Mario Gabelli, Chairman of Gabelli Asset Management

This is a partial transcript from Your World with Neil Cavuto, May 30, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: The terrorists chose the financial capital of the world for their mission on September 11. Now Wall Street, like the rest of New York, is on a road to recovery, or is it? Joining me now for a look back is one of the most well respected men on the Street, Mario Gabelli, the chairman of Gabelli Asset Management.

Mario, it's good to have you.

MARIO GABELLI, CHAIRMAN, GABELLI ASSET MANAGEMENT: Always good to be here, Neil.

CAVUTO: That was then, this is now, and now we've got concerns about India and Pakistan coming to blows, Wall Street kind of stumbling through this process. What's the mood there?

GABELLI: Well, the earnings are going to be up sharply on the next three, four quarters for a combination of reasons. The economy is good, interest rates are down, actually, in the last three or four weeks, oil prices are coming in. I think you're having a rising floor but you still have that wall of worries.

Mr. Market, the psychology of the market, is not positive. Some of the reasons you cited. We all know we are still at war. We all know we still have issues, and at some point we think stock selection continues to do well.

CAVUTO: Here's what worries a lot of brainiacs. They say, "This dollar, watch this dollar." Watch what -- the euro is picking up steam. The British pound is picking up steam. The Canadian dollar is picking up steam!

The U.S. dollar is not.

GABELLI: There's nothing wrong with that. I think, you know, 93 to the dollar versus 87 to the dollar are par with euro -- there's not a challenge. What is a challenge is that there's a major rout.

Don't forget three years ago, the euro started trading at a 120 to the dollar...

CAVUTO: That's right.

GABELLI: Purchasing power parity, interest rate differentials, there's a lot of reasons why...

CAVUTO: But as it gained strength, the argument is that that eventually eclipses the dollar, and that we should be worried. Do you worry about that?

GABELLI: Well, if I kept lending your brother-in-law $1.2 billion a day, some day he's going to say I want my money back and you are going to say, hey, you can't pay him. Yes, we are always worried about having -- as a debtor country. However, it doesn't, at the margin, affect me, because I believe the major change helps the farmer, it helps companies like Proctor & Gamble, and I don't think it has a concern yet that the Fed will have to tighten and raise rates to contain the dollar. So I think it's not decisional.

CAVUTO: But is the Fed worried about some other big issues, like sputterings of inflation and what's been happening...

GABELLI: Oh, come on, Neil, you know that!

CAVUTO: Look at gold. Look at gold stocks. Do you own any of that?

GABELLI: We have a gold fund. Caesar Brian runs it. He's been terrific. He's up almost 100 percent.

CAVUTO: Do you still believe in that or is it...

GABELLI: We just think it belongs in a portfolio one to two percent. But if you go back to the '60s, which is only 35 years ago, the stop-go, stop-go, stop-go policies by the Fed never worked.

CAVUTO: So what are you buying right now?

GABELLI: We are buying companies in the utilities area, where there's a defense plus a dividend plus PUHCA, the Public Utility Holding Company Act was changed. You'll have an enormous number of deals -- you may have a lot of deals anyway, so take out power, and we think the Enron-itis of the problems, the confessing of the painting of the trades, all of which leads to opportunities we're buying. Other small cap stocks like standard motor products, we're buying companies in the publishing area.

CAVUTO: Which should be an interesting pick. Is advertising picking up?

GABELLI: Yes, of course. There's a tail wind of advertising, and as advertising picks up in the combination of change in the regulatory environment, you'll see a lot of transactions. It'll focus a lot of money on the media -- Tribune is a wonderful company, and they can go either way.

CAVUTO: All right. Very quickly. War breaks out, conventional war breaks out between India and Pakistan. What's the fallout?

GABELLI: You won't have conventional war.

CAVUTO: So it would lead to something bigger?

GABELLI: I would assume so.

CAVUTO: OK. Mario...

GABELLI: Neil, what a way to end!

CAVUTO: Well, it's a profound...

GABELLI: You throw a bomb on me on Kashmir and then you want me to leave!

CAVUTO: I wasn't talking about you.

GABELLI: Oh.

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