Consuming Passion Can Pay Off

The surprising strength of the consumer economy brings surprising rewards, but also a few risks.

Here are some tips from personal-finance experts:

Refinance your home. Shaving dollars off your monthly mortgage has rarely been easier, or more popular.

In one recent week, 55 percent of mortgage applications were for refinancing, says Douglas Duncan of the Mortgage Bankers Association in Washington. If the pace holds, $425 billion worth of refinancing this year will surpass all years except 1993.

Mostly, people are switching from adjustable-rate to a fixed-rate mortgages. But a "refi" might help lots of other people, too.

Mr. Duncan's rule of thumb: Divide the costs of refinancing by the monthly amount you will save in your mortgage payment. If refinancing costs $1,500 (closing costs and points on the new mortgage) but saves $60 a month, you'll need 25 months to pay for your refinancing costs. If you stay in your home longer than that, you come out ahead.

But you might come out ahead right from Day 1 - if the lender lets you roll the refi costs (including points) into your loan. Your interest rate falls immediately, and you pay nothing in up-front costs.

Switch credit cards. Credit-card issuers want your business. And while their interest rates haven't fallen as sharply as those for mortgages, you can shed high-rate cards for those charging less, says William Plasencia, managing editor of Bank Rate Monitor in North Palm Beach, Fla.

Two Web sites can help: Bank Rate Monitor (www.bankrate.com) and Ram Research (www.ramresearch.com).

Shop. For some companies, production has outstripped demand, which means lower prices. Look for bargains in products such as paper, autos, toys, plastics, textiles, electronics.

Invest. Though stocks are at record highs, some consumer-related sectors are just starting to pick up steam. Retailers (see story, left) rank among them, but there are others.

This is a good time for a fresh glance at overlooked companies, says Forrest Mervine Jr., managing director of Investment Counsellors of Bryn Mawr in Conshohocken, Pa.

Among his favorites: Cott Corp., a Canadian beverage bottler, and Kansas City Life Insurance Co. He sees a possible takeover for Cott (ticker symbol COTTF) and steady profits for Kansas City Life (KCLI; both stocks are Nasdaq-listed).

Watch out below. Despite a strong market, Mervine remains wary. He has boosted his cash position from 5 to 15 percent of assets, ready to hunt for bargains.

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