thumbnail of Chicago Tonight with John Callaway; No. 5064; Stock Market- Day 2
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<v Speaker>Chicago tonight with John Callaway is made possible in part by the Joseph <v Speaker>and Bessie Feinberg Foundation. <v Speaker>Considering the - considering the volatility of the last several days, this was a <v Speaker>reasonably steady day and calming day and, um, and so <v Speaker>and I - we think it was good. <v Speaker>Good evening, I'm John Callaway. Welcome to Chicago Tonight. <v Speaker> The flood of panic which hit Wall Street yesterday receded somewhat today. <v Speaker>The market gained back 20 percent of yesterday's $500 billion loss. <v Speaker>In fact, if yesterday's losses weren't so great, we could be celebrating today's <v Speaker>one hundred point climb as the greatest one day gain in the history of the market. <v Speaker>As it was, blue chip companies enjoyed significant gains today. <v Speaker>But overall, there were more losers than winners by a 3 to 1 margin. <v Speaker>Smaller companies took it on the chin again.
<v Speaker>The gyrations of the market throughout the day made one wish for a dose of some financial <v Speaker>Dramamine. <v Speaker>When trading opened this morning, the shock of yesterday's 508 point freefall <v Speaker>was still being felt. And up and down, back and forth, morning sessions seemed <v Speaker>to indicate no one was quite sure what was going to happen. <v Speaker>But by the closing bell, stocks had regained about a fifth of yesterday's drastic slide. <v Speaker>The Dow Jones industrials were up an estimated 102.27 to <v Speaker>1841 on volume of more than 610 million shares. <v Speaker>Considering the - considering the volatility of the last several days, this was a <v Speaker>reasonably steady day and calming day. <v Speaker>And and so - and I - we think it was good. <v Speaker>Just after today's session ended, President Reagan announced that he was ordering his top <v Speaker>aides to meet with congressional leaders to try to pare the federal deficit. <v Speaker>Today, I signed the preliminary sequester order under the Gramm-Rudman-Hollings law. <v Speaker>However, I think it is preferable, if possible, that the executive and legislative <v Speaker>branches reach agreement on a budget deficit reduction package.
<v Speaker>Accordingly, I am directing that discussions be undertaken with the bipartisan leadership <v Speaker>of the Congress for that purpose. <v Speaker>The president also said that he thought interest rates needed to come down. <v Speaker>That hint to the Fed, combined with the 1 1/2 percent drop in the prime rate of two <v Speaker>leading banks, may be just the shot in the arm badly needed by the world's financial <v Speaker>markets. Prices in London began to sink at the open this morning and <v Speaker>kept sinking. In Australia, shares lost a full quarter of their value <v Speaker>Tuesday. Hong Kong suspended trading for the rest of the week. <v Speaker>But at the Midwest Stock Exchange here in Chicago, it was clear that something was <v Speaker>returning to the market today that was missing yesterday. <v Speaker>Hope. <v Speaker>And joining us now to help pick up some of the pieces of yesterday's crash in today's <v Speaker>semi-rebound are Dan Miller, who is associate publisher and editor of Crain's Chicago <v Speaker>Business. Robert Dederick, economist with the Northern Trust Company, is back with us <v Speaker>tonight. And Gene Makevich, senior vice president of E.F.
