CNN LOU DOBBS MONEYLINE
Dow Declines to 8,043.63; Nasdaq Slides to 1,206.01
Aired August 5, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: Tonight, Israel strikes back just hours after a Palestinian suicide bomber blew himself up. We begin our coverage tonight with John Vause in Jerusalem.
JOHN VAUSE, CNN CORRESPONDENT: Israeli action moves into the Gaza Strip tonight, with attack helicopters destroying what Israel says was a bomb-making factory, and it comes after a string of deadly attacks on Palestinians.
DOBBS: President Bush huddles with his top military and national security advisers to hear the latest thinking on proposal for attacking Iraq.
CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Another triple-digit decline. The Dow Jones Industrials down nearly 700 points in just three days.
BILL TUCKER, CNN FINANCIAL NEWS CORRESPONDENT: The Nasdaq (UNINTELLIGIBLE) 3 percent to close barely above 1,200.
DOBBS: Also tonight, investors flee stocks for real estate. We'll have a special report for you on the booming real estate market around the country.
And the world's largest aerospace company tries to defy the laws of gravity. Tonight, a special report on dazzling new technology.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Monday, August 5. Here now, Lou Dobbs.
DOBBS: Good evening. Tonight, Israel is trying to do everything possible to stop a new wave of deadly suicide attacks. Israel is building a fence to keep terrorists out, and it's carrying out almost daily raids against suspected Palestinian terrorists. Also today, Israel imposed new restrictions on Palestinians on the West Bank. Will suicide bombers continue to try out deadly missions against the Israelis? John Vause joins me now from Jerusalem -- John.
VAUSE: Well, Lou, let's talk about that air strike in Gaza. The helicopters were over Gaza City for just over an hour, firing three missiles in fairly quick succession. By all accounts, they hit their mark, what Israel says was a steel works factory used for making weapons, weapons which Israel says would ultimately be used -- would be used against Israelis. Palestinian soldiers on the ground tell CNN that four people were injured, lightly injured, we are told, one of them a 14-year-old teenager. This latest air strike in Gaza comes two weeks after an F- 16 dropped a one-ton bomb on an apartment building, killing a senior Hamas militant leader, Salah Shehada, along with 14 other people. Back then, Hamas vowed revenge, and we have seen a string of deadly attacks by Palestinian militant groups, the most deadly being the bombing of the Hebrew University, and then the other one, the suicide bombing on a bus in northern Israel, killing nine people, wounding 50 -- at least 50 others.
Now, this latest attack in Gaza, though, comes as senior Palestinians meet with the Israeli defense minister and the head of the Israeli security services. Palestinian sources tell CNN that meeting began before this air strike in Gaza and it ended about 15 minutes after the air strike happened. This meeting is interesting and important, because it took place reportedly with the knowledge of the Israeli Prime Minister Ariel Sharon, and it also took place despite that string of deadly attacks on Israelis over the last 24 hours -- Lou.
DOBBS: John Vause, thank you. John Vause, reporting from Jerusalem.
On Wall Street today, another miserable session for investors. We've now had three trading days in the month of August, and there have been three triple-digit losses in the Dow Jones Industrials. Today all but two Dow components finished lower. Three stocks fell for every one that rose. The Dow fell more than 269 points; the Nasdaq dropped 42 points, both losing about 3 percent on the day. The S&P 500 down 30 points as well.
Christine Romans at the New York Exchange, Bill Tucker at the Nasdaq marketsite -- Christine.
ROMANS: Well, Lou, broad losses here (UNINTELLIGIBLE), cable, energy, drugs, semiconductor stocks, all of them getting hit hard. The Dow fell more than 3 percent and ended on the worst level of the day, at 8,043. That brings its three-day losses to almost 700 points; almost two-thirds of that big rally from the July lows is now gone.
Now, the signals from the market were mostly negative. There were 155 new 52-week lows here; only 21 new highs. Three stocks fell for every one that rose. Almost all of the most active stocks here were down at least 3 percent. Overall volume, though, was muted, compared with recent very heavy sessions; 1.3 billion shares changing hands.
Now, the Dow is now down 19 percent so far this year. Painful, but about half the loss of the Nasdaq. Bill Tucker is there at the Nasdaq marketsite -- Bill.
TUCKER: Thank you, Christine. Concerns about the strength of the economy undermined investor confidence early in the session. After failing to build any momentum in the first hour, the fight seemed to slip right out of stocks, and stocks headed on their downward path, falling to within 14 points of their intraday low set back on July 25, closing a fresh five-year lows. The decline today led by the semiconductor sector; the Philadelphia Semiconductor Index falling nearly 6 percent to its lowest level since November of 1998. There were 12 stocks lower for every five higher on the Nasdaq, and volume today, the fourth lowest of the year -- Lou.
DOBBS: Bill, thank you. Bill Tucker, Christine Romans. We'll be back with Jan Hopkins as we continue our coverage of this market.
In Oregon tonight, two of the largest forest fires in the country continue to burn. Those fires, however, have still not merged as had been feared. Firefighters are struggling tonight to build fire breaks, trying to strengthen a 40-mile defense line. The containment line has eased the threat to communities on the eastern front of this fire. Seventeen thousand people live in that area, but the fires continue to move northward. Those fires now threaten the community of Agnus, a whitewater rafting center on the Rogue River.
