Tough Week for the Stock Market
BRIAN NELSON, CNN ANCHOR: So, where do we go from here, and what should smart investors do now? With some thoughts on those questions, we turn to Jeffrey Rosensweig of the Business school at Emory University right here in Atlanta. Thanks for being with us.</s>JEFFREY ROSENSWEIG, EMORY UNIVERSITY: Great to be back.</s>NELSON: First thing, if you would: what do you think's going on with the markets? They're in this slide, and they do not appear to be responding any more to the tax cuts from the Fed back in January.</s>ROSENSWEIG: This was a tough week. I mean, I would say we are in a bear market. The technical definition of the bear market -- we're not quite there yet on the S&P;, but you know, it smells like a bear, it walks like a bear and it growls like a bear. I've lost money, you've probably lost money, most of our viewers have -- it's a bear market, and it is a tough week.</s>NELSON: And it's not just affecting one particular market. It's the Nasdaq -- the S&P; is down as well.</s>ROSENSWEIG: That's right, S&P; is down about 18 1/2 percent from its peak, and the technical definition of a bear market is 20, but Nasdaq is down about 55 percent. And many people are in Nasdaq-type stocks. Those are the tech stocks, those are the things that we were so euphoric about, and now we're really pessimistic about. When that's down 55 percent, we're in a bear market.</s>NELSON: So, let me rephrase that question, or ask it once again: Why do the market not seem to be responding to the earlier tax cuts?</s>ROSENSWEIG: Interest rates cuts, of course.</s>NELSON: Yes, interest rates cuts, yes.</s>ROSENSWEIG: As you know, and I think one reason is: Interest rates cuts take a while before they have their full economic impact, and we're impatient. And I think we're also are going -- junkies for more good news. I think already, Nasdaq turned up at the very end of the day Friday, kind of hope in instant (ph) recovery, but it may just be a dead-cat bounce. Because now there's talk that Greenspan will come back with our third interest rate cut. I have been predicting on CNN all along that he's going to have three cuts of at least 50 basis points. Some looking for another one as well. But again, we have to have the courage to realize it takes some time for these to have affect, that we will get all three cuts, and we'll probably a tax cut as well. And in about six months, the economy is going to look a lot better, but it takes a lot of guts to be buying into this bear market.</s>NELSON: What's the dynamic factor right now? Is it consumer confidence...</s>ROSENSWEIG: Exactly.</s>NELSON: ... in the economy?</s>ROSENSWEIG: Exactly. And you know, another measure that we -- talking about the Wilshire Index, which measures kind of the total value of the stock market -- it's down something like $4 trillion, which is almost quarter -- over a quarter of its value, so it's not just a psychological, that we're not feeling as confident. We are much more poorer than we were one year ago. A lot of us have lost a lot money, we've taken four trillion out of there, so we're just not as eager to go out and buy the big house, put in the new kitchen, buy the big Chrysler vehicle or GM vehicle. I think this will all turn around, but you're right, right now there's kind of a negative psychology going on in the market, not helped by the incoming administration, et cetera...</s>NELSON: Has the incoming administration sort of talked us into a recession? Are they partly responsible?</s>ROSENSWEIG: Brian, I think you're right. I think they've done a good job on some things, but it is as if they wanted to say, look how bad things are now, we'll come riding to the rescue, and they were the first ones to ever throw that "R" word out there, the word I almost hate to use, because we're not in a recession, and I don't think we will be in a recession, but they sure talked us pretty close to it.</s>NELSON: Very last question, very critical: Do you buy or sell in this market right now? We haven't got a lot of time, so...</s>ROSENSWEIG: You probably wait a few weeks as things are rough, but then you buy. I was on exactly 10 years ago, two hours before the Gulf War, and things were so down, and I said, this is the buying opportunity of the decade, and it proved to be. Within the next month, we are going to see the buying opportunity of this new decade, the first decade of the new millennium. It's going to take guts to buy, but look at the Nortels, the Nokias, the Suns, look at the great companies. They come down a few more bucks, get in on -- and now, don't call me in two weeks. Leave them alone for five years, and in five years, some of them will double or triple -- and some, who knows.</s>NELSON: Folks, remember, you heard it first right here on CNN. Jeffrey Rosensweig, thank you very much. Jeffrey is from Emory's school -- Emory University right here in Atlanta.