Sunday, March 30, 2008


By John Crudele

March 27, 2008 -- ANOTHER day, more bad news for the stock market. That's been the pattern.

Yesterday it was a surprisingly bad drop in sales of durable goods, plus speculation that giant bank Citigroup might have a frighteningly big loss this quarter.

On Tuesday, the gloom was caused by a collapse in consumer confidence and news that home prices were sliding quickly.

Tomorrow it'll be something else. The day after that, thankfully, will be Saturday - so maybe nothing bad will happen.

It's all enough to make an investor turn tail and run.

But what if you still have some money left after paying the outrageous price of gasoline and filling your bags with overpriced groceries at the supermarket?

What if you still have the nerve to invest in something - anything - even though your house didn't turn out to be the deal you thought it was?

Normally I'd call folks on Wall Street for advice on investing in this environment, but I already know what they'd say - buy stocks and hold them for the long term.

How long? Just long enough for the person giving that advice to be out of sight if the move doesn't pay off.

If you missed it, The Wall Street Journal did a fine front-page piece yesterday about the stock market's "lost decade," when Treasuries did better than stocks.

Not surprising, but it's nice to see someone else holding their nose.

So here are some ideas that might protect you in a bad economy and might even make you a few bucks.

Let's start with stocks - although they are not the safest investment for these times.

Let me state very clearly that stocks are likely to be the most dangerous and volatile investment over the next few months.

This is another warning - stocks could drop precipitously.

Prices of equities haven't retreated nearly as much as they should have, maybe because - I suspect but can't yet prove - the federal government is holding a safety net under them.

That being said, this should have been a fine year for stocks. And it still can be if you pick your spots.

It's a well-reported fact that the stock market historically does well in the last seven months of a presidential election year like this one, up 13 of the last 14 times.

That means the rally should begin in June.

There are several other favorable trends for stocks, like prices rising during options expirations week and at the end of each month and quarter.

Last week options expiration helped the market. This week professional money managers wanted the market up so they could show clients better results.

But all of these patterns could - and probably will - be interrupted by more bad news.

First-quarter profits that come out in a few weeks aren't going to wow anyone. Projections for the rest of the year could also sting.

Oil companies should keep earning well, especially since Washington is ignoring their excessive profits.

And companies involved in agriculture and commodities might also thrive.

Safe plays would be companies that produce the staples of everyday consumer life.

So walk around you supermarket and see what people can't do without - and then buy stock in the manufacturer. That gets us to more conservative and sensible stuff.

Treasury securities and certificates of deposits - as boring as investments come - will let you sleep at night, but maybe not so well.

CDs are paying next to nothing. And you can lose money in Treasuries if the bond market sinks and interest rates climb.

And that could happen, especially if I'm correct that economic statistics, like the nation's payrolls, make the economy look stronger than it really is over the next couple of months.

If you're worried about the US financial system, then you'll want to look at assets that aren't denominated in dollars.

Buy some diversified foreign bond funds. Stay away from any one particular currency - especially the euro - because the US could easily drag Europe into a recession that'll hurt those investments.

Buy into some precious metal funds, or Exchange Traded Funds that specialize in gold, silver or other commodities.

You could also do what I recently did - bank hop.

In desperate need of capital, many banks are now offering multi-month premiums to new customers.

Chase gave me a 4.5 percent annual rate; an annuity from Allstate 7.5 percent.

Not exciting, but I'd rather get my excitement at the amusement park than in my portfolio statement.

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