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Diverse 2009 outlook from local investment gurus

This time last year, there must have been a fire sale on cracked crystal balls. More than a few market prognosticators foresaw that 2008, like most presidential election years, would be a positive one on Wall Street despite the specter of a housing meltdown and plenty of banks with troubled balance sheets. Instead, we were rocked with the biggest plummet in the Dow Jones Industrial Average since the Great Depression and the worst year for the benchmark Standard & Poor's 500 index since its creation in 1957. As we head into 2009, picking up pieces of shattered crystal balls and shredded 401(k) statements, many stock market gurus around the country are predicting a rebound. But among local prognosticators, there's no consensus on what comes next. Tom O'Brien of Clearwater, who analyzes the market in books and on the radio, thinks we've hit the bottom, with the Dow reaching 10,000 within a few months and a good chance of notching the 12,000 milestone soon after. Others see a mild bounce, but not until the latter half of the year. And Rodney Johnson, president of H.S. Dent, a market research organization in Tampa, predicts a "soft" uptick in the markets will be followed by a "dramatic washout." "You'll see it rise back up some, but when the (federal) spending doesn't do what it's being asked to do, when the housing market doesn't rebound, then all of a sudden it's going to get more desperate," Johnson said. Ray Ferrara of ProVise Management Group in Clearwater, however, is bullish long term. Pent-up demand from companies to spend on their businesses is poised to eventually trigger huge growth for the economy, he predicts. "I've often referred to the supply of money as high-octane gasoline that runs our economy," Ferrara said. "We've got a lot of high-octane fuel, but we've got a transmission problem and we're not moving it from the tank to the engine. When it happens, we're going to get this huge burst of growth." Most agree that the injection of hundreds of billions of dollars from the government makes inflation more likely at some point regardless how the financial markets react. From a smattering of local money managers and stock market watchers, here's some tips on where to park your money and what to avoid.

RAY FERRARA, president and CEO, ProVise Management Group LLC in Clearwater

Market outlook

Don't look for another gut-wrenching market turbulence like in 2008. Choose wisely, but there are many sectors poised for growth in the stock market this year.

"If one is carefully looking at the opportunities out there, they can make money with equities throughout the year. The key will be for investors to remain disciplined as they move forward."

Where to put your money

Look for high-grade corporate bonds and municipal bonds to recover first. Two years or further out, stocks "that got clobbered the last six months," such as energy and commodities, are a good bet. And, of course, stocks like Procter & Gamble that sell consumer goods staples typically are a safe bet during recessions.

What to avoid

Insurance companies, the financial sector and housing.

And forget that flight to safety last year. With rising inflation, Ferrara thinks it will be better to keep your money in the stock market than U.S. government bonds yielding a mere 2 percent return.

TOM O'BRIEN, local radio show host and author

Market outlook

2008 is history; O'Brien sees a big jump early in the year. "To me, we've made a bottom. I think we're going to see (the Dow reach) 10,000 by March."

Similarly, he predicts the Standard & Poor's 500 Index (now just above 900) to cross the 1,000 threshold within a month and a half and possibly approach 1,265.

Where to put your money

The government's infrastructure spending should be a boon to telecommunications. The metal sector is promising. Inflation makes the materials sector strong, especially companies like DuPont, which has been hammered but still posts a 6.5 percent dividend and takes in $7-billion a quarter. "DuPont is not going away."

He's pushing conservative investors into the S&P 500.

What to avoid

Auto and airline stocks; financial stocks. Housing stocks aren't ready to bubble up from the bottom yet.

With a fundamental pullback in consumer spending habits, the retail shakeout hasn't ended.

RODNEY JOHNSON, president, H.S. Dent in Tampa

Market outlook

Thanks to stimulus spending, the Dow may peak between 9,600 and 10,000 during 2009, but it will come back down by the end of the year.

Johnson's boss, Harry S. Dent Jr., came out with a book (which went to press before the market meltdown in June) titled The Great Depression Ahead. Part of that was reflected in the financial turmoil of the fall, but Dent predicts a deeper recession is ahead with the markets bottoming out in mid 2012 between Dow 3,800 and 4,500.

Where to put your money

Take advantage of low prices and high yields on corporate and municipal bonds. Other good bets: silver and gold. The market uptick during the year will be led by commodities.

What to avoid

The housing market. "It's bizarre that every month people say we're at a bottom and they're still wrong."

Limited upside on technology stocks. "With wireless and the Internet, the 'big aps' have pretty much run their course; they're at 90 percent market penetration."

JEFFREY SAUT, chief investment strategist, Raymond James & Associates

Market outlook

The stock market will be "marginally higher by year-end" as we experience an L-shaped economic recovery.

"The markets can obviously do anything, but historically, given the percentage decline," Saut said, "it doesn't get a whole lot worse than this. The time to be aggressively bearish was this time last year, not now."

A year ago, predicting a market drop, he held 40 percent cash and hedged everything on the down side. Heading into '09, he's only 20 percent cash and buying dividend-paying convertible preferred stock and some distressed debt.

Where to put your money

Closed-end municipal bond funds that are insured. "Everyone should have some kind of position in gold."

What to avoid

Buying Treasury bonds that have negative returns when inflation is factored in. Autos and airlines.

TIMOTHY McINTOSH, chief investment officer and founder, Strategic Investment Partners in Tampa

Market outlook

Expect more downside in the stock market in early 2009. As liquidity improves, the best-case scenario is a 5 to 10 percent gain this year.

"Structurally, we have so much to overcome," McIntosh said. "The main goal is just to get through the next couple of months without falling off a cliff even further."

Where to put your money

"Health care is our No. 1 sector. We see a lot of value in pharmaceuticals and medical-supply companies." Large banks with pristine balance sheets. Devalued stocks that are industry leaders and likely survivors, such as Apple and Wal-Mart.

What to avoid

Treasury bonds. Airlines. Materials and industrial stocks, given McIntosh's forecast of anemic economic growth this year of 1 to 1.5 percent.

Diverse 2009 outlook from local investment gurus 01/03/09 [Last modified: Monday, January 5, 2009 10:02am]
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