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
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
, 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
-- 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.
The widespread pessimism of media headlines reminds Stack of other bear-market bottoms -- notably the
cover that famously predicted "The Death of Equities" in 1979. The issue came out just before the start of the last great bull market.
Inflation vs. deflation debate
: Almost every speaker pointed out deflation, with asset values falling faster than the
and Treasury can create new liquidity. But some were willing to look beyond the deflationary valley to possible inflation down the road.
There were bulls on gold stocks, agricultural commodities and even energy, although potential gains may be down the road. Jim Jubak, author of "Jubak's Picks," said fertilizer and agriculture stocks are already starting to rise because demand for food will grow worldwide.
Several speakers said investors should buy intermediate-term, high-quality corporate bonds to capture yields that are outstripping those of Treasuries, which are paying almost nothing. Jack Ablin of Chicago's Harris Bank, went as far as to recommend an exchange-traded fund that buys high-yield, or junk, bonds.
Ablin's willing to take on the risks of companies going bankrupt and faster inflation. But Forbes columnist Richard Lehmann warned that a slew of junk-bond failures may be just around the corner.
Government spoils markets
: Joe Battipaglia, a market strategist for Stifel Nicolaus and a well-known
pundit, roused the audience when he advocated avoiding stocks associated with the government's Troubled Assets Relief Program, which injects funds into distressed finance companies.
He warned that the government could start making rules about compensation and spending for the industries it controls, which could drive the best talent to other businesses and hurt their profit potential. He said companies would "rue the day they took government money." Of course, banks didn't have a choice; they were required to participate.
This was a meeting of the "investor class," people who are worried about losses in their stock portfolios and 401(k) plans but still believe the market will provide long-term growth. Their relative optimism comes from experience and contrasts with the views of investors who plan to avoid stocks after watching their hard-earned money go down the drain in retirement plans.
The one thing these investors agreed on is the need to keep corporate America competitive, and growing -- not only to provide jobs, but to return investment dollars to their rightful owners. And that's The Savage Truth!
Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column in the Chicago Sun-Times is nationally syndicated. She was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. Savage currently serves as a director of the Chicago Mercantile Exchange Corp.