Eric Gillin and Lisa Meyer Chat on Yahoo!

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Lisa Meyer and Eric Gillin chatted on Yahoo! on Thursday, Nov. 8, at 5 p.m. EDT. For an audio transcript click here.

Eric Gillin :

It's Thursday - 5 p.m. on the East Coast, 2 p.m. on the West - time once again for TheStreet.com Martini Chat.

Good afternoon, I'm your host Eric Gillin coming to you live from the world headquarters of TheStreet.com on Wall Street. Also here Lisa Meyer,

TheStreet.com's

own personal finance editor. Chris Edmonds has the week off.

Lisa, looks like the bulls continued their march this week with the Fed's 50-basis point rate cut providing some fuel for the rally. How do size up this week's action?

Lisa Meyer:

Well, Eric, it seems like the market is looking past the current economic contraction toward a rebound, which many analysts predict for some time next year. Recent economic news does indicate that the economy is showing some signs of recovery, or that, at the very least, a recession might be mild. A few retailers, for example, said that October sales rose despite the terrorist attacks in September.

Another reason for the strong performance in the stock market is that the recent rate cuts by both the Fed and the European Central Bank dims the prospects of fixed-income securities, pushing investors back into stocks.

But the market rally might not be on that solid of ground. The Fed's 50-basis point rate cut and the government's move to discontinue the 30-year bond are both efforts to cheapen corporate borrowing rates. But will lowering rates really encourage new capital spending? At least in the near term, most companies aren't expanding even if they have the money because their products lack demand.

Another indication that the rally might not have any firm grounding in economic data is the recent productivity number, a 2.7 percent increase in the third quarter from the second. While such an increase is notable in a contracting economy and much above the consensus estimate of 1.8%, the gain didn't come from increased output. It seems that those employees that didn't get laid off are just working harder.

A more optimistic view, however, is that any Internet initiatives companies have put into place could be finally paying off, creating greater efficiencies and allowing companies to sell more products without increasing their overheads.

The good news is that productivity typically deteriorates during recessions and recovers during the first year of economic revival. The fact that productivity has held up well so far shows that earnings gains may be strong when the economy does revive. But fourth quarter's productivity numbers should be more telling since that figure will include October's unemployment data.

Eric Gillin :

We'll have more on the markets in our weekly Roundtable later in the show.

We have another fast-paced show this week. We begin with of a look ahead to the Christmas shopping season and the impact on retailers with a panel of retail analysts. Also joining us will be Tim Arango who covers the retail beat for

TheStreet.com.

And we'll wrap up the week with an extended version of weekly markets roundtable with a group of seasoned Wall Street pros. Plus, all the news headlines and the Five Dumbest Things on Wall Street.

But first, a toast.

Eric Gillin :

One year ago, the unemployment rate was 3.9%, an unprecedented historical low. Today that rate is at 5.4%. While that isn't a historically a high number, it does show the rapid acceleration in the number of people losing jobs.

Clearly we're headed for a recession, but few people have turned around to see how fast we've fallen. Within two years, the American economy has flown of its tracks. And along with it went a good number of jobs.

I raise a glass this week to the unemployed, those who, like this economy, have been cold-cocked. It's not easy to find a new job. It's like bobbing for apples in an ocean. Think you've got one, make a move and end up with a bad taste in your mouth.

There's my aunt. She's 62 and had been one of Sun Microsystems' first few thousand employees. A widower, these people became her family. CEO Scott McNealy had been "Scott" to her. Her workplace had been a "campus." Her closets burst with Sun-emblazoned shirts, caps, pens, pencils, cups, laptop bags, leather jackets, sweaters, sweatshirts, coasters, penknives, flashlights...

A couple of years ago, frustrated with new managers and bored with her post in the purchasing department, she scaled back her hours to part-time and settled into a new routine. Just nine months ago, she won an award for saving the company millions by switching suppliers. Last week, she was let go - among 4,000 others from her company.

Now she spends her days at home, too old to get a new job, too young not to need one. Because of prior medical conditions, her Cobra will be very expensive. Thankfully, she planned well for retirement. But the drop in Sun's stock stings.

