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Saturday Morning News

Stock Market Ends Wild Week

Aired March 24, 2001 - 9:09 a.m. ET

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

KYRA PHILLIPS, CNN ANCHOR: Investors are getting a fresh of breath air from the one of the wildest weeks ever on Wall Street. The market fell sharply after the Fed lowered interest rates about a half a point, but it went rebounding late in the week. The Dow Jones Industrial closed higher Friday but was down 3.2 percent for the week. The tech-heavy Nasdaq fared better and was up 2 percent for the week.

Well, while your investments are probably on the downside, there is an upside to all of this, courtesy of the Federal Reserve. Recent interest rate cuts are giving us new money-saving strategies. Buying a new home or refinancing is much cheaper. The average home mortgage is 6 percent to 5 to 8 percent, down from just over 8.5 in May last year.

That did not make sense -- we'll sort that out in a minute.

And home equity loans are just under 9 percent today, down from 9.33 percent in December.

Joining us now live from Washington is half of the Motley Fools, Tom Jacobs. He joins us to talk about the interest rate cuts and how they can save you money.

Hi, Tom.

TOM JACOBS, THE MOTLEY FOOL: How are you this morning?

PHILLIPS: Very good. I wish I had one of your hats, though.

JACOBS: Oh, everybody's getting them. You've got to get in quick.

PHILLIPS: Yes, I'll get one for my co-anchor. He'd look real cute.

All right, let's get down to business it. Talking about bringing our debt down, how can we start doing that right off the bat? And I also want you to talk about -- you mentioned the Consumer Credit Counseling Service quite a bit also. Will you incorporate that into what we're going to talk about?

JACOBS: Certainly. We think it's always a good time for individuals to invest in themselves by paying down their debt. Most people carry credit cards with 18, 19, even 20 percent debt. And when interest rates decline, it offers an opportunity to negotiate lower interest rates.

PHILLIPS: Let's talk about how you can do that. I know that I have actually done that before. I had a tip from a roommate many years ago, and I just called up and said, Well, such-and-such company is giving me 9 percent, why can't you beat that? Is that the way you do it?

JACOBS: Absolutely. Now, it might get to -- be a little hard to get them that low, but they spend a lot of money to attract you. You know all that mail that comes through your mailbox every day with solicitation after solicitation? Credit card companies spend about $1,000 to secure you. And when you have the negotiating power with them to negotiate lower rates, because they don't want to lose you.

PHILLIPS: Now, how does this Consumer Credit Counseling Service, how can that help us out?

JACOBS: Well, we're kind of lukewarm on them, and the reason is, is that though it says it's a nonprofit service, it's primarily supported by lending organizations. They work with you to restructure your debt. You pay them a monthly fee. But they're not as interested in how much money you have over to live on as to how much you can use to pay off lenders.

So we think that every individual can do their debt down him- or herself.

PHILLIPS: Also, be careful of these counseling centers, then. You're not recommending them.

JACOBS: No. We do not recommend them. We think you can do it yourself.

PHILLIPS: All right, so refinancing your home, is this the time to do it?

JACOBS: Well, I think for many homeowners it's a great opportunity. We're seeing interest rates that are getting close to a 30-year low last reached in 1998. It's a great opportunity to, if you have a rate that is more than, let's say, 2 or more points higher than current rates, to think about getting a refinance and lowering your monthly payments, if you think you're going to be in the house long enough to make it pay.

PHILLIPS: Mortgage rates, aren't they at a historic low right now?

JACOBS: They absolutely are. Thirty-year low, not seen since 1998, we're getting close to that. Hey, my sister, she used to brag about her 7 percent rate in the early '70s, and we're below that for 30-year fixed-rate mortgages.

PHILLIPS: All right, give us some other tips.

JACOBS: Well, we think -- you know, we really think that the credit card debt is where everybody should start. It's a great, great way to invest in yourself, bring down monthly payments. You call your credit card company and you say, Hey, look, I'm going to transfer my debt unless you give me a lower rate. And if they don't, you can do that.

The refinancing is a great opportunity. Auto loans are a little tricky area, because a lot of times, the way cars depreciate, your car might not even be worth as much as the loan. So that's a tougher area to say you could go out and save money on.

PHILLIPS: Well, I was also reading that even though our stocks may be taking a big hit right now, more people are out buying homes and buying cars right now. It's at a high.

JACOBS: Oh, you're saying that consumer confidence seems to be continuing.

PHILLIPS: Correct. Is that true?

JACOBS: Well, I am not an economist, but I can tell you that if you use every opportunity to improve your situation, now is a great time with declining interest rates. And if people have confidence to do that, we think that's good.

PHILLIPS: All right, Tom Jacobs, The Motley Fool. You're going to stick around and help us out with our e-mail segment too, right?

JACOBS: I can't wait.

PHILLIPS: OK, thanks, Tom.

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