Heavy rain is falling on the Gulf Coast region tonight. Tropical storm Bertha came ashore in New Orleans early this morning. But once the tropical storm hit land, the storm was downgraded to a tropical depression. The rain is causing flash flooding in several Gulf states, and at least one drowning in Florida is being blamed on the storm. Forecasters predict the downpours will continue possibly through tonight and into tomorrow. Some areas may receive as much as eight inches of rain.
The rain may help ease the drought conditions in the southern conditions, but they're likely to make Louisiana's outbreak of West Nile virus even worse. Those rains produce standing water, which provides the breeding grounds for mosquitoes. These mosquitoes in turn carry the virus to humans. The Centers for Disease Control say the disease is not going to disappear. So officials are wanting everyone to use repellent to protect themselves. The outbreak in Louisiana has already killed four people and infected 54 others, and has spread to neighboring states.
Since it was first detected three years ago, West Nile virus has spread rapidly toward the western part of the country. Eighty-eight people have been infected nationwide so far this year.
A blistering heat wave continues to maintain its grip on the east. Temperatures have been averaging five to 10 degrees above normal for more than a week now, and conditions have been worsened by high humidity. That's been making the temperature feel closer to 100 degrees in most cities along the Eastern Coast, and closer to 110 degrees in others. Excessive heat warnings have become the norm of late. But relief apparently is on the way. A cold front is moving down from Canada. With it, heavy thunderstorms. Forecasters say it will bring temperatures down to a more seasonable level.
Still ahead here tonight -- General Tommy Franks briefs the president and his national security team about possible war plans against Iraq. We'll have a live report for you from the Pentagon with the latest. Three thousand Iraqis protest against the United States as Iraq invites members of Congress to join them in Baghdad. We'll have that story for you.
And investors running from the downturn in the stock market, looking for a safe haven in real estate. That report coming up. And we'll discuss the risk of a double-dip recession with two of Wall Street's top economists, Bill Dudley of Goldman Sachs, Stephen Roach from Morgan Stanley will join me. Stay with us.
DOBBS: A new report paints an unflattering picture of two of our nation's top law enforcement agencies. That report shows five Justice Department agencies cannot account for nearly 800 weapons and 400 laptop computers. Most of the missing weapons belong to the FBI and the Immigration and Naturalization Service. Some of those laptops may have contained national security information. The FBI hasn't conducted a complete inventory of its weapons or computers in a decade.
The Justice Department's inspector general called that a serious deficiency of management.
President Bush today was given a top-level briefing on the planning for a possible invasion of Iraq. The briefing was given by General Tommy Franks, commander of Central Command.
Senior Pentagon correspondent Jamie McIntyre joins us now, and has more on the story -- Jamie.
JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well Lou, President Bush spent the weekend if Kennebunkport and then made a stop in Pennsylvania, but came back to the White House this afternoon in time for a National Security Council briefing in which Pentagon sources say planning for possible attacks in Iraq was discussed.
Now, the administration is insisting that this was simply a routine meeting of his National Security Council. But Pentagon sources say that Army General Tommy Franks was updating the president on the latest war planning for Iraq, the latest thinking about how a military ouster of Saddam Hussein might go.
One official called this not a plan, but it was a, quote, "good proposal for a plan."
The Pentagon sources say that President Bush was not asked to make any decisions as a result of this briefing today, and they still say that military action is not imminent. In fact, that he has not made that decision to attack Iraq.
There are, however, other signs that the war is growing closer. For instance, there's this stepped-up production of satellite-guided bombs that is to replenish the inventory from the Afghanistan war. And also another signal: Some key Pentagon officials have been told to get their vacations in soon, this month, if possible.
But nevertheless, Pentagon sources say that even after this briefing today, President Bush will still be able to deliver a denial that he's been giving for weeks -- that is, that he has no war plan on his desk -- Lou.
DOBBS: And Jamie, any sign that those plans are consolidating into one direction or one approach?
MCINTYRE: Well, they are. Pentagon sources say that the plans are beginning to focus. The latest version has a series of modules of plans, various different aspects that can be -- sort of a menu of options that can be adopted or mixed and matched.
But the information on the actual war planning is very, very close held. Only a handful of people in this building have access to it and, believe me, none of them are talking.
MCINTYRE: And that is reassuring.
Jamie, thank you. Jamie McIntyre, senior military affairs correspondent from the Pentagon.
New research suggests the Pentagon has quietly begun to mobilize more combat troops from the Army National Guard and reserves. The private firm Stratfor says the mobilization indicates a U.S. invasion of Iraq could take place in January or February of next year.
At the beginning this year about 18,000 Army Reserve and National Guard troops are scheduled to be -- were scheduled to be mobilized, and were. That rose to nearly 30,000 in April and just under 37,000 at the end of last month. Stratfor reports the mobilization appears to be shifting to more infantry, armor, artillery and engineering units. It also says full units like companies, battalions, brigades are being called up. Routine mobilizations are limited to nine months, so the Reserve units are scheduled to be stood down by the end of next March.
The speaker of the Iraqi parliament today invited members of the United States Congress to visit Iraq. He said they could bring a panel o0f experts to check sites where they believe weapons of mass destruction are being produced. The White House, for its part, was not impressed by that invitation, and once again demanded action from Iraq, not discussion.
The Iraqi invitation came as about 3,000 Iranian -- Iraqis held an anti-American demonstration in Baghdad. The protest was organized by members of the Iraqi Parliament. The demonstrators burned American flags and an effigy of President Bush, just to underscore the warmth of the invitation, I suspect.
