Logical thinking, education best tools investors can use when war looms

www.news-star.com Story last updated at 12:21 a.m. Sunday, March 16, 2003 By APRIL WILKERSON SNS Staff Writer

Logical thinking and education are the best tools investors can use in the face of a potential war, investment representatives say.

The Shawnee Edward Jones office offered a program Tuesday titled "War, Terrorism and Your Investments." Retired Army Gen. Barry McCaffrey was interviewed during a remote broadcast, followed by Alan Skrainka, chief market strategist for Edward Jones.

People worry about their investments when there is a crisis or threat of war, Skrainka said. But if history is a guide, confidence in the market will be restored if there is a war with Iraq, he said.

"Fear and uncertainty pushes the market down," he said. "The lesson is that it's almost always a mistake to panic sell."

Rather, people should stay focused on the things they can control: quality of investments, diversity of portfolio and their emotions. The market has endured war before, and it will bounce back again, he said. People should not make major changes in their portfolios.

Skrainka gave several recommendations for wise investing. Stocks that pay dividends are quality choices, he said. When the market fell 22 percent in recent years, stocks with dividends fell 11 percent, compared to a 30 percent drop for others, he said.

Investing in defense contractors and other companies in the business of war is not a good idea, Skrainka said.

"I don't think it's time to load up on defense stocks," he said. "Don't try to profit from short-term events."

Oil prices are at a 12-year high, but the cost can go down as quickly as it's gone up, Skrainka said. The strike in Venezuela, a cold winter and the threat of war have pushed up prices, he said, but the world is not running out of oil.

"People hear scenarios of what can go wrong, but it's a mistake to assume the worst-case scenario," he said. "We will get through it, and confidence will be restored."

McCaffrey was interviewed on the broadcast by Connie Silverstein, a member of the Edward Jones management committee. McCaffrey talked about the possible war, other countries' feelings about it, as well as security in America. McCaffrey commanded the 24th Infantry Division during the Gulf War, has served as the U.S. Drug Czar and teaches national security studies at West Point.

Iraq will be disarmed in the next 30 days, one way or another, McCaffrey said. A military effort would be quick, he said, and changes in weapon technology, such as night vision, will make a difference.

McCaffrey said troops are aware that support for a war is not universal. They will do their job regardless, he said, but it is the leadership who is more concerned about lack of support.

McCaffrey cited several countries, like Saudi Arabia and Turkey, who are providing "quiet support."

McCaffrey responded to questions about Homeland Security, saying progress has been made since Sept. 11, 2001.

"Five years from now, we will be immensely better off than a year ago," he said. "In the meantime, we have a big job. But we're starting to make serious inroads."

Increased border control, global cooperation for the war on terrorism, and public education are positive steps, McCaffrey said.

The nation's color-coded alert system gives the public more information on being prepared, which is good, he said, although he cited calls for duct tape and plastic as "alarmist nonsense."

McCaffrey said he doesn't believe a war with Iraq would trigger terrorism in the United States. Al-Quaida groups are on the run, he said, and strategies are being devised for each type of foreign threat.

Tuesday's program was part of the Edward Jones investor education series. Local investment representatives are Jim Smith, Jody Smith and Pam Richardson.

April Wilkerson may be reached at awlkrson@news-star.com or 214-3926.