She took her severance package and is getting her affairs in order, but she's worried. Every day, she looks at the want ads, but none of the opportunities seems like something she can do.

I'm sure you've heard her story before. Plenty of Americans are living it. Maybe one of them is you.

As the ad market crumbled, most of my friends bounced from paper-to-web site-to-freelance-to-nothing. Take my best friend Will, who was laid off from a dot com and now answers phones and mail at a doctor's office.

Every day, he looks for a better job. Last week, he landed an interview. A year ago, we would have celebrated, drinking whiskey at a bar. This year, we sipped canned beer at home, barely mentioning the success for fear we'd jinx the possibility of an actual job offer.

There's my friend Aileen. She's been laid off by four different places in the past 10 months. She's frustrated, depressed, burned out. Aileen was once a reporter covering the law industry. Now, she temps in a law office.

She hates the work. She spends her day assembling form letters and her nights hunkered over freelance work penning children books. Both hopeful and hopeless, she looks every day for a permanent job. She says bitterly, "There's nothing out there. It's pointless."

There's Greg, who once was a big fish in a small pond. Still in his twenties, he's won awards for his reporting and shouldn't have trouble getting more honors -- that is, in a regular economy. But when his job dried up, so did his sense of self-worth. In between sips of beer, he says he's a failure. He also looks for a job every day.

And there's Mike and Liz, living in Manhattan. Mike had been out of work for a long time until a few months ago when a callback turned into a paycheck. But as soon as Mike regained his footing, the other shoe dropped. Liz, who supported them both with her income as an editor for a mainstream magazine, lost her job. Both still look for jobs every day, but now the search is not just in New York City, but also anywhere in the nation.

There are my friends back home in Boston, working as waiters and security guards because their jobs in banking and advertising disappeared. All of my friends have college degrees. Few of them are actually getting paid to use in any practical sense what they learned from their college majors. And despite the demoralizing effects of that apparent waste of money and four years, all of them look every day, waiting for an opportunity.

No one put it better than my aunt did the other day. She said, "This out-of-work stuff is sure a lot of work."

Here's to her.

Here's to all of those people out there struggling with the want ads. I toast those who thought they had it all planned out and then went to work and discovered those plans obliterated. I toast those who look every day, even if there's nothing much to see.

Cheers to them. When this economy recovers, and it will, they'll be the first ones hired back.

Eric Gillin :

Lisa, not a lot of good news on the employment front recently, although the jobless claims number today was a bit surprising.

Lisa Meyer :

Yes, it is surprising, falling by 46,000 to 450,000. It shows that the initial wave of job losses after September 11's terrorist attacks is decreasing. But the jobless claims number is also a bit deceptive because continuing unemployment claims edged up again to 3.72 million - which is consistent with other data showing that joblessness is at a 5 year high. As your toast told us, Eric, there are just less job opportunities out there. And I fear that it will continue to take a long time for those who have been recently laid off to find new positions.

Eric Gillin :

Speaking of the economy, the focus now shifts to the holiday season and how retailers will fare during their make or break time of year. Today, we take a sneak peak at the outlook for holiday retailing with two gurus of the trade.

Jeff Klineflter is senior retail analyst at US Bancorp Piper Jaffray. Jeff's analysis focuses on the softline and mass merchandisers from Abercrombie and Fitch to Target.

Also joining us is Kurt Barnard, a long-time retail pundit who runs Barnard's Retail Consulting Group and publishes an industry newsletter titled Barnard's Retail Trend Report.

Joining me in the questioning is Lisa Meyer, our own personal finance editor, and staff reporter, Tim Arango who covers the retail beat.

Kurt, let me begin with you. What's the early line on holiday season sales?

Kurt Barnard :

At best, they are looking very subdued.

Lisa Meyer :

How come subdued?

Kurt Barnard :

There are a number of reasons. Consumers are not in a spending mood. They are very cautious these days.

1. Consumer spending is down.

2. People are charging less on their credit cards. Total credit card debt stands at seven hundred billion dollars! They spend only what's in their checkbooks and pockets.

