Savage: At Investor Forum, Optimism Bubbles Up

A large, but subdued, crowd of investors gathered last week in Orlando, Fla., for the annual World Money Show. When asked for their outlook, a third of the audience predicted the Dow would linger around 8,000 points for a decade, similar to the 1970s, when the index stayed at 800 for almost 12 years.

Pessimism abounded, but each investment guru could find at least one sector worthy of investment. However, there were many conflicting viewpoints and suggestions.

The most optimistic view came from one of my favorite stock analysts, Jim Stack of InvesTech Research, who said we're likely nearing the end of the recession. That, of course, doesn't guarantee a strong rebound.

Stack made his point with simple charts. The first, a steep mountain peak, showed the rise and fall of the dot-com industry. Then he added a graph of home prices from the past decade. The two lines closely tracked each other, including the sharp, jagged rise and equally fast decline of prices.

If the two bubbles are such a good match, then we're near -- although not quite at -- the end of the housing collapse. One caveat, Stack said, is that the number of homes on the market has diminished only slightly, leaving room for more distress sales and lower prices.

As for the stock market, Stack has increased his weighting to 75% from 45%. While that doesn't make him a raging bull, he said stocks seemed to be holding their November lows, small caps are stabilizing and earnings are down, but still within the long-term trend.