Wall Street Week with Louis Rukeyser; 0235; Wall Street Week Wrap-up

I'm with them forever. For public broadcasting it. Why do you want for Wall Street. Our panelists are Frank Cappiello. Robert Bryce. And I'm Louis Rukeyser This is Wall Street Week. Welcome back. This will be our

final show of the current season. Before we go even a single step father I want to stop and make one thing moderately clear. Even in Washington you know there isn't much that's perfectly clear these days. My own clarification relates to the totally unfair and possibly spurious rumor that the reason we're taking off at this time is that our panelists have been so sickened by the state of the stock market that they require a summer long rescue. I know that's not true because one of the doctors told me so. In any event this being the last Wall Street week until October we have three mildly special events planned for you this evening. First we're going to look at the only kind of tape that most investors can look at these days without actively requiring an antacid. And speaking of videotape of course and through that electronic retrieval system we're going to revisit several of the highlights of these last eight months programs and listen again to some of the words of wisdom from our special guests. Second and absolutely law. So you can share the excitement as the flaming red rushes into their

embarrassed faces. We're going heartlessly to review our panelists confident New Year's Eve predictions which they told you exactly what to expect in 1973. And third with our now traditional triumph of hope over experience we're going to ask them to predict what's going to happen during our four month recess. And precisely what you want to be doing about it in order to be sure of becoming independently wealthy by the time we return. Don't mock it now this is the kind of advice for which other investors have to pay hundreds of thousands of dollars. And this is not necessarily any less reliable than what they get. But first before we get into all those amazing highlights I am duty bound to bring you one lousy little light weekly report on what actually did happen this past week on Wall Street. And as the Dow Jones Industrial Average indicates the only good day was Monday when the market stayed closed for Memorial Day. Otherwise it was straight down with Wednesday's 16 and a half point loss the third worst of the year and the total decline for the week nearly thirty seven points. That's more than wiping out the previous week's

big gains. And green the blue chip index down to eight hundred ninety three point ninety six. The study of the Koran came one tiny volume averaging only eleven and a half million shares a day. The market was a sluggish as it was gloomy. Investors couldn't even work up enough energy to panic. The erosion came amid more reports from abroad of gold rising and the dollar sinking. And reports from Washington of the first decline in the government's leading economic indicators in two and a half years and of the possibility of higher taxes on gasoline and other items. Small wonder then that the averages declined. The New York Stock Exchange index of all common stocks listed there was off more than two points to fifty four point eighty six. The American exchange index continued its long decline by giving up another quarter of a point to twenty two point four naan and the Nasdaq composite index of over-the-counter stocks yielded close to three points to finish at one hundred two point three oh well it sure is nice to be able to close

this season on such a high note of confidence. But fear not. You may be going broke but our elves have not deserted you. Those compilers of our Wall Street technical market index are giving an on headed by for the seventh straight week now with seven indicators up to neutral and one down enjoyed by new rockers on hand and will no doubt be able to tell us exactly why the index is right and the market is wrong. But before we ask our panelists to give us the accumulated wisdom of their ages I understand Miss Smith has arranged a brief ceremony of her own. Robert so Harmeet dean of the business school administration University of Connecticut. Nice to have you with us. Thank you it's nice to be here. I come representing the world award program of the University of Connecticut and present to you a special award. The program is funded by grants from the AGM

now and the R Foundation which Mr. GM Globus is the president. GENERAL Oh whom you know has spent the last 50 years of his life trying to supply information to investors to make sure that financial journalism really serves investors well. We've been giving the Wall Street news reports and trying to discover what's happening in Wall Street and to the writers ever since 1958. This is the first year that we've ever gone out of the writing field. Wrong street week has been identified as very strong as contrast with Wall Street. Do I have a plaque for you may read it. University of Connecticut. GM Loeb special award in 1873 for distinguished contributions to investment finance and business presented to Louis Rukeyser for his television series Wall Street Week 1972

gratulations. Thank you very much. I won't pretend that you took me by surprise but when I heard you were going to be on tonight I. Thought briefly of having the smith dress up in an Indian costume and reject the honor for me but I was told that had already been done this season. So we decided that we would just accept it with due gratitude I realise it's not just for me but it's for the entire production including the terrific production staff headed by Anne Darlington and superb technical crew under our director Steve McCullough. So on behalf of all of them and of our viewers thank you very much Steve. Well Lou may I say that in a in a very brief ceremony before the show we gave a special plaque to Darlington as exacting producer. I'd like you to know the impact that this show is having on investors and our viewers who are interested in the financial world. This is told the story and told it well we give you our heartiest congratulations. Thank you very much and since Mr. Smith is probably on a mission carried off this is a very heavy distinction. Thank you to him. Thank you for that.

