.

ROMANS: Yes, some pretty scary levels.

O'BRIEN: I hope there's some credibility left in the world for us.

Now, let's do an e-mail quickly, if we could. This one will be for Jim Ellis, so listen up, Jim. "Forget growth stocks. The only true indication of a company's success is the pay. Yes, pay. Yes, share with the shareholders a dividend. Growth is a bamboozle word that means nothing. Pay out your profits to the shareholders. If it doesn't pay a dividend, don't buy it." And then he goes on and on and on. That comes from Gene V.

What do you think about that idea, Jim?

ELLIS: I think that while that's an interesting thing to say now, since we've seen so many stocks that don't pay dividends have done so poorly, a lot of the growth stocks, lot of the tech stocks, I think that that still might be a little simplistic.

There are a lot of reasons that companies set their dividend policies in a way that doesn't pay a lot of money out to investors. And I think that particularly in technology companies that need to reinvest, or technology companies that might not have a lot of earnings, I mean, if you only invest in dividend-yielding stocks, you would basically cut yourself off from a lot of young companies. So I think that that might be a little too simplistic. But I do understand the frustration there, because we've seen so many companies that didn't pay out anything that now have completely lost their value for investors, and it made them feel that they've been cheated.

O'BRIEN: All right, I wonder if there's anybody out there who owns technology stocks with no earnings any more.

Let's get a phone call in, this one from New York, where we have Buehler. Ferris, Ferris Buehler? Is that -- or just Ferris?

CALLER: Hi, Miles, how are you?

O'BRIEN: Mr. Ferris, how are you?

CALLER: I'm doing fine.

O'BRIEN: (UNINTELLIGIBLE).

CALLER: I'd like to ask a question. What effect has George Bush's tax cut that he hammered through last year that really rewarded the wealthy of this country, what effect has that had on the market?

O'BRIEN: Kelly Wallace.

WALLACE: Well, Democrats will certainly it had no effect, or it had a big effect on the markets, and that it increased the deficit. You had that $1.35 trillion tax cut last year, and then this year we're learning that the federal budget deficit will be about $165 billion, the first time the government will see deficits in about five years.

Democrats are blaming the tax cut. You won't be surprised, of course, Republicans and the White House will say that tax cut helped prevent the recession from lasting even longer and helped stimulate economic growth. They say growth was about 6 percent for the first three months of the year. That is a Washington debate that will continue.

And right now, that deficit, though, is about $165 billion, less money to spend and now big decisions to make.

O'BRIEN: All right, Christine, I got an e-mail for you here. This person says this. "I will not invest in the stock market again until new and highly rigorous laws are in place that restrict stockbrokers from falsifying and promoting IPOs and other stock offerings to feather their own and other insiders' nests." Bill Robinson from Raleigh, North Carolina, has that.

And that hits right to the issue we were just talking about, the credibility gap.

ROMANS: You know, and it's interesting, because a lot of experts say this is going to continue to unfold. Some would say more legislation, more rules isn't really going to help anybody, that you've got to sort of follow the rules that are already in place. And no matter what, there are going to be a few bad apples, a few greedy people.

A lot of folks say that most, most stockbrokers out there, most analysts out there are playing it straight. But right now, we're caught up in all of this almost hysteria about responsibility at those levels.

You know, I don't blame the person who wrote that e-mail. I mean, I don't know how, if you read the paper, you could really have much trust. That's why the stock market is having so much trouble right now.

O'BRIEN: All right, let's get a phone call in. Scott's on the line in Indianapolis. Hello, Scott.

CALLER: Hi, Brian. My question is, I know an independent that was pushing for the reforms long before the Democrats had ever mentioned a thing, and long before President Bush had decided to move on it. Wouldn't it be irresponsible for the Democratic Party to take responsibility or the moral high ground on this issue?

O'BRIEN: All right, that's a good one. Kelly, you want to take that one? That sounds like a Washington question.

WALLACE: It is, and it is an interesting point, because just a few years ago, Democrats even, and Republicans, kind of standing in the way of more regulations, more controls in terms of corporations and accounting and disclosure. So the caller raises a very interesting point.

Democrats will say, though, that they have been doing more, that they have been trying to sort of lead the push here, that Republicans are kind of stalling and holding back. They will point to the passage in the Senate of this bill, it's 97 to nothing, from Democrats who are saying the president should have come out and publicly endorsed the bill. The president is saying, Look, just get me a bill as quickly as possible that I can sign.

So both parties are posturing here, both parties are worried, because both parties have received contributions from many of these corporations. So they obviously have a difficult path here.

But right now, Democrats think they are more closely aligned with ordinary Americans, and that Republicans have a perceptional problem of being more closely aligned with big business.

O'BRIEN: All right. One final e-mail, this one goes to Jim Ellis, so listen up to this one, Jim. "Up until Tuesday, I had a sizable amount of money in stocks. As I watched the Dow go south for the last few months, I thought it was time to pull out. I put most of the money in bonds, but I also put a large amount in a gold fund. I've been told this was a bad decision, that gold was a very volatile place to be. Was this, in fact, a bad decision?" That from Judith.

And bonds aren't such a great place to be either, are they, Jim?

ELLIS: It's very difficult to find a good place to be in this type of market where everybody seems to be running for the exits at the same time.

I think that probably gold is probably not the best place to be. I know a lot of people want to seek the shelter of hard assets when there's market uncertainty like this. But probably gold's not it. Gold historically has not been a great performer, though it does always get a bump up when the market seems so sort of shaken like this.

I think that instead, this might be a time to be in, you know, sort of -- maybe in -- straight in cash, and sort of money vehicles, and try to figure out when the bottom comes. Now, if you can tell me when the bottom's going to come, I'll pay you some money and both of us can move to Fiji.

But I'm not sure if any of us can figure that one out.

O'BRIEN: All right. Anybody else want to wrap this up? Christine, do you have a final comment on that?

ROMANS: Yes, it's really important (UNINTELLIGIBLE)...

O'BRIEN: You can talk about Fiji if you want, (UNINTELLIGIBLE).

ROMANS: I'm very bullish on Fiji, actually.

O'BRIEN: Me too.

ROMANS: (UNINTELLIGIBLE) Tahitian Islands. No, I just want to make sure that I noticed on that, that e-mail, it also depends very much how close you are to retirement, especially if you're talking about your 401(K).

If you're getting close to retirement, folks, within the next 10 years or so, you really need to be taking some serious looks at your portfolios, because if we're in some sort of sustained -- I'm not saying we are, but if we're in some sort of sustained down trend, a longer, a more very unusual secular bear market after this, you need to make sure you're protected.

O'BRIEN: All right. Time to look at the Seely Posturpedic Fund, right?

ROMANS: Right.

O'BRIEN: All right. Kelly Wallace, Jim Ellis, Christine Romans, excellent panel, good questions from all of you out there. Sorry we couldn't get them all on, but we do appreciate your participation in the broadcast.

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