U.N. Secretary-General Kofi Annan says an Iraqi offer to hold weapons inspection talks may be worth considering, but needs to be clarified.
(BEGIN VIDEO CLIP)
KOFI ANNAN, U.N. SECRETARY-GENERAL: I think it's one of the first letters we've received from Iraq inviting the inspectors to come in. Obviously, it was a one-way (ph) program. Whether this is a real break and a real change in attitude is something that we will have to test.
(END VIDEO CLIP)
DOBBS: Iraq recently invited the U.N. chief weapons inspector for talks about the possibility of allowing U.N. teams back in Iraq. The White House has dismissed that Iraqi offer, and the United Nations, of course, has been spurned at the highest level since three attempts to reinstitute those weapons inspections this year.
Iraq is the subject of tonight's MONEYLINE poll. The question tonight is: When, if ever, should the United States attack Iraq, immediately, before the end of the year, next year, or not at all?
We invite you to cast your vote at MONEYLINE@cnn.com. We'll, of course, have the results of our poll later in the broadcast.
Coming right up: our Enron scorecard.
Plus, fears of another downturn in the economy, gripping investors. Wall Street economists Stephen Roach, Bill Dudley will be here to tell us if the worries are justified.
And the turmoil in the market has forced many investors to consider alternative investments.
Tonight we'll take a look at art, and whether it offers the possibility of attractive returns.
And the miners rescued from that coal mine in Pennsylvania sell their story to Disney. The price tag: $1.5 million.
And science fiction on its way to becoming reality. Boeing working on anti-gravity technology to take spaceships that may one day take those ships to the stars.
Stay with us.
DOBBS: The president tried to strike an optimistic view about the economy today during a fund-raiser for Pennsylvania gubernatorial candidate Mike Fisher. The president said U.S. monetary policy is sound.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: One reason they give the president the veto power is to make sure that Congress doesn't overspend. Overspending could serve as an anchor on economic vitality and growth.
(END VIDEO CLIP)
DOBBS: Earlier the president honored the nine miners who were pulled from a Pennsylvania mine shaft. The president said their dramatic rescue represents the best of this country, and that the same spirit would help the United States win the war against terrorism.
Tomorrow President Bush heads to Crawford, Texas for a month-long working vacation.
The president's optimism about the economy comes despite last week's revised GDP numbers -- and what revision it was. Those figures raising fears about the possibility of a so-called double-dip recession.
Morgan Stanley's Stephen Roach says the revised data pushes the economy to a brink of another recessionary relapse. Goldman Sachs' Bill Dudley disagrees, but he doesn't have much good news for us either.
Nonetheless, we invited them both here to sort it out for us with their rather realistic and -- if somewhat negative view of the world.
Gentlemen, good to have you here.
STEPHEN ROACH, CHIEF ECONOMIST, MORGAN STANLEY: Good to be here, Lou.
DOBBS: Let's start out with the double-dip recession. We now know we had a recession. It's -- the most recent revision can be credited as being accurate. Why are you so convinced?
ROACH: Well, I think not only did the revisions, Lou, reveal that this economy of ours, post-bubble, is more recession prone than we had ever believed before, but in the second quarter of this year, the growth rate is down to one percent, which is right smack on the stall speed of a relapse or the dreaded double dip.
DOBBS: Or as we've just learned in the past week, certainly within the margin of error at the Commerce Department.
ROACH: Well, that margin of error makes Chinese GDP look good.
DOBBS: Absolutely. You don't believe there will be a double-dip recession, yet you believe there will be a 75-basis point cut by the Fed. Why?
WILLIAM DUDLEY, CHIEF U.S. ECONOMIST, GOLDMAN SACHS: Well, because I think there is a risk of a double-dip. I think that the economy is close to the stall speed that would cause that outcome. And the Fed definitely doesn't want to go there. They don't want to see what it would be like to have a Japanese-style experience.
DOBBS: Let me ask you both. We're seeing strong signs of the consumer remaining in this economy, strong retail sales, given everything that this economy has gone through. And I mean, you -- as negative as you both are, you have to be amazingly impressed by the resilience and strength of this economy.
DUDLEY: I think that's the difference between Steve and my view is I think we think the consumer is going to hold out well enough to keep us out of a double-dip. But I think the Fed, you know, needs to take out some insurance. It doesn't cost them much. And that's what I think they're going to do.
DOBBS: What do you think of that idea? Would that 75-basis point cut by the Fed stave off the double-dip recession you see?
ROACH: Not in your life; 475 hasn't done it. What's another 75. Maybe the American consumer is overextended, more leverage than ever before, not a whole lot of saving has lost an awful lot of equity wealth and is basically spending on the basis of the last bubble in America, his house (ph). And what happens when that goes?
DOBBS: You still believe that real estate is a bubble?
ROACH: I'm afraid so. I mean, this is a post-bubble world we live in, Lou. We saw Nasdaq go. We saw the technology bubble go. Starting to see the dollar bubble go. And I think the house is next and then...
DOBBS: We finally get to parity with the euro and now you're talking about a dollar bubble.
DUDLEY: I'm not quite as negative because I see some supports for the economy from fiscal policy, from the lean level of inventories. And the tech bust, I think, is over. So, I think that Steve, you know, has a reasonable point of view that there are definite risks out there. But I think the risks aren't quite as advanced as he sees them.
DOBBS: Well, given all of this, almost $8 trillion ripped out of the stock market over the course of the past two and a half years. As you point out, the rates now down to 1.75 percent. That puts us in real terms at about zero already, in terms of real interests rate. What's it going to take to drive this market because corporate America sure as heck is not investing?