<v Speaker>Hutton and Company, is back with us this evening. <v Speaker>And Dan, let me ask you for your, uh, comments on - general comments and observations <v Speaker>on today's semi-rebound. <v Speaker>Well, I wasn't too surprised by John. <v Speaker>The panic and hysteria that led to that sell-off on Monday, uh, <v Speaker>set the stage for some very profitable bargain hunting among stocks that had fallen to <v Speaker>attractive lows. <v Speaker>Mr. Dederick, It was a skirmish and the bulls won. <v Speaker>But there'll be a lot of more skirmishes ahead of us. <v Speaker>This is just the first of a number of days. <v Speaker>Violent rallies of this sort are not atypical after you've had a marked crash, <v Speaker>but don't think that the process is all over. <v Speaker>So in other words, we had an earthquake and we will have aftershocks. <v Speaker>Almost certainly. Ups and downs. Ups and downs. <v Speaker>Mr. Makevich? Agree. <v Speaker>I think there's a lot of anxiety at the opening. <v Speaker>I think the anxiety was throughout the day, even on a roller coaster kind of a day. <v Speaker>And I think that the swings that we're seeing both up and down make people very, <v Speaker>very nervous, make investors nervous. <v Speaker>They make people that have nothing to do with the stock market nervous because they say <v Speaker>it's got to catch up with them even if they're not an investor and they don't have
<v Speaker>primary dollars on the line. They feel very, very insecure, very, <v Speaker>very much, uh, as though they're being hurt or will be <v Speaker>hurt in the future. <v Speaker>Now, when you talk about them being anxious, do you hear that in telephone calls from <v Speaker>customers? We definitely hear that. We - I mean, what's it been like for you the last two <v Speaker>days? <v Speaker>It's been very aggressive. It's been very alarming to get out of here at any <v Speaker>we could've done business 24 hours a day and had calls coming in all day long. <v Speaker>People are confused. People have great anxiety. <v Speaker>They have questions. They want to talk to somebody. <v Speaker>They - whether they're in the market or not in the market. <v Speaker>They have questions about their mutual fund that are not getting answered. <v Speaker>They have questions about their their pension plan, their I.R.A.s, even the custodian <v Speaker>accounts, which even if the child is not ready for college, they are still asking the <v Speaker>questions. <v Speaker>Do you have answers when they ask about those things or do you have to say, look, we got <v Speaker>to let things - the dust settle a little bit here? <v Speaker>No, we have answers because there are two types of investors. <v Speaker>One is the one that was willing to take a risk and has made a reasonable profit usually
<v Speaker>over the last three to five years. And those that's said up front, John, I don't want <v Speaker>to take any risk. I want safe investments. <v Speaker>I always want to know exactly what my prof- profits are going to be. <v Speaker>And I don't want the market. I don't want to take risk. <v Speaker>And what we've done for years, literally the last five, six, seven years is outlined <v Speaker>investments that are very predictable, that have virtually little or <v Speaker>no market risk. So that many of our people, I would say maybe 75 to 80 percent <v Speaker>of our investors - I'm not going to say are sitting back - but they are very anxious and <v Speaker>they're very concerned. But they're in investments that do not have market risks. <v Speaker>And we position ourselves over over a period of time. <v Speaker>How about you? Did you - I mean do - if I would have taken your anxiety pulse <v Speaker>yesterday afternoon at 2 o'clock in the afternoon, what would it have been, you <v Speaker>personally? <v Speaker>I would say that we were very serene as, uh, financial planners and estate <v Speaker>planners go. And I would say because of the type of investments that we're in, <v Speaker>we really don't have that same anx-anxiety.
<v Speaker>Less than 5 percent of our time - Mr. Dederick - is dealt in the stock market. <v Speaker>Are you trying to say that with the stock market down near a thousand points, that <v Speaker>you didn't have losses? <v Speaker>Your -your clients? I would say that over 95 <v Speaker>percent of our clients had no losses in the stock market period. <v Speaker>[talking over each other] OK. <v Speaker>on this show before, I've - I've said to John when they when we used to talk about <v Speaker>no risk or no market risk investments. <v Speaker>We've been involved in such things as universal life concepts, <v Speaker>estate planning type of tools, single premium deferred annuities that we now <v Speaker>have down to a one year period without penalties. <v Speaker>All types of things that not only are predictable and enjoy a high rate of return, <v Speaker>but you will also know exactly how much profit you're going to have at the end <v Speaker>of a period certain usually with tax advantages. <v Speaker>OK. Let me come back to some of the other factors. <v Speaker>And Dan, let me ask you, the president indicated for the first time today,
<v Speaker>I mean, it's a real switch that he is willing not only to meet with congressional <v Speaker>leaders, but he is willing to talk about some <v Speaker>kind of tax increase. He didn't rule that out. <v Speaker>Is that what we need to hear to calm things down a little? <v Speaker>I don't think we need to hear that in any meaningful sense in the longer term, but that <v Speaker>might calm the waters a little bit. <v Speaker>And that's really all it was just a little cork in the- in the holes that are starting to <v Speaker>spring out. <v Speaker>Are you suggesting that that if they did get together and they really did make some <v Speaker>cuts in that budget, that that wouldn't send a true and profound message <v Speaker>to the financial markets and to the world? The profound message would come from a tax <v Speaker>increase of any sort of scope whatsoever. <v Speaker>That would be an extremely negative message to the market. <v Speaker>And then you would really see a route, I think. So that you think cuts are the only way <v Speaker>to go. And so far as the budget is concerned, yes, absolutely. <v Speaker>And what about the Fed? The Fed indicates today, Greenspan indicates today we'll lose <v Speaker>money a little bit. We'll get those interest rates back down to banks, lower the prime a <v Speaker>little bit. But does that help?
