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| MARKETS AND POLITICS | |
 November 15, 2000  |
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How is the election drawn-out election affecting the stock market? |
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JIM LEHRER: Now, the American perspective on the markets, foreign and domestic, and to Robert Hormats, vice chairman of Goldman Sachs International, a former economics official in the Reagan and Carter administrations; and Daniel Gross, a financial writer and author of "Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance." First, Robert Hormats, do your soundings overseas jibe with those we just heard? ROBERT HORMATS: They do. I think foreigners are a little confused by what is going on. For one thing, this sort of confirms that America is a litigious society. But it really has not had an effect on their -- the dollar has remained very stable during this whole period. If foreigners were very concerned about the environment, about the economy here they would have pulled money out. They are not doing there. So, there has been a curiosity, but there has not been panic, and there has not been a feeling that the American economy is falling apart or that American politics are falling apart. On the contrary, they think we have stable institutions and a pretty well run economy. JIM LEHRER: In other words, they may be laughing at us but they're still investing in it? ROBERT HORMATS: They're still investing; they're certainly not pulling out money. JIM LEHRER: Well, Mr. Gross, how is this presidential uncertainty affecting our other markets, the stock markets particularly? DANIEL GROSS: I think it has been a contributing factor to the recent declines, rather than a precipitating factor. In the week since the election we have had major companies like Hewlett Packard and Dell come out and say our earnings aren't looking so good and our future is not looking as rosy as we thought. That is what has caused the recent sell-offs. This is relatively a minor blimp - the political situation - because I think everybody believes it will be resolved, the markets will go on from there. JIM LEHRER: In other words, the reading on Wall Street is that the country is not that grossly divided; it's just divided between these two men in the middle? DANIEL GROSS: I believe so. I think there was in many ways a divided verdict not only among the voters but among investors. One of the exit polls show that among people who are stock holders 51% went for Bush and 47% for Gore, so there was no great sentiment one way or the other that one person would be bad or one person would be good for the market among investors. JIM LEHRER: Bob Hormats, is your reading of Wall Street the same - that there's no holding of breaths there -- oh, my goodness, Bush is going to win, oh, my goodness, Gore might win? ROBERT HORMATS: No. There really isn't. I mean, the country was divided along political lines, but there are really no deep ideological divisions. And the general view is that policy is not going to lurch to the right or the left. We are not going to have dramatic cuts in taxes or dramatic increases in spending I part because the Congress is so evenly divided -- there are going to be checks and balances, so to the extent there are cuts in taxes they will be modest; the extent there are spending increases, they'll be modest, and basic sound fiscal policies will remain. In the longer term there is a problem because Social Security needs fixing and Medicare needs fixing, and I'm afraid, given the impasse and the divisions, it's going to be very hard to address those issues but they are not immediate issues -- they are longer term ones. JIM LEHRER: Dan Gross, do you agree there could be a long-term problem here if this thing goes unresolved too much longer? DANIEL GROSS: Too much longer certainly. I think one of the things that people feel very secure about is we may not know who the next President is, but we know who the chairman of the Federal Reserve Board is. Alan Greenspan and the success of his tenure was practically the only thing that Gore and Bush agreed upon, and investors have a great deal of faith, and justifiably so, in his ability to shepherd the markets, to pass judgment on the various fiscal plans that will come before the Congress in the next session. So I think Greenspan's experience and the reputation and image he has is helping hold this together even though we may have uncertainty for several more weeks. JIM LEHRER: But your point is -- to review what you said a moment ago -- is any kind of drop there has been in the stock market or volatility in the stock market has not specifically been caused by this presidential uncertainty? DANIEL GROSS: Not specifically. I think it's again a contributing factor but not a precipitating factor. People who may have some money to put to work may be hesitating for a while. You know, there was a lot of discussion in this campaign, especially by Al Gore, about HMO companies, drug companies, big oil, tobacco companies. He spent a lot of time bashing them. If he were to win, I think that's bad news for the sectors. Conversely, Bush wins, it's good news for those sectors. And the fact that you haven't seen wild swings either way in some of those stocks shows that people are -- that there is still some uncertainty. People are wondering where to put their money. JIM LEHRER: So, Bob Hormats, when Jim Baker and others say, oh, my goodness, this certainty is affecting confidence in the U.S. stock markets, et cetera, take it with a grain of salt? ROBERT HORMATS: Yes. I think we really haven't seen any evidence of that, and I quite agree with Dan. Alan Greenspan today is the repository of credibility in this country and abroad with respect to American economic and financial and monetary policy. His credibility and that of the Fed is such a dominant factor in the thinking of the market, thinking of global markets, thinking of markets at home that that has really preserved stability to a very great degree, even though we don't know who the next President is going to be. In addition, the institutions of this country are very strong; they're very resilient. We're not - and anyone who says we are I think is wrong-- we are not a banana republic. We are going to come through this. We are going to have a President on January 20th. And we have the strongest, most resilient institutions in the world - political and financial -- and foreigners respect that because there has been a tradition of stability and they fully expect that will continue. This is a very important part of our credibility today and in the future. JIM LEHRER: Dan Gross, would you agree with what Bob Hormats said earlier, that there is no sign thus far at least that international investors are shying away from U.S. companies or whatever because of this? DANIEL GROSS: Yes, I agree. Our markets are the most secure and the most transparent. You know, this is the haven for safety especially our government bonds. People buy those as a secure -- the most secure investment. And the bonds have been relatively stable in the last week. If people were pulling out their money from this country, you would see those fluctuate a lot more. And, really, there is nowhere else to put it. There are no other economies that are growing like ours, that are as safe and stable and secure as ours. JIM LEHRER: All right. so if somebody says - both of you gentlemen - if somebody says whether it's one of the Gore folks or one of the Bush people says, oh, let's resolve this thing in a hurry because if we don't we are going to have an international financial crisis, forget it, Mr. Gross? DANIEL GROSS: Yes, I would tend to disregard James Baker's kind of alarmist calls. Again, these markets have survived impeachments; they've survived all the crises we've had in Mexico, in Russia, in Asia. Our economy has survived. And there is no reason it should not survive this crisis. JIM LEHRER: Bob Hormats? ROBERT HORMATS: Yes. I agree, I think if this lasts a long longer and there is real indecision as we get closer to January 20th, then foreigners and Americans, as well, would begin worrying about continuity and stability, but if we resolve this, as I expect we will, in an orderly fashion, then the problem will be resolved and we'll go on and people will focus on the economic fundamentals and the new policies of the new administration and the Congress, and that will be the topic of discussion rather than this impasse that will last for a temporary period of time then presumably be finished. JIM LEHRER: Okay. Gentlemen, thank you both very much. |
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