Wall Street Week with Louis Rukeyser; 1020; Happy Birthday to Us: W$W's 10th Anniversary

It's an interesting marketing situation. You know like the regular show I know my mouth. This program is made possible by a grant from the Martin Marietta corporation and by this and other public television stations. Wall Street Week.

From the New York Stock Exchange produced Friday November 14. Your host for Wall Street Week is Louis Rukeyser. Our panelists a Frank Capra Hello Howard Piccola and Robert Murat James Price Carter Randall William waters Julius Westheimer and John J. Faylen Jr. president of the New York Stock Exchange. Good evening I'm Louis Rukeyser This is Wall Street Week. Welcome back and happy anniversary. Tonight is a very special evening for us it was we were celebrating our 10th anniversary on the air a mere blip in the life of the cosmos. But a relative in the life of the average television show. And we're marking the occasion by originating what sometimes seems the only place in the world from which we haven't already done the program. Over the years was we come to you from

London Chicago Vancouver Los Angeles Honolulu. And of course most often from the financial nerve center of the Western world. Owings Mills Maryland tonight for the first time Wall Street will actually come to you from New York. Indeed from the very floor of the New York Stock Exchange which is a code so much of the action which we've reported to you each week to help me in looking back over one of the most heart stopping and sometimes while at battery in decades and the history of money scattered around the floor in their customary disarray. Our seven most veteran panelists and we'll also have a cameo appearance by our hosts the president of the New York Stock Exchange. It should be a lot of fun. And it's nice for us country boys to have a brief fling in the big city. And by the way whoever said that Wall Street has no heart. Why just look what they did for us knowing we were coming here to celebrate our 10th anniversary show. They merely greeted us with one of the most astounding weekly performances since they started trading stocks in this vicinity

two centuries ago. The Dow Jones Industrial Average was up every single day for a total rise of 54 points. The second biggest weekly gain it's ever scored. Indeed the Dow reached today the highest point it's managed to achieve any time in Jimmy Carter's presidency. Talk about hospitality the broader composite market indexes of the New York Stock Exchange and the over-the-counter market even outdid the Dow joining our 10th anniversary celebration by marching today to all time record highs. And before any skeptics suggest that this was just a token bow in our direction by a small coterie of insiders I'd like to point out that all this anniversary action came in one of the two heaviest weeks of trading in the history of this Augusta institution. And we are deeply grateful for this absolutely lovely gesture. Underneath their crusty exteriors these floor traders and specialists are so sentimental that as I understand it at least 50 of them were

late for work this morning because they stopped by makeup to have lumps in their throats. And so since we're anxious to repay them by getting on with our review of the decade just passed and a look ahead to the one guest starred in let's see precisely what did happen here and warmhearted old Wall Street in the week has passed and the Dow Jones Industrial Average tells the story and story inspired also by hopes that interest rates might soon be peaking. The Federal Reserve Board actually raised the discount rate by a point as expected after the weekly close. The Dow roared to its best levels since January 10th 1977 nine hundred eighty six point thirty five. And the anniversary celebration was widespread in the indexes of the New York and American stock exchanges and the over-the-counter market. The only spoilsport says you might have expected with the Elves who compile our technical market index and impudently gave their third straight sell signal. But they never did know how to behave at a respectable party anyhow. Other

news for the week included a continuation of indications that the economy is strengthening. Though retail sales faltered a bit of $15 snap back in the gold price which had been at its lowest point since May and the decision by the International Trade Commission that its problems lay not in its stars or in the Rising Sun but in itself. A mixed bag indeed as we start our second decade by anyone's definition the last decade has been a remarkable one for the American economy. But most remarkable Unfortunately for its disappointments. And the biggest disappointment beyond question is the series of ineffectual wars on inflation year after year the price of just about everything keeps going up really slowly often frighteningly fast. Everybody talks about it but as with the weather nobody seems to be able to do much about it. Our presidents all say they are trying to Richard Nixon the effort comes to mean a round of wage and price control as Gerald Ford calls a conference on the subject and winds up

