Wall Street Week with Louis Rukeyser; 2020; Live from NY: W$W with LR's 20th Anniversary

That. Tavern on the green in New York's Central Park the 20th anniversary of Wall Street Week With Louis Rukeyser is made possible by the financial support of viewers like you by Travelers Insurance and related financial services working to provide financial peace of mind for American business by Enron providing natural gas which holds the promise for a cleaner world and a more energy independent America. Enron court and the Enron foundation can by Prudential based securities rock solid market wise

produced Friday November 16. That evening I'm Louis Rukeyser. This is Wall Street Week. Welcome back. And welcome to our very special 20th anniversary celebration. Coming to you from New York's Tavern on the green a setting that seems particularly appropriate tonight for two reasons. Green because we will be talking as always about money and how you can get more of it and Tavern because we will also be talking about the state of the U.S. economy. And by the time we're finished you may well feel the need for a tavern. I'll Drink To That all week long people have been asking me to explain the reason for our longevity and success. But I think the real answer to that one is perfectly simple. Clearly it is because we have solved all the

problems of the American economy. Think for a minute of what we will be seeing today if Wall Street we hadn't been looking out for your interests over the past two decades. Just for starters if we hadn't been here the U.S. dollar would be weak. Interest rates would be high. The federal deficit would be growing and the politicians would be getting ready to raise your taxes again. Thank goodness we've managed to put all that behind us. So I don't know what's even left for us to cure in the next 20 years but we'll keep on trying. With me here in Central Park tonight are about 350 of our very closest friends including many of the folks viewers have said with their favorite guests and panelists over the years. And I'll be chatting with some of them in a moment. First though a quick look at the week's economic news which was dominated by one thing that didn't happen then. One thing that did. The shoe that failed to drop was war in the Middle East as a so-called smart money concluded with its usual confidence that an attack on Iraq was not imminent after all. And so the world oil price fell back below $30 a barrel.

What did happen on the other hand was that the Federal Reserve Board which appeared in recent years to be operating under the delusion that prosperity causes inflation. Looked around this week and acknowledged presumably with approval that the prosperity has indeed now satisfactorily disappeared. So it's finally ok to start lowering interest rates. Better late than never. The bond and stock market side and both those depressed areas staged minor parties of their own stocks were helped too by some internal factors. For example many technicians reported to perceive what they delight in calling a head and shoulders bottom. Thereby naming two parts of the human body that are rarely used in Wall Street. But who knows what will be top of the charts next week. So let's check out the bad news while it lasts. And as the Dow Jones Industrial Average indicates signs that inflation might be less fearsome than previously believed. Combined with the reality of lower interest rates and oil prices to send stocks to their best levels in two

months. The blue chip index picked up nearly 62 points to close at twenty five fifty point to five. And on rising though still not impressive volume all the broader indexes showed gains for the week to bear market rally or the start of something big. R-Tenn. chief Elle's remained totally divided on the market's technical outlook for the next six months and heading out to a big fat zero. And you can be sure that at least one of them will be right. The week's losers included gold silver dollar and the American consumer whose confidence in the economic future has for the past three months set record velocity. Meanwhile back in the entertainment capital of America Washington D.C. neither Republicans nor Democrats seem precisely euphoric from the White House came where the President Bush looking ahead to still another tax debate next year. We're spending hours in front of a mirror learning how to read his own lips

while on Capitol Hill. A savings and loan scandal produced a new definition of a liberal senator one who is liberal as to whom will take campaign contributions from. So as they say the beat goes on and two of our own best beloved drummers over the years have been Frank Cappiello and quite Arendal both of whom appear to panelists on our very first show on November 20th 1970 and have been a frequent guest ever since. Gentlemen what's the most important thing you've learned over the past 20 years. Well two things Lou I think patience and humility which was the easier lesson. I think humility. Try to what's your answer. I didn't learn either one of them very well. As a matter of fact Cinq-Mars never humble. Right. But I'm going to give you a serious answer one of the big things I have learned is that the American people really don't understand the capitalistic system as well as they should.

