Recap of Sat., July 20: Bet On America!

Stock Smarts: Bet On America!

Buy stocks and buy American — in the 1990s, that was the best advice around. But that was then and this is now. Look at how the major markets have fared over the past three years:

Dow Down 28%
Nasdaq Down 53%
S&P 500 Down 40%
(Since July 19, 1999)

So are U.S. stocks still the best place for you to invest?

Hilary Kramer of Montgomery Asset Management says the American market is still where you want to be. The U.S. economy is the strongest and greatest in the world and there is no real threat from any other foreign markets. And she also thinks that American accounting principals, even with the current scandals, are the most sound. Our focus (in terms of investing) has to be on the long term, and we can’t look to make quick money.

Dagen McDowell of Fox Business News says that even with the sell-off here in the United States there are cheaper stocks to buy elsewhere in the world like in Europe.

Jonathan Hoenig of Capitalist Pig Asset Management says forget about everything else and take a look at the Dow, trading near the 8,000 level. America might be the best place to live, but it might not be the best place to have your money, in terms of stocks. He sees opportunities overseas, especially with international bonds.

Gary Kaltbaum of Investorsedge thinks that it’s wake up call, and that we are in a major bear market. He keeps hearing about the recovery in the economy, but sees no positive movement in the stock market. He points out that from 1966-1982, we had a great economy in America and the stock market didn’t budge. He says he has two words for investors: cash and sell. There is nothing wrong with being in cash and waiting this out.

Jonas Max Ferris of Maxfunds.com has been negative about the market for some time, but he thinks now stocks have been so beaten down in price that you could make a small bet. The thing that really concerns him is that we are now at levels seen when the terrorists attacked. Now we have "the attack on the CEOs," on the market, and if one more major scandal comes down, he fears the market could come down even further.

Buy American?

So where is our Cashin’ In crew betting on a turnaround: in America or abroad? Some members of the panel offered up their picks.

Gary: Preferred Income Opportunity Fund (PFO) A "boring" play, but one that will be a slow and steady performer. Hilary likes the play, as it invests in the preferred stock of utility companies. Jonathan thinks it’s technically strong, but doesn’t love the play.

Jonathan: Strategic Global Income Fund (SGL) A play on international bonds. Hilary doesn’t like the pick (why not be in equities, she wonders). Gary says it’s a fine pick. (Jonathan has a position in SGL.)

Hilary: Philip Morris (MO) A red, white and blue pick, which neither Jonathan or Gary like. (Hilary has a position in MO.)

Mutual Fund Face-Off: Best Janus Alternatives

A lot of investors own mutual funds from the Janus family of funds. And we’ve been getting lots of emails asking what to do since so many in the family are down this year.

Back in January, Dagen and Jonas each picked a fund that would serve as an alternative to the Janus fund. We took a look back to see how the funds are performing, and whether or not they still like the funds.

Dagen – Smith Barney Aggressive Growth Fund (SHRAX)
Minimum Investment: $1,000
Year-To-Date (as of 7-19-02): Down 36.0%
Expenses: $11.70 for every $1,000 invested

There is no doubt this fund has been terrible in 2002. If you bought it early in the year, you should hold it and wait out a comeback, as the fund’s long-term track record is solid. But don’t put any new money into the fund right now.

Jonas – Marsico Focus Fund (MFOCX)
Minimum Investment: $2,500
Year-To-Date (as of 7-19-02): DOWN 10.2%
Expenses: $13.00 for every $1,000 invested

While it has been a tough year so far for this fund, Jonas still likes it.

Money Mail

Dagen and Jonathan capped off the show by answering some of your questions.

Question: "Can you briefly explain the difference between a ‘bull’ and a ‘bear’ market

Dagen: This, in case you haven’t noticed, is a bear market. But traditionally, a bear market is marked by a 20% decline from a high point. A bull market is a 20% increase from a low point. One way to remember the difference is that when a bull attacks, it moves its head and horns up, while a bear swipes its paws down to attack.

Jonathan: I think this bear market has shocked all of us in terms of how long it has gone.

Question: "How has the advent of electronic trading, banking and overall increased speed of information, changed the market, for the good or the bad?"

Jonathan: The technology has improved our lives. People can make trades over the computer at a lower cost in terms of commissions. But the markets really never change, even though the technology surrounding the markets may change.

Dagen: Cheaper trading is a good thing, but it has also made people trade more often then they probably should, and that’s not so good.

Question: "I bought Calpine (CPN) at $13.10 a share. Since then it has lost over 50%. Where is this stock headed?"

Jonathan: Not a great stock. My strategy with this kind of loser would be to sell half of it now, and put a stop loss order of 10-15% off the price right now, so if it continues to fall you get it off your screen.

Dagen: Take some money out of it now. Earnings in the power sector are real weak.

Transcripts

If you are interested in receiving a transcript of the show, please call 888-443-6988.