wearing a fruitless wind. Jimmy Carter after his inauguration launches no fewer than seven different economic programs all aimed at least in part against inflation and prices rise more rapidly each year of his presidency. None of it works. And one way or another most of the major financial stories of this decade are related to that failure. There is the plight of the dollar. December 1971 Nixon is forced to devalue the dollar. Inflation has already forced him to take it entirely off the gold standard and will force another devaluation in 1973. It was opened October 1973 the Israeli-Egyptian war brings an Arab oil embargo that for most Americans is a rude awakening to the existence of OPEC's and to its power. In reality the oil producers militancy has been growing for years driven in part by their resentment of the eroding value of the dollars in which they are paid. There is scandal in April 1973 this man

an obscure securities analyst named Ray Dirks blows the whistle on the biggest swindle in Wall Street history equity funding he says. One of the hottest stocks on the street is mostly inflation to. 56000 bogus insurance policies. One hundred twenty million dollars in phony assets. At mid decade there is recession as the Federal Reserve clamps down on the money supply to fight inflation unemployment soars. It's the worst recession since the Great Depression itself. And with it come bankruptcy. Franklin National Bank in 1974 the largest bank failure in American history little more than a year later New York City almost becomes the biggest municipal bankruptcy. And at the end of the decade Chrysler Corporation is still uncomfortably close to the brink of being the biggest corporate failure. The financial system survives but some people start wondering how much danger lurks in the mountain of credit. Inflation has forced by 1978 a lot of people are mad as hell and aren't going to

take it anymore. There is a tax revolt in June Howard Jarvis celebrates his victory on Proposition 13 as Californians seek to curb the government's contribution to their cost of living. Finally there is gold in 1979 investors turned to gold and silver in desperation for protection from the all too clear perils of paper money. But some get too greedy. And in the aftermath of Silver's collapse Funk says plaintively. A billion dollars just isn't what it used to be. And after a decade of inflation he's certainly right. But then comes signs of hope from Wall Street to Main Street the talk this year becomes how to get America moving again. There is growing talk of lowering taxes and raising productivity of deregulation and re industrialization of changing the way America does business. We end our first decade with the election of a new president and a new Congress dedicated

to assuring that the American economy in the 1980s. Well not just be a stale and depressing rerun of the 1970s and so we began our second decade with the hope that 10 years from now we'll have a happier story to report. Chances of that. I mean. I think that the only thing certain for an investor is change in the decade in the 70s it was the tangible assets that were the best performing. When I was a timber back the alpha form stocks by a factor of 5. In the 80s I look for stocks that outperform these assets. Incidentally you were an early warning signal for us on the OEMs rush of the energy stocks do you think that it is going to continue to be a big area in the 80s for at least half the decade. I look for the oil industry to be booming for the next three or four years while what we have in the second half to solve our problems. No I think the profitability will be out of the industry to the extent it is now

and alternative fuels and it wont be as exciting in the second half of the decade. Thanks. Thank you for your five year warning. What do you think were going to have better luck in the 80s in the 70s. Yes I really do I think the change towards economic conservatism which has really been under way for the past two years but the recent election has accentuated is a very very important factor for investments. Let's elucidate on that. Well I think as you said the move towards what is quoted is re industrialization. Actually the prospects of tax relief for business for investors can be a very very positive type of thing. That will ultimately mean that stocks will once again resume their position as a hedge against lower rates of inflation and as are you going to keep your technicians alive for another decade. Yes I am but I'm not so sure if I'm going to follow this closely in the next decade as I add now most unkind cut of all. Well it's no surprise that Wall Street's first decade was not Wall Street's finest decade for common stocks. What's less well-known though is that some stocks continued to perform