And programs like this do perform a service to help them understand how to stimulate their thinking. Know I'm very proud of being a participant in that. We're proud that you have contributed to that education. Frank what do you think is the mistake people have tended to make over the years. What should they not have done that they did do. Well I think they don't stay with good stocks long enough. I think there's been a tendency increasingly as markets become more volatile to switch to something that they think is better and the mistakes that we've made is not doing your homework up front but not trusting our instincts and staying a little longer. When you buy good stock unless something goes wrong basically with the company don't worry about the market. I think there's too much concern about the ups and downs of the market. And essentially you make money by being a stock picker not by being a market analyst. At least that's been our experience. Carter was a good fundamentalist you probably agree with that as well. I agree with that but I also think most people think the stock market is one great big casino. It's smart.

It's a place in which to invest your money and own a share of America and make money over a period of time. Well it doesn't make you a technician there are a dozen technicians explain that they're able to call next week's move or the market and you should play that for what it's worth. Well that's where indeed I have learned humility I'm not able to call next week or next month but I can call the next three to five years in 20 years. We haven't taught any humility. No I don't have to. We're going to have I don't know how many more years but if we had 20 more frank Where would you expect to see the economy in the markets. Well I think the first. I guess the next couple of years will be a little tough for the economy. But I would expect by the end of this decade by the end of the first 10 years of this decade or rather the first 10 years of next 20 years of that. Alternatively the last 10 years for the first time I've got cabin fever. I would expect that the American economy would be slower but I think the European economy

will probably be the star of the world and particularly Germany. I think Germany will be the one story that you can rely on in terms of the stock market. And the economy. And also just as we were looking to Asia for the last few years looking to Europe I think the Pacific Rim up to the year 2000 won't be much. I think it will be Germany. Beyond that I think maybe China will intervene. So if we had another 20 years of Wall Street Week and I think we had you may be here but I won't do that. I think we'll see Germany resurgent China later. But America surprisingly will still be number one. Germany may be number two and Japan may be number three and you know make your market calls accordingly. We were all in high school and we started well I'll be here in 20 years. But you got to what are you going to be here 20 years from now if asked. And in the year 2010 Lou the Dow Jones industrial average is ten thousand. Exactly 10000 are exact about that. And what they will do and how much inflation in the intervening period.

I mean we will be able to buy. More than a small postage stamp but you might be able to make a telephone call with that yes or no. No inflation averaging 4 percent per year. Compound it in the process. So you're pretty optimistic about our future. Course even though we don't understand the capitalist system the way we should have always been optimistic about our system and I intend to remain so. But bless you bless you both and we look forward to hearing more from you. Over the next few years and decades on the other side of the Atlantic you know a standard parlor trick is to recite all the names of the English kings and queens in order. We won't ask anyone to do that tonight with the names of all the guests on Wall Street. Week four we've now had nine hundred and fifty six different programs with six hundred ninety five different guests but we thought you might like to recall the very first guess was in 1970 and he's been gracious enough to come back tonight. Stan West is a consultant who retired five years ago as research director of the New York Stock Exchange.

In November 1970 Dr. West talked to us about who the average investor was in America. Stan how would you answer that question differently. Well first of all I'd say there are a lot more of them than there were in 1970 the last. But are they richer. They probably are because of what's happened to the market over those years actually as a new study coming out sometime before the end of the year with the most up to date figures. But the latest was 1985 and the number of characters at that time was 47 million compared with thirty one million when we first talked 20 years ago. Those are people who own stocks directly own stocks or stock mutual funds. OK. We're probably half the country or more is involved in stocks through pension funds and other interact with insurance companies. Exactly. But people who own mutual funds are probably more important now relatively than they were 20 years ago. Why is that that people are frustrated at doing it themselves. I think it's a combination of things. The all the new products and services that were

