Lou Dobbs, Is the Market Hopeless?

Lou Dobbs, the silver-haired anchor of TV's number one financial news program, CNN's Moneyline News Hour, is in the center of the biggest news story of the season. It's Dobbs, not Tom Brokaw, who provides the deepest coverage of the fraud, swindles and greed at some of America's stalwart corporations that shocked the economy. When yet another scandal was revealed, he wrote, "As if the Enron, Merrill Lynch, Xerox, RiteAid, Qwest, Dynegy, Global Crossing, Tyco and ImClone scandals weren't enough, the World-Com disgrace offers irrefutable proof that corporate America became rife with corruption toward the end of the longest economic expansion in our history." Unless the politicians do something, Dobbs warned the Dow Jones Industrial Average--nearly 12,000 in 2000--will fall to 5000.

Whether Dobbs is reporting a bear or bull market, his Moneyline leads--in prestige and ratings--the other cable TV business-news programs, including Fox News' Your World With Neil Cavuto and CNBC's Business Center. Besides anchoring the show and serving as its managing editor, Dobbs was part of the team that founded the Cable News Network for Ted Turner in 1980. In 1990 he was presented with the Luminary Award by the Business Journalism Review for his "visionary work, which changed the landscape of business journalism in the Eighties." Who better to help make sense of our current financial confusion?

[Q] Playboy: Do you really think the market will continue to fall? In your newspaper column, you warned that the Dow could drop to 5000.

[A] Dobbs: That was hyperbole--a warning. I believe politicians have been late to understand the seriousness of the situation, but now they're beginning to get it. They're understanding the profound nature of the scandals, and they know something must be done.

[Q] Playboy: You've said the stock market has become a barometer for where we are in our personal and national lives. Well?

[A] Dobbs: Other than the corporate scandals, we're doing fine. I'm still optimistic about the market and about this economy. It's shown remarkable strength and resilience, though I'm disappointed in the lack of leadership in corporate America. Investors have weathered the greatest slide in market history over the past two years. The economy, able to recover from a recession as quickly as it did, surprised most of us with its overall resilience, particularly after September 11. But then we were hit by the accounting scandals. The bad news isn't over in terms of scandals and irregularities. President Bush has said that more scandals will be revealed. But a healthy investor skepticism will lead to a more solid recovery. We'll see less froth in the market. Investors will demand real earnings and real reform. That's a solid foundation for prosperity.

[Q] Playboy: Did the corporate scandals catch you off guard?

[A] Dobbs: They caught everybody off guard. And so many people were hurt--painfully hurt, including employees, investors and creditors. It's good that the accounting business and the management of 401(k)s will change as a result. (continued on page 112)Lou Dobbs(continued from page 109) We'll fix some of the problems, and at some point we'll learn that someone has come up with a clever new way to screw a lot of people. It's regrettable, but that's the way it is.

[Q] Playboy: Should Wall Street have realized earlier that there were problems in these companies?

[A] Dobbs: Some of the best analysts on Wall Street said they had no idea in hell how Enron conducted its business and made that much money. People didn't know and they shrugged their shoulders. Now we know how Enron did it.

[Q] Playboy: Did you own Enron stock?

[A] Dobbs: I never invested in Enron, not out of any great foresight but because I couldn't figure out their business. I couldn't find anybody who understood their business.

[Q] Playboy: What needs to be done to solve the problems we've encountered?

[A] Dobbs: More disclosure for investors. You have to feel encouraged by the Senate and House legislation for greater corporate responsibility, but it doesn't go far enough. We need to expense stock options in corporate America, but we have at least turned the corner and are beginning to see real reform.

[Q] Playboy: Should American investors be protected in ways they aren't?

[A] Dobbs: Because of 401(k)s, three quarters of the workforce is invested in the stock market. That's not a bad thing. The problem is that companies began to push their employees to buy company stock and put the investment in their 401(k)s. That's double jeopardy. If you have stock options in your company, your other investments should be diversified. Diversification is the surest way to protect yourself.

[Q] Playboy: The counterargument is that employees invested in their company have more skin in the game.