Lisa Meyer :

Mr. Barnard, how does the economic downturn impact the retail landscape? Do consumers seek out lower prices at a Target or a Kmart, taking market share away from traditional department stores like Macys?

Kurt Barnard :

You bet your bottom dollar and then take it to a discount store. Absolutely true. Discount stores like Kohls are doing very well because of the shift in consumer spending from traditional department stores and special stores.

Lisa Meyer :

What about niche retailers?

Kurt Barnard :

Niche retailers, to the extent of what they carry, are doing very well. Take for example Michaels. It is selling a lot of things you can do at home. A lot of home projects. It is selling a lot of patriotic things, in red white and blue and the store is cashing in on that.

Tim Arango :

Jeff, today Abercrombie and Fitch reported a huge 20% drop in same store sales in October. I was on your holiday call today. Do you blame that drop on a lack of promotions, and think the store can do well going into the holidays? Isn't this holiday going to be different? Aren't shoppers going to be out there looking for bargains? Could the store continue to falter?

Jeff Klinefelter :

All of those comments are relative and based on the current environment. This year back to school quickly became promotional - particularly after the initial rush in the beginning of August. Because of that, and their resistance to start marking down through the months, that was to their disadvantage. When you get to a gifting psychology during the holidays, you back away from a purely price point sensitivity.

Tim Arango :

Do you think that money otherwise spent on travel will instead go towards gifts? Have you factored that into your sales projections?

Jeff Klinefelter :

We have. It's an excellent point. A lack of traveling to see relatives or take holiday vacations could in fact be redirected into product sales. It's hard to quantitatively factor it into our specific monthly sales estimates.

Lisa Meyer :

Mr. Barnard, America is an aging nation. Baby boomers are nearing retirement. How might this age shift change the competitive landscape among retailers. Will spending patterns shift?

Kurt Barnard :

The aging consumer is responsible for major changes in the retail market place. Mainly in apparel. People don't have the same figures that they had when they were 20 years old, now that they are 40 or 50 years old. A lot of the retailers that are doing what they call "private label" are doing extremely well. I'd like to add something to the previous question about Abercrombie and Fitch. The store is also victim of a sharp drop in attendance in malls. All of their stores are in malls.

Lisa Meyer :

The Internet and e-commerce was full of hype and promise, but the reality is that it has had little financial impact on traditional retailers. What is the best use of the Internet in retailing - I-commerce, the gathering of market information - or e-commerce? And are there any retail sectors where e-commerce has and can have a material impact?

Kurt Barnard :

We are convinced that what's happening is that a lot of the so called e-commerce operations are little more than advertisements for brick and mortar stores. People go to the site, see what they like or don't like, then go to the store to convince themselves that they really want this.

Jeff Klinefelter :

I would add that we've figured out in the last two years e-commerce is not a replacement for a normal channel of distribution. It's an additional channel of distribution. It will serve as an I-commerce and an e-commerce function. I-commerce is the current buzzword. It will hold and serve the same purpose. We talk about convergence commerce, which is taking traditional media to encourage commerce. Whether it's TV or magazines, you can use content to drive interest.

Tim Arango:

Kurt, how surprised were you today about the massive warning from Barnes & Noble? Weren't books supposed to be more resilient than other categories?

Kurt Barnard :

Not at all. I would have been surprised if it had been otherwise. Simply because America has been riveted to their TV sets since Sept. 11. People are glued to the TV screen and have little time for anything else. They have given up on reading newspapers.

Lisa Meyer:

I've been wondering about Amazon.com recently. What type of value or use does the company offer as more brick and mortar companies bring technology for Net-commerce in house? Amazon's only assets are brand name, technology and distribution system. Do they loose value as we go forward?

Jeff Klinefelter :

That's an interesting topic right now, particularly in light of the company's recent announcement for a strategic partnership with Target. Amazon is clearly moving back towards an outsourced service model. The company would take on the responsibility of maintaining and upgrading the technology.