developed in the financial industry in the last 20 years which did not exist and we talked 20 years ago stock options standardize options financial futures index trading have kind of given people sort of a discouraging attitude toward the market and I think they feel more inclined to trust their savings with professional management through mutual funds. This is the family hour on television. So why don't you use an obscenity. But I have to mention program trading. Do you think that scaring people out. I suspect it has had a negative effect on people's attitudes towards investing. Do you think the exchange is beginning to realize that because they talk for years as if it wasn't important for the last few weeks they seem to be waking up from what I read they seem to be getting the message delivering that message in behalf of the individual that we were there to bring them back probably in trading really was not important when I left the exchange five years ago. So you're not guilty. So I have I wash my hands of it. Twenty twenty years from now would you expect those numbers to be much greater.

If. Carter's and Frank forecasts hold true. I would expect a lot more individual shareholders. There's a first time for everything stand. Thank you very much for being with us. In the years after the West got us rolling and we've had many memorable guests from top government leaders here and abroad to some of the sharpest financial minds of the 20th century. Earlier this year we asked viewers whom they would nominate as their own favorites for the new Wall Street Week With Louis Rukeyser Hall of Fame for guests were honored in the first installation this year. Two of them unfortunately are no longer living. But the other two are sitting together at this table by happy coincidence Peter Lynch who led the Fidelity Magellan Fund to the best record of any mutual fund over the past 15 years. And John Templeton that giant of two generations of international investing it reminded us that the financial world does not end where people stop speaking English. Peter retired in June at the ripe old age of 46 and that was one month before the Dow Jones Industrials hit their all time high. Was this timing intentional We are just getting out while the getting was good.

No. Obviously I had no idea what was going to happen in Kuwait. I think the most important thing I've learned in the last 20 years is what's happened to corporate profits. It's magic than 20 years. The Dow Jones Average has tripled and the profits of the Dow Jones companies have tripled. It's a direct relationship what happens to a company's earnings what happens to their stocks and that's the key thing over time. Many people argue about where the markets are undervalued or overvalued. Are you suggesting then that they're usually fairly valued. They're always fairly valued when you look at the last 20 years. Avon products and Sears. These a great companies 20 years ago. They've fallen 30 60 percent in price in the last 20 years. And over the same period of time Merck Coca-Cola has had their profits go up 15 fold. And guess what. Stock's gone up 15 fold. So if the Dow Jones today was 500 you'd been very happy to own Coca-Cola and Merck. So there's a direct relation. That's what you have to concentrate on. There are people that own electronic stocks that don't know the difference between an eeprom and the senior prom and they're trying to buy stocks. And amazing part is the public is very careful with their money when they buy a dishwasher and they buy a TV set when they rent apartment. They're

careful when it comes to the stock market. For some reason they just don't do any work. It's not that much a half an hour of work would save a fortune. What would they do in that half hour. They would first of all see if the company has sales and profits a lot of times they buy companies. There's nothing there. There's literally nothing there. Companies are there's nothing to look at. If you look at most companies that have going to tune in later on this company I'll give you an example. Wal-Mart started as a public company one month before the show that point the 37 stores in October of 1970. That point 10 years later you can tune in to Wal-Mart. Their profits are up 20 fold. And the stock was up over 20 fold. It still had another 10 years left. Profits went up 25 for in the last 10 years. You can make 25 times your money again. You have plenty of time. You don't have to make money my best stocks have been the third year the fourth year the fifth carry on. It's not the third week the fourth week. People want the money very Rapley doesn't happen that we can be very disappointed the stock market.

Let me bring John in because you told me last time we talked on the air that you are now holding stocks for an average of five years. Is that still true. Yes Louis we don't intend to hold it in five years but we find if you buy things when they are terribly unpopular and depressed they don't suddenly come back. You have to be patient. Peter said the market in the end is fairly valued. You've made a career of seeking bargains so you sometimes must think it's undervalued. Very much so. Yes. Very rarely is any share value for it's true price. True Value. They go in a single year's time 50 percent too high and 50 percent too low. So it really pays to judge the value of corporations by the thousands in order to be able to tell which one has the lowest price today in relation to it's true that this past weekend I was with a group of academics I mix with all segments of society and they told me that nobody can analyze stocks that it's all just a random walk and a very efficient market. And that's the kind of advice that you people give them the kind of analysis you do is worthless. How do you reply to them.

