Stocks May Steady in '09, but Troubles Won't Vanish

In addition to the credit crisis, 2008 could also become notorious for the number of retailers filing for bankruptcy. Among the biggest were Circuit City, Sharper Image, Linens 'N Things, Steve & Barry's, Mervyns, KB Toys and Tweeter.

Windham Financial's Mendelsohn says that a "devastating" Christmas shopping season will impact more retailers and will likely put smaller shops out of business. However, a quick recovery in the credit markets might ease some retailers' pain.

"It all depends on the credit markets and how well they free up in terms of debtor-in-possession financing," he said. "In better times, a lot of these stores would've been able to reorganize and survive. That's not going to be the case here."

Mendelsohn adds that under normal circumstances, an investor could buy distressed assets and the retailer could reorganize, making some money on the investment. "In 2009, if the banks aren't going to put up the debtor-in-possession financing, then these companies are going to close up and the bonds will end up at zero," he says. "It's a dangerous area to be playing, unless the banks start to put the money out there."

The year also saw the largest bankruptcy in history -- Lehman Brothers. In an effort to put off bankruptcy, a host of companies have eliminated jobs, pushing the unemployment rate to a 15-year high of 6.7%. Now, there's little wiggle room left as the calendar turns over to 2009.

"These companies have been hit relatively hard already, so to the extent that Chapter 11 bankruptcies will continue into 2009 depends on how long and how deep the job cuts will be," Pavlik said. "Depending on how a possible stimulus package is positioned, that may help save some businesses, although I'm not sure how long-lasting that impact will be."

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