spectacularly leaving their holders well ahead of inflation even before you count the money they received from dividends. The public's perception of the stock market usually continues to center around the Dow Jones Industrial Average and its performance over the last 10 years has been little short of wretched. The Dow was at seven hundred sixty one point five seven. The day we went on the air in 1970 which means that through the end of last month it gained a mere 21 percent in 10 years. The consumer price index in the same period increased by one hundred twelve percent. But the composite index of the New York Stock Exchange which covers all the common stock traded there tells a somewhat brighter story than that recited by the 30 old line industrial companies in the down while the Dow peaked in early 973. The New York composite moved all time records this year finishing October 62 percent above where it began the decade even without counting rapidly increasing dividends

as investor interest in smaller companies boomed in the late 70s. The volatile Nasdaq composite index of over-the-counter stocks was a principal beneficiary. The index was started in February 1971. Three months after we went on the air at 100. By the end of last month it had almost doubled. A 93 percent increase. Those who thought small often scored big. But the biggest stock success story of our first decade came on the long scorned American exchange with a heavyweight in an energy stocks about a third of its total valuation now the Amex composite so dramatically in the late 70s that it nearly quadrupled for the decade up 273 percent and not at all incidentally up more than 450 percent since the end of 1974. A performance that outstripped gold and practically any other alternative investment so it was possible even before this glorious week to make money on Wall Street.

If you knew the right places helping you try to find them as been among our most sustained efforts over the years. I'm going to chat now with three fellows who have played an important part in that effort. Bill what is what were the most striking changes you noticed in the markets in this last decade. I think one of the most striking changes were the products other than common stocks because common stocks performed so poorly. People's Money had to find other avenues for example the invention of the listed stock options which took place halfway through the decade and made that market an extremely interesting one. Also I guess the money market mutual funds were Dave innovation let poor small fellows get some of those high interest rates on you big guys have before. Do you think we'll have further innovations like that. Yes I do although I do think that the 1980s are going to be the return to common stocks. I think that we are in for I think we're on the edge of what could be a superior bull market. If I asked you for one reason why it's going to be the return to common stocks what would that be. I think inflation and I'll give you two reasons inflation and interest rates goes down to if it gets twice as much as for.

Those Westheimer you carry the flag throughout the decade for the great growth stocks of the 60s. You see signs of the end of the 70s beginning of the 80s that maybe you can look right again. Yes I think they play is the same but I think the actors have changed and I think I made my big mistake by sticking with the high capitalization growth stocks too long the Coca-Colas the Avons the Polaroids it did very badly during the decade. But I see some new stocks coming up now which I think will be better during the 1980s. What do you think Wall Street will be looking for in the 1980s. I think there will still be looking for the principles of growth higher earnings higher dividends high return on invested capital and I think investors can get that in the high technology stocks. The defense stocks and most assuredly the energy stocks. We just heard from people that we only have five more years that we're going to start solving our problems in the late 80s the energy stocks won't be any good you give five to 10 year forecasts also. Well in five years I'd like to come back and update it but I think the energy stocks are going to be good for a long time to come.

Jim Price you've been among the most common of our panelists and the long term approach to investing really went out of favor doing the markets in the 1970s. Do you think that the 80s are going to be more hospitable to that buy and hold approach. They could very well remember that we went into this decade with even the 20 times earnings and we go out of it and I think that momentum is now on the upside and that the buy and hold could be the right thing to do. When do you decide as a buy and hold or when to sell a stock. I think it's the most difficult of all and I personally offer and if I get a big gain we'll sell half and keep half and hedge my bet because nobody knows where the top. Do you see some particular areas that are going to be in favor in the 80s likely I have to agree that the technology computer services and I think people will pay higher and higher multiples for these companies. So happier days are definitely going to hear again.