That's just resigning from the game. If you take the game of tennis. Exactly as many loses as winners. But that's no reason to give up playing tennis. Peter talked about the mistake of impatience. What are some of the other mistakes people make and then let John handle that as well. When you start a blog it's obviously not doing the homework and not looking to the company. And if you don't know what they do you have a rough start. The market the last 20 years had 10 declines of 10 percent or more in great companies go down. And in those declines you a great opportunity. I remember when the market went down in 1987 Dreyfus fell to $17 a share that $17 a share in cash. I mean that was ridiculous so you have the ticket opportunities. Most people have the brain power almost everybody in this plant has the brain power to make money. The stock market. The question is whether you have the stomach for it whether you're willing to do a little bit of work then those are the key elements. It's not that hard. If you if anybody looked at Dunkin Donuts or if they look at general public utilities I think

Jim-Bob utilities two years after Three Mile Island it already doubled and I was able to make four times my money on it because the company was solid. What's your answer John. Well the main thing that people need to learn is that selecting assets is totally different from almost every other activity. If you go to 10 doctors and they tell you the same medicine that's the thing to take. You go to 10 engineers to build a bridge they tell you the same thing that Subi which you go to 10 investment advisors and they pick out the same answer. You better stay away from. Say the same thing to say the same thing in other words the time when that asset is selling at its best bargain price is when most people are trying to sell. There's no other reason why an asset will go down to a bargain price. And if you wait until we get through the tunnel and out into the sunshine you'll have to pay a premium price if you even wait until you can see the light at the end of the

terminal. You already passed the best bargain days many people think it's foolish to be a long term optimist because we have so many problems in this country with problems of debt public and private. Problems of less than perfect political leadership and either party problems of a growing international competition. How can you buy stocks when you just run for the hills. Well the beauty of a stock is if you put a thousand dollars on the stock or you can lose a thousand. I mean I've proven that many times if you're right you can make five thousand you can make ten thousand. And you don't have to be right half the time if you're right three times out of 10 times you recognize the company's doing well and you understand what they do. You add to it you take advantage of it you can make a lot of money you're talking about finding companies at all the overall state of the economy not affect you at all. You can't you never can predict the economy. You can't predict the stock market. But when you look at Dunkin Donuts you say of the best don't a chain you don't have to worry about Korean imports. You don't have to worry about what's happening with Amazon and M3 be. You just said yourself they're doing well.

We know what to give you for dessert. That's what that would all get sound what happens to the company. You don't win a lottery ticket. Time's on your side when you want to stock you want you work with that company and you'll do well. What do you think. We look to the future. You never think it's a dark future but boy what do you say about these problems. That will be bear markets about twice every 10 years and in recessions about twice every 10 or 12 years. But nobody has been able to predict them reliably. So the best thing to do is to buy when shares are thoroughly depressed and that means when other people are selling. Is this one of those times right now. In all of my 50 years of investment counsel I cannot recall a month in which they were such an almost universal pessimism as they won last month in October. So that doesn't prove that we can't get still more pessimistic. But if you're already the most pessimistic in 50 years you must be somewhere near the bottom. At the start of the past decade you electrified our audience by predicting that we could get to

around 3000 in the next decade. They laughed when you sat down to play but it turned out to be almost precisely right. Carter has now stolen a march on your belief that 10000 in 20 years. But what do you say in 10 and 20 years. I think the next 20 years will be just a marvelous is the past 20 in the past 20 years. The standard of living has gone up 60 percent the earnings have gone up three fold. The dividends have gone up threefold the gross national product is going up five fold. And I would think our studies indicate that that would be what we expect for the future including share prices they share prices have normally doubled in America about every 10 years. So 20 years out they should be four times as high. People say to me John now you're approaching middle age yourself so when you get there you'll have to answer this question personally. People say to me gee I'm 62 years old I can't afford to buy stocks. I need income. What do you say to those people. They would come out much better if they would buy we'll manage common stock fun and then just

