By The San Diego Union-Tribune
JIM WELSH
Founder, Welsh Money Management, Carlsbad
Welsh has been working in investment firms for 30 years, including 19 as head of Welsh Money Management. He has $10 million under management and writes a monthly newsletter, The Financial Commentator. In the past year, he has had a 16 percent return on assets.
On the economy: “I think the economy will continue to have problems, with slower growth continuing well into next year. The housing crisis will deepen, and the problem will spread to credit cards and auto loans. The problems with credit are bigger than most people comprehend. We have wiped out up to $6 trillion in asset values in the stock market and the housing market. Our credit-creation system has broken down and will take a long time to fix.”
On the markets: “The stock market is extremely oversold right now. We're due some kind of a bounce. But if it comes, it will only be temporary, providing people a good time to sell. Another 10-15 percent drop on Wall Street is imminently doable. There's a chance we could go to 800 points on the Standard & Poor's 500 and 8,000 on the Dow. We're in a major bear market that has a lot further to go.”
Where to invest: “I would put money into cash, money markets, Treasury bills. Commodities may have seen their peak. I think there's a chance that gold will fall below $840 per ounce (compared with $927.60 yesterday). The equity markets might hit a bottom then.” Welsh said that once gold, oil and other commodities bottom out, it could be a good time to sell equities and buy commodities.
MICHAEL PENTO
Senior market analyst, Delta Global Advisors, Huntington Beach
Delta Global Advisors provides management or advisory services for $1.5 billion in assets. Pento has worked at investment firms for more than 16 years, including on the floor of the New York Stock Exchange. He provides market commentary in a variety of media outlets.
On the economy: “We are in a lot of trouble. In the housing market, we are exiting one of biggest bubbles in U.S. history, if not the biggest. It could still take a couple of years before we hit bottom. In the meantime, banks have a lot of nonperforming assets (loans that are not being repaid), which puts a lot of pressure on them to raise capital. I think the Federal Reserve should raise interest rates to drain excess money out of the economy. But knowing Fed Chairman Ben Bernanke, I don't think that's going to happen. I don't see the Fed being able to raise rates considering that Fannie Mae and Freddie Mac are looking down the barrel of a gun.”
On the markets: “I don't think oil or other commodities are in a bubble. If Iran suddenly extends a peace branch to Israel, maybe oil prices will go down. But right now, you've got some geopolitical risk as well as the problem that the supply of oil is struggling to keep up with demand.”
Where to invest: “We believe in investing in commodities and diversification out of U.S. dollar-denominated assets. The Swiss franc and Australian dollar are my favorites, with the Canadian dollar a secondary choice. The central banks in those countries are still able to respond to rising inflation by raising interest rates, unlike the Federal Reserve. I don't believe anybody should be concentrated in the U.S. dollar. And with the introduction of foreign exchange funds, there's never been an easier time to invest in foreign currencies.”
BRENT WILSEY
President, Wilsey Asset Management, Poway
Brent Wilsey has been in the investment business for 27 years, including 17 years running his firm. He has more than 230 clients with more than $100 million under management. He hosts 760 KFMB AM's weekly “Smart Investing” show and is a frequent guest on other radio and TV business programs.
On the economy: “Nationwide, I think we're pretty close to a bottom. In the next three months or so, we should see some positive signs. We've cleaned up a lot of stuff. There are even some good numbers from the home market. Although some areas keep going down, other areas – especially in the middle of the country – seem to have stabilized.”
On the markets: “Commodities like oil, gold and silver have had a very nice run, but if you buy in now, you're buying at the top of the market. Some equities, like retailers, have been beaten up quite a bit. I could be wrong, but I think six to 12 months from now, things could be pretty good.”
Where to invest: “If you're investing in equities right now, you want to look for companies that have clean balance sheets and strong cash flow.” His favorite stock picks include Regis hair salons, Life Time Fitness exercise and spa centers and a bevy of health and biotech firms, including Cynosure, Usana Health Sciences, Chemed, Coventry, Humana, United Health and WellCare.
BRIAN BETHUNE
Director of financial economics, Global Insight, Boston
Bethune has more than 20 years' experience as an economist in industry and banking, including such organizations as the Bank of Montreal, the World Trade Organization and Caterpillar. Global Insight is an international financial research firm with more than 3,800 clients worldwide.
On the economy: “Fairly large pieces of the economic machinery are not pulling their weight. The only thing that's driving the bus right now is a rise in exports, which have been helped by the shrinking value of the dollar. Without that, we'd be absolutely in a severe recession. We've obviously got some heavy sledding ahead of us, with some significant head winds.”
On the markets: “Both equities and commodities are so volatile that the average Joe probably won't have the stomach for it. If you'd been in commodities recently, you would have done pretty well. But from now into the near future, things are going to be very volatile.”
Where to invest: “Going down to your local credit union or federally insured bank and putting your money in a 12-month or 18-month certificate of deposit is probably one of the safest investments you can make right now. CDs can give you some pickup (with higher interest payments) than a Treasury bill. And they will probably do better than a straight 2 percent money market fund. Bonds will do a little better than a CD, but it depends on what bond you own.”
HERB GREENBERG
Co-founder of Greenberg Meritz Research & Analytics, Carmel Valley
Greenberg is a former columnist for MarketWatch.com and frequent guest commentator on CNBC. He formerly covered business for such newspapers as the San Francisco Chronicle and Chicago Tribune. He founded his firm in May with fellow analyst Debbie Meritz.
On the economy: “We're in a very strange environment. We have the unwinding of the financial excess of the early part of this decade, which is bad enough by itself. But then we have the rising price of oil overlaid on top of it. We're seeing the deflating of a bubble built on false expectations and false fundamentals.”
On the markets: “There are some people who are saying the worst is over and things are going to get better. I agree that things will get better, but tell me when. It could be months, quarters or even years. Stock markets sometimes just bounce around for years without going anywhere.”
Where to invest: “It's easier to say what to stay away from rather than what to invest in. I'd stay away from investing in home builders, retailers or most companies that make consumer products: anything that's tied to people buying things with money that they shouldn't have. But if you are looking for an opportunity, make sure you determine whether the company is stretching its financial statements to make its numbers look better than they really are. Every time I hear a company say, 'We're doing well even though the rest of the economy isn't,' that raises questions in my mind. Sometimes there are legitimate reasons for the company to be doing well, but a lot of times there aren't.”
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