Well they've been pretty good the last couple of years. You can't complain about that in our first 10 years the wisdom of panelists like these has been supplemented by the advice of nearly 400 special guests men and women representing every conceivable point of view on investments the economy and the rise and fall of Western civilization. One conclusion seems absolutely safe. They couldn't all of been right. But some as it happened seemed righter than others. One repeat guest Milton Friedman one of three Nobel Prize winners who appeared over the years summed up the basic problem nearly six years ago. We do not have two public enemies inflation and recession he said. We mustn't suppose they are independent phenomena. We have recession he continued because people won't let you continue an inflation indefinitely. And when you try to stop it you have pain. Not everybody of course agreed on what caused the inflation and we Wallach said he didn't think there was a single cause saying it's the money supply he told me is like saying that when somebody is shot the cause is the gun. There's a reason the gun was fired.

Albert Summers pointed out that reason as he saw it. We have a distribution of political power that is not the same as the distribution of economic power in an unfettered free market. Reconciling those forces he maintained is what America's future is all about. What a hold Lee suggested how that might be done. We've got to provide investment for jobs he said. And in long before it was fashionable we've got to work on the supply side of the economy. Well we're still working on it. And two veteran advisers of president suggested why it's taking so long. Pierre Wrenn Frey said flatly that he'd never met a politician who paid any attention to any economist and Walter Heller warned early this year that as he pathetically put it a presidential campaign is not a period of great enlightenment in economics week in week out of course. My guest talked about stocks and the stock market along the way some of them made truly remarkable selections or oil service companies like

Schlumberger as early as 1973. Small computers like datapoint in 1975 aerospace companies like Boeing and 78 and gambling stocks like Bally also won that year before they got hot. Not all the selections or select tours were brilliant of course. For example we also had a guest who confidently asserted in 1972 that Winnebago was the next Xerox. Along the way we've had fearless even reckless market forecasts in both directions. The Dow we were told confidently always confidently was going to 300 and below what to 3000 and above. Both were wrong. The veteran Edson Gould had the last word on that. Always said you never can be sure about the stock market along with stocks we charted the ups and downs of gold with gold bugs and gold folds alike. Among those able to cut through the emotional hoopla on both sides was a wise Swiss

banker. If you believe inflation will go on said Hubert Bosh and I go if you believe that we will always have political disturbances and it is not too late to buy gold. But through all of the talk and all of the argument about investment strategy one single point was stressed again and again as the phenomenally successful John Templeton expressed it the right thing in investing is to buy the things that are unpopular buy the things that have been neglected for years by the things that other people are selling. If you buy something at a quarter of what you think its worth he said you may have to keep it five years. But in the long run most things go up to what they are worth. A hopeful thought indeed but you might prefer his words to live by the thoughts of a man who's been in Wall Street longer than any of us. Lucian Hooper Of course I'm hedging confessed. I'm an expert at it. I've been doing it for 58 years. Hawk eyed among you will notice that the Trading Post Behind me is different from the ones we saw

earlier. It is in fact one of 14 new electronically up to the minute trading post being installed this year on the floor of the nation's senior experience. This kind of technological modernization means a great deal to those working here. But what if anything does it mean to you and me. John Jay Phelan this year was named president of the New York Stock Exchange John to these expensive new tools really help the customer. Yes they do. They are all the automation and the latest that we think will help serve the investing public as the volume continues to increase in the 80s. It means that we won't have the kind of back office problems we got the last time the market soared in the 60s. I think that's correct this is part of our overall program to prepare the exchange for 150 million shares a day when we expect that's going to come. Well we hate to be forecasts of the future what if it comes next week and next year will be over. What else do you see in the future this exchange. We see a growing exchange a healthy exchange and one that is adaptable to change and to the changing

economic lines of the climate of this country. We wish you well and we thank you for being so nice to us tonight. Thank you very much. And now worried about the future of investing as it seems to our two most regular panelists this past decade Kauto Randall and Frank Caprio thought of what's in your crystal ball. Lou I see great changes in the decade of the 80s. One is a trend away from consumerism into capital formation for productivity. I think that in turn will permanently reduce inflation and interest rates much lower than than we now I think we're going to see great technology in the health care and the communications field and I see at least a doubling probably a tripling in the Dow Jones Average. Do you have an inflation forecast that we're going to just that doubly or triply into real prices. Yes I will say that the inflation for the decade of the 80s will average about 7 percent lower by the end of the decade. What do you think are the most important of these factors that give you a rosier view for the 80s than we had in the