DUDLEY: I think that's what the message of last week's data was. One thing that I've been watching very closely is how does the stock market weakness feed back into the economies. Well, you saw last week as businesses are reacting pretty aggressively by tamping down hiring and also cutting back on capital spending. That's where the feedback seems to be the most rapid.
ROACH: And I would add to that businesses actually start laying workers off to cut costs, to boost earnings. That's the coup de grace for the American consumer. Income shock is the worst thing that can happen at this point in time.
DOBBS: Well, some good news. The most recent report showing layoffs abated in the month of July, somewhat. Is that a trend you'd expect to be temporary?
ROACH: I do. I think that as we go through the year, earnings- constrained companies lacking in any pricing leverage are going to have to cut costs further. They've cut all of the capital spending they can cut. And I'm afraid head count reductions and layoffs could well be next.
DOBBS: All right. Bill, tell us how that 75-basis point cut by the Fed is going to save us?
DUDLEY: Well, I'm not sure it's going to save us. But I think the Fed has to try. I think that there's a Fed staff study of the Japanese experience, and they really had two broad conclusions: one, that the Bank of Japan was too optimistic about the growth outlook; and two, that they should have done more. I think the Fed should follow their own advice, look at the current situation, see the risks out there and ease further.
DOBBS: Well, the way you are both talking, one should listen with some credibility to the idea of disinflationary talk that is surrounding some of this economy right now. Are you concerned?
DUDLEY: Well, I'm concerned that, you know, nominal GDP growth in the second quarter was only 2.2 percent. I mean, the Fed is probably trying to achieve growth of 4.5, five percent. So, whenever nominal GDP growth is well below what the Fed is targeting, you have got to be worried about that risk.
ROACH: I would just add that right now, Lou, about half of the U.S. economy is actually in deflation, the goods-producing sector, the construction sector. Only services, where we tend to make up prices, is there a positive inflation rate right now in the United States.
DOBBS: All right. Not to bring up Goldman Sachs and one of its alums, but Robert Rubin suggesting criticism of the treasury secretary and this administration, that the tax cut should be rolled back. Does that make sense in this environment?
DUDLEY: Well, I think this idea of still focusing on making the tax cuts permanent is really focusing on the wrong thing. I think, if anything, we should bring the fiscal policy stimulus forward to today.
DOBBS: You mean, deepen the tax cuts now?
DUDLEY: Now, rather than cutting taxes (UNINTELLIGIBLE)...
DOBBS: So you'd be at odds with your former colleague?
DUDLEY: Well, I might -- I don't know if I would be at odds with my former colleague. But the idea of...
DOBBS: He's running a tax hike and you're saying roll it back.
DUDLEY: Well, I don't think he wants a tax hike, but cutting taxes down the road doesn't make sense when the economy needs the support now.
DOBBS: You're in the comfort of MONEYLINE. You can speak absolutely without fear and straightforwardly. Steve, what do you think? ROACH: Look, I think the issue is pretty rough right now. We do need maximum monetary and fiscal stimulus to avoid a deflationary trap. The problem is it may not work and it is a risky strategy down the road because if we get...
DOBBS: So, what do we do?
ROACH: Right now?
DOBBS: Right now.
ROACH: More fiscal stimulus, more monetary stimulus and hope.
DOBBS: Tax cut, tax incentives?
ROACH: I don't -- I'm not in favor of tax incentives to boost investment. We have too much capacity out there.
DUDLEY: We've already tried that and...
ROACH: And it never worked.
DOBBS: What would you have us do?
DUDLEY: I think tax cuts for moderate income households is probably a good way to go.
DOBBS: The working man and woman in this country is getting hammered. Those mortgage interest rates have come down, but credit card rates are high. You have alluded to the heavy debt burdens. What are we going to do for the working man and woman in this country?
ROACH: Well, again...
DOBBS: And it's fine to talk macrotheory, but what are we going to do for those people, because they are the one carrying this economy?
ROACH: I think that's entirely right. And the pressures that the average working person is under in terms of the loss of wealth and equity markets, possibly in housing markets...
DOBBS: And possibly their jobs.
ROACH: And possibly their jobs, their income generation...
DUDLEY: That's why you have to keep the economy growing, because if you don't keep the economy growing, you don't have job creation. If you don't have job creation, that's really what puts the moderate income person at risk.
DOBBS: I'm with you all the way.
ROACH: Yes, but how do you legislate job creation for earnings- constrained companies who need to cut costs to survive?
DUDLEY: That's why he wants...
DOBBS: The president is embarking on a working vacation. I was hoping that you gentlemen would offer him several bullets here.
ROACH: Keep working.
DUDLEY: Yes, work hard.
DOBBS: And less vacating?
DOBBS: OK. Gentlemen, thank you very much. Bill Dudley, Stephen Roach.
ROACH: Thank you, Lou.
DUDLEY: Thank you.
DOBBS: Coming up next, we'll take a look at our Enron corporate America criminal charges scoreboard. It's a scoreboard that's critically important for your recordkeeping.
Also, fears about the economy send stock prices falling sharply again. Jan Hopkins will have complete coverage of the market.
Lawsuits that act against the common good in this country, author, attorney Philip Howard will be here to tell us how one man is suing an airline because it put a fat passenger in the seat next to him.
The miners rescued from that coal mine in Pennsylvania, well, Disney putting forward a wonderful offer, which they accepted. We'll have that story.
