Wall Street Week with Louis Rukeyser; 2226; The Best of W$W With Louis Rukeyser

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made possible by the Corporation for Public Broadcasting and by the financial support of viewers like you by the travellers nearly 40 million Americans benefit from our insurance investment services and managed health care. The travellers by MF s and the FS helping future will fund and institutional investors achieve their financial goals since 1924 and vibrant entrail securities rock solid market wise Prudential Securities celebrating 10 years on television with Wall Street Week With loser of geysers. Guys are welcome to a very special holiday edition of Wall Street week since Christmas comes on a Friday this year our elves are understandably exhausted. You think it's easy providing toys for all the good little boys and girls in the world not to mention a few

politicians. And so we're giving them and all their human teammates a night off and presenting you with a taped package of holiday goodies that I hope you'll enjoy. Because 1992 has been a truly remarkable year in these precincts and we thought you would get a kick as we have them sipping tonight some of the very tasty us moments of a genuine invented year. These were shows we treasure in our archives and with zillions of viewers have told us they wanted to see again. A historic debate about the future of taxes in America between the country's two most eminent Nobel Prize economists Milton Friedman and Paul Samuelson rare insights on why governments all over the world are being run by events from the most influential banker of the past two generations. Walter Wriston and enduring wisdom about how to invest successfully from two authentic geniuses of finance. John Templeton and Peter Lynch and to top things

off. If that's the word We'll reprieves one of the most bizarre and undeniably memorable moments of the year. An exclusive musical rendition of I kid you not those weary stock market blues. What a night. But even though we're suspending him just for this one holiday week our usual format we thought it just wouldn't be Christmas if you didn't get at least a brief look at our elves. Those 10 clever technical market analysts who each week do to fully peer into their crystal balls and tell us where the stock market will be six months hence as if they really knew. They're far removed from sex Monday in mercenary considerations tonight but they insisted that they did have one important message for you anyhow. So let's zoom to the north pole and see what it is. At least I got that one right. A Merry Christmas to you too little elves wherever

you are. Well Milton Friedman is the hero of many who call themselves conservatives. And Paul Samuelson is the guru of generations of liberals. The two economists agreed on a surprising number of points from the dangers of protectionism to the ill effects of keeping the money supply too tight. But there was one fundamental question on which they sharply disagreed. PAUL Are Americans overtaxed or undertaxed. Well actually America the American society now in the post Reagan years given its propensity to appropriate money for entitlement programs for useful public services is a under taxing society that is contributing to our very basic long run problem which is we are overconsuming we are under saving and negative this saving of the public sector which I trace as a direct legacy of

the Reagan policies is our major problem so I am for fiscal stimulus now but the emphasis must be on temporary because. To fight in this election year to speed up the recovery and move to a new higher plateau of structural Reagan O'Neill deficits would be a major tragedy. I can spell out in my turn just what temporary measures would get you the safest and best return for the buck. Go ahead Paul and then we'll let Milt respond to your suggestions as well. The word temporary suggests that the president should not first have vetoed the extension of unemployment benefits that's a program which is much needed and which self-destructs when people get extra jobs the investment tax credit. Unlike most taxes works best if it's temporary. I would be in favor of that. The

state local governments have an inflexibility problem in their constitutions and temporary help to them would be very much in order. But the capital gains tax which the president is most concerned about is really a minor sideshow it won't even figure in the next six quarters. Forecasts of GNP. We should have capital gains tax reform but it should be indexing that's a long story. Finally I don't sound like the present generation of Democrats completely when I say this a tax break for the middle classes for those of us who are between 17 and sixty thousand a year is precisely bad medicine for the long run and I'm going to quote what I once heard Milton Friedman say. The future is longer than the present and that program would do a lot of harm. But when will we find happiness through higher taxes. No I don't think so. The one point in which Paul and I are in 100 percent agreement is

