By Anthony Silva, WBZ NewsRadio 1030 New England Business Editor

BOSTON (CBS) – WBZ NewsRadio 1030 Business Editor Anthony Silva wraps up the trading week with Dave Caruso of Coastal Capital Group.

Silva: “We have our seatbelts on, Dave, this has been a real crisis week.”

Caruso: “It’s been mostly by the Fed. They made the mistake of being honest and telegraphing what they really want to do, which is tapering these big bond buys and by the end of the year they’re going to see what happens, and by 2014 they could end up doing it.”

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Silva: “That is certainly a short-term negative on the markets. You don’t want to fight the Fed.”

Caruso: “It’s the ultimate in transparency, so the markets just can’t handle that truth. At some point in time the Fed is going to raise interest rates to a more normal level. The good news is that they are actually going to do that because the economy is getting better. And if there is one thing I know for certain, it’s nice to have the Fed on your side. But if you don’t have the economy actually growing and people having jobs, it’s never going to work. So, they got the truth this week, and they didn’t like it.”

Silva: “Let’s drop back a little bit. What the Fed has been doing the last few months is buying billions of dollars of bonds, artificially suppressing interest rates, right?”

Caruso: “Absolutely. They’re buying these mortgage securities because they want to keep interest rates low. Now we’re starting to see interest rates go up. In fact in a couple of weeks we had almost $18 billion in bond funds, people left because of what interest rates are doing. So I think the Fed is really trying to say, ‘we’re seeing better times, so we’re going to start raising interest rates,’ but the market didn’t like it.”

Silva: “The question is what should individiual investors do now, seeing these numbers going down on Wall Street and the possibility of interest rates going up.”

Caruso: “Well my rule No. 1 is don’t panic. I still think the best is to hold on to these stocks and real estate because they’re probably the most undervalued of the investments you can look at today. They got decent income and dividends. I certainly don’t think bonds are a great place to be in, in a rising interest rate environment and we’ve had a 30-year bull market in bonds, so at some point in time we have to retreat just a little bit. Commodities are tough right now. So I think you should retreat just a little bit. And when in doubt, get some help if you need somebody with allocation, but find an allocation you feel comfortable with.”

Silva: “Since the first of the year, the Dow has gained how much?”

Caruso: “Between 11 and a-half and 12 and a-half percent on the S&P and the Dow. So we’re still doing really good and we’re only off about 4 percent or so from those all time highs, but we’re still worried after what’s happened after the last four or five years.”


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