Recap of Saturday August 11

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Big money in a bad market?

There are no two ways around it: the stock market is having a rough go of it this year. As of this past Friday’s close (8-10-01), all the major averages are in the red:

Dow: down 3.4%
Nasdaq: down 20.1%
S&P 500: down 9.9%

So why are we in this situation, and is there any way of making money during these difficult times?

Hilary Kramer of the Cisneros Group sees the global recession and waning consumer confidence as being the major sources of the bear market. And she notes that even with six rate cuts from the Fed, there has been no spark in the stock market.

Todd Eberhard from the Eberhard Investment Association feels that psychology is having a huge impact on the current state of the stock market. Investors hear about good news and no one cares. They hear about bad news and everybody cares.

Chris Bonavico of Transamerica Funds sees overcapacity in the tech sector as being a major cause of this downtrend. Too much money has gone into one area of the economy. But he does think that the end to the bad times is near, saying that most recessions last two years, and we are a year-and-a-half into the current one.

Jonathan Hoenig from Capitalist Pig Asset Management actually sees what he calls a "stealth bull market" in both the small cap and value stocks and in real estate investment trusts (REITs). He likes REITs because they are under-owned and have good prospects for growth.

Todd likes REITS as well, but for different reasons, saying that they are good buys when inflation is down and interest rates are falling. But when leases are not being filled to capacity (as is the case right now), the REITs aren’t necessarily the way to go.

Hilary mentions that there is a vacancy rate of 10%, which could grow to between 20%-30% by 2003, and that the real estate market traditionally lags 18 months behind the stock market. So she would stay away from the REITs.

Chris goes a different route, looking at Dell (DELL) as having the potential for a good play in the current market. He likes the company’s model of selling computers directly to the consumer.

Mutual Fund Face-Off

Topic: The best financial services fund
Panel: Dagen McDowell of SmartMoney and Jonas Max Ferris of
• Dagen: T. Rowe Price Financial Services (PRISX)
• Jonas: ICON Financial Fund (ICFSX)

Power Plan

Whether it’s a ball game or a wedding, you are bound to hear Kool & The Gang’s party classic "Celebrate." And bandleader Robert "Kool" Bell certainly knows how to produce the hits.

But he doesn’t know how to pick a stockbroker. And he wants to know when a person should get into the markets, and when they should get out. So how can he go about getting his financial world in a state of kool?

Jonathan Hoenig says it much harder to know when to get out of a market then to get in. But he thinks the adage of "buy low, sell" high is misleading. He would say "buy high, sell higher," as companies that are showing strength and momentum are better buys than companies that are weak, even if the stock price is low.

Hilary Kramer looks what she calls the "Warren Buffet" model of investing, and that is to pick strong companies that might have some bad news, but also have a strong foundation. She also had three tips for picking a broker:

• Get referrals from people you trust
• Match your personalities & strategies
• Never use a broker that doesn't return calls promptly!

Money Mail

Dagen and Jonathan wrapped up the show by answering some email question from viewers. If you want to have your question answered during the "Money Mail" segment, e-mail us at


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