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CNN Saturday Morning News
Interview with Rajeev Dhawan
Aired June 07, 2003 - 07:47 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.
HEIDI COLLINS, CNN ANCHOR: After a three year bear market, stocks are suddenly on the rise. Yes, you're hearing it right. Since hitting lows in early March, the Dow Jones industrial average is up about 20 percent now. The NASDAQ has jumped about 30 percent, and the S&P 500 Index is up about 25 percent.
So, are we seeing the beginning of a bull run? And where should you be putting your money? That is the million dollar question.
So we put that question to Rajeev Dhawan.
He's the director of the Economic Forecasting Center at Georgia State University and he is right here in Atlanta now with us this morning.
Thanks for being here, sir.
RAJEEV DHAWAN, ECONOMIC FORECASTER: Good morning. Heidi.
COLLINS: We're so excited that you're going to tell us all how to make a whole bunch of money this morning, right?
DHAWAN: Really?
COLLINS: You didn't know that?
My first question for you, the market has been looking really good all week. Is everybody a bull right now?
DHAWAN: I think quite a few people want to be bulls. But it's like the Sammy Sosa incident, it has happened. There was something wrong with it, we don't want to believe it, but at the same time we have question marks about what happened before.
COLLINS: What's wrong with it?
DHAWAN: Well, if we look at the Wilshire 5000, which is the, basically the market cap, that has done three rallies and three dips in the last one year. This is the third one of them after the third dip. So it's up by 20 percent. We would love it to keep on going, even I would love it to keep it going, but I have reservations.
COLLINS: What about those reservations? Is that something that you see investors feeling to this very day, this psychology of it? How long and how much will it take for investors to start feeling confident about putting their money back into the market? DHAWAN: I think first and foremost is the investor confidence in the accounting accuracies and stuff like that. And what happened is every time we talk that the Enrons and the WorldComs are behind us comes along thing called Healthsouth and other stuff. So we need to have no more incidents like that. We need to have the economy and in jobs. Remember yesterday we barely added any jobs. We actually lost 20,000 jobs or so. So at least it's not as bad as it was three months ago when we were losing around more than a quarter of million jobs.
But going forward, for this rally to be sustainable, there has to be a real job growth. There has to be real sales in -- growth in sales for the companies. If you look at the revenues of most of these companies, they have been flat for the last two years. And they've been showing you some earnings by cutting costs, by laying off people and cutting on the other corners, but not by actual sales growth.
So for this rally to be sustainable, the sales growth of the companies has to come back.
COLLINS: So how does this affect you and me?
DHAWAN: Well, you and me are both young. Don't go by the heck of a lot.
COLLINS: Yes, we are. Aren't we?
DHAWAN: Right. So we have a long time to play the market and the other stuff so we can make our decisions easily. We are in for the long run.
But people who are above 50 or 55, just close to retirement, they thought they were about to retire in a year or two, but because of the declines in the last three years, they're holding back. They need to be very careful. You just don't have to be in the stock market or just in, entirely in the housing market, or in the bonds. You may have to do a mixture. You may have to go over your financial planner, tell him your risk profile, tell him what your cash flow requirements are in the next few years -- are the kids out of the college, am I going for some other big expansion -- and then do the decisions accordingly.
COLLINS: So, and people would, or some analysts, anyway, would certainly say that the market never really moves uninterrupted. Do you see there being a big possibility for another slide backwards?
DHAWAN: It's possible. That's why I'm saying, looking back at the history of the just last one year, three times the market rallied more than 10 percent and every time it came down and touched a low bottom, the same number almost, in a year. So, we -- and the reason was that one time there was a scandal. The other time the war clouds gathered up. The third time the war became really imminent.
And the funny thing is that the rally started before even the war started. So people were betting that OK, one part of the uncertainty is resolved, the war is going to get over. The issue is after the war when does the things come back? So I'm optimistic there's going to be a recovery by the end of the year, or maybe early next year. But how strong that recovery would be will depend upon the consumer confidence in between in the next three months. If we somehow panic or if the SARS becomes a problem or some other country blows up, then it's going to not keep this rally going.
COLLINS: So many factors to be thinking about, as usual.
Rajeev Dhawan from Georgia State University, we appreciate your economic forecast, if you will, this morning.
Thanks so much for your expertise today.
