This is a partial transcript from Your World with Neil Cavuto, October 18, 2001.

NEIL CAVUTO, HOST: More anthrax anxiety on Wall Street. The Dow Jones industrials today slipping more ground, about 70 points worth. The Nasdaq also weaker on the day.

More people, by the way, hitting those unemployment lines. The number of jobless claims jumped by 6,000 last week. And despite the economic slowdown, First Call says that 51 percent of companies reporting earnings thus far have managed to beat their estimates. Of course, they scratched them to zilch, but they're beating them.

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Anyway, a sign of good things to come? Let's ask Mario Gabelli. Mario is the CEO, the chairman of Gabelli Asset Management.

MARIO GABELLI, CEO, GABELLI ASSET MANAGEMENT: Great to be here.

CAVUTO: Good to have you.

GABELLI: Yeah.

CAVUTO: What is going on with this market? You know, we were talking during the break that it's doing fine, then another anthrax scare or another scare or something undoes a hundred-point rally, it turns into 150- point decline. What's going on?

GABELLI: Well, you have you to sift through a very simple thing: Earnings are bad, you're going to have a lot of bankruptcies, a lot of layoffs because of 9/11. But as you look into 2002, interest rates down, oil down, tax decrease finally hitting, a second booster shot, inventories out of the way. Everything's working. Earnings up big time (UNINTELLIGIBLE) to the new accounting rules for goodwill. And the -- everybody is throwing the kitchen sink in this year, Neil, so the earnings are going to be terrific.

CAVUTO: And on one questions that, do they?

GABELLI: They shouldn't, because that's what's going to happen. And in turn, with interest rates at these levels, you have a good margin of safety in the market.

What's wrong? What's wrong is the consumer is very fragile. Confidence has to be bolstered both at the business level and at the consumer level. So whenever you have a new scare of people that haven't with it before it kind of concerns the consumer.

A real funny thing happening with the consumer. Car sales at an all- time record: 18, 19 million car sales without fleets, without car rentals. Why? And that's what we're trying to explain.

CAVUTO: Yeah, but with a lot of heavy discounts.

GABELLI: It doesn't matter. If I'm going to get laid off, why do I want to spend money on a car...

CAVUTO: No doubt. I'm just saying for the auto companies, and the Fords and the GMs...

GABELLI: Used car prices stink: For Ford Motor and General Motors it's not good, but for the economy it clears out the inventory.

CAVUTO: So you say good signs are coming.

GABELLI: Yeah. Past the next 90 days the economy is going to be good.

CAVUTO: When?

GABELLI: Oh, on December 3rd, 19...

CAVUTO: No, in other words, you've heard the White House now officially say two back-to-back quarters are in the cards for negative growth, recession, right? What then?

GABELLI: I think these dynamics in place, the cost cutting by companies and all of the things that the free market is doing will work in 2002 to get higher earnings.

CAVUTO: OK. Let's talk about your kind of bets. You were an early believer in media stocks. Do you still like News Corp by the way?

GABELLI: Oh, of course, Neil. What do you think I'm going to tell you? You'd cut me off early an extra minute.

CAVUTO: Just wanted to check that.

So, do a media play for me: What do you see going on?

GABELLI: Well, what I see is the following. In order to bolster consumer confidence, you're going to have some selected dynamics. Consumers do well, consumers staples that are advertiser-important will do well. That'll help the media. Comparisons will be easy. The restraints on media concentration will be changed because the world has changed. So you're going to have a very good environment in which to make (UNINTELLIGIBLE) and to do deals. Newspapers, broadcasters, telephone companies, and a lot of the sick puppies that also will be (UNINTELLIGIBLE).

CAVUTO: Is AOL Time Warner a sick puppy?

GABELLI: AOL is a wonderful stock. The stock's 30. It's still at 13 times EBIDTA, $10 billion of cash flow. Growing a little less in the short term. But nobody's immune from this.

CAVUTO: Yeah, but you know, they just raised the rates on AOL for the online service and they're not getting as much revenue for subscribers as they thought they were, is that a worrisome sign to you, or do you just say, no, the whole pie is OK?

GABELLI: Well, you have to look at it the way I do. 9/11 created a whole environment that we didn't anticipate. It's like having in 1951, 50 years ago, the entire automobile industry shutting down. You look past that to what we (UNINTELLIGIBLE) fundamentals call normalized earnings and normalized growth.

So you've got to take the next 90 days and lift them out and say, what happens in the next five years, and on that basis AOL's model works.

CAVUTO: So believe in them. Other stock picks. You had some interesting, eclectic names here, but Kellogg's stood out here.

GABELLI: Well, it's a breakfast. Don't you want to have breakfast with Mario?

CAVUTO: So in other words, that's...

(LAUGHTER)

You know, you're your own marketing guy.

GABELLI: Yeah, I hope so...

CAVUTO: Did you and Jack Welch exchange notes or something?

GABELLI: Well, Welch has a book. I've got to, you know...

CAVUTO: All right.

GABELLI: Give it time. You've got an Irishman from Boston, now you've got an Italian from the Bronx, Neil.

(LAUGHTER)

I mean, you know...

CAVUTO: So in other words...

GABELLI: Peanut butter and jelly...

CAVUTO: ... some safe plays.

GABELLI: ... Smacker's, which is doing a terrific deal with Procter & Gamble. Kellogg's, which is the cereal, and Keebler's. A white bread company called Flours. There are a lot of companies that are mundane, that are attractive, that are selling at a reasonable price. And with interest rates down, their growth rate becomes more valuable. The present value of that future stream of earnings is worth more, Fundamental 101. And so as a result of that, you've got to look at them.

CAVUTO: All right. Mario, it is always fun. Thank you very much.

GABELLI: Snap, crackle and pop.

CAVUTO: All right. Thank you, Mario Gabelli. He's a cottage industry.

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