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CNN Today

Volatility in Stock Markets Unnerving Investors

Aired April 17, 2000 - 2:05 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BILL HEMMER, CNN ANCHOR: What should you do? Weather the turbulence? Bail or buy? Where's bottom out there anyway? Questions for our guest now, David Johnson, business analyst for public radio's "Marketplace," who's live from Dallas.

David, nice to see you. How are you?

DAVID JOHNSON, BUSINESS ANALYST, PUBLIC RADIO'S "MARKETPLACE": I'm pretty good, Bill. I mean, this (UNINTELLIGIBLE) this morning started at 4:00 a.m.: I was keeping up with those Asian markets you were just talking about.

HEMMER: Yes. I see you're sitting in your office today. Certainly, you've been watching it throughout the day. What do you make of the volatility rather thus far today?

JOHNSON: So far, I guess it's not particularly surprising. You never know exactly, you know, what to expect. I heard Myron talking about margin-call selling, and I guess we saw a little bit of that. I think we saw a lot of that on Friday, and I think we'll still see more of it.

One uncertainty we have is how many people, you know, picked up the telephone this weekend after having a conversation over the breakfast room table and called the 800 number of the mutual fund and said, get me out, put me over to the money market fund. And we were looking for those liquidations. I don't think they've been that great so far. Volume is up a little bit.

HEMMER: We...

JOHNSON: The other uncertainty is tax selling: How much is out there?

HEMMER: That's true. April 17th is the deadline, today.

You know, earlier this morning, we saw a dip at the beginning. We saw it come back strong at midmorning. Was that a bear trap, or do you think the bulls have an argument here?

JOHNSON: Well, it could have been. I think it's a little early. There's a trite saying on Wall Street, There are old traders and there are bold traders, and there are no old bold traders. I don't think I want to be the first one in. Try to look for a bottom in some of these stocks.

I mean, (UNINTELLIGIBLE). There are a lot of, you know, low- price earnings ratios, and the lowest prices we've seen in months in a lot of these technology stocks, in particular. But by the same token, we don't know what kind of weak hands are out there just waiting for some sort of an uptick to sell into. And then, you know, you can have a lot of stock.

I think caution is probably still the best route right now.

HEMMER: Now, David, there's a whole lot of things we can get into now in terms of mentality for the market. You bring up a good point about the psychology.

For about three years now, I believe you believe -- correct me if I'm wrong -- that everybody thought the only place to make money through investment was the stock market. Do we break that way of thinking or is it something that's just kind of taken a back seat for now and then it's getting ready to go forward once again?

JOHNSON: Well, I think they thought that, but Bill, I think what they thought was that the only place to make money was in a certain segment of the market. The Nasdaq was up 85 percent in 1999. And you could argue it's been a bear market in a lot these big-name, "old economy," blue chip stocks for a long time. Then you start off the year 2000 with a 25 percent gain in two months. So, that's where the psychology shift went.

What the psychology shift's probably going to have to do after it washes out a lot of players, probably, is get back to, you know, a diversified portfolio and maybe a real boring 8, 10, 12 percent return on your investment.

HEMMER: Well, we hate that stuff, don't we?

JOHNSON: Yes.

HEMMER: All right. Quickly in the time we have here, let's talk about fundamentals. Earnings have been strong for a number of companies. If you look at Sun Microsystems from last week, and also this week Intel comes out, America Online, is there not a fair argument that if indeed the earnings stays strong, investors will come back to those companies that have had solid strength for years now?

JOHNSON: Oh, I think so and maybe right a way. I mean, we got a lot of earnings reports today. There were virtually all good, if not better than expected. So far, we're running, you know, ahead of expectations.

You know, the conference calls are important, because you want them to talk not only about what January, February and March were like, but you want, you know, this three-month period and the next three-month period to be good too, because we're buying the future.

But I say, you know, so far, so god. We've just got to get over this margin selling and fund liquidation (UNINTELLIGIBLE) the last- minute people selling so they can cover their checks when the IRS comes.

HEMMER: Got it. Got it. Hey, David, nice to take with you.

JOHNSON: Nice talking to you.

HEMMER: Next time, we're going to change that monitor behind your left shoulder there.

(LAUGHTER)

David Johnson in Dallas, thanks again for you.

JOHNSON: All right. Bye.

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