Cashin In

Recap of Sat., July 27: Hang Tough!

Stock Smarts: Hang Tough!

Chances are your bottom line has hit a new bottom with the recent carnage in the stock market:

Dow — Down 30 percent
Nasdaq — Down 75 percent
S&P 500 — Down 44 percent
(Since All-Time Highs)

Since the highs set over two years ago, stocks have crumbled, bringing the major indexes back to where they were five years ago. Most of us have stayed the course and felt the pain. But what should you do now?

Wayne Rogers of Wayne Rogers & Co was very impressed with the rally of this past Wednesday (7-24-02), and although he thinks it is impossible to really pick a bottom, he believes we are seeing signs that one is forming, including heavy volume.

Jonathan Hoenig of Capitalistpig Asset Management, who has recently covered his short positions in both General Electric (GE) and Pfizer (PFE), thinks that were are getting ready for a period of a long-term trading range (which would infuriate both bulls and bears), and that we are still not near a bull market. He says he is doing his best to sit on the sidelines right now and wait for better opportunities in stocks.

Dagen McDowell of Fox Business News says that one of the reasons we might not be near a bottom is that so many people are still holding on to "loser technology" issues. Investors need to go through their portfolios, get rid of the junk and hold on to good, solid companies. And people should never be afraid of cutting their losing stocks loose.

Jonas Max Ferris of says that even though a lot of money has been taken out of mutual funds, it’s still not as much as what’s left in the funds. If you had a well-balanced portfolio before this bear market, it might be time to shift some more assets into stocks, as prices are more reasonable.

Hilary Kramer of Montgomery Asset Management says that investors can free up money by "losing the losers," and put the money into good opportunities.

Stock Game Plan

Sometimes we just can’t let go when it comes to stocks. Wal-Mart, IBM and Citigroup are three big ones that many have held onto through thick and thin. If you own them now, what do you do with these stocks? And if you don’t have them in your portfolio, is it the perfect time to get in?

Wal-Mart (WMT)
52-Week High: $63.94
7-26-02 Close: $48.18

Jonathan wouldn’t buy it at these levels, and would even think about shorting it. He loves the company, but just not the stock. He sees a lot of downside risk. Hilary has a position in Wal-Mart, and thinks that everyone should have a bit in his or her portfolio. Wayne says buy something in the store, but don’t buy the stock.

52-Week High: $126.39
7-26-02: $66.40

Wayne sold his shares in IBM a while ago, and isn’t attracted to the stock, even at these lower levels. There are better places to have your money. Jonathan says this is a growth stock from the last bull market. Investors should try and find "the next IBM." Hilary thinks it is going lower, because the tech rebound is going to come 24-48 months down the road, and not in early 2003 as first thought.

Citigroup (C)
52-Week High: $52.20
7-26-02: $30.74

Hilary is holding on to her position of Citigroup, and is adding to her position – she says she loves the company. Wayne is a supporter of Citigroup, and thinks that if you buy now (as he has), you will be happy three years down the line. Jonathan is not buying Citigroup, or any other large-cap financial stocks.

Mutual Fund Face-Off: Fat Yield Funds

Stocks that pay dividends – they were pretty boring in the bull market. But now they are in big demand. What’s the best mutual fund to buy if you are looking for fat dividends? Dagen and Jonas faced off over a couple of selections.

Dagen – Greenspring Fund (GRSPX)
Minimum Investment: $2,000
Year-To-Date (as of 7-26-02): Down 13.1 percent
Last-Three Years (annualized, as of 7-26-02): Up 2.5 percent
Expenses: $11.90 for every $1,000 invested

Jonas – Vanguard Utilities Income Fund (VGSUX)
Minimum Investment: $3,000
Year-To-Date (as of 7-26-02): Down 23.3 percent
Last-Three Years (annualized, as of 7-26-02): Down 3.7 percent
Expenses: $3.70 for every $1,000 invested

Money Mail

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

Question: "When I sell a company’s stock, does someone else have to buy it? How does this work?"

Dagen: Anytime you make a trade, there always someone on the other side of that trade. That’s one of the reasons that insider trading isn’t a "victimless crime." In that situation, someone is buying at a huge disadvantage.

Question: "I have saved about $5,000 in jars in the past five years. I want to buy stocks now that prices are down. What do you suggest?"

Wayne: Put it in the bank.

Jonathan: Put your money to work slowly. In this market, bonds and fixed income are there places to be.

Dagen: Buy a mutual fund – you get the most bang for your buck.

Question: "I thought gold went up in bears markets, and down in bull markets. Is this true?"

Jonathan: Historically, gold and stocks work in reverse. I am still bullish on gold – especially gold bullion coins.

Dagen: If you want real assets, go for real estate.


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