Brenda Buttner was joined by: Gary B. Smith, TheStreet.com columnist, Pat Dorsey, Morningstar.com columnist; Scott Bleier, chief investment strategist at Prime Charter; Tobin Smith, editor of ChangeWave Investing; and Bob Olstein, president of the Olstein funds.
Trading Pit
So far this year, $210 billion has been put into savings accounts and $36 billion in stock mutual funds. Those numbers were flip-flopped last year. So what's going to take investors off the sidelines, and into stocks? Bob stated that a lot of people got hurt when the tech bubble burst, and what investors need is for that area to stabilize. He believes that once a company, such as Cisco (CSCO), has 2 or 3 months of good performance, things will turn around.
Gary B. put together NOW and THEN Nasdaq charts. The Now chart displayed the Nasdaq's uptrend to about July 2000. He said back then, the Nasdaq was like going to a casino where the slot machine always paid off. It was in an uptrend, and buying on the dips almost always worked. But on his Now chart (which charted August 2000 to the present), everything flipped around. The Chartman said that nothing's working, and buy the dips now and stocks go up a little bit and then collapse. He agreed with Bob that a stock like Cisco must report a couple of good quarters for investors' confidence to build. He advised to stay in cash until the charts break out of their downtrends. Pat said that there is nothing wrong with investors putting money into their savings accounts, and businesses need to start spending again for things to really turn around. Tobin agreed that there's nothing wrong with putting money in the bank but the he views that money as, "afraid money," and that money should stay in the bank. But your investment money should be in the market. He said to forget about Cisco, disagreeing with Bob and Gary B. There is the real economy and the tech economy, and the tech economy is going to take a lot longer to comeback. Scott jumped in and said that index driven investing has brought on a situation where a lot of money has been put into a few stocks, and these stocks weigh heavily on the averages. But, underneath the averages are a lot of companies that have had their earnings going up.
Stock X-Change
Bob, Tobin, and Scott all stayed on to with a stock pick that investors should buy if they want to get back into the market. Scott recommend Humana (HUM) because it's a cheap, value stock. Tobin picked Philadelphia Suburban (PSC) because its earnings growth should come on strong. Bob selected Chicago Bridge & Iron (CBI) due to the shortage of electrical power in the United States.
Chartman
Gary B. and Pat came back to look at Gary B's favorite Real Estate Investment Trust or REIT. These are companies that manage a portfolio of real estate to be able to earn profits for its shareholders. This sector is up 12% from the start of year, not too bad in this down market. Gary B. selected two stocks that he really likes from this sector. First up, Equity Residential (EQR). He's bullish on this stock because it had a textbook breakout to a new high, and even though it is a slow mover, it should make it to the mid-60's. Pat disagreed because the bad economy will hurt its bottom line. Gary also picked CBL & Associates (CBL) because he believes it is set to break out once it can close above $31.50. But Pat again disagreed with Gary's bullish position because revenue from its tenants is slowing and weak consumer spending will hurt the stock.
Predictions
Scott: I was wrong about Ford (F); all auto stocks going lower
Pat: Sell Best Buy (BBY)! Company misses 2nd half numbers
Bob: Nasdaq starts heading higher in October
Tobin: Nasdaq closes August at 1750
Gary B: Nasdaq 1600 by end of October
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