tell the fund to send them what income they need to spend. Almost every mutual fund will send you whatever you request per year or quarter a month. So it's a standard system and if you trace it back in investing that way we'll give you the income you want plus capital gains. Peter do you believe that stocks will continue to outperform other investments. Absolutely. Particular stocks have be very careful that's the key point. Some stocks in the next 20 years a lot of money is being made a lot of money is going be lost. I think the people that gamble may buy options. What a tragedy if you're right on a company you have a three month option on our six month option. Times on your side if you own the right companies and you fall on. Some people are playing it's like playing poker without looking your cards or playing bridge in your car. They own companies and they don't look at they call the broker twice a day to get the price of the stock. That doesn't count. You have to do a little bit of work yet to be out of the malls at maybe half an hour a month. Looking at why do you own this company. The reason is this sucker is going to go up.

That's not a very good reason for what you said earlier that you like companies to have earnings you realize that many brokers will think that's needlessly picky. Well when I when I look over the last 20 years I think more of the turnaround at Chrysler the turnaround of Ford the turnaround of Boeing. You have to say yourself does this company have a reasonable chance of turning around. Do they have good products and are they going to solve it. Which would be really sad to own a company when they're doing badly. I used to follow the textile. She made a great expression. It's always darkest before pitch black. But things were bad they always get worse and you want to look to see if this company can be around very important statistic. Thank you both for your common sense and your optimism at a time when we need both. We look forward to hearing more of your very special wisdom from both of you. One thing we've often been asked is why we didn't do a one hour special filled with tape highlights of the most memorable moments of the past 20 years. Funny you should ask folks because by an amazing coincidence we're going to do just that. Next Monday night and here's an advance peek. Join us for a special hour featuring some of the most memorable moments of the first

20 years of Wall Street Week With Louis Rukeyser. When you begin to look at the world of the 1990s the United States comes down a notch or two. Should we abolish the Federal Reserve Board. Yes. What would you replace it with a computer. Well what is your attitude toward money. That it's a very nice thing to have and how can we become more competitive in the market by a return to excellence on most PBS stations Monday evening at 10:00 p.m.. 9:00 Central Time. Check local listings for times in your area. There's an awful lot of fun in that hour too. I'll just tell you about two of my own favorite segments one has amazingly accurate predictions we've heard over the years. The other has amazingly inaccurate predictions we've heard over the years and I think you'll enjoy them both. And next Friday our regular program where we are back to the international financial center of Owings Mills Maryland and back to what passes for normal around here I guess will be

Kenneth tackle an expert at figuring out how much cash companies really are hiding inside their corporate cookie jars. I can't close tonight without paying tribute to the real stars of the past 20 years and they are you the viewers 20 years ago all the wise guys were sure you didn't care that much about what was happening to your money and that you certainly wouldn't watch a television program on the subject. Thanks for proving that the wise guys were really dopes. And let's go on proving it together. For many years to come. Meanwhile this has been Wall Street Week. I'm Louis Rukeyser. Tonight. St. Louis requires or has been made possible by the

financial support of viewers like you by the traveler's insurance and related financial services working to provide financial peace of mind for over 40 million Americans by Enron providing natural gas which holds the promise for a cleaner world and a more energy independent to America Enron Corp. and the Enron Foundation and by Prudential Bache securities. Rock solid. Market wise. For a printed transcript of this program. Send $5 to transcripts Wall Street Week With Louis Rukeyser Owings Mills Maryland 2 1 1 1 7. 5 daughters 2 transcripts Wall Street Week With Louis Rukeyser Owings Mills Maryland 2 1 1 1 7. Wall Street Week With Louis Rukeyser. Transcripts also available to subscribers of the Dow Jones news retrieval service.

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