The Journalists Weigh In on the Auto Bailout & Sliding Stocks
Thursday, November 20, 2008
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SUSIE GHARIB: I talked today with three prominent financial journalists: Floyd Norris, chief financial correspondent of the "New York Times"; Chrystia Freeland, U.S. managing editor of the "Financial Times" and Allan Sloan, senior editor-at-large for "Fortune" magazine. I began by asking Allan what he thinks is weighing on the markets.
ALLAN SLOAN, SR. EDITOR AT LARGE, FORTUNE MAGAZINE: A four letter word starting with an F, but it's fear. People are just scared to death something is about to happen.
GHARIB: Floyd, I saw a headline today, it said 101 blue chip stocks selling under $10 a share so what does that tell us about investor appetites to buy stocks?
FLOYD NORRIS, CHIEF FINANCIAL CORRESPONDENT, THE NEW YORK TIMES: There is very little appetite anywhere in the world right now. The stock, the United States stock market is doing better than most this year. We're only down.
GHARIB: Down 40 percent on the Dow.
NORRIS: We're down 40 some percent and that is better than Europe is doing.
GHARIB?: Look at Russia, look at Shanghai.
NORRIS: I hope you feel better now. But what is going on this week is that we have seen another crumble in the financial stocks and that is scaring people. They wonder who knows what. I think the problem started or was worsened by Secretary Paulson saying that he wouldn't have put any more money in this year. I think he may have to change his mind and certainly say he's willing to put more money in this year. And he may have to put a lot of money in quickly.
GHARIB: Chrystia, everybody is holding their breath like is there going to be another shocker to this financial crisis, another company that is going to fail.
CHRYSTIA FREELAND, US MANAGING EDITOR, FINANCIAL TIMES: I think Floyd has made the essential point. The new thing that has happened over the past 10 days since Hank Paulson's speech is people suddenly started to think, oh no, the financial crisis part of this may not be over yet. And we've seen that reflected in real anxieties in the credit markets, which have started to freeze up. We have big spreads there again, in the banking stocks, really, really being hit. And I agree with Floyd. I think that we may have to see very significant government action.
GHARIB: Well, we certainly saw Citi stock fall yesterday and then again today. Floyd though, this Saudi prince is buying up shares of Citi. That has got to be a vote of confidence for the financials.
NORRIS: Unfortunately he bought stock at a lot higher prices than now. But there should be a vote of confidence at some point from somebody. And I think it may take Paulson doing some more money to make clear that they are unwilling to let this go any further. Right now there is a lot of concern that a major institution could be in trouble.
GHARIB: And Allan there is real anxieties about the auto industry. Are these big three going to get the bailout?
SLOAN: The short answer is I don't know because everyone wants them to be bailed out but nobody wants them to do it. And it's now a total political question and if anything, GM has said about its financial condition is accurate. They haven't got a whole lot of time before they file regardless of whether there has been a deal.
NORRIS: It is remarkable to see how haughty GM and the other auto makers remain. They fly their corporate jets in.
FREELAND: Wasn't that astonishing that someone didn't say to them this is one meeting that you shouldn't take a private jet to.
NORRIS: Well, it is. And it's also astonishing that after it was done, they didn't apologize. They still feel like they are the kind of people who can have the money when they want it which they've always have been. And they feel like it's not their fault. And to some extent, it isn't. I mean we are seeing Toyotas and Mercedes pile up in parking lots now in Long Beach because the imports aren't selling. But they're in bad shape in Detroit and they need a lot of changes. And that's probably going to mean paying for the retirees and the workers and the shareholders and bondholders and a few groups I haven't thought of.
GHARIB: I know you guys are not in the prediction business, but I would like to get your sense because you cover the markets of when you think this selling is going to end on Wall Street. What do you think, Chrystia?
FREELAND: The truth is Susie nobody knows and I think something which has been particularly terrifying about this crisis is there have been various moments when people have thought OK this particular phase is over. We are now going to move into a recession, in the real economy. We are moving into a more predictable phase so I think there is a lot of fear and a lot of uncertainty and they are feeding on each other.
GHARIB: Allan, when did it go from fear to confidence?
SLOAN: Well, considering that I have taken three nibbles with my own money into the market and have been kicked in the teeth every time, I am now willing to concede that I don't know. But I hope it's soon. Because it's the ugliest market I have ever seen.
GHARIB: Do you agree with that, Floyd?
NORRIS: It is certainly the ugliest market I've ever seen. I think we're seeing people reacting to the fact that their 401ks are down so much and many of them have their houses down so much.
GHARIB: Right.
NORRIS: It is a terrifying thing at the moment. People who have come in have been like Allan, thought they were kicked in the teeth. One little thing we've got going for us now is that it is tax selling season and maybe, you know, heaven knows if you had a capital gain somehow this year, you could certainly find a way to offset it.
GHARIB: All right, we'll leave it there. Floyd, Allan, Chrystia, thank you so much for your time.
NORRIS: Thank you.
SLOAN: Thank you, Susie.
GHARIB: And that wasn't all Sloan, Norris and Freeland had to say about the economy, the markets and the bailout. For more of their insights, join us Thanksgiving night for our special: "From Bubble to Trouble: The Financial Crisis of 2008."
