Wall Street Week with Louis Rukeyser; 2120; A Black Conservative Voice

Wall Street Week With Louis Rukeyser is made possible by the Corporation for Public Broadcasting and by the financial support of viewers like you by the travelers over 40 million Americans benefit from our insurance investment services and managed health care. The traveller's and by FDIC capital company helping to provide investor liquidity FDIC Triple-A municipal bond insurance tomorrow's security and by for eventual securities the knowledge and resources you'll need to help make intelligent investments rock solid market wise. Produce Friday November 15. Our panelists are Howard Stern Louis Holland and Martin Zweig. Tonight's special guest is Walter Williams professor of economics at George Mason University. Good evening I'm Louis Rukeyser This is Wall Street Week. Welcome back.

Well this was the day when Wall Street lost its calendar and staged its October rout in November. Ever since the hysteria of 1987 when a five hundred eight point panic stirred horrible memories of another bleak October day back in 1929 investors had their nails from October 1st through how are we. Two years ago in an October we run that scared some get a reanalysis into terminal despair. The Dow Jones Industrials skidded 190 points in a single day and I Tober 1990 produced a weekly loss greater than anything seen since. So investors were weary. In October 1991. But the great market comeback just continued with new all time highs for the Dow and as recently as this week in a number of other broad market averages. Then today just when you thought it was safe to go back in the water the stock market was torpedoed by three

seeds. Congress computers and cold feet. The United States Congress whose memory span appears to be approximately twenty three point four seconds the size it would be a wonderful time to increase its interference with the U.S. economy. And so are our ever helpful legislators led by New York's Republican Senator Al D'Amato who has been casting about desperately for any issue that might make it possible for him to be reelected next year. He started talking about putting controls on credit card interest rates. Never mind that when Richard Nixon foisted wage and price controls on the nation in 1971 to the same kind of initial media enthusiasm we laid the groundwork for an eventual explosion of inflation and a decade of economic failure. Never mind when that other great presidential economist Jimmy Carter tried to crack down on those same credit cards in 1980 having reached the remarkable conclusion that the real cause of America's economic stagnation was the Visa

card. He managed to produce something truly unusual. A single handed recession that otherwise would not have occurred. The politicians presumably figure that we don't remember the results of such previous ham handed interventions in the marketplace so they can play to our passions again. Who doesn't want to pay lower interest rates even though the smartest procedure has always been not to put more on the credit card that could be paid off each month. And isn't it nice too to presume that some congressman can wave a magic wand and repeal the laws of supply and demand and they have to deal with such a nasty realities as the prospect that sets arbitrary limits might actually result in as many as 10 to 15 million Americans losing all access to credit cards in an already crummy economy. Investors took one look at those shenanigans and another at the growing sentiment in Washington to take a belated anti recession steps that might themselves touch off a new round of stagflation with no real benefits for

savings and investment and investors voting with their cash gave a resounding new. Then there was the second see the computers when selling began today notably in the spectacularly frothy biotechnology area and the troubled airline industry. Those desperate old program trading games kicked in to the extent the New Exchange rules still allow and help mightily to turn a normal correction into a loss of more than one hundred twenty points in a single day making today the worst day since October of 1989. And this is the worst week since October of 1990. And this was supposed to be the month of Thanksgiving. But let's not forget that the U.S. cold feet with the economy sending signals not only that it is not blasting into a new expansion period but was even losing what little steam the recovery had last month. Investors began to wonder about the same thing millions of other Americans have been

wondering about namely how can the market be so good when the economy is so awful. We tonight will seek to discover whether today's panic will soon like its recent October counterparts be yesterday's news or whether the gloom stories are finally going to get one right. And we'll be talking with a leading economist who that we happens to be Black himself thinks the way to prosperity for blacks or whites will not be found through greater government involvement in their problems. But first let's count the wounded. The Dow Jones Industrial Average came within a dozen points of setting still another record before swooning on Friday in a market that saw a hefty 240 million shares traded. And the only fifteen hundred stocks decline because it's been a little bit ahead until Friday. The Dow's weekly loss was held to one hundred two points at twenty nine forty three point to zero. And the all are indexes but the Amex reached all time highs earlier this week and the Amex came close.

