[Kyra Phillips, Cnn Anchor:] Well, as we transition into the new year, it's a good time to get your financial house in order. This morning, we'll get some money dos and don'ts from Lauren Young. She's a senior writer for "Smart Money" magazine. She joins us from New York this morning. Good morning, Lauren.
[Lauren Young, Senior Writer, "smart Money" Magazine:] Good morning, Kyra.
[Phillips:] All right, let's kind of start with the obvious here. Not a time to sell your stocks, definitely a time a buy to buy. What are some of the bargains out there?
[Young:] Bargains, definitely in the technology sector. I mean, the average technology stock is down 30 percent in the year 2000. So, there's a lot of good stuff out there, but you do need to be ready to stick around for the long haul.
[Phillips:] Well, what would be some of your picks?
[Young:] Some of the things we like are some of the larger blue chip names. I think that obviously some of the Ciscos of the world, even Microsoft, are things that you should be looking at to have as a core of a long-term portfolio, not something that you need for the next 12 months or 18 months.
[Phillips:] Well, definitely not a time to buy a house right now, right?
[Young:] No, we do believe that the economy is slowing, and I don't want to sound like a doomsday person here. But, one thing you do need to think about is: Can you afford to take on a debt to buy a new house? Now, the other good thing about waiting is that housing prices do tend to lag the stock market by about two years. So, we could see some real bargains out there as soon as the market shakes itself out.
[Phillips:] All right, I like this one. You say be nice to your boss.
[Young:] Be really nice to your boss. I hope mine's watching. No...
[Phillips:] Me too.
[Young:] Important is that, well, we've seen layoffs. Montgomery Ward laid off a slew of people last week, and we don't think that's going to end. And having a job is obviously one of the best ways to pay your bills. So, it's really important to figure out where your company's going and, you know, try and be ahead of the trend. If they're thinking about layoffs, maybe you should start getting your resume ready, and sending it out to some other people.
[Phillips:] So public service and retail sectors, you think those are two of the key areas?
[Young:] Yes. Well, obviously, with retail stocks doing terribly, retail companies are not doing well and, as a result, you will see some layoffs in that area. Again, service companies too could be hit by a round of layoffs.
[Phillips:] So, obviously, you've got to have a cushion of cash. What about reevaluating your 401 [k]. Is that a good idea too?
[Young:] Yeah, Kyra, I'm glad that you brought that up. Your 401 [k] is really, obviously, a core asset for you. And a good way to raise cash is actually to do it in your 401 k] plan. That means, if you need some money. Let's say you should have about a three-month cushion, if you do lose your job, or if some major financial disaster strikes. A 401 [k] is a great place to do that. But, you should also be looking at your asset allocations seeing, you know, what areas of your 401 [k] did well last year, what might not have, and, you know, realigning it for the year 2001.
[Phillips:] So, what are you sort of recommending then? For example, mine is very aggressive.
[Young:] Aggressive is good, as long as you don't think you need the money any time soon, and you look pretty young. I'm assuming you are. So...
[Phillips:] Oh, Lauren, thank you.
[Young:] You're welcome. So, you know, but for people who are nearing retirement, this is a very important time, and we are really in a pivotal sea change in the economy to think about what are my goals in the next year? Am I going to retire? Am I having a child? Am I buying a new house perhaps? Lots of things to think about. And this is the best time to do it in January, you know, along with losing weight.
[Phillips:] We had to throw that one in, right?
[Young:] Yes.
[Phillips:] Do you think the do you think the markets need an interest rate cut or just a big boost of confidence right now?
[Young:] Oh, I think an interest rate cut would actually give a lot of confidence to Wall Street about where the market is heading and where the Federal Reserve chairman thinks the market is heading. I also think that it could spur some economic spending, which is obviously what drives our economy and that's really important. We've seen consumers, you know, draw back a little bit, and we do need to boost that quite a bit.
[Phillips:] All right, here are some obvious ones. Watch out for credit cards, of course. Look at your financial house. New income market, why don't you talk a little bit about that?
[Young:] OK, well, I think that there are new ways to play the market. I mean, everybody has been so reliant on the stock market for so long and, you know, the fixed-income market actually did quite well last year. Bonds are not bad. I mean, they sound stodgy. They sound boring, but let me tell you, they deliver a solid return, pretty much year after year, and we've been telling our readers to go out and look at the fixed income market, particularly at the longer end. You can buy treasury strips. If you go onto our Web site, we'll tell you exactly how you should do it.
[Phillips:] Boy, in the past, people said steer away from bonds, at least in the past couple of years, right?
[Young:] Right. Yes. It has not been one of the better markets for bonds. But, we did see coming out of the last slowdown, the fixed income market pick up very nicely. And we do think that, and again, you know, we're not saying put all your eggs in one basket, but you could get some return from some from government treasuries.
[Phillips:] All right, Lauren, and your final tip was stop spending. OK, how the heck are we going to stop spending? Come on.
[Young:] Tell me. I'm going on vacation next week. I know, but listen, I was just telling someone downstairs that I think it's really important she had bought a new house, maybe she doesn't need to furnish the entire thing on a credit card right now. I think it's really important for people to reevaluate. In this economy, we are in a slower climate. What you can actually afford and do you need, you know, another black turtle neck sweater or do you need a new car? I think people have to kind of realign what their expectations are for spending. And I don't think it's so hard to do, if we all do it together. But I, you know, it's hard. But, stop spending. You don't need you don't need that new television set.
[Phillips:] All right, Lauren Young, we'll hit the outlet malls then. Thanks for joining us this morning.
[Young:] Thank you.
[Phillips:] Great tips.