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Two Ways To Play: Needs Vs. Wants


Strengthen your portfolio in good times and bad.

According to Bloomberg, billionaire investor George Soros said the worst of the credit crisis may be over but warns that the U.S. may only be in the early stages of its effects.

Soros said that there is always a lag between the financial system and the real economy and America is in the early innings of the game. Similar to how home prices "overshot on the upside," they are likely to overshoot on the way down. Further, Soros categorized the rally in U.S. stocks as a "bear market rally."

His comments come after banks and securities firms around the world have reported approximately $320 billion in writedowns following the collapse of the U.S. subprime mortgage industry. Further, a report today showed sales of existing homes fell for the fourth time in five months, suggesting no end in sight to the worst housing slump since the Great Depression.

See Mr. Practical's related column Fed Chooses Wall Street Over Main Street.

From the Bull Pen: Bulls look to stocks trading near 52-wk highs in these environments. With these stocks in mind, what happens when the tape does turn? "Needs vs. Wants" is the theme and they are considering, amongst others, plays like Wal-Mart (WMT), CVS (CVS), and Costco (COST).

From the Bear Cave: Continuing with the "Needs vs. Wants" theme, bears looking for downside plays might find them in Coach (COH), and Tiffany (TIF). Bears expect demand at these stores to falter should economic woes deepen.

See you tomorrow!
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No positions in stocks mentioned.

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