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Stocks & Bonds

What Investors Need

We would all have more faith in the markets if we knew that someone was running the show.

Recharge your savings by investing in -- stocks? Are we serious? Yes, we are.

And you'll be even more intrigued by the April magazine cover story when you learn that the author, senior associate editor Andrew Tanzer, is our resident bear. Andrew, who lived abroad for 24 years, witnessed not one but two real estate meltdowns, in Hong Kong and Japan. The one in Japan was followed by a stock-market collapse and years of virtually no economic growth. Sound familiar?

Having been thrice burned, what makes Andrew willing to invest in U.S. stocks? First, the time factor. He's focusing on stocks to hold for seven years or longer, a period during which "they should generate a reasonable return," he says.

Second, he's selective, leaning toward "financially strong businesses selling basic goods and services that have strong demand and don't require much consumer credit." If they have the potential to pay rising dividends, so much the better.


And finally, says Andrew, this isn't Japan. The U.S. economy is more diverse and has built more multinational enterprises that will make attractive long-term investments.

Who's in charge?

If that doesn't make you feel better about stocks, I have another suggestion: We would all have more faith in the markets if we knew that someone was running the show. Just like kids in the sandbox, investors need to see that grown-ups are in charge of the playground.

Yes, the economy is in the tank, but you can't ignore the confidence factor. And there's been precious little of that since all hell broke loose last fall. A recent survey by the CFA Institute Centre found that the institute's members, who are chartered financial analysts, have less confidence in the markets now than they did last October and are less likely to support government rescue plans.

Financial experts continue to debate the merits of setting up a "bad bank" versus injecting capital into banks versus bailing out homeowners. And nobody seems to know just how much banks hold in toxic assets or how poisonous they are. If the pros are in the dark, what's an individual investor to do?


Aside from more transparency (the latest buzzword, but an apt one), we need someone to stride onto the scene and into the role of J.P. Morgan during the bank panic of 1907 or Paul Volcker during the inflationary spiral of the late 1970s and early 1980s. So far, none of the major players -- not Hank Paulson, not Ben Bernanke, certainly not Nancy Pelosi or any other member of Congress -- has made the grade. And the new guy in charge of the Treasury and the financial rescue package can't do his own tax return.

New faces

For investors who have sworn off stocks, at least temporarily, we offer what we're calling our Tofurky portfolio (no meat -- or, in our case, no stocks). Assembled by senior editor Jeff Kosnett, it will whet your appetite without violating your diet. You can also read Jeff's "Cash in Hand" column on fixed-income investing, which is already a popular feature online.

In the April issue, we also welcome back columnist James Glassman after an absence of seven months, during which he served as Under Secretary of State for Public Diplomacy and Public Affairs. And if you're in the mood for a change of pace and a fresh face, meet associate editor Jessica Anderson, who takes the wheel at Drive Time".