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May 24, 2012
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Michael Muskal: 'Pro-choice' position hits record low, according to poll
Chris Farrell: Are We in a Tech Bubble?
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The Kosher Gourmet by Emma Christensen:A simple way to do fish right
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The Kosher Gourmet by Megan Gordon: Enjoy a celebration of the most rich and layered flavors: Black bean, sweet potato and quinoa chili
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May 18, 2012
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May 17, 2012
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May 16, 2012
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May 14, 2012
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May 11, 2012
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May 10, 2012
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Jewish World Review
December 24, 2008
/ 27 Kislev 5769
Some predict mid-2009 for return to investing joy
By
Gail Marks Jarvis
http://www.JewishWorldReview.com | (MCT)
Good riddance.
When the clock strikes midnight this New Year's Eve, many will be happy to give a goodbye kiss to one of the worst years in stock market history. The trouble is that the start of 2009 doesn't look like it will deliver much relief.
As Wall Street investment strategists issue outlooks for next year, they are describing the early 2009 economy with such terms as "horrible," "awful" and "dismal," words you rarely see from individuals who tend to be optimists.
They see consumers in trouble with debt and job losses, businesses struggling to borrow money and hold onto customers, and cities, counties and states trying to do more with less as pressures on consumers and businesses reduce local tax revenue. The strategists see an infection still permeating the financial system and the world's leaders still grasping for an effective solution.
Aware that every miserable cycle eventually ends, though, the strategists are embracing mid-2009 as a time that might bring joy back to investing. The general outlook is that the economy will remain troubled throughout the year. Goldman Sachs economists, for example, think unemployment will reach 9 percent by the end of 2009. But they think a massive infrastructure-building program by the government will improve the economy in 2010.
Because stocks tend to respond in advance of an actual upturn in the economy, the assumption is investors will start to take risks on stocks around the middle of 2009.
Goldman Sachs strategist David Kostin is estimating that the Standard & Poor's 500 index will rise 26 percent next year. Yet he and other strategists are advising investors to tread carefully.
"Our historical analysis suggests that it is better to stay defensive too long than rotate into cyclicals too early," Kostin said.
Cyclicals are stocks of companies that do best when the economy is on the upswing, such as retailers and heavy-equipment companies, with people eager to shop and businesses selling more products and buying materials and equipment. A defensive posture might entail not being tempted by low prices to jump too aggressively into stocks.
Consumer spending makes up about 70 percent of the economy, and the U.S. consumer is important to economies throughout the world. Consumers have lost enormous sums in retirement savings, and home prices are down 22 percent in major cities and likely to bottom at 33 percent, said Citigroup analyst Lewis Alexander. That will strip homeowners of $5 trillion, or 47 percent of U.S. disposable income, he said.
Meanwhile, credit card companies and banks are cutting back on lending. So the mixture of lost wealth, nervousness and tough lending standards will leave consumers saving more and spending less for an extended time, experts said. Businesses, too, will continue to cut back.
"It has become painfully clear that the ease of credit and liquidity it afforded provided the fuel for the financial, consumer and housing investing bubbles to develop over the past two decades," Merrill Lynch strategist Brian Belski said. "Consequently, supply in those areas now outstrips demand, and the necessary reduction in capacity will likely take several years to shrink."
Analysts such as Belski and Kostin emphasize investments in companies that make what people need regardless of economic conditions: consumer staples, such as toothpaste, and health care.
Experts say investors need to study companies in any sector for financial conditions that will allow them to weather a recession.
"Given the credit markets will likely remain tight for the foreseeable future, we believe those companies, industries and sectors that are able to self-fund themselves via high cash reserves and low leverage are best positioned going forward," Belski said.
Companies with financial strength and the ability to pay dividends are even better. And Kostin is advising investors to select large companies over small companies, and U.S. companies over Western European stocks.
Strategists are emphasizing care in bonds, too, suggesting high-quality general obligation municipal bonds and federally-insured certificates of deposit, which typically pay higher interest rates than Treasury bonds. High-yield bonds are paying tremendous yields, but the funds could incur large losses as bankruptcies increase.
Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.
Gail Marks Jarvis is a personal finance columnist for the Chicago Tribune and author of "Saving for Retirement without Living Like a Pauper or Winning the Lottery." Comment by clicking here.
Previously:
12/09/08: A small dose of short funds may be useful
11/11/08: Mutual funds can get caught in downward spiral
10/27/08: Investors can bounce back from even the worst of times
10/20/08: Want to sell? Look at 401(k), but don't leap
10/16/08: Want to be like Buffett? There are ways
09/29/08: Money protection only goes so far, so know the risks
08/26/08: Retail stocks may not be best fit for investors
08/20/08: Rear-view mirror investing can be dangerous to a portfolio
07/01/08: What do we do? My daughter didn't get a scholarship
02/25/08: Before abandoning your mutual fund
02/14/08: Dirty little secret of some funds may be haunting
01/29/08: Sorting out the stock market
01/03/08: One word for 2008 crystal-ball gazers: Caution
12/11/07: Buy and hold isn't necessarily tried and true
11/26/07: Translating the falling dollar's implications for investors
11/13/07: Gradual retirement may not be key to happiness
11/05/07: Rate cut won't offer immunity to investors
10/29/07: Employers set to help workers save in 401(k) accounts
10/22/07: Playing bounce may be costly to stock investors
10/10/07: Investors find boring often can be fruitful
10/01/07: Make up lost time with swift, smart action
09/24/07: Balance is key for investing by retirees
09/18/07: Homeowners who wait see options fade
09/04/07: Easy matter to rate fund's performance
08/27/07: Mortgage mess could be good for savers
08/17/07: Small stocks are coming with large caveats
© 2007, Chicago Tribune Distributed by McClatchy-Tribune Information Services
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