After testing internally, Target management decided that it would be too much of a drag on its own expense structure to have a staff maintain a web site. Other companies are coming to the same conclusion. There may in fact be a future, but then you have to question what type of consumer brand Amazon would be? Would it be a B2B or a business service concept? That has yet to be determined. I would imagine it would put less value on the consumer front going forward.

Lisa Meyer :

It is shaping up to be a very interesting holiday season as we go into our economic downturn. What can we expect? Are we going to see decreased spending? Are consumers going to return stores?

Kurt Barnard :

No. It's going to be very subdued. Consumers will spend far less money than they spent years ago, preferring to buy things for the home and things that can be done at home. They'll avoid fashion apparel.

Eric Gillin:

What names do you like in retail?

Kurt Barnard :

Wal-Mart. Target, Kohls, DollarGeneral and a little company like Michaels.

Jeff Klinefelter :

I differ a bit. I follow teen retailers. I found in the last 6 months teens have increased their spending on an average monthly basis. They spend on fashion and accessories. More teens are working in part time jobs and are spending. They will cushion what will likely be a reduction on spending by adults.

I like Target and the value it brings. But investors are going to look at who has value, who has a strong balance sheet and can open a lot of new stores. Finally, who has a different type of brand? That's what the teens want.

Eric Gillin:

Kurt, do you buy this? Do you think that teen spending will help?

Kurt Barnard :

Yes. The teen market is very important. The teens are not deterred by going into malls. They very clearly have money to spend. They have part-time jobs. Whatever money they earn is theirs to spend. They don't have any other expenses to pay.

Eric Gillin:

My big question then is what about Alloy online? It targets teens exclusively. It has no brick and mortar stores and no plans to have them. The company is showing decent growth in the teen market.

Jeff Klinefelter :

I follow them. It has evolved into a far different business model from where it started. The company is focused on teens. It is going after a media presence. It is going after media properties such as school newspapers or high school/college periodicals. Then the company will leverage its sponsorship relationships with a Revlon or a Ford that wants to go after the teen market. That's where the bet is.

Eric Gillin:

The stock has done well?

Jeff Klinefelter :

Yes. The company has met its objectives. It has met its earnings and growth and the company is close to profitability.

Eric Gillin:

We have a reader question?

Question:

How are retailers advertising this holiday season, and any early signs on which strategies might work?

Kurt Barnard :

They are advertising major price breaks. They think that will drive the consumer to the stores to at least look.

Jeff Klinefelter :

I agree. There are two forces. There will be a possible cutback on advertising to protect the bottom line. When companies do advertise, it will be to promote price breaks. It is a profit preservation.

Kurt Barnard :

The problem is that companies that don't continue to advertise will loose market-share to those who do.

Eric Gillin:

That's very interesting, and we'll keep tabs on the shopping and hope to have both of you back soon.

Our guests have been Kurt Barnard, who owns a consulting group, and Jeff Klinefelter, senior retail analyst at US Bancorp Piper Jaffray.

Eric Gillin :

With us now is K.C. Swanson from our San Francisco bureau who has been shopping around for the Five Dumbest Things on Wall Street. Hey, KC, what's stupid on the street this week.

K.C. Swanson:

With the economy still deteriorating, the prospects for auto sales down the road are only getting uglier. That renders the strategy behind 0% financing promotions all the more dubious. The expensive promotions are extra painful for companies already hurting for cash and the short-term sales gains from the current promotions probably won't be enough to save a bleak upcoming quarter. It seems like a smart time for automakers to conserve cash rather than fight over pieces of a pie likely to shrink in the coming months.

Eric Gillin :

Sort of like cutting of your nose to spite your face, no? At least consumers are happy. You've got another tantalizing transportation screw up, right?

K.C. Swanson:

This week the secretary of transportation lit into the airline industry for airport security lapses in the wake of the terrorist attacks. The secretary's comments came only weeks after the government agreed to give airlines a generous $5 billion in cash, plus another $10 billion in loan guarantees as compensation for losses from the attacks.

