Chicago Tonight with John Callaway; No. 5064; Stock Market- Day 2

<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.