They collapsed on Friday. We even lost an elf as chief elf Stan Weinstein switch from neutral to bearish on the technical outlook for the next six months bringing the 10 elth consensus back to completely neutral. The bond market which normally would have profited from the stock market's troubles was restrained by fears that Washington is getting ready to inflate again. The same figures that helped gold and silver. Four years ago just before the stock market took the dive that faked out the gloom stories into thinking that I was heading back to 400. Our panelists Marty's wife warned us that he was afraid we were about to have a crash. Tonight Marty is here again so tell us oh sage what today's terror really means. You know I don't think we have to worry about the seaward Lou and I don't think we're in a crush. I am concerned that the economy and as you pointed out you kind of useless. And I think the real reason the stock market went down today was fears over the economy probably induced

by the credit card news. But still people are worried about the economy. It seems to have been stalling out knocked over industrial production figures were not good. There was some inventory build up but that is partly because they couldn't sell the goods. Right. But do you think we're back in a double dip recession. I hate to say it we probably already double dip. At least we're going to be in for a less growth in the fourth quarter than we were in the third. And you're right the economy has lost the upward momentum. And I'm concerned because consumer confidence is measured as measured by various polls. It's come down quite a bit. Very unusual to have an economic recovery with consumer confidence first going up a lot and then down a lot. So you're probably going to get a double dip in some sort of I guess what every investor wants to know is whether this is the signal to get out what I don't have all the answers to that will I'm surprised at that. I don't think it's going to be that easy first of all the the most bullish thing right now is the Federal Reserve cutting rates and they cut the discount rate again this week it's the sixth cut between that and reserve requirements in the last year. And you don't

want to fight the Fed. The only time it paid to fight the Fed was back in the early 30s when we had a depression. And to really get bearish you're going to have to bet that the economy's in a collapse I don't mean down one or two percent for a quarter I mean a collapse and it's a very tough bet to make. I'm not sure I want to make that bet. Are stocks overvalued in your judgment. I think they are overvalued. I don't think they're critically overvalued if we have an economic recovery. I would say they're moderately overvalued if we don't have an economic recovery I don't think it matters whether they're overvalued or not. What are the chances that this market will snap back next week. You really put me on the spot of the night. Well it is very simple when we have a shot first of all as Congress backs down from this credit card thing I think people would breathe a sigh of relief and the market could turn it around and rally it is not I think we go down again. I'd say maybe 40 percent shot of it up next week which is 60 percent down. Other values that you think people should be moving to buy if the market is down. I don't necessarily buy in values and utility stocks look about the most reasonably priced of any group. So if you want values that would be the best because interest rates are

down and utilities dividend yields look very good compared to short term interest rates their home what do you make of today's list according to Ron pretty much in agreement with Marty we've been in this trading range now for for nine months at 200 points. So I think we're going to stay in this trading range I think that we have a conflict here between again as Marty said Laure interest rates and I think the Fed will continue to reduce interest rates on the other hand we have the conflict not supporting the market. Now that being a drag on the market that is the economy and the expectation is there in my view anyway that we're going to have more slow growth and I think it's possible we'll have another double dip in the bond market fellahs think there are a lot more sophisticated stock traders but they seem to be if anything more volatile. Why shouldn't bond rates continue to go down if we're going to have a weak economy and not much inflation. Well I think that there is some concern this time because historically when in fact you've had all the rate cuts we've had the economy has responded. This time it has not responded and so I think given that given that scenario I think that bond traders are a little bit leery that maybe in

fact it won't work and that the economy eventually will pick up and then interest rates will start to rise. Basically even in the anticipation of inflation. The economy certainly is a name it but it was in a bit yesterday what suddenly happened today. Well I think that the biotech stocks breaking up obviously they were in La-La Land. And I think that as you know the over-the-counter market has been red hot. The volume there has been larger than that on the New York Stock Exchange five all time hours in a row. Exactly we've had more speculation in the new issues have all been over price we had a hamburger chain today that came at 16 and went to 24. So I think that we have an environment where the engines quit on us and so I think that we've been in La-La land with some groups but I think for example there are some areas of the soft cyclicals I think that was a cyclical throwing water chemical might be a company and now coal even though I think that if in fact we analyst estimates of 25 to 30 percent don't come through next year. I think you'll get hurt in those stocks

also. Let me begin by asking you the question that many seem to think was a hard one. What are the chances that this is just an aberration I'm going to snap right back. I don't think was snap back next week Lou. I would guess we will go off another hundred fifty points not in one day until we hit a bottom here. What happened today from my remarks this year on the program I'm not surprised I'm not panicked. I think one needs to bear in mind that the market normally goes up 10 to 11 percent a year. We're up 23 percent on the S&P 500. So people should be pleased even with this decline where they've come. Well if one accept your reasoning why should one cash in on everything. Because we're never that sure of the prediction and I think that longer term one will want to be in stocks. I think what stocks would be picking up in this decline. Small capitalization companies I do not think I had to seen the end I favor those. I was represented by that you are price New Horizons

Fund of The Vanguard Explorer fund as packages or small companies. And I like the computer companies like DEC. I think one interesting point I really agree with. It was said earlier is this conflict between what people think of the economy and what people think of the stock market and what's different this time to me is that when the Fed is lowered rates and the economy hasn't gone full what the true reasons are that the banks are very skittish about making loans. And maybe the American public has enough credit built up enough debts that they're saying I will go out and spend again. That's what's different. All right this is the point the program when we normally pause for a round of your questions we're using that time tonight to discuss this week's extraordinary events and to give some extra time to the vital subject to be discussed in the rest of the program. We'll soon be back to normal. At least we hope so. So keep those cards and letters coming to us here at Wall Street Week Owings Mills Maryland 2 1 1 1 7. That's Wall Street Week weans Mills Maryland 2 1 1 1 7.