In other words, the airlines pocketed a multibillion-dollar federal payout to help make up for the drop-off in air traffic, but they're either too incompetent or too stingy to ensure a level of security that would help reassure the public. That means they share some of the blame for their own weak revenues.

Eric Gillin :

I wrote a story on the airline industry a week ago and honestly, I can't think of a more boneheaded management team in such an essential place. Hopefully, the government can save us from them. At least money laundering seems popular still. That's number three.

K.C. Swanson:

A new government study on money laundering has revealed glaring oversights at many brokers and mutual fund companies. The good news is that the antiterrorism bill just signed into law requires securities firms to establish rigorous anti-money-laundering programs.

Securities companies will have to verify the identity of their customers before opening accounts and report suspicious activity to the government. Those rules make plenty of sense; it's only a shame they weren't in effect sooner.

Eric Gillin :

Excellent point. And number four?

K.C. Swanson:

In a conference call this week, Conseco (CNC:NSYE - news - commentary - research - analysis) crowed that its third-quarter operating earnings were up 49% from a year ago.

Nice try, but investors tuned to the call were more interested in whether the company will stay solvent. Amid worries about a liquidity crisis, the stock has dropped about 80% since its recent peak in May, and its bonds recently traded at 51 cents on the dollar.

Eric Gillin :

I hear the last one's a real case of adding insult to injury.

K.C. Swanson:

You know you have a crummy broker when he not only steals your money, but also proceeds to lose it through bad stock picking. The SEC says that was the case with Daniel Patrick O'Connell, who worked in the San Francisco office of New York brokerage Spencer Trask Securities.

O'Connell told one client, a wealthy Silicon Valley family, that he'd use some of the money to purchase low-risk bonds. Instead, he burned through nearly all of it in one month investing in tech stocks. Isn't this what stockbrokers are supposed to counsel against?

Eric Gillin :

I'm sorry, did you just say "tech stocks?" I must have blacked out back there. This is still 2001, right? We didn't fall through a wrinkle in time to 1999, did we? Man. That's patently stupid. What do you have for tomorrow? A tidbit?

K.C. Swanson:

This company called 2DoTrade has suspended trading by the SEC. The company claims it has a disinfectant for anthrax. The company started as chain of white tablecloth Italian restaurants. You have to guess that its biotech claims are pretty far fetched.

Eric Gillin :

Thanks, K.C.. Now, with the latest news including how the markets finished at the closing bell, from the Wall Street headquarters of TheStreet.com, our news editor, Yi Ping Ho. Yi Ping, another strong rally on the day. How'd we finish the day and what's ahead?

Yi Ping Ho:

The Dow gained 33.15 points, or 0.4%, to 9587.52. The Nasdaq was down 9.75 points, or 0.5%, to 1827.78, and the S&P 500 was up 2.74 points, or 0.3%, at 1118.54. The Dow had been up more than 100 points earlier in the day.

Yi Ping Ho:

Wall Street has, once again, gotten a leg-up by the Federal Reserve. Stocks rallied after Alan Greenspan and gang announced another half-point cut on Tuesday.

The Fed was widely expected to cut interest rates, but economists were divided over the size of the reduction. The half-point decision turned modest gains into an outright rally on Tuesday. And the momentum carried over into Wednesday.

Tech investors also cheered some better-than-expected results posted by Cisco after Monday's closing bell. The network equipment company said it earned a pro forma 4 cents a share on revenue of $4.45 billion. Analysts had been expecting earnings of 2 cents on revenue on $4.19 billion.

The Enron saga continued today as rival energy trader Dynegy confirmed it held talks to buy the company for up to $8 billion in stock. The possible deal is said to have the blessing of ChevronTexaco, which owns 27% of Dynegy.

And a morsel of good news on the economic front: The Labor Department said today that initial claims for jobless benefits fell unexpectedly by 46,000 to 450,000 last week. Nevertheless, the total number of people drawing unemployment benefits remains high.

Meanwhile, European stocks rose overnight after the Bank of England and the European Central Bank announced half-point reductions in their key lending rates today.

