Brokers urge cautious investing

Economic forecasts based on war forecasts may not be as accurate as some believe

The outbreak of war in Iraq is revising everyone's economic forecast, while local brokers aren't putting too much stock in last week's market rally.

"Our concern is this is not trading on economic fundamentals but a belief that war will be over by Monday," said Dean Brosious, investment representative at the Craig's Edward Jones branch. "We can't really see the economic justification."

Brosious' wariness Friday was at the end of eight straight days of gains on Wall Street as the Dow Jones industrials ended the week up 235 points -- its strongest weekly increase in more than two decades.

His overall guidance for Craig's mainly conservative investor base isn't affected by war: stay diversified, buy into quality companies looking five years out, or more.

"Markets like peace and that's why we see this run we have today," he said of Friday's activity, driven by hopes of quick war, many believed.

That optimism seemed gone in early trading Monday.

Overall, Brosious pointed to history for prolonged conflicts' impact on the national economy.

"It has always responded positively to support an extended war effort," he said. "We don't really have anything else to go on at this point."

But extended war also could mean higher oil costs, affecting both manufactures and transportation, said Ken Recker, with Craig's First National Bank of the Rockies.

In such a scenario, Recker believes people would also move money into safer investments, while long-term fixed mortgage rates would likely increase.

"People would be inclined to put money into bonds, not real estate, given the instability of this market," Recker said.

Paul Shockley can be reached at 824-7031 or at pshockley@craigdailypress.com.

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