And a new asteroid to tell you about. It will apparently come within 330,000 miles of earth. This one will come so close, you'll be able to see it with binoculars. All of that and more still ahead here. Stay with us.
ANNOUNCER: LOU DOBBS MONEYLINE continues.
Here again: Lou Dobbs.
DOBBS: These are the top stories tonight.
Israeli helicopter gunships have attacked a suspected terrorist weapons factory in Gaza. It follows a series of Palestinian attacks over the past few days. More than a dozen Israelis have been killed in those attacks.
General Tommy Franks briefs President Bush and his national security team on war plans against Iraq. Pentagon sources say the concept of operations for an attack is, quote, "well along."
And 3,000 Iraqis demonstrated against the United States today in Baghdad as Iraq invited members of the U.S. Congress to visit Baghdad. The White House dismisses the offer.
It was, by any measure, an ugly session on Wall Street today. The Dow, a third consecutive triple-digit decline. Three hundred twenty-five billion dollars of market value erased today.
And Jan Hopkins is here with our coverage of the market.
Another -- this is getting a bit tiresome -- tough day on Wall Street.
JAN HOPKINS, CNN FINANCIAL NEWS CORRESPONDENT: That's right, Lou.
We're returning to an old political campaign mantra: "It's the economy, stupid." Not you. But, you know, the mantra.
DOBBS: ... include me in that, certainly.
HOPKINS: Today it was weakness in services that rattled investor confidence, and the selling accelerated at the end of the day.
The Dow lost more than 3 percent. The Nasdaq also sinking more than 3 percent. The same for the S&P 500.
Christine Romans is at the New York Stock Exchange, and Bill Tucker is at the Nasdaq market site -- Christine.
ROMANS: Well, Jan, financial stocks shaved 45 points off the Dow here. JPMorgan Chase and Citigroup tumbling after Lehman Brothers cut their price targets, citing a tough operating environment.
Disney fell 7 percent to the lowest price since 1994. This after Moody's put it on review for a possible downgrade.
Now Procter & Gamble lost $2. Investors taking profits there after it booked a healthy profit in the period. It's still among the best-performing Dow stocks this year.
And Philip Morris rallying 5 percent because of a favorable court ruling. One of only two Dow stocks to rise here today.
Now the Nasdaq and Bill Tucker.
TUCKER: Thank you, Christine.
The Nasdaq falling to fresh five-year lows today, and stocks were led lower by their generals. Microsoft, which announced plans today to open up and share some of its source code for its Windows and Explorer software in compliance with its as-yet unsettled antitrust settlement suffered the least. Intel, among those that suffering the worst. It closed down 5 percent to a new 52-week low as part of a very weak semiconductor sector.
Qualcomm also joined Intel on that 52-week low list as wireless stocks tumbled in today's market.
And Cisco had the distinction of being the earnings report that everybody is waiting for, but it doesn't report until after the bell tomorrow -- Jan, back to you.
HOPKINS: We'll be watching. Thanks, Bill.
And market watchers are getting nervous about how far we've fallen after that late-July rally. The Dow has given up 700 of the 1,000 points it gained. And as Bill mentioned, the Nasdaq has lost all of its advance. The Nasdaq tonight is back to a five-year low.
Lou, as stocks tumble, bonds are continuing to rally. The two- year treasury is now below 2 percent. And so ironically, it could be those low yields that bring investors back into the stock market: They don't want to take less than 2 percent.
DOBBS: Although we have to balance that with the risk-averse reasons that people are putting money there. And the 10-year note down 4.20. It's remarkable.
And as you say, that 700-point loss, it all came in three days.
HOPKINS: Yes. Yes.
DOBBS: Jan, thank you.
The S&P 500 has dropped more than 40 percent since its peak back in March of 2000. Many sectors have suffered much steeper losses than the broader market.
The wireless services sector is the hardest-hit in this downturn, dropping 93 percent over that period.
Closely behind, the telecom equipment group.
Rounding out the worst-performing sectors: multiutilities and unregulated power, computer storage and networking equipment stocks.
On the upside -- there is an upside. Health care facilities such as hospitals, assisted living firms soaring 128 percent. Tobacco up 123 percent, if you can appreciate the irony, and other winners include homebuilding, casinos and gaming and managed health care.
Today chip stocks were one of the worst performing sectors. The Philadelphia Semiconductor Index dropped nearly 6 percent today. Semiconductors are consistently one of the most volatile sectors, if not the most volatile sectors in this entire market. And it makes it difficult to tell if chip stocks are a good investment, a bad investment, or merely part of a trading strategy. Greg Clarkin has the story.
GREG CLARKIN, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Chip stocks: They're among Wall Street's favorite trading plays. Choppy and volatile, they swing wildly on a rumor or even just a whiff of news.
Traders say chip stocks have gained favorite trading status for a number of reasons. One, the chip business has a number of regular reports that measure the health of the industry. That allows investors to position themselves. Secondly, it's a group of stocks that are easy to get into and out of.
ROB COHN, CSFB: These are probably one of the better trading vehicles for investors, meaning better -- that there's liquidity and there's action. And that's why people tend to flock to them. There's -- the individual stocks as well as the group as a whole in the stocks has a lot of liquidity to it, which you might not get in some of the other more exotic technology areas.
CLARKIN: To get a sense of the trading activity, take a look at the Philadelphia Semiconductor Index: It's been sliced in half since early March. But within each step down there's tremendous volatility.