that the basis for calculating capital gains should be indexed. I think it's it's a shame that that wasn't done when indexation was carried out for the income tax as a home. But to go back to your basic question we are very overtaxed. And we are overtaxed. Not for the kind of reasons that Paul is citing but because we are no longer run the government is no longer of the run by the people it's run by the bureaucrats in Washington. The government is a self generating monstrosity that spends money on things that the people at large do not really want to spend money on. Nobody will tell me that the people online at large are in favor of giving subsidies to farmers in the form of cheap water in California in order to let them produce crops which the government then buy at an artificially high price. There's nobody in the United States who thinks that's a sensible idea and yet we do it so that we are very much overtaxed. Also I think it's a very great mistake to lump

together the Reagan and Bush administrations. They're not at all the same Bush is producer pursuing a policy of reverse Reaganomics from nineteen eighty five on the federal deficit and federal spending as a fraction of national income were both going down they went up earlier primarily in considerable part because of the military program which after all had a big return in helping bringing bring communism down. But from 85 to 89 both spending and the deficit went down as a fraction of it. Since Mr Bush's come in both have gone up very sharply I do agree with Paul that a lot of structural deficits over a long period are a great great danger and should be avoided. But I believe you have to attribute that danger to Mr. Bush not to Mr. Reagan. We have to end it all on the overtaxing let me say one more thing. Total government spending in the United States federal state and local is

now about 43 percent of the national income. I think we're not getting our money's worth. If you agree with Paul's contention that budget deficits are a major structural threat to our future how are we going to get rid of these deficits while lowering taxes by cutting spending there's no other way. Perhaps no man in recent history has done more to change old ways of doing financial business or excited more controversy and Walter Wriston who headed Citicorp for 17 years before retiring in 1904 and who made fresh waves this year with a book called the twilight of sovereignty. Well parts of your book read eerily like a script for what's been happening in Europe this month. For example you wrote preciously and I quote a common currency will be the final step in a completely integrated market and the European economic community has moved toward this eventuality. But this surrender of sovereignty touches the very heart of the nation

state to lose control of the right to issue currency is an attack against one of sovereignties most valued rights. Should we expect next in this European currency crisis. Well I think it was almost inevitable that what happened last week was going to happen. Now once you have disparate economies and disparate nation states and a market as big as we now have fixed exchange rates are an artifact of the past. The float is the only thing that will act as a shock absorber between disparate national policies. So was it a mistake to try to have a common European currency. Well I think that it's not necessary to have a common economic union to have a common currency. And I think that that will be delayed a little bit longer than some of the people believe. We'll still see a free trade area in Europe and I certainly hope so. And the

business community is driving the economic community toward a single market even faster than the politicians are talking about it. And I think that's all to the good. Given the changes you have identified is it more likely that this European community will be outgoing than protectionist. I would hope so. Danger in the world is protectionism. And. There are a lot of people both at home and abroad who have not learned that lesson of the Great Depression. And I think we stand on the razor's edge and that. But I would hope that as other trading blocks are formed like the North American Free Trade Zone and in Asia. That that will operate in a world market for liberalism. Tell us some of the other ways in which you think countries have lost sovereignty or are losing sovereignty. Well one of the ways that they have is they used to be able to control

what their citizens heard and said. And the biggest example of course was the Soviet Union. But in Prague in the revolution the chanter years waving their fists at the riot police shouted the world sees you and the world dead. And the anomaly of the world is that that picture was carried to the Soviet empire the old wooden via Russian satellite. And the people in Eastern Europe saw that and took courage from each other. So in effect those governments were overthrown partially at least by the information revolution would be won. The second thing is that we still have a law on the books the United States that requires the president of the United States to approve the landing of a cable. In our country which is sort of ridiculous when we have billions of bits

of data flowing in at all sides. So there is no way as sovereign today. Can deny these people the stream of information that is carrying with it the alternatives to a way of governing. How should American economic policy adapt to these changes. Well I think the most important thing is that if you agree. That intellectual capital is becoming relatively more important than money capital we have to create a climate which attracts it because it cannot be driven. Bill Gates for example can walk through any Customs shed in the world and say nothing to declare. But he has the intellectual capital to create a Fortune 500 company. He can go anywhere. That's an extreme example.

