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What’s in store for the markets?

ADVISERS SHARE THOUGHTS ON VOLATILE TIMES AND THE SIGNALS TO WATCH

The credit crisis and recent market volatility have left many investors wondering what lies ahead. The Business Journal asked several local advisers what they expect from the stock and bond markets for the rest of 2008.

Charles Biderman

TrimTabs Investment Research

520 Mendocino Ave. #350, Santa Rosa 95401

Phone: 707-525-1001

Web site: trimttabs.com

“The problem with the U.S. economy and stock market is the result of the correction in the single-family housing market. Prices got way too high when homes could be purchased for no money down at below-market interest rates.

“When the thousands of foreclosed homes get absorbed back into the housing market, that will mark the bottom of the economic downturn – assuming of course no more major bad news happens.”

Denise Gilseth

Stifel, Nicolaus & Company Inc.

703 Second St. 4th Floor, Santa Rosa 95404

Phone: 707-542-3521

Web site: stifel.com

“I expect a volatile stock and bond market bound within a trading range for the rest of the year. If we see rising unemployment, if the dollar continues to weaken and if political rhetoric along the lines of increasing taxes becomes evident, I would expect more downside.

“I think it is too early to call an end to the credit crisis, but if we see some positive signs about the economy, earnings and the dollar, I would expect the market to cheer it on.”

Gerard Gloisten

GBS Financial Corp.

558 B St. #200, Santa

Rosa 95401

Phone: 707-568-2400

Web site: gbsfinancial.com

“The U.S. markets will spend a great deal of time discovering, unwinding, deleveraging and finally writing off the toxic mix of mortgage securities scattered amongst the investment marketplace.

“This is one of the primary culprits, along with inflation, causing the markets uncertainty and the malaise (bearish markets) we are experiencing the last few quarters. The good news unfolding involves the energy markets, the weak dollar and a market that is now

on sale. Energy exploration and alternative sources will be strong for years to come.

“U.S. assets, both tangible and intangible (stock market), are selling at discounts when you take into consideration the Federal Reserve accommodation of lower rates to stimulate the economy. The U.S. economy will adapt and thrive again.”

Scott Holder

Edward Jones

170 Farmers Lane #4, Santa Rosa 95405

Phone: 707-576-1099

Web site: edwardjones.com

“I invest in principles not predictions, so I really avoid making short-term predictions regarding the market and the economy.

“I remind my clients that recessions tend to be short. Since 1945, the average recession has lasted 10 months. Recessions begin and end without warning. By the time you realize you’re in one, they’re usually about over. Investing for the long term means not jumping in and out of the market.

“From Dec. 31, 1997 to Dec. 31, 2007, if you were to stay invested in the S&P 500 that entire time you would have averaged 5.8 percent per year. Had you missed just 10 of the best days, your return would have dropped to 1 percent, and that’s not including taxes and fees.”

Kent Kuhlmann

Retirement Capital Strategies

3280 Villa Lane, Napa 94558

Phone: 707-253-1195

Web site: rcsadvisor.com

“I think we are in a bottoming process right now.

“The S&P is trading at about 12 times forward earnings which is the lowest it has been in years. The Fed is using some very innovative tools other than just lowering rates to stimulate the economy and provide liquidity so monetary policy is very bullish.

“Investor sentiment is at all-time lows, which is also a very bullish signal for the market. The only part that is still out of sync is momentum, and when that changes, I think we will see good things happen.

“I don’t expect much in the short term, but late third quarter to fourth quarter, it is my belief that we will see the markets move into positive territory.”

David McClurg

McClurg Capital Corp.

950 Northgate Drive #301, San Rafael 94903

Phone: 415-472-1445

Web site: mcclurgcapital.com

“Recent volatility and declines in equity prices have caused concern, fear and panic among investors. The common reaction is to make ad hoc revisions in strategy, but remember Warren Buffett’s advice: ‘The market is there to serve you not to guide you.’

“The summer housing market will stabilize, and stability of prices will return confidence to the troubled collateralized debt market. Once that happens, there is plenty of liquidity in the financial system to unlock the credit markets.

“Over the next few months, investors should gradually add to a portfolio of well-chosen common stocks. We would anticipate a complete recovery and new highs in the market within 18 months.”

Fred Ptucha

Progressive Asset Management, Financial West Group

575 W. College Ave. #105, Santa Rosa 95401

Phone: 707-575-9680

Web site: progressive-asset.com

“I think stocks will go lower over the next quarter, but I’d expect a little rebound in the second half of the year, so the stock market will probably end the year flat.

“I’m bearish on bonds. I think at the long end, interest yields will be higher to offset inflation expectations. The market tends to discount the future by about nine months, so if you anticipate more inflation going on into 2009, you’re going to sell long bonds and stay short to minimize interest-rate risk.†

“I’m bearish on the dollar. I’m recommending all my clients to have a portion of their funds invested internationally. I’m quite bullish on the future of energy, especially natural gas and oil, so I am buying Canadian oil and gas royalty trusts with yields of 10 to 15 percent.”

Charles Root

Double Eagle Financial

2300 Bethards Drive Ste. R, Santa Rosa 95405

Phone: 707-576-1313

“Our clients are in about 35 to 40 percent cash at this point. One of the most important indicators to watch is the NYSE Bullish Percent indicator, which measures the overall number of buy signals versus sell signals in the market.

“We started going to cash in late October of last year, when indicators showed the market going into ‘defense.’ Right now what I’m waiting for is signals of strength in the market based on the number of overall buy signals versus sell signals, which will lead to being on ‘offense.’ Then we’ll head back to cautiously putting some funds back into the market.”

Richard Stone

Salient Wealth Management

750 Lindaro St. #130, San Rafael 94901

Phone: 415-526-2900

Web site: salientfinancial.com

“We have no crystal ball and do not time the markets, but our bet is that the U.S. housing market will continue to be weak, and it will take more time to work out of the global liquidity crunch.

“We do not see stagflation on the horizon. As a result, stock performance, reflecting slow growth or recession, should be mediocre. There may be better opportunities overseas than in the U.S.”