[A] Dobbs: That's great if you're managing the company. But what were the people with skin in the game doing at Enron? They were selling their stock while talking to their employees about buying it.

[Q] Playboy: Would you be in support of regulations?

[A] Dobbs: The only protection for an investor is education. You can regulate until hell freezes over. Intelligence and diversification are the simple watchwords. You may not get rich overnight, but you won't go broke, either. As I said, there should be reforms to stock.

[Q] Playboy: Should people hurt by the Enron, WorldCom or other collapses be able to recoup their losses?

[A] Dobbs: It's unfortunate, it's painful, but I don't see how you make them whole. This is a system about risk and reward. It is not about mitigating risk after the damage is done. At the same time, where there is evidence of wrongdoing, the criminal prosecution should be aggressive.

[Q] Playboy: How much of an impact will the scandals have on the Bush White House?

[A] Dobbs: Many Democrats want this to be a nightmare for the Bush administration, and it may well turn out to be one. The Republicans would love for it to go away. It certainly will not do that. The Democrats aren't in much better shape, though.

[Q] Playboy: How has President Bush handled the scandals?

[A] Dobbs: I give him mixed reviews. He was late and weak in addressing the issues of corporate integrity and reform. He chose to call the people responsible "a few bad apples" and "bad actors" instead of "crooks," which they are. But the administration is finally showing signs that it wants to deal with the problems. So far there's been no action against Enron, which is regrettable. We need action.

[Q] Playboy: How serious are the accusations related to Bush's own insider trading?

[A] Dobbs: The president has been investigated three times in two campaigns. I believe there's very little there. It's a diversion. It's mostly payback for White-water, which is fair.

[Q] Playboy: How about the charges related to Vice President Cheney and his stint at Halliburton?

[A] Dobbs: Those hold potential for further examination. We'll see.

[Q] Playboy: Do you expect Cheney will be part of the next ticket with President Bush?

[A] Dobbs: I think we'll see someone else on the ticket.

[Q] Playboy: You once donated to the Bush campaign. After that, how can you be objective?

[A] Dobbs: I did it when I wasn't at CNN. Anyway, I've always been straightforward about my political views.

[Q] Playboy: Doesn't it filter into your reporting? If you're a Bush supporter, you're likely to ask him different kinds of questions than you would ask someone on the opposite side.

[A] Dobbs: I don't think so. I would ask the same questions. My hope is that I'd ask the right questions. I've covered five presidents and their administrations and have seen as much stupidity, tomfoolery, mistakes and gaffes under one as the other. I'm not biased when it comes to my job, even if I vote for one guy over the other. The audience is better served if it knows how an anchor or interviewer votes. Anchors and reporters should fully disclose their political leanings and their votes. I have been open about it whenever it has come up.

[Q] Playboy: But a Republican and Bush supporter would probably wish the Enron and WorldCom scandals would go away.

[A] Dobbs: I don't wish they would go away at all. For the sake of the people who were hurt, I wish it had never happened. But I am callous about this in another way: It is an incredible business story. The way we cover it defines our news organization.

[Q] Playboy: You buy and sell stocks. Isn't that also a potential conflict of interest?

[A] Dobbs: I have a number of investments that are static and private. I can't just go out and trade stocks, although it would be a lot of fun. I was never involved in day trading. I'm very careful.

[Q] Playboy: Behind the scandals, how has Bush handled the economy?

[A] Dobbs: As for the recession, he did the right thing with tax cuts. They helped curtail the slowdown. I marvel at the luck of this administration--having put that economic stimulus package through Congress when they did. I am not a fan of economic stimulus. I don't think it's required. We've had a record number of interest rate cuts by the Fed. We have tremendous stimulus built into this economy through extra government spending, through the support programs for the airline industry and the war against terror. I would argue against those in the administration who have pushed for additional economic stimulus.

[Q] Playboy: What about the Fed? Did Alan Greenspan begin his interest rate cuts soon enough?

[A] Dobbs: There's no question that he was too late, and he was too exuberant raising rates in 1999 and 2000. But don't misunderstand me. Greenspan is one of the best Fed chairmen in history.

[Q] Playboy: Where will rates go from here?

