What the experts say

Stocks with takeover appeal

The recent spike in mergers and acquisitions has led many investors to buy up stocks of companies that they believe are likely takeover targets, said Pat Dorsey in Money. But there’s more to such a strategy than simply buying a “promising company with big, cash-rich competitors on the prowl.” Stocks of certain companies tend to spike “anytime buyout activity heats up.” When a sale falls through, however, the stock will get hammered. Rather than simply looking for promising sale bait, shop for companies that are “appealing to potential suitors” but can also stand on their own if they are “left at the altar.”

Art on the upswing

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The market for fine art dropped off a cliff last year, said Mary Pilon in The Wall Street Journal. The Mei Moses All Art Index, which analyzes thousands of items that have been sold repeatedly at auction, fell 35 percent in the first quarter of 2009—a reaction, no doubt, to art collectors’ own plunging net worths. In 2010, however, auction sales for old masters and contemporary art have bounced back. The art market usually trails the stock market by about six months, “which suggests there could be more upside later this year.” Still, fine art is not an investment to stake your retirement on. Besides being subject to violent price swings, art is highly illiquid and expensive to transport, store, and insure. Art purchasers must pay sales tax, while sellers incur a 28 percent capital-gains tax—nearly twice the current long-term rate for traditional investments.

Foreclosure, truly a last resort

More shocking than the current sky-high number of foreclosures is that more distressed homeowners haven’t decided to stop payments, said Stephane Fitch in Forbes. For many of the estimated 20 percent of American homeowners who owe more on their mortgages than their homes are worth, “strategic default” would actually make financial sense. “The seven years it would take them to rebuild their credit could very well end up being shorter than the time it will take for their homes to return to the peak values seen in 2006 and 2007.” Yet a recent survey by Trulia and RealtyTrac found that 59 percent of Americans would reject foreclosure as a solution for getting out of an underwater mortgage.