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Morning News

Savage: Investors Facing 'Gloomy Winter' in Stock Market

Aired December 20, 2000 - 11:09 a.m. ET

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

BILL HEMMER, CNN ANCHOR: Watching stocks right now, keeping a close eye on Wall Street. Right now, stock prices taking yet another tumble today. The open they went down. Still in the red right now. On the big board, the Dow Jones Industrial average, the number right next to the INDU, off 114 to 10469. And on the Nasdaq, the news is again tough to take: 97 on the negative side, down to 2414. That's more than 4 percent drop yet alone today.

Terry Savage, an investment analyst, adviser and personal finance columnist with the "Chicago Sun-Times" live from the Windy City.

Terry, 2418. What do we need other than a lifeline right now?

TERRY SAVAGE, INVESTMENT ADVISER: You need more than -- you need all the lifelines now. I think you need patience now is what you really need, and a lot of cash in reserve.

We are down 50 percent, 51 percent last I looked, from the highs of a year ago -- less than a year ago in March -- and 41 percent for the year. And it just shows people that when you get extremes, don't expect them in just one direction. That's an old Savage truth.

HEMMER: You said the word "patience," but let's go back to yesterday with the Federal Reserve really not moving. Did that hurt the market in the short term? And will that carry over as we look into January?

SAVAGE: Well, actually, Bill, the Federal Reserve's action, though a bit belated, is really kind of positive one. They jumped right to the side of "the next move will be down."

HEMMER: OK.

SAVAGE: But you remember, we talked last summer, saying that wherever -- the new economy doesn't care about interest rates, the new economy doesn't matter, it's a life unto its own. Well, now people are realizing that the customers for the new economy are the old economy. They've been feeling a crunch. They're not going to spend as much capital spending. And the new economy customers and the old economy tech stocks are all getting hurt in this.

HEMMER: So, Terry, let's talk about the positive frame, then. At what point do you believe a bump may come knowing that the Fed will meet again at the end of January? Is it mid-January after we get over the buying season, a disappointing season that's expected anyway?

SAVAGE: Now, we're going to see more earnings disappointments in the first quarter that haven't quite been anticipated. So I'm not sure the good news will come in the first quarter even if the Fed does make a move, which it probably will either in January or certainly at its meeting at the end of January to lower interest rates. But I think we have a...

HEMMER: Back to life and back to reality then, huh?

SAVAGE: Yes, we have a gloomy winter. And, you know, I was talking just last week with Daryn. Defining a recession in hindsight is not nearly as important for investors and consumers as planning in advance. So with all-time high credit card usage now and $600 billion charged up on credit cards that's being paid down piece by piece, the word is for consumers to slow down a little bit this holiday season, which they've gotten that word, and for investors to understand the stock market is not a quarter-by-quarter deal, it's a long-term 10- to 20-year proposition.

HEMMER: All right, Terry. Come on back in January. We'll talk more.

SAVAGE: We'll see you then.

HEMMER: Have a good holiday.

SAVAGE: You too.

HEMMER: Terry Savage live in Chicago; 118 on the Dow, 102 on the Nasdaq right now, both negative side.

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