FBN's Liz Claman Finds Fall in Summer Today on Wall Street
While the biannual Television Critics Association Press Tour rumbles along this week in the swank surroundings of the Beverly Hilton in breezy Beverly Hills, Calif., things at the corner of Wall and Broad in sweltering lower Manhattan are getting downright scary.
At midday, the Dow Jones Industrial Average had dropped more than 400 points; and by the end of the day, the Dow registered a 512.76 point decline, erasing all the gains for the year 2011.
It was the market's biggest single-day point loss since Dec. 1, 2008, when the Dow tumbled 679.95 points in the throes of the financial crisis.
Fox Business Network (FBN) anchor Liz Claman took her "Countdown to the Closing Bell" show to the floor of the New York Stock Exchange ( NYSE) to report on the downturn. Then she took a few minutes to answer some questions from HCTV.
So get yourself a nice warm cuppa to steady your nerves, and here we go ...
Q: When TARP was passed, one of the rationales was that otherwise the stock market would plunge -- and yet it plunged anyway. We heard the same thing for the debt-ceiling deal, and here we go again. What was or wasn't done with the deal that has affected the market -- or would it be going down right now regardless of the outcome of that debate?
A: I'd say today's move was less about the debt-deal passage, which is now two days old, and more about Europe, and the fact that it's still a festering sore. The European Union could barely muster enough will and money to bail out Greece, and now, bigger nations like Spain and Italy are groaning in pain. Global traders woke up today and hated the market direction. You can throw some disappointment about the US economy on top and everyone crumbled.
Q: Do you believe the major ratings agencies will still downgrade the U.S. in the near future?
A: Eventually at least one of them might. If you hold countries to certain standards, and they fall below them, then you have to downgrade them. I've talked to a lot of experts on this, though. No one, no agency wants to be the one to downgrade the U.S. They looked at the debt deal, and while it fell short of the cuts the agencies stated they needed to see to maintain the triple-A rating, they're now saying the cuts are enough to "count" toward a "down payment" of the $4 trillion (in cuts they asked for). They're trying NOT to downgrade the US.
Q: Considering the nation's high debt-to-GDP ratio, why haven't we been downgraded already?
A: Again, there's a huge hesitancy to cut the credit rating of this nation. We've always been AAA rated. The question hangs over everyone's head: would that cause mass selling and panic? Not something we need, especially right now.
Q: What are you hearing is the chief factor -- if there is any one major factor -- affecting the downward trend of the Dow?
A: It's an amalgam of things: as I said, Europe -- parts of it -- is a worry. Our slowing-to-a-trickle economy. Our jobless rate, which is stuck above 9 percent. Negative sentiment. Slowing manufacturing. Lack of confidence. Need more?
Q: Do financial experts foresee any significant improvement in the unemployment numbers by this time next year?
A: No one knows, because a year ago everyone thought, "It can't get worse," and it has. Now people are loathe to make any kind of bet it will improve. I do talk to some people who think things will improve -- Warren Buffett of Berkshire Hathaway; David Cote of Honeywell; Paul Otellini of Intel-- but they all have global businesses that can find growth somewhere. It's other than the US. It's much harder for the small business owner, who we know is the real driver of our economy.
Q: Luxury goods are apparently selling again -- what does that say about the economy?
A: It says the new wealthy in Russia, China and Korea are spending their money on Tiffany jewels and Sotheby's art.
Q: Do experts believe we are in a double-dip recession or that we never left the previous recession?
A: Depends on whom you ask. I keep hearing the term "soft patch." Is that a precursor or fancier way to avoid using the term "double-dip recession?" I hope not, but this will be a tough trend to turn around.
Q: Should investors buy, sell or hold right now?
A: Some very wealthy and smart people I talk to are selectively buying, mostly U.S. large-cap names with a global footprint. Remember, the wealthiest investors are the gutsiest. I'll never forget when billionaire Wilbur Ross bought up Worldcom debt after the company imploded. It looked like trash, but he saw treasure. Who's still a billionaire today? Wilbur Ross. That might tell you something.