70s. The trend away from consumer consumerism and into capital formation the Vietnam teenagers are now adults and they're much more interested in stability than they are in the consumerism. What is capital formation is out of football. I don't know that is supplying capital to private industry to improve plant and equipment. Productivity you think the nation's coming to its senses a little bit on this issue that I think very much so and of course I think the recent election was an indication of that and that was a mandate from the people. Frank Cappiello just mentioned the election in fact all three of the major presidential candidates talked about more savings and investment and it's a byproduct of it is a sea change in this whole country. I think that may well be I think we've tried to fight inflation in a number of old fashions and I think the new way may well be the best way and that is in Senate lower taxes to increase the human greed factor to increase productivity and that's the way you balance budgets by increasing the gross national product not by reducing

spending that's too difficult. Frank you just said a kind word for human greed is that correct you know fellow human greed is the greatest factor motivating the economy and we ought to unleash that particular fact. Is that how you run your personal life. Where do you think people ought to be putting their money. OK there are four or five areas but one theme runs through all of our investing and that is the aging of America. America is growing older and I think you'll have to take advantage of this in a number of investment areas. One of them obviously has been the nursing home stocks. Another would be recreation stocks cruise ships things of that type. Coincidentally I believe the real estate will probably be investment for the first couple of years of this. This next 10 years I'm going to work on gold. OK. I think gold will probably fluctuate between $500 an ounce and a thousand dollars an ounce. And I'm not going to tell you when it's going to get to a thousand between 500 and a thousand yes. So in other words if you would be selling it off heavily at the moment and I just I just don't think gold is going to come down. But I don't think it's going to go up to fifteen hundred

dollars an ounce like some of the bulls on Gold think. Thanks very much gentleman. But before we end our 10th anniversary program I thought it might be fun to tell you the three questions I've been asked most about Wall Street Week over the last decade and what the right answers are the first question is Who is that woman who appears at the beginning and end of each program and the answer is she's not only cells also known as Miss Smith. And she's been with us from the start. The first producer with whom I worked in developing was a very bright and talented lady named Ann Darlington came up with the idea that it would be nice to have another very bright and talented lady on the set as a combined executive secretary and on air floor director put right any of the many technical problems that can go wrong in a live television production without viewers wondering why a stagehand it suddenly wandered into my living room. It was a great idea. And Natalie has done a great job for all of us. You'll be seeing her again in a minute when we she helps host a little anniversary party for some of our favorite repeat guests over the years. And I hope

you'll be watching the credits at the end of this program for the names of some others who have done such a classy job each week. Question number two is who are the elves. And the answer is that's the name I gave from our earliest days to whatever more politely known as technical analysts. Those people who take a want to charge this will go on a graph and a piece of witch's hair and purport to tell you where General Motors will close a week from Thursday. We do a base into the elves each week by reporting our own chief elves technical market index. Do I believe in it. Well I believe sincerely that if you follow it religiously it will be unquestioned sometimes be right. And the third question is do you write your own opening commentaries. And the answer to that is why of course I do. Whose commentaries did you think I wrote. And finally and most important there is you. Has been a success for 10 years it's primarily because the American television audience contains many millions of viewers who are a lot smarter than the

pull bars of Madison and Sixth Avenue it is so. So congratulations to you for challenging us to do better and better in the decades Still to come. This is very much your night too. And I wish you were here. I'm Louis Rukeyser. Good night. It was like putting a written transcript of tonight's program to. Send $1 to transcripts of. Wall Street Week Owings Mills Maryland 2 1 1 1 7. That's $1 a transcript. Wall Street Week Owings Mills Maryland 2 1 1 1 7. Allow 4 weeks for delivery. Maryland residents include five cents sales tax.

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