Morning News

Shiffres: Contribution of Rising Energy Prices to Inflation 'Benign'

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BILL HEMMER, CNN ANCHOR: Want to get back to Wall Street right now where the Dow has made a bit of a rebound, down only 37 points. We saw that remarkably lower a short time ago. There you see it on the Big Board, upper-left screen, right next to INDU, down about 35.

The Nasdaq has been the big mover thus far. It has been down about 35 minutes ago well over 200 points, but it too has bounced back, stabilized somewhat, now down 126 points.

On that note, Wall Street has been on a wild ride in recent days. Let's talk for some answers with Manny Shiffres, an associate editor of "Kiplinger's" magazine live this morning in our D.C. bureau.

Manny, good morning to you.

MANNY SHIFFRES, "KIPLINGER'S" MAGAZINE: Good morning, Bill, thanks for having me on the program.

HEMMER: Not a problem at all. It is good to have you. Let's start with the obvious. What do you make of the down attitude we are seeing thus far?

SHIFFRES: Well, it looks like the market is reacting to economic numbers that came out in Japan, which indicated that GDP there had fallen for the second consecutive quarter, which technically means that Japan is in recession, and Japan's stock market fell, Europe fell, and U.S. just continued the trend.

I don't think you should get too hung up over one day's activity or one particular number coming out of a foreign country.

HEMMER: Manny, let's take that just a bit deeper. Two years ago, you remember what happened on the Pacific Rim with South Korea, with Taiwan, with Indonesia, with Malaysia. Is this a hangover from that, that we're seeing?

SHIFFRES: I don't think so. I think that is a problem specifically to Japan. They just haven't gotten their economic act together. Although we think that over the long-term, Japan's outlook is quite promising. But, we have a very positive situation in this country, inflation remains moderate, earnings are growing very well. And there is a lot of reasons to be bullish. One reason not to be bullish, however, one reason to be cautious is the tremendous valuations accorded to the high-tech stocks that so prominent in the Nasdaq.

HEMMER: Let's side-step tech for a second and get to oil and gas prices. Do you see this as the precursor to inflation? And if it is, how will that be reflected in the markets?

SHIFFRES: Well, it's clear that rising energy prices, rising gasoline prices, in particular, will help push up the inflation rate. But the question is: Where do we go from here? And I can't imagine that energy prices will rise much higher from current levels. So that means that looking out six months or a year, the contribution to energy -- to inflation will probably be moderate to lower.

HEMMER: Manny?

SHIFFRES: Yes.

HEMMER: OK. The other bit of news coming out this week, obviously tomorrow with retail sales coming out, those numbers will be out then, Thursday and Friday, producer price index, consumer price index, a whole lot of information this week. What are you think, as we embark now on this Monday morning not even an hour into this week's trading day?

SHIFFRES: I think it's really important for investors not to get hung up over one particular number, two particular numbers. The important thing is the trend. Inflation is picking up a little bit because, primarily, of rising energy prices. I would think that, looking out from here, again, the contribution of rising energy prices to inflation will be benign, might even lower the inflation rate over the longer term.

So I just don't think people should get too hung up over those numbers.

HEMMER: Good deal, fair enough. Manny Schiffres, "Kiplinger's" magazine, live in D.C. Just to let you know, Mann, the Dow minus 36, Nasdaq 122, as we are speaking. Thanks, again, we'll talk again soon, all right?

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