Obama advice: Buy stocks, think long-term

WASHINGTON - President Obama, seeking to boost public confidence in his economic recovery plan and U.S. markets, suggested yesterday that now was a good time for investors with "a long-term perspective" to buy stocks, and he vowed that the nation's financial mess "is going to get cleaned up."

Speaking to reporters after an Oval Office meeting with visiting British Prime Minister Gordon Brown, Obama said he had no doubt that his plan to rescue the U.S. economy would work.

Among the topics he discussed with Brown, he said, were efforts to coordinate economic stimulus plans with other members of the Group of 20, an organization of major world economies that is holding a summit meeting in London next month.

Obama and Brown said stabilizing the international banking system was crucial to reviving economies around the world.

"We've got to isolate bad assets," Brown told reporters. "A bad bank anywhere can affect a good bank anywhere."

Responding to questions, Obama said: "I'm absolutely confident that credit's going to be flowing again, that businesses are going to start seeing opportunities for investment, they're going to start hiring again, people are going to be put back to work.

"What I'm looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing," he said, likening the market to political tracking polls.

The U.S. banking system "has been dealt a heavy blow," and a lot of losses "are working their way through the system," Obama said, adding that "it's not surprising that the market is hurting as a consequence."

He continued, "On the other hand, what you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."

Obama predicted that government actions "are going to slowly build confidence, but it's not going to happen overnight."

The S&P 500, a benchmark measure of U.S. stocks, has dropped 23 percent this year after a 38 percent decline in 2008, the steepest annual retreat since 1937.

Pressed later at a White House news briefing on whether Obama had essentially issued a "buy call" to help boost the stock market, spokesman Robert Gibbs dismissed the notion.

Obama has often "talked about the fact that brighter days for our economy are ahead, if we take important steps and make important decisions now, about addressing many of the problems and challenges that we face," Gibbs said.

"Whether you agree with how he's going about it or not, he's trying to help confidence," Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia, told Bloomberg News. "Certainly a piece of the confidence is to get the market stabilized."

On Capitol Hill, Federal Reserve Chairman Ben S. Bernanke said the government needed to continue moving aggressively to combat the recession and financial crisis, even as it takes steps to rein in the budget deficit in the longer term.

Testifying before the Senate Budget Committee, Bernanke said more money might be needed to stabilize the financial system.

"Whether further funds will be needed depends on the results of the current supervisory assessment of banks, the evolution of the economy, and other factors," Bernanke said. "The administration has included a placeholder in its budget for more funding for financial stabilization, should it be necessary."

With that and fiscal stimulus spending, the government debt will likely approach 60 percent of gross domestic product, up from 40 percent before the financial crisis and the highest since the years after World War II.

Bernanke said that debt ratio made it all the more important to contain deficits in the future to maintain credibility among the investors worldwide who buy U.S. government debt.

But he gave a strong endorsement to continued - and expensive - efforts to deal with the crisis.

"We are better off moving aggressively today to solve our economic problems," Bernanke said. "The alternative could be a prolonged episode of economic stagnation that would not only contribute to further deterioration in the fiscal situation, but would also imply lower output, employment, and incomes for an extended period."

Bernanke, as is his practice, neither endorsed nor opposed many specific spending recommendations contained in the proposed budget released by the Obama administration last week.

In congressional testimony, Treasury Secretary Timothy Geithner predicted that aggressive steps taken by the government would help lift the economy out of the ditch.

But he ran into Republican skepticism, including a suggestion that Obama's team was "cooking the books" in rosy recovery predictions.