That's the last honor for tonight but we've got it with us tonight the same four experts who were on hand New Year's Eve when the Dow Jones Industrial Average stood at a proud one thousand and twenty and they all said the high for the year would be somewhere between eleven hundred and twelve hundred. They could still be right of course with those predictions even though the Dow did topped out less than two weeks later at one thousand fifty one point seven zero its all time high. But we know for sure is that all four were too optimistic about the little for the year. Carter Wendel the most conservative predicted nine hundred twenty nine. We went below that on the second day of spring. Year's actual So far at least on the most closely watched of averages was eight hundred eighty six point five one. On May 21st there were only seven points higher at this very moment. Now plainly something happened to puncture a hole in all that Cory. But what was the dominant new element that affected the stock market so adversely in the

first half of 1973. Frank Cappiello inflation inflation initiated perhaps by phase three and after that we got prices in the running to loosen controls and what hasn't. Yes right after that we received the bad news about our balance of payments deficit for the year devaluation occurred after subsequent to that. And since then inflation has been the prime prime suspect. Recently it's been Watergate but it's still inflation that we want to get will be inflated. I think it's already been inflated around the what's your answer. Well obviously I agree with Frank but I put it differently it's been fear it's been fear of what's going to be done about inflation. It's been fear of what the results of Watergate are going to be has been fear of the energy shortage. That may be it has not really been definitive events it's been fear of what's going to happen.

Same thing except I think it's been the steady succession of things the inflation the devaluation the Watergate the energy crisis more Watergate more Watergate with really with no let up since late last winter. I think it's funny and we could use a little good news. We sure could dance a little I think it's all of those items manifested in an international monetary crisis and I think the real pressure as far as capital flows in the market are concerned is the fact the foreign investors are withdrawing from the market. This is a has been a very very important demand influence in the market and I think because of the substantial amount of uncertainty dealing with the status of the dollar and what will take place with the 80 to 90 billion dollars of U.S. dollars held overseas it still overhanging the market. Later in the program we're going to ask you all to put all this together and tell us where it's going to take us for the summer. But now it is time for still another special event tonight. This one on billed. From time to time as you know we arbitrarily award our mildly coveted Wall Street Week Golden

Nugget to a letter that for some reason or other particularly strikes our fancy. Tonight for the first time we're going to give a nugget to a gentleman whose complaint is against of all people those of us here on Wall Street week this month would not be pleased. Thank you very much for this move. I'm glad to see that you haven't been devalued. If at this point this thing was going to last. In any event tonight's angry winner is Sidney Kaufman of Phoenix Arizona who writes as follows. Dear Mr Rue Kaiser You are a fine one to tell the loyal fans of Wall Street Week that you all won't desert us and will continue to be our securities blanket to the end all this and within a month the program and the panel and the staff will go on a long summer vacation. There's a stock market closed down for the summer. Do the exchanges announce that they are going on vacation. How many brokers are registered representatives do you know that take a vacation from work for the entire summer.

I think we have a credibility gap here. I can understand a two week vacation with a replacement Stephanie Guest panel and moderator but to leave us your loyal viewers at the mercy of an unpredictable market. For almost four months it's cruel and unusual punishment. I think it is only fair that before you all go on your vacations you allow your viewers to vote on this matter. Hopefully. Why bless you Mr Kaufman. We are taking a four month vacation by choice. We just ran out of funds. If the money were available we'd like nothing better than to stay with you through the summer and hopefully in future years will be able to if that's what you want. Anyone who thinks I'm able to take a lavish four month vacation on the tips these guys give has got to be kidding. And if anyone else is feeling lonely over the summer and want to drop us a line the postman will be delivering to the same old stand we always Mills Maryland 2 1 1 1 7. That's Wall Street Week

Owings Mills Maryland 2 1 1 1 7. But enough of this. It's time to begin our backward look at some of the highlights of our 1972 73 season and let's start with that nagging question of the honesty of the marketplace. Among those you'll see will be James Needham chairman of the New York Stock Exchange whom I asked about the operations of the exchanges specialists who make the markets and the individual stocks listed there. And our first speaker heard barouche author and former official of the Securities and Exchange Commission. When I asked what he regarded as the most important remaining problem with which the FCC ought to be dealing. But I think basically the problem now is one of manipulation and fraud in the marketplace. When I was at the FCC one of the jobs I held was the head of the market surveillance unit and what we would do is analyze the price and volume movements of stocks each week we put