Looking ahead, Wall Street is due for more important economic reports. With the fate of the U.S. consumer at stake, economists will be scrutinizing tomorrow's consumer sentiment index, released by the University of Michigan.

And it'll be a full plate next week: We'll get October's retail sales on Wednesday, the Philadelphia Fed Survey on Thursday, and the consumer price index, a key gauge of inflation, on Friday. Industrial production, reported by the Bureau of Economic Analysis, is also scheduled for release next Friday.

Eric Gillin :

Yi-Ping, thanks.

Eric Gillin :

Now its time for that part of the show that is unpredictable, insightful and always offers a surprise or two: our markets Roundtable. With us today are Tony Dwyer, Chief Markets Strategist at Kirlin Securities and TheStreet.com columnist Aaron Task. Also back is our Personal Finance Editor Lisa Meyer.

Lisa Meyer :

Many experts have speculated on why the government discontinued the 30-year bond. One theory is that the government wants to cheapen long-term corporate borrowing rates - which are pegged to the bond. But will lowering rates really encourage new capital spending?

Aaron Task:

I think they want to give investors more incentive to get into the stock market instead of the bond market. Corporate REITS really haven't come down that low. It will help the consumer, but it won't bring spending by corporations.

Eric Gillin :

About the 30-year bond - this week Justin Lahart had a fascinating piece about how the SEC was probing into possible corruption around the death of the 30-year-bond. Clearly, people were aware of the Fed's move before it happened. What do you think of this? You think someone got rich when the bond got killed?

Aaron Task:

I think someone got rich. A lot of folks got hurt. It was the second largest move in one day ever. The bond rallied over five points and that's huge in the bond market. It's clear that there was a consultant at a Treasury press briefing. The news was supposed to be embargoed until 10 a.m. The Treasury Department released the information on its own website earlier than it was supposed to. It was a fiasco from an execution standpoint.We're still feeling reverberations and will for a long time.They should have been more careful.

Eric Gillin:

What happens from here? Do they catch someone and they go to jail?

Aaron Task:

It's difficult to prove insider trading unless you work for a company. I don't think from what I understand that this will fall into that category. The consultant was invited to the press conference. He was there legally. So it's not like just anyone obtained information illegally.And it was on the Web site earlier than it was supposed to be. That's the Treasury's fault. I don't think anyone will get severely punished for it.

Lisa Meyer :

What's the cause of today's strong market performance? The productivity data, growing 2.7% during Q3 from Q2? The growth is indeed remarkable in a contracting economy. But how positive is this data in terms of the overall economy's health?

Tony Dwyer :

The reason for the strength was that you had a lot of hedge funds and players who were shorting stocks and tech as a whole.It seems to me the last couple of days are evidence of short covering. The Philadelphia semiconductor index is up 4.5%. S&P is up 15% and the NASDAQ is up 20%. You do need a period of consolidation. The rally in April and May was 33 sessions long. Yesterday was the 33rd day.

Lisa Meyer:

You don't think the gain came from any use of the Internet? Creating greater efficiencies and getting rid of overhead?

Aaron Task:

I work for a Net company, so I have to say yes. But these gains can't be sustained forever. We've hit a plateau.

Tony Dwyer:

I agree with Aaron. Technology only exponentially enhances itself. You get more speed, you get more applications. It will be cyclical, like the economy.

Lisa Meyer:

If Q3's productivity data doesn't reflect the dismal October employment data, what can we expect in Q4?

Aaron Task:

The numbers will go down a bit. Unless like Tony said, it's going to be tied to economic activity. We seem to be in what we hope is the worst part of the economy and, if we get to recovery sooner, maybe the productivity numbers will look strong again. But if people aren't working, then the numbers won't look too healthy.

Lisa Meyer:

Will Q3's strong productivity number help keep inflation down - giving companies the ability to sell more goods without increasing overhead and therefore not having to boost prices?

Aaron Task:

Yes, that's a big factor. It's key to the theory that you can have strong economic growth without inflation because technology lets you produce goods at a far lower price. But now we're worrying about deflationary pressures.

