SCOTT SIMON, host:
We're joined now by our man from the world of business, New York Times columnist Joe Nocera in our New York studios.
Joe, thanks for being with us.
Mr. JOE NOCERA (Columnist, The New York Times): Thanks for having me, Scott.
SIMON: The market's dropped another one and a half percent on Friday.
Mr. NOCERA: Yeah.
SIMON: But it was nothing like the way they opened the week.
Mr. NOCERA: Well, yes.
SIMON: Do we take a deep breath or prepare for more?
Mr. NOCERA: Oh…
(Soundbite of laughter)
Mr. NOCERA: …you know, I think that we are headed for a pretty rough stretch. My own barest view, admittedly, is that the economy is in pretty bad shape, the financial system is pretty rocky, and that cannot mean good things for stocks. I talked to a bunch of people this week who really thought that 2008 is going to be a rough year. And that's pretty much where I am myself.
SIMON: But why don't more people see this as just a correction, I think, is the term of art, because, I mean, the Dow is 75 percent higher than it was 10 years ago.
Mr. NOCERA: Well, a correction is 10 percent down. Bare market is considered 20 percent down, technical terms. And so, there are parts of the market that are 15, 16, 17 percent down in certain indices, and then there are certain indices that are in bare market territory. It's a kind of pointless argument because, you know, is this market finally out of gas is the big question.
SIMON: There are people who keep offering the evidence that most sectors of the economy are doing pretty well.
Mr. NOCERA: Well, Scott, they are and they aren't. I mean, you can definitely make that argument right now. But let's think about what's happened just in our own lives, just - in other words, forget about Wall Street for a minute, just think about Main Street.
We've been through, first, the stock market bubble, the tech bubble, and then the housing bubble. And one of the things that characterize the housing bubble is millions upon millions of people borrowed money against the equity of their home. That became a piggy bank, and it became a way people supported the lifestyle that they wanted. If those prices go down as they have, suddenly, guess what, you have all these debt. You have to pay it back.
And one of the things that's been startling to me as I've looked into it this week is realizing how much and how fast debt has run up in the first eight, seven-plus years of this century. Mortgage debt has doubled. Credit card debt and consumer debt has doubled in seven years. And that has to be unwound, and that's going to be painful.
And so my argument would be that paying back that debt and kind of coming to terms with the fact that your houses and price isn't going up anymore is going to have a damper on consumer spending, which in turn will have a damper on corporate earnings, which in turn will keep the stock market from rising anytime soon.
SIMON: In your column on Saturday, you hark back to the period between 1969 and 1982, when the markets barely budged. Remind us what would happen if we slid back into a period of no growth in the markets.
Mr. NOCERA: Well, one of the reasons baby boomers don't remember that period is because it didn't really matter to our lives. We didn't have 401(k)s. We weren't putting kids through college. So, you know, the real issue here is that when the stock market stops rising and if it were to go flat for a long time, it's very, very meaningful to the lives of many, many people. And it would have a dramatic effect on how baby boomers retire.
SIMON: What do you expect on Monday? Markets were closed last Monday, and we saw what happened around the world.
Mr. NOCERA: Well, you know, only idiots predict what's going to happen when the markets open on Monday.
SIMON: I know that, that's why - that's the question.
Mr. NOCERA: Because that's why - yeah. Yeah. Yeah. My old friend, Peter Lynch, he used to run Fidelity Magellan back in the '80s. He used to say he hated Mondays because he said over the weekend people become amateur economists. They read all the gloomy stories in the newspaper and then they just want to sell. And he actually had a statistic showing that Mondays were, by far, the worst day of the week for the market. So, I'm not predicting, but I'm just saying that Peter Lynch usually knew what he was talking about.
SIMON: Joe Nocera, thanks so much.
Mr. NOCERA: Thank you, Scott.