[A] Dobbs: My guess is the rate cuts are finished for quite a while. If solid signs of growth continue, rates will be kept stable.

[Q] Playboy: Does the Fed have too much power?

[A] Dobbs: No, but the Fed could be more forthcoming and timely in revealing the reasons for its decisions. It should give the public the minutes of its meetings. This is not a nation of ignoramuses who have to be protected from information. We're a country of smart people who deserve to know as much as possible as soon as possible. I resent the Fed's policy of secrecy.

[Q] Playboy: Was it easier working with the Bush or the Clinton administration?

[A] Dobbs: They have been similar. Clinton and Gore were extraordinarily accessible. They were good for business, too. Bob Rubin was probably the best (continued on page 144)Lou Dobbs(continued from page 112) Treasury secretary this country has had in a century or more. We'll see how Bush and Cheney play out. The Bush cabinet is outstanding.

[Q] Playboy: What would be different if Gore had won the election?

[A] Dobbs: I believe that Bush has shown himself to be a hell of a leader in the most difficult of times. I can't say whether Al Gore would have risen to that occasion, though I'm satisfied with the way things turned out.

[Q] Playboy: In spite of your support for Bush, your network is attacked by conservatives for its liberal slant while liberals attack Fox for being conservative. Are the attacks warranted?

[A] Dobbs: There is a basis for those views. There was a reason CNN was referred to as Clinton News Network during that administration; I had misgivings about some of the programming that made its way on the air during Clinton's presidency. On the other side, despite the protestations of Fox chairman Roger Ailes, there is no question that Fox is appealing to a conservative audience. Our hour on CNN doesn't easily fit into either camp. We work mightily to maintain balance.

[Q] Playboy: That's Fox News' slogan.

[A] Dobbs: For us, it's not just a slogan. We dare to be dull because some of what is necessary for our audience simply does not give itself to partisan rancor. There is an objective standard of truth and facts. The "he said, she said" trend is terrible. It is not sufficient to achieve balance by putting on a Republican screaming that Clinton is an idiot and a Democrat screaming that Bush is a fool. It may make for good TV and it may make for bigger audiences, but at the end of the day the audience is not well served. If that achieves higher ratings, they are ratings I don't want.

[Q] Playboy: Is there pressure to go in that direction?

[A] Dobbs: There's always pressure to get higher ratings.

[Q] Playboy: Is it particularly dangerous to "dare to be dull" with Fox News beating CNN in ratings? Fox' Neil Cavuto isn't far behind you.

[A] Dobbs: There's a difference between sensationalism and drama. I don't mind making interesting and exciting television. We do things here to draw an audience and make decisions to appeal to an audience. But our standards win out. Even if Fox is beating CNN in many areas, we're the top business-news show. I've been doing this a long time, and a sufficiently large number of people trust me to report the news that matters to them.

[Q] Playboy: What's the long-lasting economic impact of September 11?

[A] Dobbs: September 11 obviously had a horrible effect on hotels, tourism, the travel industry and, of course, the New York economy, but I don't think that it is significant of either the depth of the recession or its duration.

[Q] Playboy: How did it affect your job?

[A] Dobbs: Prior to that day, the most demanding times were the stock market crash of 1987 and the Gulf war--but nothing compares with September 11, which changed everything. It was a war story, an economic story, a story about the market and a human story both with its tragedies and heroics.

[Q] Playboy: Did you anticipate the market crash that followed the attack?

[A] Dobbs: Of course, but the more dramatic surprise was the reaction on Wall Street: the great insistence on the part of Wall Street and the financial district to reopen the market. It was a mark of honor to get it open. It could have dropped 1000 points and anyone would have called the day it opened a success. If it hadn't been hurt by the corporate scandals, the market could well have rebounded. Now I think things will grow slowly. The days of buying a stock based on Wall Street hype or propaganda forecasts are behind us. Investors have to be careful. There are real values in the market now, but we have to adjust our expectations--single-digit returns are going to be the order of the day for some time. We have to expect that. We have to take long views in our investing, which is appropriate and healthy.

[Q] Playboy: But not back to the levels of 1999 and 2000. Was it more fun having your job throughout the late Nineties when the stock market was racing?