Eric Gillin:

How strong is this economy now? The fed cut rates this week. We had the Bank of London cut rates today. Stocks seem like they're holding up. The number of anthrax cases seems to be waning, reducing the fear out there. The war effort doesn't seem as impotent as it did a week ago. Is the case for an upside getting better or is it simply too early to tell?

Tony:

Here's an analogy. Biotech stocks are great in phases 1,2,3. You buy the dream and hope that it's going to come through. But when it starts coming true, you can put some valuation on it and that's the worst thing that can happen. We're in a mode where we're hoping. That's a great story.Right now there's going to be economic decline for at least another quarter! So the story can hold up.

If it's not as robust as the market perceived it would be, if you're going to get that kind of sell-off when you get that buy on the rumor, sell on the news. As I mentioned before, this has been a very significant rally off the lows and at some point you have to pause. It's driven by the lower interest rate environment.

Eric Gillin:

About the Fed move this week. Rates are now at 2%, which is very low. One thing that many have talked about is the ability for financial companies to start "printing money." Many people don't really understand how that really works. How do financial names "print money?"

Aaron Task:

That means that financial institutions can borrow money at a lower rate from the Fed, then re-invest it at a higher rate. There is no fee involved when borrowing from the Fed in an open market.

Eric Gillin:

Any evidence that that's happening?

Aaron Task:

Lets look, tell me what the two year note closed at today? It closed today at 240. So I'd say yes, they are printing money and they should be if they are smart.

Lisa Meyer:

Do you think that the Fed's aggressiveness is a sign of desperation?

Tony:

It's always going to be perceived as a sign of desperation. Wall Street has become this place for the conspiracy theorist. It knows something we don't know. If that was the case, the Fed would have lowered rates by 200 basis points months ago. It seems to me there is some sign of desperation. Not in what the Fed is doing, but in the part of the ECB. It has made it clear over the last two years that it does want to be perceived as a puppet. Everyone lowers rates the same amount the same week.

Lisa Meyer:

In fact, interest rates are so low that borrowing money now is essentially free, after you subtract consumer price inflation, currently running at 2.6%. The level of short-term rates is comparable to Japan's. What is the possibility that America falls into a Japan-like situation?

Tony Dwyer:

That's a global thing. How the U.S. economy goes, so goes the global economy. If we go into a spiral, it'll create more wars than now. There's clearly an international decline that global banks are grappling with. Near the low, you're always going to have conspiracy theory.The reality is that the sun is coming up tomorrow. They're doing what they can to get the longer rates down.

Aaron Task:

The Philly stock exchange bank index is up 17% since Sept 21st. To speak to the issue of the Fed and the Japan scenario, I don't think we're going to be like Japan. You see what happened when the auto industry cut rates? The American consumer is willing to spend money.

That said, I do think the Fed has been acting in a desperate manner. The Fed started easing before the economy started to turn south. Lower interest rates are going to get consumer confidence up. The Fed hurt its credibility a bit. The economy hasn't recovered. It doesn't have the magic that it once had, so the Treasury came in and cut the 30-year bond. Desperate times call for desperate measures. The Fed has been active, we'll see if it works.

Tony Dwyer:

If you had unemployment at 12 or 10 or 8 percent, then there's a consumer that's not going to spend. But when rates are down like this, most of the country is still working. They don't all work on Wall Street. That's going to be a thing that stabilizes. The auto industry is having huge sales because they're financing cars for free. There's money to be spent. That's a big plus. That can't be underemphasized.

Eric Gillin:

Thanks to Tony Dwyer, Chief Market Strategist at Kirlin Securities, and

TheStreet.com's

own Aaron Task.

Next week we'll have our pre-Thanksgiving show including a look at the turkeys of the year and we'll take a look at the PGA Tour and the business of golf.

And, of course, we'll take a look at the markets, the Five Dumbest Things on Wall Street and Yi-Ping and the news. And, my co-host Chris Edmonds should return to his normal perch from Atlanta.

Until then, thanks to all of our guests and Lisa, thanks for filling in.

Lisa Meyer :

Glad to be here Eric. I had a lot of fun.