<v Speaker>Yeah, very much so. I think the consensus among economists has been that the Fed has been <v Speaker>too tight with money and that indeed, the economy needs more of that dough coming in and <v Speaker>it better get some soon. <v Speaker>Mr. Dederick? Don't speak for me as part of your consensus. <v Speaker>But I knew you would. First of all, let me back up on the budget. <v Speaker>The president is only talking about the small program that is already <v Speaker>before the Congress. The $23 billion program. <v Speaker>That is small potatoes. But he went beyond that today? <v Speaker>No, he did not, not to my understanding. <v Speaker>Well, my understanding is that he did it. <v Speaker>How can I argue with my own understanding? No, no, no, but I'm just saying that in effect, <v Speaker>by saying I'll meet with the Congress - congressional leaders and not ruling out a tax <v Speaker>increase is rhetoric that I haven't heard from him. <v Speaker>That's correct. <v Speaker>But we're still talking about that small number. <v Speaker>We're not talking about a big package is what I'm trying to say. <v Speaker>No, as far as monetary policy is concerned, whether it's been too tight or not <v Speaker>is my view questionable. Interest rates were going up of their own accord. <v Speaker>The markets were very frightened. We mentioned this yesterday. <v Speaker>The markets were frightened of inflation. They were concerned about rising interest rates <v Speaker>abroad and what this might mean for an attack on the dollar.
<v Speaker>So basically, the markets were pulling rates. <v Speaker>The Fed was trailing behind the anchor rate, which the Fed establishes. <v Speaker>The Fed's funds rate hasn't gone up much at all. <v Speaker>Now, today, it is, in fact, come down. <v Speaker>But I don't view that as tight money. I view that as the market's calling the tune and <v Speaker>the Fed, which really was elected in a position where you either followed them or showed <v Speaker>no action. <v Speaker>But none of that adds up to a 500 point decline in the Dow or a one hundred point gain <v Speaker>today. <v Speaker>Well, does a 400 point decline then in the last two days of the Dow put it <v Speaker>where it belongs? Or are we that far over value in the market? <v Speaker>No, no. Where we have that - I mean, what what do you think the value of those stocks is? <v Speaker>I don't know, John. I do know that what we see in the market today, the carnage left on <v Speaker>LaSalle Street and Wall Street as a result of program trading. <v Speaker>It's the result of the future coming in the wrong order and too soon. <v Speaker>It was just beyond anybody's control. It's got nothing to do with fundamental - You use <v Speaker>program trading as a term. I think a lot of people, smaller investors, those <v Speaker>of us who are real rank amateurs at this don't know really what that means.
<v Speaker>It just means your computer has got a program that determines a specific point at which <v Speaker>you will sell a stock. And when a stock hits that - <v Speaker>And if it goes to 98 degrees or 100 degrees, I start to sweat. <v Speaker>That kind of thing? Exactly. And if your stock falls to a certain level, you're gonna <v Speaker>sell it. And not only that, it's going to drop a little bit further. <v Speaker>And then Dederick is going to kick in. And I don't know what Gene's gonna do with his <v Speaker>people. They're all in cash. <v Speaker>And so apparently they're not participating So when the machines start clicking, human <v Speaker>beings aren't even really - <v Speaker>Oh no, It's just computers talking to each other and selling. <v Speaker>That's all it is. It sounds like a bad movie. <v Speaker>What it does - it magnifies - it magnifies, John, everything, and it makes all the jobs <v Speaker>that much more accentuated. <v Speaker>In other words, when the market goes up, normally if they've gone up 30 or 40 points. <v Speaker>Now we're seeing double that. And on the downside, the same way. <v Speaker>So with this computers, everything is magnified. <v Speaker>Everything is out of content. <v Speaker>And it makes the swings that much crazier. <v Speaker>It's like the game has changed. <v Speaker>This is though, we were playing single wing football up to a certain point. <v Speaker>And now all of a sudden there are passes.