it in a computer and we get a printout as to exactly which stocks had suspicious volume or price movements. And there were so many stocks each week that we couldn't begin to investigate into the maybe some tougher rules are needed for their operations. Could you expand on that for us. No I don't think I've said that I think what I've said is that. The rules for market making should be uniform on all of the exchanges. Are you satisfied with the rules in your own exchange. I believe that our rules are the most stringent rules in the United States no one seems to dispute that they're stringent enough. I think they are for the purposes for the type of market that we have in the types of securities we have. There are stringent enough. Why do you think the president hasn't had more enthusiasm than Wall Street. Oh I think there are a combination of reasons including one that people very seldom talk about and that is it just may well be that the stock market is wrong. I don't think the stock market is always right. I don't think it's pretty so I don't think it always

anticipates I think sometimes it legs and if you want what I'm telling my clients right now I think the stock market is sick period. You think it's going to get well I think it's going to get well when it realizes the ultimate economic facts of life as you know New York Stock Exchange reported the first decline in the number of individual stockholders since they started keeping records more than 20 years ago. You've made one proposal that might bring back small investors what are some other things. That's just one of things that happen the first thing that they realize that the market is only likely if an individual investor in the market now that a lot of people think the very attractive they were cracked would have a small investor to provide liquidity in the market. Small investor though then with the stock market for one reason that individual investors in the market who didn't like what happened. And the first thing we've got to do is make it crystal clear to everybody on Wall Street why we're all screwed

if you go around and I guess what's worse the answer. But I say Rawls group exists to protect millions of jobs in this country and to create the necessary new jobs for the future. That's why we say well the reason we exist is to protect your interests and if possible to enhance them. That is the stock market really going to be a place where I can still be done. You get a lot of arguments there. I asked David Babson the noted investment advisor whether you thought the next generation of investors could reasonably expect the same kind of return that the list generation got from growth stocks. I think that investing is going to be more difficult progressively more difficult as we move into the 70s and 80s. I think that the political social trends of the country

becoming more favorable for long term investing. Inflation is inevitable. Continued inflation whether the rate will be 3 percent of 4 percent a 6 percent or a percent I don't want can't be 10 percent. It's absolutely inevitable because the cause of it. The public wants to continue the cause of it which is insisting on public spending at a rate of fire in excess of the ability of the private economy to support it. And there's no in evidence that I can see that the public is going to turn away from this and inflation creates more and more problems for companies and for our democratic capitalistic society. And I think if the years go by it's going to be more and more difficult to do well in investing in the United States just as is becoming more difficult to do well

investing in England with what 10 15 20 years buy in England and on the road to socialism. What are some of the ways in which those trained to my stars will affect the future of the U.S. economy. We have to be careful about changing lifestyles because I believe we have a situation where the 1960s so extreme violent change that are tending to be imputed to behavior in the 1970s. It's actually the studies show that in the 1970s we'll probably have a period of absorbing some change that they will be evolutionary and not revolution. And as you said earlier yourself that youngsters might say they're not materialistic but they're still wrong automobiles. They still want TV and stereo and all the so-called material things at least what we would call material things. What does this mean in terms of industries and for that matter in terms of individual stocks. Well we have a very dramatic situation in terms of our

population and the mix of our population. During the next 10 years the Rajah's growth in our population will be in the group as 25 to 35 years old. Now consider the needs of that group. They're just forming their families just beginning to have children. And so we see we call this the decade the consumer that. And we see strong growth in appliances and all of the non durable goods associated with just plain household moving so the population factor suggest strong growth in consumer markets. And we all want and will want appliances in there want convenience items in particular because of the Raja number of women and wives will be in the labor force in a commonly heard view on Wall Street now is that the golden days are past and that it is now virtually impossible for the average investor to make money consistently in the stock market. What you have you won that.

Well I don't know if you're going to make money consistently. You never did. I would say that investors don't do as well in the stock market as they ever have done. I question whether speculators will do well I don't think but they have a deal well in the long run. What do you think are the most important investment for the individual investor. Well the first place I think the individual investor should discipline himself to save a specific amount of money every month whether he can afford it or not. Second that it could compound in dividends rather than sell them. He should buy a very high grade secured is reparable issue is selling about $50 a share and never sell it below $10 a share. The final layer that he should sell his most of the thoughts that go. As we already noted you spent a good part of your time now dealing with the affluent. Do you think that the little guy has a chance to compete with these people.