Some of that can be traced to the lack of a consensus on Wall Street as to the health of the business. Recently a Goldman Sachs analyst turned positive on chip equipment stocks. That very same day a Deutsche Bank analyst said it was too early to jump back into the equipment makers.
The Goldman report raised some eyebrows, especially when a "New York Times" report raised questions about it related to a large options play on chips by Goldman.
Traders say another reason for recent choppiness in chips is that early year strength may have been nothing more than a restocking of inventory. And that and other fears have been pounding away at the chip stocks, with the Philadelphia Semiconductor Index trading at a 52-week low today.
Greg Clarkin, CNN Financial News, New York.
DOBBS: Well, if you're feeling a little battered by the stock market, perhaps even the real estate market, let's turn to something you might appreciate: the art world. Benefiting for -- from all of these problems, many investors are looking for tangible places in which to put their money. Sales of top-quality art is rising, and the pieces are holding their value.
Kitty Pilgrim has the report.
(BEGIN VIDEOTAPE) KITTY PILGRIM, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Don't put it in the mattress, hang it on the wall.
Art sales are booming. Quality art is selling as briskly as ever. Trendy is out. In art, the blue chips -- old masters, impressionists, quality drawings, are selling. In New York the spring auctions broke records.
Citigroup advises on art purchases these days as investors look to diversify their assets.
SUZANNE GYORGY, CITIGROUP ART ADVISORY SERVICE: What we're seeing now is -- and which we've seen before -- is there's a trend when the equities market is down people tend to put their money more into art or into real estate. And I think that's a lot of what we're seeing now.
PILGRIM: Art experts are happy to tell you high-quality art holds its value. This chart from April 2000 shows an art index outperforming the Dow, S&P 500 and Nasdaq over the last two years.
GAVIN SPANIERMAN, SPANIERMAN GALLERY: I think that people are sick and tired of the roller coaster ride in the stock market. I think that people are looking for a place to put their money that is safe, that's tangible, they know what they have. It's there on their wall; it's not going anywhere.
PILGRIM: Art experts were concerned the economy and the psychological effects of September 11 would dampen the art market.
In fact, just the opposite happened.
MARC PORTER, INTL. MANAGING DIR., CHRISTIES: What we found day in and day out is that people continue to return to objects of great beauty or historical importance to give them comfort, to remind them of about what the culture is all about. And it remains one of the places that people love to put their money.
PILGRIM: Investing in art is tricky. Art experts say avoid trends and fads, but only buy what you love. That way even if the painting does not appreciate as much as you want, at least you have the joy of hanging it on the wall.
Kitty Pilgrim, CNN Financial News, New York.
DOBBS: And now our MONEYLINE question for our poll tonight. Our question this evening is, when, if ever, should the United States attack Iraq: immediately, before the end of the year, next year, or not at all?
Please cast your vote at cnn.com/MONEYLINE. We'll have the results for you in just a few minutes.
And now we want to update our corporate America, Enron criminal charges scoreboard -- if we can turn to that.
No arrests announced today. No further developments, apparently, in the Enron investigation. The criminal charges since the Enron collapse scoreboard remains as it was Friday, 18 to zero.
By the way, the day since the collapse of Enron: 245.
Coming up next here we'll take a look at several frivolous lawsuits. The -- Philip Howard says these lawsuits are only reinforcing the idea that you can sue for anything, despite the absurdity of the claim. He'll be my guest as we talk about the Trial Lawyers Association (UNINTELLIGIBLE) and other issues confronting the nation.
Investors seeking shelter in housing? But can the prices hold up, or is it a bubble? We'll have a special report for you on the real estate market around the country.
And we'll be telling you about the prospect of a new era in space travel: anti-gravity. It's not science fiction. In fact, it could soon be propelling a spaceship. We'll have that story for you.
And space enthusiasts, grab your binoculars. An asteroid will soon pass by the planet earth -- not threaten it this time, just pass by it -- 330,000 miles away, just slightly farther away than the moon. All of that and a lot more. Stay with us.
DOBBS: Well, the housing market has remained a solid investment while the broader market has suffered severe losses. We're going to be bringing you that story and examine whether or not real estate in this country is a good buy or whether it's in the grip of a bubble.
Let's take a look now at our weekly look at the law, how lawsuits are sometimes, in point of fact, quite often, acting against the common good instead of supporting it. Tonight, we're focusing on three cases. The first concerning a man who is suing an airline because a fat passenger was in the seat next to him, the second about a man in a wheelchair who sued a strip club. And the third involves prisoners who want to watch R-rated movies.
Attorney, author Philip Howard joins me now. He's the author of "The Collapse of the Common Good," and always vigilant against the absurdities of the (UNINTELLIGIBLE) in this country, and there are plenty for you to grapple with. Let's start with the idea of suing because a fat passenger is in the seat next to you.
PHILIP HOWARD, AUTHOR, "COLLAPSE OF THE COMMON GOOD": Well, it's hard not to be sympathetic. The poor guy is in a plane and he only has half a seat. He shows up and the armrest is gone and he has to squeeze in there.
DOBBS: The armrest is gone?
HOWARD: The armrest is gone because the person, the fat person had lifted it up because he couldn't get into one seat. So, he asks his flight...
DOBBS: I'm getting increasingly sympathetic.
HOWARD: And now, he sues for $9,500 for emotional distress and breach of contract.
DOBBS: Well, if one could do that with the airlines, one could make a lot of money, I would think.
