What the experts say

Renters laugh last

Financial pundits like to say that paying rent is like throwing money down the drain, said Jack Hough in SmartMoney. I beg to differ. For one thing, the housing market has further to drop. But more important, “I’d rather rent cheaply and funnel my extra cash into something other than a house.” Both the housing market and the stock market have been battered recently. Over the long run, however, houses have been a “lousy” investment compared with stocks. The past several decades have seen an unusual boom in home ownership. But “for U.S. investors, reliable data on stocks and houses goes back well further than 10, 20, or even 50 years.” Between 1804 and 2004, for instance, stocks returned an average of 7 percent a year. By contrast, houses returned a measly 0.4 percent a year over the 114 years ended 2004. “That number is suspiciously close to zero.”

Value investors take caution

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This bear market may seem like an ideal time for value investors to scoop up underpriced stocks, said Mark Gongloff in The Wall Street Journal. But bargain hunting is risky business right now. “There have been few safe harbors for stock market investors of any stripe in this downturn. But value stocks have been the unsafest of all.” While the Dow is down 50 percent from its October 2007 peak, value stocks have fallen even further. Banks, a staple among value investors, are a prime example of this “value trap.” When banks began stumbling in late 2007, their low price-to-book ratios made them “irresistible” to value investors. But the book part of that equation was based on mortgage debt and—well, you know the rest of the story. And now we all recognize that “the risk of buying cheap stocks is that they can just keep getting cheaper.”

The COBRA bailout

The first thing many worry about when losing a job is health insurance, said Sandra Block in USA Today. “Maintaining coverage can eat up a fair portion of unemployment payments. Last month’s economic stimulus act included a 65 percent subsidy of COBRA premiums for employees laid off between Sept. 1, 2008, and the end of 2009. If you’re already paying COBRA, you may not see payments go down until May—but you should “receive a credit or rebate” for “March and April overpayments.” You’re not eligible for the stipend if you left your job voluntarily, or if you qualify for group insurance elsewhere. Although workers can stay on their employers’ health plans for up to 18 months, the subsidy is only good for nine. And some people—particularly young, healthy, single ones—may find that buying their own coverage is cheaper than COBRA, “even with the federal subsidy.”