<v Speaker>And we thought, well, the scores used to be 13 to 7 and 12 to nothing. <v Speaker>Now, all of a sudden it's seventy three to forty one. <v Speaker>Even though the game may essentially still simply be won or lost on a given day, the <v Speaker>scores are different. <v Speaker>Well, but that's always - this happens periodically. <v Speaker>We had the 29 crash after a rapid run up where there we <v Speaker>had margin credit. We've had stock market booms. <v Speaker>We've had stock market crashes. If people want to speculate, they'll find ways of doing <v Speaker>it. If people want to try to find ways of avoiding risk, they'll - they'll find ways of <v Speaker>doing it. We have these speculative waves periodically. <v Speaker>They exaggerate the fundamentals. <v Speaker>But there were fundamentals at work here. <v Speaker>There is the problem of the trade deficit. <v Speaker>There was concern about inflation here. <v Speaker>The market did not come out and just say we're going to start selling. <v Speaker>It became concerned about rising interest rates in Europe. <v Speaker>It said something is wrong. This implies there's going to be pressure on interest rates <v Speaker>in the United States, whether we like it or not. <v Speaker>And panic - concern took hold. <v Speaker>Concern turned into panic as the process - as everybody tried to get out the door. <v Speaker>You try to get a lot of elephants out of a door in one time.
<v Speaker>And it's a painful process. [off camera] Somebody gets hurt. Yes. <v Speaker>But this has gone on before. And this is not a new phenomenon. <v Speaker>We find new ways of speculating and we'll find them because we like to speculate. <v Speaker>Computerized trading was stopped, <v Speaker>I understand, today for some time now. <v Speaker>Is that good? Do we want to put the brakes on computerized rating? <v Speaker>It was not stopped by fiat. It was stopped because the underlying stocks <v Speaker>had stopped trading. In other words, there was an influx of orders and that couldn't be <v Speaker>matched up with buyers and sellers on some key stocks such as IBM. <v Speaker>Now, enough of those stocks couldn't trade so that the futures market, <v Speaker>which is based on that price of that stock in the future, those markets <v Speaker>here in Chicago with the CBOE and the Merck, those markets couldn't trade. <v Speaker>Well, that took a whole lot of speculation out of the market all of a sudden. <v Speaker>And that's why I think we've saw a lot more calmer day today than we did yesterday. <v Speaker>We've talked about the deficit. <v Speaker>We've talked about some of those signs, those underlying structural problems. <v Speaker>Let me throw out a couple of others. <v Speaker>Growth at 3.4 percent for 1987, not great, <v Speaker>but not bad. Unemployment rate, the lowest it has been in years.
<v Speaker>Corporate profits announced today. Crain's Chicago Business will have lots on that. <v Speaker>Looking very nice, 20 percent profits for a lot of companies. <v Speaker>Home construction news today. <v Speaker>You say your interest rates are up. <v Speaker>Home construction is up. <v Speaker>New starts are up. <v Speaker>Gentlemen, give me a break! What - what what more do you need? <v Speaker>Everything you're seeing is right on target. <v Speaker>But - I'm sure these gentlemen will agree - that you're talking about cash today. <v Speaker>You're talking about facts today. <v Speaker>I think what the market is telling us is something a little bit different. <v Speaker>The market is looking down the road. The market is projecting anywhere from 6 months, 12 <v Speaker>months, 18 months, whatever it decides to do. <v Speaker>And it's saying that even though the facts that we're going to read today and here today <v Speaker>seem good, the perception is that it's not going to stay as good as <v Speaker>it is right now. <v Speaker>And as the market is telling us, watch out, especially if the interest rates go up, <v Speaker>especially if we don't do anything about the deficits, the two big deficits and all the <v Speaker>problems still remain here.
