Add WorldCom and Xerox to the very crowded Wall Street hall of shame. And once again the top folks in the company made out like bandits while shareholders were hung out to dry. With all these crooks and liars, should anyone believe in stocks anymore?
Joe Battipaglia of Ryan, Beck & Co. says it has to end here, and that we are coming to a "tipping point" in terms of what individual investors will put up with before confidence is totally shot. Management needs to define what it is going to do after the second quarter to make sure that problems within respective companies are fixed. But he sees some factors in place to help the market rebound, including the strengthening economy and interest rates that won’t be touched by the Fed for a while.
Wayne Rogers of Wayne Rogers & Co. thinks that there are always scandals within the business world, but we have just had a rash of them at the same time, adding to the market’s problems. There are still honorable people in the business community, and things will be good in the long run. However, he does not see a bottom yet, and thinks it is nearly impossible to predict.
Jonathan Hoenig from Capitalistpig Asset Management doesn’t think we have seen a mass selling on Wall Street, but more of a "buyers’ strike," in that an absence of buying can also drive stocks down. He still believes large cap stocks are not where you should have your money, and gold and REITs (hard assets) is where the opportunities are.
Hilary Kramer of Montgomery Asset Management does see buying opportunities out there, but she thinks the market is still headed for more down times through the summer. She brings up the point that by the end of the summer, Arthur Andersen is going to have to turn over its publicly traded clients to other accounting firms. And in some cases, the new firms will find irregularities, causing more scandals.
Jonas Max Ferris of Maxfunds.com says that the problems on Wall Street are more wide spread than anyone thought. Several months ago, he felt that companies were overstating earnings by 20 percent - now he thinks that is below what the actual number might be.
$urprise Profit Stocks
Companies are about to start reporting how much money they made or lost over the past three months. Which stocks will profit from their profits? Members of the panel offered their picks.
Jonathan’s stock: Glenborough Realty (GLB). Hilary likes REITs that focus on residential properties, but not commercial real estate trusts, like GLB. Joe likes equity REITs. (Jonathan has a position in GLB.)
Joe’s stock: North Fork Bancorp (NFB). Hilary likes the play. Jonathan does like some of the smaller banks, but not this one. (Joe does not have a position in NFB, but his firm is recommending the stock.)
Hilary’s stock: Washington Mutual (WM). Joe likes the pick. Jonathan says it is not a bad play, but it is not on his buy list.
Mutual Fund Face-Off: Iraq Attack Funds
It’s hardly a secret:: military action against Iraq is more a question of "when," not "if." So one of our viewers wrote us asking which mutual fund would be the best one to buy if you expect an assault on Saddam Hussein. Dagen and Jonas faced off over their choices.
Dagen: Vanguard Intermediate-Term Treasury Fund (VFITX)
Minimum Investment: $3,000
Expenses: for every $2.90 for every $1,000 invested
Year-to-date (through 6-28-02): UP 4.8 percent
Jonas: American Century International Bond Fund (BEGBX)
Minimum Investment: $2,500
Expenses: $8.70 for every $1,000 invested
Year-to-date (through 6-28-02): UP 11.8 percent
Dagen, Jonathan and Wayne wrapped up the show by answering some e-mail questions from viewers:
Question: "What is the problem with America Online (AOL)? It's now at about $14. Should I sell and take a loss from $35 or hold onto it?"
Wayne: Sell the stock. The problem is not with Time Warner, however; it’s with AOL.
Jonathan: Not a stock you should own for the long term. You might want to sell off half your shares for a tax loss, then reconsider how long you want to hold the rest.
Dagen: If you can wait around 10 years for a comeback, then hold on. But it really is not a stock to own right now.
Question: "The biotechs have been beaten down for some time. Is it time to spend some money in biotechs, and how will interest rates affect this play?"
Dagen: People want to buy these companies because they are so beaten down. But these stocks are very volatile, they show no earnings and are usually tied to one drug product, and if that drug is shot down by the FDA, you are in real trouble.
Jonathan: It’s tough to find good stocks in this group.
Wayne: I wouldn’t bet on the entire sector.
Question: "Has a bear market ever bottomed in the summer months?"
Dagen: You really can never see a bottom.
Jonathan: When the bottom comes, we won’t know it.
Wayne: It’s better to go to Vegas than to try and predict a bottom.
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