HOWARD: Well, of course, the airlines are in an impossible position. It's a catch-22. If they had denied the person the seat, they would have sued for violating his rights.
DOBBS: That's right. There is a suit going, at least a threatened suit, because of fat -- well, excuse me -- people, overweight people being rejected from an airline, right?
HOWARD: That's right. And Southwest is trying to charge double fares now.
DOBBS: It works perfectly. It's all coming into balance here. The other cases, I mean, this gets crazy. Prisoners suing for the privilege of watching R-rated movies or apparently the right to watch R-rated movies?
HOWARD: Yes, right. I mean, the one thing that's missing here are judgments. So, finally, Congress makes a judgment about prisoners last year. They passed a law that says we're not going to allow prisoners to watch R-rated movies, whatever. It's a judgment by Congress.
DOBBS: They make the law, as I recall.
HOWARD: They make the law, that's right. The court overturns it as a possible violation of the First Amendment rights of the prisoners. Now, you know, movies are entertainment.
DOBBS: (UNINTELLIGIBLE) put the prisoner in a superior position against Congress?
HOWARD: One would think so. I mean, the point of prison is not entertainment. You'd think Congress could go that far.
DOBBS: Well, that may have been an original theory, I believe. There are people who would argue with you on that.
HOWARD: Well, yes, perhaps. But the fact is we need the laws to be made.
DOBBS: Now, the fellow, the disabled person who is suing the strip club?
HOWARD: Right, because they...
DOBBS: I don't understand. HOWARD: They didn't give him a good enough viewing of the strip stage. And also, they only made available, he claimed, a larger lap dancing room for him and not the better, smaller room upstairs for lap dancing.
DOBBS: Wow. How do you think that case will turn out? How will the wheels of justice do their work?
HOWARD: He's relying on a law where Congress gave equal access to the disabled. And you can really make a claim for anything under that law, and he's using it and the lawsuits...
DOBBS: Well, actually, in that claim, I have to say it though, it makes some sense because the requirement is that every establishment have hegress (ph) and egress for entrances accessible to people with disabilities.
HOWARD: Right. And, of course...
DOBBS: I'm not sure that it went to the idea of lap dancing, but...
HOWARD: He can go to the facility. But the fact is if you have something that gives someone the, quote, "right to equal access," and no one has the authority to draw the line, you can make a claim whenever you don't like where you are sitting. And that's what this person is doing.
DOBBS: The travails of law, trying to balance all of these interests.
DOBBS: Philip Howard, as always, thanks for being here.
HOWARD: Thanks, Lou.
DOBBS: Good to have you here.
Well, the housing market, as I said, has remained a solid investment throughout all of the travail in the stock market over the past two and a half years. Kathleen Hays tells us more about it now.
UNIDENTIFIED FEMALE: Good afternoon, Classic Realty Group.
KATHLEEN HAYS, CNN FINANCIAL CORRESPONDENT (voice-over): Real estate offices across the nation are swamped with eager buyers. With stocks down 30 percent over the past year, and home prices up 7.5 percent, scared investors looking for a safe harbor are flocking to realtors like Charles Oppler.
CHARLES OPPLER, OWNER, CLASSIC REALTY GROUP: There are many people that want to take their cash out and hopefully have taken their cash quite a while ago, looking to put it in a more secure investment like real estate.
HAYS: While the stock market swings like a roller coaster, homes are rock solid. Since the 1960s, when records were first kept, there has never been a calendar year when the median home price declined. Another advantage: a home is an investment you can live in and one where you deduct your mortgage interest.
When you sell it, the tax break is sweet. For a married couple, up to a $500,000 tax exemption. Stock investors pay a tax of 20 percent on long-term capital gains. Even though home prices are up, mortgage rates remain near all-time lows. This helps keep homes affordable.
Even so, some worry the hot housing market is overheated, like it was in stocks, and those looking at real estate as investments should be cautious.
BARRY HABIB, GMAC MORTGAGE: If you look at stocks right now, stocks are probably on the lower end of their spectrum, where real state prices are probably on the higher end. So, from a strictly investment perspective, I think that you are probably better off long term with results investing in stocks than you would be in real estate.
HAYS (on camera): If your nest is empty and you're ready to downsize, many realtors say sell your house now, cash in on the recent run-up in home prices, because interest rates are low now, but once they start to rise, the hot housing market could quickly cool off.
Kathleen Hays, CNN Financial News, New York.
DOBBS: Coming up next here, the nine miners rescued from that Pennsylvania coal mine have sold the film and book rights to their story. We'll have the details for you.
Boeing, working towards the use of anti-gravity to send spaceships to the stars. We'll have a special report for you.
And an asteroid that will be close enough to the planet earth for us all to watch through our binoculars. Astronomists say there is no need for panic this time, just a great visual display. All of that and more still ahead, and I'll have a few thoughts on exaggeration. Stay with us.
DOBBS: More good fortune for the nine Pennsylvania coal miners who were rescued. Disney has purchased the exclusive television and book rights of the miners' stories, paying one and a half million dollars. The miners and the lead rescuer will reportedly receive $150,000 each. ABC will air a two-hour television movie about the rescue and Disney's Hyperion unit will publish a book. The miners received more than 120 offers for their stories. And good going, Disney. Now, the results of tonight's MONEYLINE poll. When, if ever, should the United States attack Iraq? Perhaps a surprising answer here. Fifteen percent said immediately; eight percent said by year's end; five percent said next year; 72 percent, not at all. This is where we say this is not always a scientific poll. It is what it is, as they say.
