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Money Management Executive

Gloomy Forecast Focuses on Preserving Cash

Published June 28, 2004, 1:00 a.m. EDT
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Updated June 28, 2004, 1:00 a.m. EDT
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Save that cash and save it now because even a "black hole" would be an "optimistic" view of the 2005 markets, a Morningstar analyst said.

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Reporting on his company’s 16 th Annual Morningstar Investment Conference, analyst Todd Trubey said that every prediction of the stock and bond markets was a negative one. He said that Jeremy Grantham of Van Otterloo & Co. called the 2003 market bounce back "brutal" because it falsely told investors that a still-ongoing bear market was over.

Bob Rodriguez of First Pacific Advisors predicted a "black hole" for 2005, but dubbed his view an "optimistic" one. He also stressed the importance of preserving cash.

Smith Barney’s Joe Deane, who was probably, by default, the conference’s lead glass-half-full guy, said that an economic rally encompassing the United States, Europe and Japan and possibly China and India could happen, but said there was no better than a 50% chance of that occurring. He also said the rising interest rates, as long as they didn’t stymie job growth or inflation, would not harm equity markets.

The experts’ favorite investments: Rodriguez – cash, Deane – a 30-year bond, and Grantham – timber. "Why timber?," Trubey the analyst asked: "If the sun shines and the rain rains, those suckers grow," quipped Grantham


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