So that so we shouldn't have policies that would discourage him from staying here. Exactly. And I think the reason I'm optimistic about America and the climate of the First Amendment. Is very hospitable to people with ideas that we need desperately. In this campaign that we've heard in both parties fear of foreigners we've heard it certainly toward Mexicans. We've heard it what Europeans we've headed toward Japanese we're on the wrong road in that kind of thinking. Of course I think other than the Native Americans all of us are immigrants. It's just a question of how long ago we got off the boat. And America is the only country that read news itself with this energy and this skill and it's you know actual capital that immigrates to our shores. And that's why we will survive and prosper or close societies to keep people away from their borders. We'll have a difficult time in my view.

Another titan of Finance the ever wise and courtly John Templeton came calling on the weekend of his 80th birthday. Which he hastened to assure us certainly did not mean that he was getting ready to retire. As if John Templeton needed another record he is setting one tonight. The man who has been teaching investors how to take a global perspective for two generations was one of the four original members of the Wall Street Week With Louis Rukeyser Hall of Fame and who on Sunday will be 80 years young. Tonight is making an unprecedented 12th appearance as my guest on this program and we all look forward to at least a dozen more. John your big news this year as was just suggested was the merger of your company with Franklin Resources which paid nearly a billion dollars for that privilege. Does this mean that you are getting out of the investment game. My wife asked me and I said this probably means that every second Saturday I'll take the afternoon oh you'll continue to manage the stock funds that have your name.

That's right. And you are careful to tell us when our 20th anniversary program a couple years ago that you were not retiring and have you set a retirement age target. God gave every one of us some talents and I believe the parable of the talents teaches us it's our duty to use them as long as he allows. So I intend to work as long as he's God allows. Trying to help people not only financially but also spiritually. We're delighted to hear that you're going to continue at your current pace the other day you said something which is quite characteristic of things you've said on this program you said that the two chief faults of most investors were that they were too pessimistic and too impatient to elucidate on that press. That's certainly true. Most investors operated with too little knowledge and think it's too easy to make a set theory of performance so they get in and out too often and without enough knowledge. And also certainly in America it's been the custom that people are really on

reasonably pessimistic. Here we are at the highest point in history in terms of gross national product the highest in the stock market history. The many other advantages and yet the majority of people are unusually pessimistic now. The index is a pessimism in America are quite high. The short interest is about the highest it's ever been. So the American people are in my opinion clearly too pessimistic. And that's a reassuring fact because you don't have bear market start when most people are pessimistic. You've also said that you are not a contrarian. You just like to look for bargains where you're finding bargains. At the point of maximum pessimism 52 years has taught us that you don't get bargains except when people are pessimistic. Share prices never go down to a very low point except under pessimism under the pressure of selling. So we look all over the world to find people most pessimistic what John Templeton has been the one generation of American investors. Peter Lynch has been to the

next. Before retiring in 1990 at the ripe young age of 46 Peter managed the most successful mutual fund in history Fidelity Magellan. But while Peter the workaholic has been replaced by Peter the philanthropist he clearly shares Templeton's rather unfashionable optimism about our future. Many people still think it's just a matter of time till the old it gets to you and you go back into some form of private money management. Might they be right. Dead wrong I mean I miss it terribly I work for the best company were love the job love the shareholders but there is no way I'm ever going to earn money again. Why not if I like what I'm doing it just doesn't work that 80 hour work week just doesn't work with a wife and three kids and a lot of outside activities I mean I base that I think my life is working. Twenty one years I was in school in the Army and I was 21 years working for Delhi and God willing I can do something else for 21 years. The great one if I hope you'll have forever but let me take somebody because they grow up and sometimes they leave home and they get interested in other men and I would even do that.