[A] Dobbs: I always have fun with what I do for a living, though it's more fun to see smiles on people's faces knowing they're secure in their jobs and their financial outlook. On the other hand, the real heavy lifting starts when things aren't going well.

[Q] Playboy: Was it possible not to get caught up in some of the giddiness of the Internet boom?

[A] Dobbs: I never did. I may have gotten caught up in the absurdity of it. We reported the absurdity of it.

[Q] Playboy: You were not only a reporter on the dot-com boom but, as founder of Space.com and president of CNNFN. com, a participant.

[A] Dobbs: I was as committed to the new economy and the Internet as anyone. I truly believed then and I believe now that the Internet is the future.

[Q] Playboy: We've heard that before.

[A] Dobbs: The development of the Internet is not unlike previous developments, whether it was the railroads or the telephone. It's going to take longer than anyone thought. Its impact has been immeasurable, but it will be more significant in the future. There will be further consolidation and far more care on the part of investors--as there should be. The Internet's promise does not, however, mean you can avoid the fundamental rules of business. The main lessons from the period are for investors. The underwriters and private-equity businesspeople making millions of dollars by taking companies public in the late Nineties bear the greatest responsibility for the public who lost money. But there is a solid industry to come out of this.

[Q] Playboy: Will there be more consolidation? Who will survive?

[A] Dobbs: Obviously AOL and Yahoo as the principal Internet services. In terms of the technology infrastructure of the web, we're watching that occur now. Consolidation is rampant and it's far from over.

[Q] Playboy: E-commerce was supposed to change the way we shop, but most people still buy the old way. Will that change?

[A] Dobbs: Every year people become more comfortable buying online. E-commerce will be a truly significant part of our real economy over the course of the next decade. The product has to improve a lot. There will be more e-commerce when a high-speed Internet connection is ubiquitous. It has far more to do with the quality of the experience, and speed is essential.

[Q] Playboy: Those Internet analysts who championed the dot-coms, including Morgan Stanley's Mary Meeker and Merrill Lynch's Henry Blodgett, have been blamed for cheering on the insanity. Do you hold them accountable?

[A] Dobbs: In many cases they screwed the investor, yes. But there still is the simple role of individual responsibility. I always tell our audience never to invest if they don't know all about the company they are investing in. If you don't understand the business and the product and management and its market, you have no business investing in the stock. I don't care how many analysts are telling you to buy or sell. I don't care how many brothers-in-law or uncles or nephews are telling you it's a great buy. It's foolish for the individual investor to act without understanding an investment.

[Q] Playboy: Recently brokerages have been chastised--and financially penalized--for misleading customers.

[A] Dobbs: Yes, and the conflict of interest on the part of Wall Street analysts and their investment banking arms is disgraceful. The firms have gone a long way toward fixing the problem, but I still say to you and any investor today: Don't buy on an analyst's recommendation without knowing what you're doing with your money. Do your own research.

[Q] Playboy: Do you admit that you helped make stars of many analysts?

[A] Dobbs: It's far easier to reach out to an expert than develop expertise yourself. Yes, we in the media are responsible for some of that. We show the record of every analyst we put on our show. We let our viewers know as much as possible. Also, we don't have analysts on who have an interest in the stock. Period. That's one of the first questions we ask.

[Q] Playboy: But you editorialize on Money-line. You're not simply reporting the news.

[A] Dobbs: You're right. I give far more opinions on the air today than I did 20 years ago. People ask me for my opinion about stocks, however, and I decline.

[Q] Playboy: How about some picks for us?

[A] Dobbs: I always decline, though when it comes to the larger issues--regulations, Enron, WorldCom--I give opinions. Is it appropriate? So long as my opinion is offered as an opinion and interpretation of the news. I certainly don't think anyone in my business should offer an opinion just to hear himself speak or to try to influence a viewer. I never do that.

[Q] Playboy: Yet some of the biggest names in television news do. Our recent Playboy Interview subject Bill O'Reilly has become the most-watched newsman on cable precisely because of his opinions.

[A] Dobbs: He and I are about as different as any two people you could run into. What Bill does is terrific, but it's not what I do. I wouldn't be comfortable offering some of the views he does. He probably wouldn't be comfortable offering some of the views I do.