Well, planet earth is in for a close encounter. A half-mile wide asteroid will be flying by the planet later this month. It's a space rock dubbed 2002-NY40. It will come within 330,000 miles of earth. It will come here on the 17th of August, as a matter of fact. And if you have a pair of binoculars or a small telescope, you'll be able to watch the fly-by. This asteroid is not to be confused with 2002-NT7, which scientists had predicted might strike the earth in 17 years, but now say it will certainly not.
Anti-gravity sounds like the stuff, certainly, of science fiction. But NASA has already placed a contract with an Ohio firm to replicate Russian experiments that defy gravity. And Boeing is considering whether anti-gravity can be commercialized or if it will come crashing down to earth. Steve Young has the story.
STEVE YOUNG, CNN FINANCIAL CORRESPONDENT (voice-over): At its Phantom Works in southern California, where Boeing pursues applied technology projects, the largest aerospace manufacturer in the world has been looking into hardware that shields against the forces of gravity. If anti-gravity works, it wouldn't take thousands of pounds of fuel to lift the spacecraft. The spacecraft would weigh much less, or nothing, and anti-gravity could drive it to the stars.
The authoritative "Jane's Defense Weekly" says Boeing is seeking the help of this man, Dr. Evgeny Podkletnov, a Russian scientist who claims to have developed low and high power anti-gravity devices. "Jane's" says the former Phantom Works head confirm Boeing's interest in the Russian and his anti-gravity experiments.
NICK COOK, AVIATION EDITOR, "JANE'S DEFENSE WEEKLY": He confirmed that Boeing believes that the science was valid and that it really was an issue of scaling the science, engineering the science to see if it was workable.
YOUNG: In a statement, Boeing said, "we are aware of Podkletnov's work and would be interested in seeing further development work being done." While anti-gravity may sound like science fiction, NASA's Marshall Space Flight Center has placed a contract with a Columbus, Ohio firm to try to replicate the Russian's anti-gravity experiments.
Experts say anti-gravity might also be harnessed to create weapons systems that could knock satellites out of the sky.
HAL PUTHOFF, INSTITUTE FOR ADVANCED STUDIES, AUSTIN: I have to say, with all other physicists, I'm certainly skeptical to hear about some change in gravitation because, by and large, engineers and physicists don't know how to modify gravity. On the other hand, we also have to admit that we don't know all there is to know about gravity.
YOUNG (on camera): Some scientists say Boeing's bound to get flack because anti-gravity doesn't sound far removed from flying saucers. It's high public relations risk, but potentially infinite commercial gain.
Steve Young, CNN Financial News, New York.
DOBBS: And still ahead, your e-mails. And I'll have a few thoughts on exaggeration and the virtues of a vacation. Stay with us.
DOBBS: Well, this is proving to be seemingly the summer of our discontent. And we seem at times to be in the grip of exaggeration from all sides. But what is exaggeration and what is true and proportional?
A good friend of my wife's and mine often says she's not overexaggerating when she says something utterly amazing, as if at other times she's just exaggerating, not overexaggerating. We now know there's been some overexaggeration of late. On Wall Street, the markets appear to be in full retreat as investors are informed a year too late that there was indeed a recession, and that earlier reports of economic growth were exaggerated. That after careful recalculation of GDP numbers by the Commerce Department.
And after careful recalculation, many companies are restating their earnings and revenues after some well documented exaggeration there as well. And we do seem to be in a period of overexaggeration, whether it's corporations saying the world will end if they have to expense stock options, or the Justice Department saying that Enron is just simply too complex for it to investigate in a timely manner, or the White House saying we have to attack Iraq right now, or Congress in full flail with hearings on whether we should or should not attack Iraq, or Al Gore himself holding forth on how this president is doing at the job that Mr. Gore wanted, but lost.
Now I have to admit that at first, I thought it was an overexaggeration to call President Bush's month at the Crawford ranch a working vacation. But upon reflection, I think the president may be on to something. Maybe we should all take a working vacation of at least a few days and give ourselves time to sort out all the overexaggerations that seem to be bombarding us this summer. Then we could all get back to work, back to business and back to reality. We need to. And that's no overexaggeration.
Let's take a look at your thoughts. We continue to receive a lot of support for our daily Enron and corporate America criminal charges scoreboard. Wade Kelly in Louisiana writes in to say: "Puh-leeze keep up your Enron scoreboard. I'm tired of hearing excuses about how hard it will be to convict these felons because their deals were so complicated. They need to find a prosecutor with some testosterone and go for it."
Alex Eucare in Virginia e-mails: "Lou, despite their involvement in the largest corporate accounting fraud and bankruptcy in history, the two WorldCom executives may not face the maximum jail sentence or monetary fines possible. Just how big a fraud does one have to commit to merit the maximum: the entire gross national product of Europe?"
And as for our story last week on congressmen and senators refusing to take lie detector tests, Durwood Hatch writes: "They are all such accomplished liars, I doubt that a polygraph would prove much. They could fool it as easily as they do their constituents."
E-mail us anytime. Our address is email@example.com. Please include your name and address.
That's MONEYLINE for tonight. Please join us tomorrow. Our guests will include columnist Paul Krugman on his decidedly negative view of the Bush administration. Former defense secretary William Cohen joins us about the plans for the attacks against Iraq. All of that and more coming up tomorrow. Please join us.
For tonight, that's MONEYLINE. Good night from New York.
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