<v Speaker>A certain amount of confidence, a lack of confidence by the buying <v Speaker>public, whether they're going to buy a stock, a bond, a refrigerator, a car or a home. <v Speaker>But if they stop buying, I think we're -we're going to have some trouble. <v Speaker>Alright now, If they stop buying is the issue. And there it seems to me there are two. <v Speaker>There's one short range, the panic that some people are, <v Speaker>the anxiety that some people may fear now after the last few days of trading. <v Speaker>And then the longer range problem by those of you who are more sophisticated, who are <v Speaker>looking at all the borrowing that we've done under Uncle Ron and the Democratic <v Speaker>Congress and saying, well, I guess I'm hearing you say is that has finally got to stop <v Speaker>and somebody has got to start paying. <v Speaker>You better send us some signals. <v Speaker>How do we gage whether we're in a recession? <v Speaker>I mean, have we. Is this the start of a recession? <v Speaker>Well, we don't know that yet. How would we know? <v Speaker>We'll know it when we begin to see signs that business activity is going to decline. <v Speaker>Weak- weak orders. Will Christmas be a sign? <v Speaker>If we have poor Christmas sales, it'll be a signal that we might be in for trouble. <v Speaker>If orders to manufacturers begin to tail off, we'll have an indication we're in
<v Speaker>for trouble. If housing starts - can go down as they have been trending down. <v Speaker>This was a blip today. If they continue down, we'll have signs of trouble. <v Speaker>This is something we're going to have to look forward to, because the fact of the matter <v Speaker>is that a drop in the stock market of this order of magnitude, hundreds of billions of <v Speaker>dollars has wiped out a lot of people's net worth. <v Speaker>And people were spending from the capital gains that they were achieving. <v Speaker>Now they're taking capital losses. So we can be certain. <v Speaker>And there's been studies made of this that consumer spending will take a hit. <v Speaker>This is going - this is - threatens us with a recession. <v Speaker>We also know the businessmen are likely to become more cautious in part, issuing <v Speaker>stock. Now, they don't get as many money, as much money per share of stock. <v Speaker>So the cost of capital of them has gone up. <v Speaker>They own stock to. Individuals just like the rest of us. <v Speaker>So they're likely to have concerns with the rest of us. <v Speaker>So there are real effects. There are psychological effects. <v Speaker>And what we're going to have to be looking for in the months ahead is to see whether the <v Speaker>damage has been so great that it is tripping off a recession. <v Speaker>Another development - I'm sorry.
<v Speaker>Go ahead, Dan. I just - It's interesting that in one day we've recouped 20 percent of the <v Speaker>- of the loss incurred on Monday with the biggest rise ever in the market. <v Speaker>We could end this week on Friday looking back at a market that's a virtual wash. <v Speaker>And in other words, Bob, that - that money that has disappeared all of a sudden in stock <v Speaker>trading is right back there on paper. <v Speaker>If that happens or if we come even close to it, what will that tell us? <v Speaker>Well, that tells us that all of this talk about the under - the perception of underlying <v Speaker>long range structural problems is so much smoke. <v Speaker>Those are severe problems, certainly, but they're not 500 point decline in the Dow Jones <v Speaker>Industrial Average problems. <v Speaker>Well, you know - They're not that bad - t's interesting that you say that. I want to come <v Speaker>back to the question of how overvalued was the market. <v Speaker>Somebody said to me this morning, well, you know, it just took us back to April of <v Speaker>1986 yesterday. And that's about when the market probably was valued at <v Speaker>where it ought to be. And the rest of this for the past nine months or so has just been <v Speaker>speculation. <v Speaker>Is that - is that personally where - near on the boat? <v Speaker>That personally is, it's a matter of opinion. You know, the old fashioned rules that we
<v Speaker>all know about the price earning ratio of a stock <v Speaker>that I grew up in - <v Speaker>fundamentals, if you will What uh, what us - is a good one used to be a good ratio. <v Speaker>It depends on the industry, depend on the timing. <v Speaker>But we could - we could search out an 8 to 1 10 to 1 - that was healthy? <v Speaker>- very healthy, had no problem buying it. <v Speaker>Five years ago the average as we all know, the price earnings ratio was about 8.5 to <v Speaker>one overall. Today we're probably looking at 21, 22. <v Speaker>[off-camera speaker] 23? <v Speaker>OK. [off-camera speaker] Tokyo 77. <v Speaker>But I don't buy the Tokyo 77. <v Speaker>That's a different world to me because they have different standards. <v Speaker>They count in yen. I mean. <v Speaker>I have to go back to my basics. I have to go back to where I find <v Speaker>my comfort level. And my comfort level really is back in the 8s and the 10s, and <v Speaker>I'm somewhat apprehensive. <v Speaker>With all due respect here, when it gets them the 22's and the 23's. <v Speaker>All right. So you buy the argument that we were overvalued? <v Speaker>Absolutely. There is no doubt in my mind, with all good respect to my colleague here. <v Speaker>I think that the market was ready for a crash, in fact, and I'll go one step
<v Speaker>further, in my opinion. <v Speaker>Personally, I think that there's a heck of a lot more way to go down. <v Speaker>Really? Absolutely. <v Speaker>Well, now, where are we now? <v Speaker>I mean, how far down do you think we ought to? I mean,how far down do you think we might <v Speaker>go? Let me qualify a little bit better. <v Speaker>I'm saying that, one, if we don't have something definitive <v Speaker>out of government where they do something concrete to bridge some of the gaps <v Speaker>of the deficits. If they don't at least try <v Speaker>to contain the cost of money, if they allow interest rates to keep on going <v Speaker>up. If the Fed comes along and starts increasing the discount rate some <v Speaker>more, then I can see a very, very major <v Speaker>concern as far as not only the stock market is concerned, but the whole economy. <v Speaker>I have to break in here because - because if if you're ifs come through, <v Speaker>there would be trouble. But I think you have to recognize that his ifs are very unlikely <v Speaker>to come through. For one thing, interest rates have already come down a bit.