DHAWAN: Thank you, Heidi, for having me.
COLLINS: You bet.
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 June 7, 2003 - 07:47 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: After a three year bear market, stocks are suddenly on the rise. Yes, you're hearing it right. Since hitting lows in early March, the Dow Jones industrial average is up about 20 percent now. The NASDAQ has jumped about 30 percent, and the S&P 500 Index is up about 25 percent.
So, are we seeing the beginning of a bull run? And where should you be putting your money? That is the million dollar question.
So we put that question to Rajeev Dhawan.
He's the director of the Economic Forecasting Center at Georgia State University and he is right here in Atlanta now with us this morning.
Thanks for being here, sir.
RAJEEV DHAWAN, ECONOMIC FORECASTER: Good morning. Heidi.
COLLINS: We're so excited that you're going to tell us all how to make a whole bunch of money this morning, right?
DHAWAN: Really?
COLLINS: You didn't know that?
My first question for you, the market has been looking really good all week. Is everybody a bull right now?
DHAWAN: I think quite a few people want to be bulls. But it's like the Sammy Sosa incident, it has happened. There was something wrong with it, we don't want to believe it, but at the same time we have question marks about what happened before.
COLLINS: What's wrong with it?
DHAWAN: Well, if we look at the Wilshire 5000, which is the, basically the market cap, that has done three rallies and three dips in the last one year. This is the third one of them after the third dip. So it's up by 20 percent. We would love it to keep on going, even I would love it to keep it going, but I have reservations.
COLLINS: What about those reservations? Is that something that you see investors feeling to this very day, this psychology of it? How long and how much will it take for investors to start feeling confident about putting their money back into the market? DHAWAN: I think first and foremost is the investor confidence in the accounting accuracies and stuff like that. And what happened is every time we talk that the Enrons and the WorldComs are behind us comes along thing called Healthsouth and other stuff. So we need to have no more incidents like that. We need to have the economy and in jobs. Remember yesterday we barely added any jobs. We actually lost 20,000 jobs or so. So at least it's not as bad as it was three months ago when we were losing around more than a quarter of million jobs.
But going forward, for this rally to be sustainable, there has to be a real job growth. There has to be real sales in -- growth in sales for the companies. If you look at the revenues of most of these companies, they have been flat for the last two years. And they've been showing you some earnings by cutting costs, by laying off people and cutting on the other corners, but not by actual sales growth.
So for this rally to be sustainable, the sales growth of the companies has to come back.
COLLINS: So how does this affect you and me?
DHAWAN: Well, you and me are both young. Don't go by the heck of a lot.
COLLINS: Yes, we are. Aren't we?
DHAWAN: Right. So we have a long time to play the market and the other stuff so we can make our decisions easily. We are in for the long run.
But people who are above 50 or 55, just close to retirement, they thought they were about to retire in a year or two, but because of the declines in the last three years, they're holding back. They need to be very careful. You just don't have to be in the stock market or just in, entirely in the housing market, or in the bonds. You may have to do a mixture. You may have to go over your financial planner, tell him your risk profile, tell him what your cash flow requirements are in the next few years -- are the kids out of the college, am I going for some other big expansion -- and then do the decisions accordingly.
COLLINS: So, and people would, or some analysts, anyway, would certainly say that the market never really moves uninterrupted. Do you see there being a big possibility for another slide backwards?
DHAWAN: It's possible. That's why I'm saying, looking back at the history of the just last one year, three times the market rallied more than 10 percent and every time it came down and touched a low bottom, the same number almost, in a year. So, we -- and the reason was that one time there was a scandal. The other time the war clouds gathered up. The third time the war became really imminent.
And the funny thing is that the rally started before even the war started. So people were betting that OK, one part of the uncertainty is resolved, the war is going to get over. The issue is after the war when does the things come back? So I'm optimistic there's going to be a recovery by the end of the year, or maybe early next year. But how strong that recovery would be will depend upon the consumer confidence in between in the next three months. If we somehow panic or if the SARS becomes a problem or some other country blows up, then it's going to not keep this rally going.
COLLINS: So many factors to be thinking about, as usual.
Rajeev Dhawan from Georgia State University, we appreciate your economic forecast, if you will, this morning.
Thanks so much for your expertise today.
DHAWAN: Thank you, Heidi, for having me.
COLLINS: You bet.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
