Cashin In

Recap of Sat., Nov. 9: Can’t Lo$e?

Stock Smarts: Can’t Lo$e?

Not since Franklin D. Roosevelt’s second term has the market lost ground in the third year of an administration – and that was during the Depression! In fact, since World War II, stocks have averaged a near 22 percent return in the third year of a President’s reign:

S&P 500 Index - Average "3rd Year" Return Since 1939

Up 21.9 percent

Source: USA Today

So, does this mean 2003 will be a can’t miss year for stocks?

Charles Payne of Wall Street Strategies says some of the “3rd year” phenomena is probably dumb luck and some is probably due to the re-election year and those in office trying to appease the voters. He says we are coming out of a three-year bear market and it is unusual to have a bear market last longer than this, so it looks like all the stars are aligned just right for an up year for the market. He thinks we will see a transition over the next 12 to 18 months from a bear market into a bull market. But the fundamentals for individual companies are not there yet.

Hilary Kramer of Montgomery Asset Management says with the Republican sweep we could see real economic policy. For example: abolishing the death tax, abolishing double taxation on dividends, and making the tax cuts permanent. That should stimulate the market next year and keep the “3rd year” phenomena going.

Jonas Max Ferris of says the “3rd year” effect is due largely to politicians looking to get reelected who stimulate the economy with increased spending, but he says that’s already happened here – we’ve lowered rates as much as we are going to lower them; spent as much as we are going to spend; the stimulus is in effect and the market’s reaction so far hasn’t been spectacular so he’s not expecting a big year in the market next year, but he says stocks are a still the best investment class to get into right now compared to bonds, gold and real estate.

Jonathan Hoenig of Capitalistpig Asset Management says he approaches the market from a trading perspective because the market doesn’t know what our trading calendar is or who’s President or who controls Congress. There are stocks you should be long next year, but you have to be extremely selective and focus on what the market is telling you.

Wayne Rogers of Wayne Rogers & Co. agrees with Jonathan. He says there’s no such thing as a “can’t lose” year but the market seems to be telling us that we are closer to a bottom than to a top, and yes you want to own some equities but you have to be careful which ones they are. He thinks we are going to go to war with Iraq and that will have a negative impact on the market because it’s the unknown and you don’t know what’s going to happen after the war ends. You don’t know who is going to run Iraq.

Mutual Fund Face-Off

It’s time to ditch that low-paying money market for a better investment. But what? Dagen and Jonas picked some possible winners.

Dagen – T. Rowe Price Mid-Cap Growth Fund

Year-to-date (as of 11-8-02): DOWN 20.7 percent

Minimum Investment: $2,500

Expenses: $8.90 for every $1,000 invested

Jonas – Vanguard Short-Term Corporate Fund

Year-to-date (as of 11-8-02): UP 3.8 percent

Minimum Investment: $3,000

Expenses: $2.40 for every $1,000 invested

$addam Stocks!

A Republican sweep on Tuesday, a U.N. resolution on Friday – the clock is ticking for Saddam. Which stocks will rise as Hussein falls?

Wayne's $addam Stock: Goldcorp (GG)

52-week high: $12.35

52-week low: $5.16

Friday's close: $10.80

Wayne owns shares in Goldcorp. He recommends this as a defensive play until it is clear what will happen to Iraq in any post-war scenario. Jonathan also likes gold stocks again as well as gold bullion. Charles thinks gold will fall along with Saddam and in a “post-Saddam” world gold is the last place he wants to be. Hilary likes gold right now.

Jon's $addam Stock: San Juan Royalty Trust (SJT)

52-week high: $13.38

52-week low: $8.53

Friday's close: $13.38

Jonathan owns shares in SJT. He has recommended this stock before. Hilary likes the pick. Charles and Wayne say they don’t understand this one right now.

Hilary's $addam Stock: L-3 Communications (LLL)

52-week high: $66.78

52-week low: $39.40

Friday's close (11-8-02): $46.10

Hilary owns shares in L-3. Charles says he likes the risk reward ratio on this one, but he is concerned that airports will move to hand checking bags instead of using machines and that could hurt L-3 stock. Jonathan says he wouldn’t consider it. Wayne says, “Pass!”

Charles' $addam Stock: Carnival Corp. (CCL)

52-week high: $34.64

52-week low: $22.01

Friday’s close (11-8-02): $29.14

Charles says after Saddam falls people will be ready to cruise again. Hilary agrees. Wayne says this company is too vulnerable to a terrorist attack even after a war. Jonathan says it’s too early to buy this stock the only entertainment stock he likes right now is Cedar Fair (FUN).

Money Mail

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

Question: “I have a diversified portfolio with a lot of well managed mutual funds, and I am 20 years from retirement. Do I sell now or ride it out?”

Dagen says: “Sit tight and hold on. Buying high and selling low is not how you’re going to make money.” She says you have what all investors need: A well diversified portfolio and lots of time to let it grow. Jonathan says he wouldn’t be putting new money into any big cap stock right now so if you have those in your portfolio it’s not a good place to keep adding money.

Question: “A while back, Jonathan actually LIKED a stock: Sonic (SONC). Can we have an update of the stock?”

Jonathan says he peeled back his position in Sonic after the first half of the year. He makes the point that you need to watch your stocks and take some profit when they have a run up like Sonic did early last summer. Right now he says Panera (PNRA) is the strongest in this group but you can’t buy these stocks and forget about them. Wayne likes the company. Dagen is worried about hamburger price wars hurting the stock.

Question: “I recently bought Intel (INTC) at $19.25 and General Electric (GE) at$23.50. What are good targets for me to sell?”

Wayne says hold on for the long haul your in at a great price. Jonathan says get rid of Intel don’t’ sit on a loss. He doesn’t like GE. Dagen says Intel’s a fine stock hold onto it, but take some profit in GE.


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