<v Speaker>This was a very favorable development today. We had a dramatic drop in interest rates. <v Speaker>And that's important because how high you value a stock depends upon the discount factor, <v Speaker>which depends upon the interest rate. And the higher the interest rate, the lower that <v Speaker>you should value the stock. So that's been there. <v Speaker>As far as the Federal Reserve's tightening policy is concerned, forget it. <v Speaker>The Federal Reserve is not going to tighten policy. <v Speaker>The Federal Reserve is concerned with stabilizing the financial system, concerned <v Speaker>with keeping us out of recession if they possibly can. <v Speaker>They are pushing toward lower interest rates. <v Speaker>So I agree - It's different from 1929, right? It's diametrically opposite from the <v Speaker>experience of 29. <v Speaker>Well, in that time, they originally had good intentions, but they became concerned about <v Speaker>the outflow of gold. There's always a pos- possibility that something will come along and <v Speaker>throw them away from their good intentions. But certainly they have them now, and they're <v Speaker>much less likely to ever have that. They've learned their lesson. <v Speaker>Mr. Diedrich, about 60 companies announced today that they were buying <v Speaker>back some of their own stock. Can you explain why they would do that and to what <v Speaker>effect?
<v Speaker>I've just heard a good explanation. Yes, I can. <v Speaker>But these - I can always explain. <v Speaker>But these fellows purport to be able explain better than I. <v Speaker>So I'm going to let them. <v Speaker>Well, I I was extremely encouraged about that. <v Speaker>And we were looking at a lot of Chicago st- companies that have made a decision to buy <v Speaker>back their own stock for the corporate treasury for two reasons. <v Speaker>One, they know what their earnings are going to be like in the not too distant future. <v Speaker>I'm talking about just a matter of months. They know that their stock is going to return <v Speaker>at a level- a price level that's in proportion to their earnings and <v Speaker>that's going to return to that level. <v Speaker>Secondly, if they don't buy that stock, somebody else will. <v Speaker>A raider - a corporate raider. So all of. <v Speaker>And you've got billions of dollars coming in to that stock market, supporting stocks, <v Speaker>buying those stocks, taking them out of the market and stopping that freefall. <v Speaker>A very positive development. Gene? <v Speaker>Added - They feel that the best buy that they can do with their money offensively <v Speaker>is to go and buy their own stock, retired to treasury and that with <v Speaker>a rather complicated formula, allows their earnings to come up because you don't count <v Speaker>the Treasury stock in figuring out what the earnings per share is.
<v Speaker>Secondly, just as Dan said, it stops other people from considering, especially if they <v Speaker>have a lot of money in their treasury grabbing that company or going after it as far as <v Speaker>a merger or acquisition. <v Speaker>I'm sorry. I just should add let it be noted that this purchase of their own stock <v Speaker>with funds, it costs money. <v Speaker>This means that those funds are not available for other purposes. <v Speaker>For investment right? So the question is - for capital expansion? <v Speaker>We could have some effect there. <v Speaker>That is the kind of - True - I mean this is all tricky. Every time you do something over <v Speaker>here, you pay a price for it over here. <v Speaker>But if you look at the companies that are doing the buying, Bob, and I'm sure you will - <v Speaker>or have Quaker Oats, IC industries, hardly companies that are cash poor right now. <v Speaker>Those are solid companies, and as Gene said, they're making their best investment that <v Speaker>they think available, buying their own stock. <v Speaker>Gene Makevich, what do you say now? <v Speaker>And I'm I'm asking you literally, cause I assume you're saying it to the person who's got <v Speaker>money tied up in IRAs, money tied up in mutual funds uh, what <v Speaker>what are you saying to this average Joe that's out there and who just doesn't know which <v Speaker>way to turn?