Now before we meet tonight's special guest who routinely challenges the assertions of most of those who profess to speak for his fellow American blacks. Let's examine some of the provocative views that have made him a minority within a minority. Black Americans he has written have overcome some of the highest hurdles gone the furthest distance in a shorter period of time than any other oppressed people in mankind's history. And he adds only 12 countries have GNP is higher than the total annual income earned by black Americans. Blacks are chief executives of some of the world's richest cities black individuals are some of the world's highest income earners and most famous personalities neither slave nor slave owner would have dreamed this progress possible. Just as he argues that his fellow blacks have made much greater progress than is generally acknowledged. He contends that the conventional response of the civil rights movement to these seemingly hopeless problems that remain is wrong. It's not that black people don't have the inner resources that make solution so elusive he says. It's a false diagnosis that sees racism

as the disease and civil rights strategy as the cure. Racism exists but it cannot explain today's difficulties. Part of the problem he says is simply age. Look at the widely varying median ages for different ethnic groups in America regardless of race he says. It is expected that the income of families headed by mid career adults will be higher than the income of families headed by persons from 20 to 25 years of age. My guest is equally scathing toward the common view that America's poor are getting poorer since the U.S. Census Bureau began collecting figures in the 1940s. The distribution of income has remained remarkably stable he says with the lowest quintile earning about 5 percent of the national income and the highest quintile getting about 40 percent during those 50 years the nation has spent hundreds of billions of dollars in the name of combating the so-called unfair distribution of income and all for naught. The only income redistribution that occurred was the massive shift of income from the people to the government. Who is this man and whom does he

represent. For some thoughts on that let's go over now and meet tonight's special guest Walter E. Williams. Author welcome we're very pleased to have you here or thank you on this exciting evening. Roger Williams knows firsthand about overcoming hurdles he's had a few of his own. He's a native of Philadelphia who spent the first nine years of his childhood being raised in the projects by a single parent mother. It went on to get his master's and Ph.D. in economics at UCLA and become a major American Economic think that regardless of race. For the past 11 years he has been a professor of economics at George Mason University. If government is truly the enemy of black progress as you have argued why don't more blacks agree with you. Well I think that they've they've brought the the the siren song of promises and I I believe that I think all Americans in general but black Americans particularly at the recognize that government has always been the enemy. That is blacks were

enslaved because government did not do its job. After reconstruction the government did not do its job. If you look at government functions in cities now the general function of government is to protect people's lives and protect their safety. Again the government failure the government schools are delivering fraudulent education that is. Giving a kid a diploma and attesting that he has received 12 years of education when in fact he might only can. You might only be able to read at the fifth or sixth or seventh grade level. Whether one accepts the view of the militant that racism is at the core of all that problems or whether one rejects it. We have problems of people in slums and cities. We have problems of dysfunctional single parent families. We have problems of poor people going from generation to generation in what's known as the underclass. How are we going to get him out.

Well well first of all we have to recognize that what we're saying is is new among black people that is in one thousand eighteen the illegitimacy rate among black teen years was less than white in 1930. The illegitimacy rate was 13 percent today it's 61 percent. Black neighborhoods are far more secure. So maybe what we need to say is Well well what happened over this interval and what can we do to to make changes I think that we need to focus more on family values. We need to stop the government from destroying family. You know that is if I were I if I if my son received a condom from his school where I sent him to I would go there and punch out the person who gave them to them. That is people have to reassert their authority not only black parents but white parents as well. I have not used the two words black conservative which we have heard so much in this country doing the clown Tom Thomas hearings. Are you a black conservative.

No I'm a radical. That is. Anybody in America you know Americans in general have utter contempt for the principles of individual liberty and any American who believes in individual liberty is indeed a radical. Most Americans believe it's a legitimate function of government to confiscate the property of one person and give it to another to whom it does not belong. But I disagree I think that government shouldn't be in those problems and then moreover the the big problems that our country face faces has to do with the immorality of government that is two thirds of the federal budget consists of those programs whereby the government stake in one person's earnings and giving it somebody else. You have written that when you were a boy the streets safer neighborhoods were more secure. You just point out to us that families were more intact. How did government. Cause this to change. Well first of all I think that almost any economist will tell you that if you tax something you're going to get less of it. And if you subsidize something you're going to get more of it.

