What the experts say

Is that stock really a ‘buy’?; A respite for housing; Bonds, beautiful bonds

Is that stock really a ‘buy’?

Wall Street analysts stuck to their buy recommendations as the market plunged in 2008, said Jack Healy and Michael M. Grynbaum in The New York Times. Now it seems they’re clinging to that optimism even as the recession deepens. Should investors heed their advice? On the one hand, stocks are down so much that they eventually have to bounce back. But it’s worth noting that analysts’ public recommendations may be more bullish than the “actual investment recommendations” they make to clients. According to the actual buy and sell recommendations for roughly 1,000 analysts tracked by First Coverage, 34.5 percent of those in January were for a sell or short call. Yet analysts were placing public sell ratings on just 5.9 percent of stocks, according to Bloomberg data. “But after so many bad calls on so many companies, why should investors believe them this time?”

A respite for housing

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Could it be that the bottom of the housing market is finally in sight? said Kate Klonick in SmartMoney. According to a report from Moody’s Economy.com, the government’s economic stimulus plan could help stabilize housing prices in metropolitan areas as soon as the end of the year. “Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight for the nation,” say Economy.com economists in the report, adding that home inventories and prices in many markets are finally at realistic levels. That’s not to say that the worst is over. “Home values in some of the nation’s hardest-hit markets—in particular Florida, California, Nevada, and Arizona—will continue to see prices plunge.” But more than 40 metropolitan areas, primarily in the South, are expected to see price declines of less than 1 percent.

Bonds, beautiful bonds

“Suddenly bonds are the talk of the investing world,” said Jeffrey R. Kosnett and Elizabeth Ody in Kiplinger’s Personal Finance. After experiencing the “kinds of spills, chills, and thrills that are usually reserved for stocks,” high-quality bonds started bouncing back last fall and are expected to continue their rally through the rest of this year. “As a result, investment-grade corporates should deliver total returns of at least 8 percent this year and possibly more than 10 percent.” Bonds look even better when you consider that inflation—which is “one of the biggest enemies of bond investors”—isn’t much of a concern right now. Just be sure to stick with high-quality corporate and municipal bonds and bond funds. “There’s too much economic uncertainty to justify jumping into junk bonds or emerging-markets bonds.”

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