Why You Should Like Insurance Companies

Financial stocks have been hit hard as a result of the subprime mortgage fallout, but insurers deserve to be treated differently.

Start with a history lesson: From January 3, 2001, to June 25, 2003, the Federal Reserve cut short-term interest rates 12 times, ratcheting down the federal funds rate to 1%. Stocks rallied sharply on the first reduction. But by the time Chairman Alan Greenspan and his colleagues announced the final cut, Standard & Poor's 500-stock index had fallen 28%.

Yes, there was 9/11 and an actual recession, as opposed to today's talk of one. But for investors, it was still an extraordinarily painful time, made more so by the conventional wisdom that Fed rate cuts are bullish for stocks.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.