And it just turns out that we've been subsidizing slovenly behavior. That is back when I was a kid too for a kid to have a girl to have a baby out of wedlock was an utter disgrace. And surely the government did not provide welfare and all kinds of in-kind programs for her. And so so so what. That's just one example of a general attack by government on. People's opportunities. And then you look at people moving up the economic ladder in New York. Sixty percent of poor people all own automobiles. But and many of them good to get into business as a taxicab owner operator. But New York City for example they have license laws that require that you pay one hundred twenty thousand dollars a license. As I implied in my opening commentary Republicans on that show the conservative Democrats not necessarily liberals but most blacks usually vote for Democrats who have been sort of the more liberal party. Is that evident change.

Well it might make the next elections that is black people have gotten a chance through the Clarence Thomas hearings to see what what the Democrats do. And then moreover I think there needs to be we need to have some respectable questions that is. During the Clarence Thomas hearing 75 percent of blacks were or Clarence Thomas is a nomination but all black congressman black and black civil rights organizations were against them so somebody might want to ask them a question who they represent. Let's bring in the panel and see who they represent sort of like why. Well there has been a disturbing trend this year. The proportion of black applicants to major business schools has gone down in proportion to other applicants. Do you have any idea why this may be happening or is it the recession. You know I don't know. But the quality of secondary education is by no means improving. And it seems like a first order condition for you to apply to college and then go on to business schools. You have to be able to read and write and be professional at some skills.

Thank you well Walter public and private pension funds have been selling their stocks with companies that do business in South Africa obviously to shine the light on apartheid. What do you think should be done I mean should the government get involved here in terms of calling apartheid. Should our government get involved. Well no our government should not get involved because I don't have anything against the South African blacks that is most the times when government gets involved with anything it hurts the ostensible beneficiaries of the involvement. That is the sanctions against South Africa cos massive unemployment among blacks and whites were able to win get windfall gains by buying the stocks of companies they had to leave on short notice. So I would yes I would say I'm for sanctions if I wanted to help the Afrikaner in South Africa but I would be against sanctions if I want help blacks there. Well did a US deficit is such a problem at the moment that we can't seem to lower taxes or step up spending like for unemployment.

We've been running deficits for a long time. Do you think we should continue as a government based on your economic training. Continue to spend large deficits or should we have a surplus years so that when we need to have deficits we have the capacity to have it. Well first of all. Within the last thirty two years the budget has been balance. One possibly two years. We've had many tax increases in the name of fighting the deficit. If tax increases good eliminate a deficit they would have done so in a very long time ago. That is we have to recognize that Congress and the president. They lied to us. We have a balanced budget or better yet we should have a spending limitation telling government that they can only take a certain amount of our income to only have a minute or so left. Let's move entirely away from black and white to this area of green and silver. If you could do anything for the economy in the next year if you were in charge of the government what would you do.

Well. What I would do I'd probably give each congressman start off to give me he comes with a million dollars they own the town. That is what we one of things I would do is to have broad tax cuts across the board not only reducing marginal tax rates reducing capital gains tax tax reducing capital gains tax restoring capital cost recovery and other measures. We need to deregulate the economy that is Washington is on is on a regulation frenzy. And what you think the chances that some of that might happen. Zero to none. And that is what we're what we're seeing we're seeing our nation go down the tubes because of the gang of 535 in Washington. It's not going to happen tomorrow or the next day but we're headed in that direction and we're still we're headed towards health care and ism in our country.

Thanks very much Walter Williams I don't think either of us is going to get invited to many wash and garden parties next week. Thanks to our panel I hope you'll be back with us again next week then I'll be talking with one of the 800 pound gorillas of investing and he's Frederick Taylor chief investment officer for the U.S. Trust Company who is in charge of deciding where to put that firm's 20 billion dollars in assets. It should be fascinating. Even if you happen to have a tad less than that yourself. Meanwhile this event was Fleet Week. I'm Lewis with Kaiser. Good night. St.. Riser has been made possible by the Corporation for Public Broadcasting and by the financial support of he was like you by the travellers over 40 million Americans benefit from our insurance investment services and managed health care for travelers. And by FDIC I g e capital company helping provide financial strength to security liquidity FDIC triple-A bond insurance tomorrow's security and by Prudential Securities the knowledge

and resources you need to help make intelligent investments rock solid market wise for a printed transcript of this program. Send $5 to transcripts Wall Street 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. For. Wall Street Week With Louis Rukeyser is produced by Maryland Public Television which is soley responsible for its content. These days. PBS.