This is a partial transcript from Your World with Neil Cavuto, September 19, 2003, that was edited for clarity.

Watch Your World w/Cavuto weekdays at 4 p.m. and 1 a.m. ET.

NEIL CAVUTO, HOST: You thought the New York Stock Exchange was confusing. Take a look at your mutual fund (search) statement. To hear my next tell it, that’s where the problems for a lot of folks really start.

With us now, a legend in the mutual fund world, a guy I really respect. He actually speaks his own mind and has earned double-digit returns doing so. If the New York Stock Exchange wanted to make a bold move, I think this should be the guy -- Bob Olstein, the chairman of Olstein Funds -- but he doesn’t want to take the pay cut.

All right, Bob. Good to see you.

BOB OLSTEIN, OLSTEIN FINANCIAL ALERT FUND: Hi, Neil.

CAVUTO: I have to ask you about the New York Stock Exchange mess.

OLSTEIN: Well, you know, I think Grasso did a good job. I think the exchange has been relatively clean. I’m not going to comment on $140-million compensation in a quasi-public body.

We need a good person there. We really do. We need a straight person. I’m not getting involved in the controversy. There is no controversy about the exchange.

But, politically, I don’t know how you sell a $140-million pay package.

CAVUTO: So whoever takes over is going to earn a fraction of that.

OLSTEIN: I think so. I really do. But I think the exchange is in relatively good shape from an ethics standpoint, and, you know, basically maybe that was a political error, but I’m not getting involved in what somebody else should make.

CAVUTO: All right. For a lot of investors -- you and I were chatting about this -- whether it’s the New York Stock Exchange issue or now all these allegations made on the part of mutual funds and what they’re up to, given Eliot Spitzer’s investigation, a lot of people don’t trust the system.

OLSTEIN: I don’t blame them. The system is broken down. It always has broken down, and you know, especially in wild bull markets. The mutual fund industry has been a relatively clean industry. I mean we’re highly regulated.

This was an embarrassment to me. The fact that somebody allowed somebody to trade after-hours to me is a public embarrassment. It’s a private embarrassment.

CAVUTO: So what do you do?

OLSTEIN: You’ve got to stop it. It’s not just happening in that one isolated case. You even have the advisers trading mutual funds every three months, every four months. I’m not going to name the bank. It’s a bank who has advisers in our fund. I’m shocked. They bought us at the high, they sold us at the low, they’re trading it every six months.

CAVUTO: But you blocked this type of after-hours trading. Let me...

OLSTEIN: Absolutely.

CAVUTO: "We blocked advisers who trade the fund in and out very early in the process. We have a back-end fee, require portfolio managers to only purchase the fund, and they cannot purchase stocks. Bonds are allowed."

So how does that make it more crime resistant?

OLSTEIN: Well, number one, if we charge them a fee to come out, if they leave before a year, that takes some of the advantage right off the table. That’s number one.

CAVUTO: So you have to stick with it.

OLSTEIN: We stick with it. We get offers all of the time from public funds, or funder funds. We have people who want to say would you let me out of the back-end fee. I say, sure, if you hold it for a year.

CAVUTO: And then what do they say?

OLSTEIN: And then they say, I don’t want the fee. They say I don’t want the fee, and I say, well, if you don’t want the fee, hold it for a year, and, if you trade it before a year, I don’t want you, and, basically, all of our...

CAVUTO: Do your investors know that?

OLSTEIN: Yes. I write to them. All of my money, my equity money is in that fund. All of my portfolio manager’s money is in that fund. Why do I want them hitting on me? These guys who traded the funds are counterproductive. They give me cash when I don’t want it..

CAVUTO: But let’s say you accepted that cash. I mean your own fees to run your fund could go down, and then your customers would be happy, and they’d be none the wiser.

OLSTEIN: Yes. You could pull it off, I mean, but, basically, we’re going to start educating people now. I think Spitzer’s right. I think he went after somebody, I think he’s going after them criminally, and, if we start getting some more criminal activity, maybe it will stop because that was criminal activity, but it wasn’t just a broker. There had to be a supervisor allowing this.

CAVUTO: But if I’m investigating a mutual fund, how do I know whether the one I’m in is not pulling these shenanigans?

OLSTEIN: Well, first of all, I want a back-end fee for all funds. I think the SEC should stop this trading of mutual funds. You have small investors...

CAVUTO: So just make it illegal.

OLSTEIN: Just make it illegal to be out more than -- within 90 days, period or have to publicly state we allow people to go in and out of our funds and then let the buyer beware.

CAVUTO: But you’ll just get a smarter rack, right? They’ll find another way.

OLSTEIN: Yes, it’s like the IRS. You know you make all of the rules you possibly can. So you need ethics. You need to stop worrying about a guy’s fees. You’ve got to understand about his philosophy, his ethics, the way he writes to you. You can smell him out.

CAVUTO: While you’re here, Bob, we’re going to take a look at how your fund has been doing. You’ve been up double digits, and you’ve been making good bullish calls. What do you see for the market the next few months?

OLSTEIN: We are in a trading range, but there’s bubble parts of the market. There’s undervalued parts of the market. This is lot like ‘74-’82. I don’t see the averages going too far because...

CAVUTO: They didn’t do a lot between ‘74 and ‘82.

OLSTEIN: Right. The earnings have to catch up to the large-cap stocks, to the Ciscos, to the companies that have moved far ahead of their earnings, but they’re underneath the network. There’s still some valuation. You’re going to have to trade. You’re going to need a professional adviser to steer you through this market.

CAVUTO: Good shot for Dow 10,000 this year or what?

OLSTEIN: I’m not looking at Dow anything. I’m trying to look for stocks to make money. That’s my job. I’m not in the philosophy business.

CAVUTO: Roberto, thank you very much.

OLSTEIN: My pleasure, Neil.

CAVUTO: Bob Olstein speaks his mind. That is a rarity on Wall Street.

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