Transcript: Image Is Everything

This is a partial transcript from "Your World with Neil Cavuto," June 29, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: Strong GDP might have beat the forecast, but, according to a recent survey by the American Research Group, our economy is in bad shape and is getting worse. So, should we really be worried?

Michelle Girard says our economy is actually looking quite solid. She's a senior economist at Greenwich Capital Markets. Also joining us is the president and CEO of Forbes, Steve Forbes.

Steve, end it with you, begin with you:

Perception is everything. Yours was the first publication that I know of that began to regularly remind folks there was some good economic news out there. Why is there resistance to doing that in the media?

STEVE FORBES, CEO, FORBES INC.: I think, as you know, if it bleeds, it leads. Bad news sells. Remember, 10 years ago, in the early 1990s, there was a lot of pessimism about the economy, even though it was growing. It wasn't until 1996 that people really realized the economy was in a real growth phase. We're in a situation today where perceptions lag reality. The reality is that, fundamentally, the American economy is in very good shape. We have the strongest large economy in the world today.

CAVUTO: So, why, Michelle, when I look at the bond market, which I guess is a good barometer for where we're going and where people think we're going, to read the long end of the market, over which the Fed has no control, things stink and they're going to be stinky? What do make of that?

MICHELLE GIRARD, GREENWICH CAPITAL MARKETS: Well, you know, obviously, even the Fed chairman himself has tried to figure out what has got bond yields this low. He has been skeptical, as we are, that it's really reflective of a true fundamental softening in the economy.

CAVUTO: Well, normally, that's the case, right?

GIRARD: It is.

And, normally, it's a signal, particularly when we get long-term yields below short-term yields, which has not happened yet. I mean, historically, that's been very accurate. But, actually, right now...

CAVUTO: We're getting close. We're getting close.

GIRARD: Well, we're getting close. We're not there.

And, in fact, to the contrary, what's happening is, the fact that yields are so low and mortgage rates are at their lowest levels in a year, it's leading to a boom in the housing sector. It's actually, you know, quite stimulative for the economy.

CAVUTO: Steve, if the rates stay as low as they are, the housing boom obviously can continue, maybe unabated. And yet, the way it's portrayed in the media is that that alone is bad news, because we have got a crash waiting for us. What do you think?

FORBES: Well, I think again, everything is bad news. The sun rises up. Oh, we might get a sunburn. That's bad for us. The sun goes down. Oh, my God, we don't have sunlight.


FORBES: So, nothing is going to convince these people. But, over time, I think people are going to realize the economy is in good shape. Personal incomes are rising. Capital spending is going up. Corporations and households are liquid as never before. And housing is not in a bubble.

CAVUTO: But corporations and households, the naysayers, Steve, will argue that they're in debt up to their eyeballs, too.

FORBES: Well, I don't know why these people don't take economics 101 and learn to look at a balance sheet. You have got to look at assets, as well as liabilities.

If you look at people's assets, what they own in stocks, bonds, money market funds, 401(K)s and the like, American households have never been as liquid as they are today. And, contrary to myth, the American households are the biggest suppliers of liquidity and capital to the global markets. We're flush with cash, but nobody seems to know it.


CAVUTO: I would do anything, Steve, by the way, to see your balance sheet.


CAVUTO: But we're not going to do that publicly on this show.

But, what do you make of that, Michelle? That the good news just doesn't get out there, and maybe the reason why we're in this soft environment is because the media says it's a soft environment?

GIRARD: Well, a couple things, like Steve says, is exactly right.

Balance sheets for the household are very strong. That's why I think it's not so surprising that we haven't seen more of an adverse impact on spending from high gasoline prices. Despite all the hype, consumers are out there shopping as strong as ever in June.

I think the other thing is, you know, perception is lagging. We have seen some better confidence numbers of late. What would really help — let's face it — is if the employment situation kicked in. I mean, that's, I think, a key factor here. If we could start putting together back-to-back employment numbers, I think perceptions would improve a lot.

CAVUTO: All right. Meantime, the balance sheet has hit the fan.

But, guys, thank you both very much. We appreciate it.

FORBES: Thank you.

GIRARD: Thanks.

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