[Q] Playboy: Though to gain audience, isn't there a temptation to sensationalize?

[A] Dobbs: Sure, and we sometimes will give too much attention to Prince Harry and his pot experimentation and not enough to the state of the infrastructure and how many investment dollars are required to bring America into the 21st century in terms of its sewage, transportation and mass-transit systems. Prince Harry will always get higher ratings. The fortunate thing for me is that I anchor a show and I also make the ultimate decision about what does or does not appear on the air. We won't touch Harry and his pot.

[Q] Playboy: Have things changed at CNN since Ted Turner left? You once said that Turner protected the news department from corporate influences. Were you worried that would change when he left? Did you worry that Time Warner would attempt to influence the coverage of news?

[A] Dobbs: In all the time I worked for Ted--over 20 years--he never once tried to influence our coverage. There aren't many people who work for a magazine or a newspaper or even another television network who can say that. I'm proud of Ted for that, and he left a strong legacy of autonomy--at least in terms of my role at this network--and it's been honored. I couldn't work under any other circumstances. But I don't think AOL Time Warner would attempt to influence the news. Our credibility is at stake.

[Q] Playboy: Yet would you be reluctant to go after AOL, for example, if the company were doing something wrong?

[A] Dobbs: Reluctance? None whatsoever. Covering your own firm is difficult, but you have to do it with the same standards you apply to anyone.

[Q] Playboy: When did you meet Turner?

[A] Dobbs: It was in Atlanta to talk about whether or not I would join CNN in late January or early February 1980. He was asking me about boating.

[Q] Playboy: When Turner decided to make the Time Warner deal, he appeared on your show to discuss it. It was the famous episode during which Turner cried.

[A] Dobbs: Here was a man who had just made a deal that put more than a few billion dollars in his pocket and assured the future of his company, but he was in tears. You expect that on Oprah, but not on our show. That's a side of him that is not well known.

[Q] Playboy: Was he crying because he regretted selling CNN?

[A] Dobbs: In his heart, if not his mind, he knew he had let go of something precious. But he was securing the future of the company. It was bittersweet.

[Q] Playboy: Were you surprised by the AOL Time Warner deal?

[A] Dobbs: Mightily surprised.

[Q] Playboy: Do you worry about the implication of this deal and mergers and acquisitions of media companies?

[A] Dobbs: I've been worried about the size of media companies for years. General Electric owns NBC, Viacom owns CBS, AOL Time Warner owns CNN, Disney owns ABC. These are gigantic corporations. It may be that my concern about scale and size is misplaced. I acknowledge that. It may be that in a perverse way we have more autonomy because we're such a small part of something huge--more so than if we were totally independent. The question remains whether there will be a place for alternative voices and alternative perspectives to be heard.

[Q] Playboy: You recently were in the center of controversy when you announced you were going to replace the phrase "war on terrorism" with "war on radical Islamists." Why is the distinction important?

[A] Dobbs: In the course of reporting on this conflict we found that 28 U.S. military operations around the world are targeted against groups or organizations that are radical Islamists--groups that have taken a system of personal religious beliefs, created an ideology and now employ terror as their action of choice to achieve their ends. I am not talking about Muslims or the Islamic religion; I am talking about a relatively small group of Islamists around the world who use violence to try to overthrow governments and to create Islamist states that would be authoritarian in nature. I believe we should name our enemy. In this global conflict, the world's only superpower should not have to whisper the name of that enemy.

[Q] Playboy: Were you surprised by the reaction--both at CNN and throughout the nation?

[A] Dobbs: My audience expects me to talk straight. Their support of the language "radical Islamists" was overwhelming. My audience is smart and sophisticated, and I would have been surprised--hell, I would have been shocked--if they did not support the truth and a straightforward description of our enemy. Their support and that of my management in the firestorm that was created by simply confronting political correctness has been gratifying. It's an important issue at an incredibly important time in human history. In the middle of that war, and with the enormous questions about the future of our economy and now with Enron, WorldCom and the other scandals, there's so much at stake. What a time to be a business journalist.