<v Speaker>We are saying that if you have a risk tolerance <v Speaker>that will allow you to go through these gyrations, then stay where you are if you're <v Speaker>looking at the long term and just gut it out. <v Speaker>But what do you say when somebody who say, well, I've got - I've got some kids going into <v Speaker>college and I need some cash? <v Speaker>On the other hand, if they are looking for a safer investment and they want <v Speaker>to go to the sidelines, and if they're in what we consider some of the wrong investments, <v Speaker>like long term bonds, junk bond, unit bond, unit trust, Jenny Mays <v Speaker>and 20 other things that I could think of, we say go to the sidelines, keep <v Speaker>your money in control, go into money markets, go into 3 month, 6 month, <v Speaker>1 year Treasury bills, buy a investment that - we have investments today, and <v Speaker>aren't not plugging any investment, but we have investments today between 8.5 and 9.5 <v Speaker>percent tax deferred and tax exempt for a period of 1 year to 3 years <v Speaker>to 5 years certain with no market and no economic risk whatsoever. <v Speaker>And we're saying control your own destiny and don't take the risk. <v Speaker>What do you say to your clients, Mr. Dederick, or what are they saying to you?
<v Speaker>Well, I don't deal directly with clients, frankly. <v Speaker>I - what I tell them is, uh, let our investment men help you. <v Speaker>I mean, you as a as a financial institution, deal with a wide variety. <v Speaker>Well, it depends upon the person's risk aversion. <v Speaker>That's important factor and also depends on where he stands now what - what his own <v Speaker>portfolio is. But we're basically - not telling people that the market is going <v Speaker>through the floor. We're telling people that we don't look for any dramatic upturn. <v Speaker>Don't think the stock market is going to be a haven of riches anytime in the future. <v Speaker>So if you're willing - to use your term - if you're willing to gut it out, probably the <v Speaker>best thing is to stay right now, because we've had the big drop already. <v Speaker>Dan, will Crain's Chicago Business next week have any stories about people who <v Speaker>jumped out of the window or who lost their shirts yesterday or regain them today? <v Speaker>I mean, what what about the human element? <v Speaker>Well, we are looking at - we're looking for a broker, a young man or woman who was <v Speaker>never - 25 years old or something who has not been through the 60s and 70s or <v Speaker>the 1920s. And what does a 500 point decline mean to somebody like that?
<v Speaker>That's a human element. <v Speaker>Right now, we're we're still puzzled about what our story is going to be next Monday. <v Speaker>We could turn around on Monday and this thing, as I said, could be a wash. <v Speaker>And we could just look back on this as a interesting historical signpost. <v Speaker>But for those who were doing futures trading in some of the dicier stuff, if you got <v Speaker>wiped out yesterday, you are not back in it no matter what goes on. <v Speaker>Right? That's true. Probably next - by next Monday. <v Speaker>They had their seats sold out from under them. They've got nothing left. <v Speaker>That's true. <v Speaker>And those are the big risk takers, John. <v Speaker>That's the other end of the spectrum. <v Speaker>We have a graphic of that we're going to put up for the public service investment <v Speaker>hotline. You want to tell us just a little about that? <v Speaker>That's 4 3 5 4 8 8 2. <v Speaker>Well, we've been doing public service hotline, John, has been in existence for <v Speaker>approximately 3.5 years. And what we do is we have a staff of professional people that <v Speaker>entertain any and all questions. And it is just that public service. <v Speaker>It is not a selling thing? We are not selling. <v Speaker>We have people I can give you 25 - that I can write a book on the stories. <v Speaker>People are moving. They go up in the attic, they find old stock certificates. <v Speaker>They come down and they say, tell me I'm a millionaire.
<v Speaker>Please tell me I'm a millionaire. OK. <v Speaker>Now, it just so happens that that stock certificate was issued in 1928. <v Speaker>It's changed names a few dozen times. <v Speaker>But the point is, we get back to him and we give him the service, we give them the <v Speaker>service of answering their question without solicitation. <v Speaker>Well, gentlemen, thank you very much. <v Speaker>I feel better informed on this. <v Speaker>And our thanks to Dan Miller, who is the editor of Crain's Chicago business and Robert <v Speaker>Dederick with the Northern Trust Company and Gene Makevich of E.F. <v Speaker>Hutton and Company. And we will keep an eye on this Wall Street story <v Speaker>for tomorrow. We are also going to be in Springfield live. <v Speaker>Bruce DuMont, our political correspondent, will be there tomorrow. <v Speaker>There's a lot of talk about Speaker Madigan saying there's enough votes to get some <v Speaker>override of the governor's veto on aid education. <v Speaker>We'll be following that story. We'll keep an eye on Wall Street. <v Speaker>And we hope that you'll be back. And then on Thursday. <v Speaker>We will have the interview that we recorded yesterday with Governor Babbitt, former <v Speaker>governor of Arizona, running for the presidency. <v Speaker>That was to have been on tonight. <v Speaker>That'll be on Thursday night on Chicago Tonight.