I think it does to a great extent. I think that the the smaller investor has to take a longer term view of the market and I'm not thoroughly convinced that a longer term view of the market isn't a better view of the market than the shorter term view that some of the professionals think. I think that this idea of trying to turn in a great performance every month or every quarter can be a major mistake. The stock market has a tendency on a day to day week to week month to month basis to in concert with all sorts of factors which basically don't mean too much. The key to the stock market is earnings. And I think it is much better to look at a company's earnings trend on a two three four year basis relative the price of the stock of course rather than trying to guess the next quarter. And I think that the individual can do that with some hard work much chance does the average small investor really have in the area of picking the big stocks compared to these big institutional fellows who can buy high quality research.

Well I haven't been terribly impressed with the. Batting average of the big institutions it seems to me that the little guy who was alert and is paying attention to the products here and that's why you was in their home looking at television and looking what's going on in his office really have another very good chance to stay stay up there and pick as well as the big people. How many stocks do you think the average small investor should own three to five and what is your definition of small a small investor. $10000 or less capital. Suppose he had 15 $20000 could you then go up to 68 or with No I think the big investors for more than three to five either. Are you right now personally making new investments in what you regard as low stocks. No why not. I got by investment I've taken a turbo beat in all of them. You're right it is silly.

Would you say that your philosophy is basically not to do if you do. I'm a great believer in contrarian advice. Well we finally have an honest expert a rare and remarkable quality in any man. But I think it's only fair to say in defense of our own forecasters their accuracy record in previous years has been pretty remarkable. So let's forgive them their trespass so far this year if they will atone by giving us the straight who what to expect on the Dow Jones Industrial Average and on individual stocks for that matter between now and Wall Street weeks presumably triumphant return to the air October 5th. Frank what's the good word. OK Hyla 998 probably around 8:40 Tober 5th the day it turned 67. Something along that line nine sixty seven point something. Stocks the buyer groups. I think because stocks such as Fluor which are involved in the energy crisis

were Kerr-McGee electric utilities I think are going to be the stocks to buy because I think interest rates are probably be lower and heading down in the fall. Long term rates Polaroid and something I mentioned in January which hasn't done too well without a lot of faith in their wake. It would clear the air between now and October 5th. We will go beyond the thousand again two thousand thirty. We will probably go as low very shortly as we will close on October 5th. Now as far as areas to be interested in I agree with Frank the electric utilities are virtually a steal in this market almost any of them. The machine tool capital equipment companies that I have liked all year and Warren Swayze in particular I think a couple of good quality growth stocks IBM G.D. Searle a magnificent drug company with

new products. I like rank organization because I think rank will benefit from sale of Xerox products worldwide. And I think they will do well between now and then. Your confidence is undimmed How about you. I think we've got to clear up this Watergate situation first. I think it will be clear one way or the other by the fall. I think this might drag the market down of a hundred. I would guess by the fall below the up trend again and approaching the thousand level as far as groups go. I would like to see stocks that have performed reasonably well so far and have a reason a new product an Upjohn type or I'd like to see a stock or group of stocks that have gone down without a really good reason. Maybe one some of the motoring stocks I'm talking to the Howard Johnson type stock I think Marriott this type have come down because people are afraid of the energy shortage. I think that if this is resolving itself by the fall at least it's not pretty.

OK finally some thoughts from our chief technician Mr. Novak. Lou I think the high between now and October 5th will be about 10 20 on the Dow. I look we don't want to about we want to see ten twenty two point four say yes that's much better. Definitely. And the low should be eight thirty six point seven three. And I think will be trading about eight fifty nine point four seven when we come back October 5th. I still think some of the stocks showing superb relative strength now are still by protecting a reaction the energy stocks natural gas stocks the process control companies building additional capacity the offshore drillers the machinery stocks. I hate to have to bring these clear eyed proceedings to a close but our time is up. Don't forget that our panelists predictions are not certifiable though from time to time the panel is maybe in any event it's time to say goodbye until 4:00 or 5:00 to find those guests who appeared on videotape tonight all looking as fit as ever. Plus our panelists who were if memory serves almost entirely live. And I also want to find what must surely be the most loyal group of viewers of any

television program could hope to have. I hope you'll all be back with us not Tober for another presumably glorious season. Meanwhile this has been Wall Street Week. I'm Lewis through geyser. Goodnight and have a happy and hopefully a prosperous summer. If you would like to obtain a written transcript of the program send $1 to Owings Mills Maryland 2 1 1 1 7. That's $1 2 1 1 1 7 4 to 6 weeks for delivery. Residents of Maryland Please include sales tax. We live in the studios of the Maryland Center for Public Broadcasting.

This program was made possible by a grant from the Corporation for Public Broadcasting in.