Well maybe the grandchildren they're great now the great better every day. So as you look toward investments changing to a time I guess I really concentrate on long term I'm surprised how much time I spent in trading and how my great stocks with a third fourth year I own another third or fourth week in that great companies went out in the end and I feel that my conviction about the American economy is even stronger than it ever was what a powerhouse without. If the American economy is such a powerhouse Why are we having such trouble shaking off this recession the economy is recovering but I think part of it is the psychology. We had a very long economic recovery and now as we have a slow bounce back but tell us if some company in Hartford lets go 500 people its on the front cover of the Flagstaff Arizona newspaper and its covered everywhere. Ive never seen a recession 1982. We had 12 percent unemployment 14 percent inflation was uncovered as well as this has much more coverage and also the state and local level is a big difference this time I think is the first year since were to be declining number of workers at state local levels and the cutting taxes and raising taxes and its a terrible picture of the state local level thats going to prove dramatically in 93 also 94 is what you're

suggesting in that the same television coverage of war which is inhibited by government's ability in that area is also so intensely covered the negative aspects of the economy and the effect of policy. I agree totally that in the decade of the 80s the two largest companies in the world you know it was this country we just cut jobs left and right the 500 companies eliminated two million jobs. But we had 18 million jobs. The same thing's going to happen the next decade we'll in that decade 2.2 million companies who are started. If you figure 10 people per job that works out to be 22 million jobs and that's a very strong last year we started 175 new businesses in this country. Even the tough credit environment. What's a new business or started one hundred seventy five thousand. No one talked about that. So I think the country's very strong. And finally something for your stocking and that of your CD and encore presentation of a feature that seems to have delighted music lovers everywhere even though to be candid I did introduce it with just a whiff of skepticism.

Now before we meet tonight special guest it's time for a feature we've never had on this program before and may never have again. Philip H Bowers a retired New York Life Insurance manager in the Grange Park Illinois composed the song and taped it with the invaluable help of his wife Carolyn. And we thought you might enjoy it as we did this version of what he calls those weary stock market blues. I've been rich and I've been poor. Which is better. But now I've got a stock market. When. I lost my shirt and my shoes. I can show you how to lose. When I buy blue chips they soon turn into cod chips. Well. Thanks to Wall Street Week on I

was dancing with the L.. Those witty invest Bert's say we shouldn't try it by ourselves. I'm not a miser. I just want to be like Lewis through Kaiser. Eat your heart out MTV. And so it went in a year that range from the sublime to the rhythmic. Were there other events we might have reprise tonight. You betcha we could have talked about some of the terrific moneymaking ideas that were recommended on this program this year. But what do they have to do with the holiday spirit. For that matter we could have talked about some of the lousy moneymaking ideas that were recommended on this program this year but tonight at least charity before all. Just for one week too I'll refrain from even mentioning the two great Washington gangs the one that is departing

and the one that is arriving. We wish them all the best and not a word just this once about economic troubles or economic triumphs. But I have to confess to you that our forbearance has limits. And after one week of letting Santa Claus set the tone we're going to turn things over next week to the Marquis decides it's our annual New Year's party. And in addition to switching from this week's milk of human kindness to a decent medium priced champagne we're going to focus sharply on the year that was and the year that will be will be reviewing the best and the worst of the American economy this year and trying to figure out where we're really heading. In 1993. And in the cool event for which at least some people have been weighed in we'll reveal exactly how well or otherwise our panelists did in Keeping you Ahead of the rest of the pack with your own finances. Four top performing panelists whose recommendations have been big authentic profit centers will be on hand to tell us

precisely where they are putting their money now in search of maximum gains in the next 12 months. It's our annual festival of black ties and red faces and we'll be saving a special place just for you. I hope you're ok. Meanwhile this has been Wall Street Week. I'm Louis Rukeyser Wishing you all the gold frankincense and myrrh your heart could desire all wrapped up beautifully in the holiday happiness and a wall of Goodnight Wall Street Week With Louis Rukeyser has been made possible by the Corporation for Public Broadcasting. And by the financial support of viewers like you by the travelers providing American business with insurance investment services and managed health care the travelers buy him at fast and FS helping you to a fund that institutional investors achieve their financial goals. Since 1924 and

vibrate ensure security is rock solid market wise Prudential Securities of celebrating 10 years on television with Wall Street Week With Louis real geysers for a printed transcript of this program will send $5 to transcripts Wall Street Week With the way through guys are always Mills Maryland 2 1 1 1 7. Transcripts are also available to subscribers of the Dow Jones news retrieval service. Run. Run. Run. Run. Run. Run. Run run. Run. Run. Run. On. Wall Street Week With Louis root geyser is produced by Maryland Public Television which is soley responsible for its content. This is PBS.