<v Speaker>I'm John Callaway. Thank you. And good night. [music] <v Speaker>Chicago tonight with John Calloway was made possible in part by the <v Speaker>Joseph and Bessie Feinberg Foundation.
Chicago Tonight with John Callaway
Episode Number
No. 5064
Stock Market- Day 2
Producing Organization
WTTW (Television station : Chicago, Ill.)
Contributing Organization
The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia (Athens, Georgia)
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Series Description
The nightly prime-time news series CHICAGO TONIGHT WITH JOHN CALLAWAY is unique to Chicago, and, we believe, a model for other television stations in the country. CHICAGO TONIGHT covers breaking news stories live, devotes thirty minutes to one timely subject each night, and is shaped by an award-winning journalist with three decades of experience. The program is broadcast in a time slot accessible to the widest number of [viewers] (7-7:30 p.m.). 'People who depend on television for their news are, in too many instances, getting only headlines. They don't get the background that makes that story mean something,' veteran newsman Jess Marlow has said. CHICAGO TONIGHT presents the news story, and the background. Concisely conducted interviews and balanced discussion among small groups composed of experts in the field make the stories mean something. 'THE CHICAGO TONIGHT research and reporting staff is headed by John Callaway, a print and broadcast journalist with 30 years of experience both in Chicago and in network news, and the winner of more than 60 journalism awards. Chicago television critic Dan Ruth told Variety last fall 'I have said in print (John Callaway) is far and away the best [TV] interviewer in the nation.' Callaway is joined by senior editor Bruce DuMont, whose experience in political coverage gives valued insight into political news stories; and Royal Kennedy, with experience reporting news at network owned-and-operated stations in Cleveland and Chicago, and as a network correspondent for ABC News in Los Angeles. 'Callaway comments on CHICAGO [TONIGHT], now in its fourth season and enjoying the largest audiences in its history, 'In an age when news gets the two-minute treatment, we're giving it 30 minutes. It's not just an occasional special; ever night is a special. Not only is no other public television station in the country doing what we're doing; no other local commercial station in the country is doing what we're doing.' 'Some of CHICAGO TONIGHT's programs in 1987 give evidence to the unique coverage the series provides, and to the void that the program fills. The three programs selected for viewing here cover two important news events of 1987: the death of Chicago Mayor Harold Washington and the subsequent power brokering to choose his successor; and the stock market crash. All programs were broadcast live. In the first program submitted, 'Mayoral Succession,' Callaway questions the late Mayor's close friend Dempsey Travis in detail, and Travis reveals some poignant personal insights about his lifelong friend, one day after Washington's sudden death. Days later 'Sawyer Election' aired, discussing in detail with aldermen crucial to the deal making [] how Eugene Sawyer was chosen as the acting mayor of Chicago. In 'Stock Market, Day 2,' analysis by Chicago's economic leaders provided the audience with needed information, and reached more than a quarter-million households, one of the largest numbers in the series' history.'-- 1987 Peabody Awards entry form. Those interviewed on the third program of the series include Dan Miller, associate publisher and editor of Crain's Chicago Business, Robert Dederick, economist with the Northern Trust Company, and Gene Makevich, senior vice president of E.F. Hutton and Company.
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Producing Organization: WTTW (Television station : Chicago, Ill.)
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The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia
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Duration: 0:30:00
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Chicago: “Chicago Tonight with John Callaway; No. 5064; Stock Market- Day 2,” 1987-10-20, The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC, accessed June 10, 2023,
MLA: “Chicago Tonight with John Callaway; No. 5064; Stock Market- Day 2.” 1987-10-20. The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Web. June 10, 2023. <>.
APA: Chicago Tonight with John Callaway; No. 5064; Stock Market- Day 2. Boston, MA: The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from