Stock Smarts:  Is now is the best time in years to buy stocks?

War, recession, and a bear market: sounds like a recipe for losing money if you invest. Not so fast. The political and economic climate we face now is very similar to the one we experienced in 1991 when the nation entered a war against Iraq. Had you invested back then, the returns would be quite satisfying: 13% per year on the S&P 500.  Compare that to the 0.8% annual gain you would have if you had invested 3 years ago when so many were bullish.  So, Is now really the best time to buy we've seen in years.

Gregg Hymowitz from Entrust Capital says now is a very attractive time to buy, as “maximum uncertainty provides maximum opportunity.”   It is difficult to gauge corporate earnings, and you have to be very choosy in picking your stocks, but it is still a good time to get in.

Hilary Kramer of the Cisneros Group thinks that stocks on the S & P are still trading at very expensive levels, and that weakened consumer confidence is making the market a tough place to invest.

Dagen McDowell of SmartMoney magazine agrees It is a difficult time to be a stock investor, as the country is fighting a tough war and facing the threat of more terrorist attacks that could impact the market.

Jonathan Hoenig of Capitalistpig Asset Management thinks that investors sometimes focus too much on larger indices, and now is not the time to invest in the large-cap stocks. There is buying opportunity in the small-cap companies he says.

Jonas Max Ferris of Maxfunds.com is not bullish on the stock market right now. He says that we had much better situation 5-10 years ago when stock prices were lower than they are now.

Then members of the panel offered up some stocks they do like now:

Hilary: Pharmacia (PHA)

Jonathan: Sonic (SONC)

Gregg: Embraer (ERJ)

Mutual Fund Face-Off

Topic: The best “junk bond” fund

Panel: Dagen McDowell and Jonas Max Ferris

Picks:

Dagen – T. Rowe Price High-Yield Fund (PRHYX)

Jonas – Columbia High-Yield Fund (CMHYX)

Money Mail

Dagen and Jonathan wrapped up the show by answering some email question from viewers:

Question #1: Is now a good time to buy Lockheed Martin (LMT)?”

Jonathan: I'd consider shorting LMT (betting the stock price will go lower not higher).  The good news that came with winning the new government contract has already been built into the stock price.

Dagen: LMT has a lot going for it, especially with the government spending so much on defense. It’s a little expensive now to buy, but if you already own it, hold on to it.

Question #2: “If the government wants the consumer to spend more, why don’t they make credit card interest deductible on tax returns?”

Dagen: More money in the hands of consumers is a good thing, but anything that turns Americans into “credit card junkies” is not such a good thing.

Jonathan: It would be better for America to cut the capital gains tax.

Question #3: I have an adjustable rate mortgage currently at 7.88%. Is now the time to lock in?

Jonathan: Rates will still come down.

Dagen: Now might be the time to refinance.

Question #4: Now that parents are so caught up in the war, how do you think the toy market will do this holiday season?

Jonathan: The toy stocks are not screaming buys right now.

Dagen: Firefighter and police toys will be big sellers this season.  

Transcripts

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