Ailing economy opens doors for stock market novices, car buyers

The daily deluge of glum news is a constant reminder of how things are looking worse than bad, but the sluggish economy also offers savings opportunities for saavy consumers.

And it goes beyond gas prices dropping below $2 a gallon for the first time in two years.

Interest rates, home prices, vehicles and stocks in some of the top American companies have all dropped because of recent economic realities.

"Now is an awful good time to buy a car," said Kirk Clark, owner of Clark Automotive dealerships. "It's probably as deep a discount as I've seen since I've been in the business."

While debate in Washington continues on a $25 billion bailout package to rescue Detroit's Big Three, the automakers are lining up with deals to offload their excess inventory.

As part of General Motor's Red Tag sale, the ailing auto manufacturer is offering up to $8,500 off select 2008 and 2009 models, among other discounts. Jeep is giving $6,000 cash back and just about every automaker is offering some form of zero percent financing on 2008 and 2009 models.

For the first time, GM dealers are allowing customers to use the cash back as a down payment, said Bob Vackar, owner of Bert Ogden dealerships.

"A lot of these lenders are now wanting 10 to 20 percent down," Ogden said. "It's helping people get financed."

Ford is offering its employee discount to everyone plus up to $6,000 cash back.

Financing is perhaps the biggest problem for consumers now. Banks are reluctant to lend to each other and even more reluctant to lend to consumers.

But for those who can get loans, interest rates have been cut dramatically amidst the economic turmoil, making everything from mortgages to credit cards to student loans a bit cheaper. The Federal Reserve slashed the rate to 1 percent earlier this year to encourage spending and borrowing.

Rates on a 30-year fixed-rate mortgage dropped to near 5.5 percent. On Tuesday, the Fed announced a plan to buy $600 billion in mortgage-related securities in an move to stabilize falling home prices and rising foreclosures.

Experts are unsure if the cheaper rates will boost spending, but there are reports of more people trying to refinance their existing loans.

Low rates plus low home prices mean it's a buyer's market for those who can get a loan.

After reaching a record high in August, the average price of a new, single-family home in Hidalgo County tumbled, falling $4,000 to $151,900 in September, according to the Real Estate Center at Texas A&M University.

"There are some good deals out there," said Connie Fielder-Norton, a McAllen-based real estate agent.

The deals will likely get better as homeowners, who need to sell, realize that prices have adjusted since the last time they were appraised, she said.

"A lot of sellers are not desperate and they haven't heard the music that values have gone down," she said.

Across the board, the economic downturn is sending many sound investments to the bargain bin. For people with ample credit, decades before retirement and an income that can tolerate risk, now is the time to buy.

"Don't look for a bottom, you're never going to catch the bottom," said Victor Valverde, a financial planner. "I'm not saying it's up from here, but you gotta remember the stock market is ... always looking six to nine months ahead of today. If it smells the recovery it will start to trade up right away."

Valverde said he is frustrated by spooked clients who hurriedly trade stocks for cash, retreating to the mattresses with whatever might be left of their sullied investments. It is a bad move, he said, because the market will pass them by.

When the economic engine seized this fall, stock prices stumbled dramatically. Over the past 13 months, the Dow Jones Industrial average fell more than 5,407 points from 13,850 to 8,443, rising with the occasional good news but always seeming to retreat to new lows with each temporary rise.

"This is unique in that the credit crisis is a real phenomenon," said Arthur Hughes, a Harlingen-based investor. "We're not going to turn until the credit markets loosen up, but that will ultimately happen."

The uncertainty is pervasive but that hasn't stopped many, including billionaire investor Warren Buffet from funneling money back into the ailing market.

"If the wealthiest investor in the world (Buffet) is ...saying ‘I'm buying American companies,' you should too," Hughes said. "You sure as heck don't want to miss recoveries. I don't see it yet, but we know it's going to happen."

-

Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434