Santa Special: A Fatter Net Worth

Perhaps, judging from the way our trio of pros see it, John Wayne had the right idea when he said "courage is being scared to death...and saddling up anyway."
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Here's a novel idea. Why limit those holiday stocking stuffers to friends and relatives? Why not get a gift for yourself, as well?

What should you buy? In this case, how about a Christmas stuffer that could wind up stuffing your bank account with more cash?

That's essentially the thinking of a trio of investment pros, who recommend putting some bucks to work in the revitalized, roller-coaster stock market

Hey, wait a minute. After this past week's mediocre market showing -- which saw the Dow tumble 251.50 points -- such an idea hardly seems very appealing, if not downright scary. Moreover, such a suggestion would have drawn a thunderous chorus of boos earlier this year when fear gripped Wall Street.

It's no wonder. Following last May's "flash crash," a sudden and frightening drop in the Dow of about 600 points in a matter of minutes, coupled later on with spiraling fears of a double-dip recession and mounting worries of spreading European debt crises, many Wall Streeters understandably ran for cover, convinced that Santa would likely be a no-show this Christmas.

That view, though, now may well be off base as a growing number of market watchers have shifted gears, believing St. Nick is on the way with a bag of goodies that contains another one of those traditional year-end spirited Santa Claus rallies.

Granted, there's still a lot out there to spook investors, such as a resumption of European debt woes, a housing market that looks like it's rolling over again, the near certainty of a painfully slow jobs recovery, a recent spurt of disappointing reports from such names as Disney and Cisco Systems, and a gridlocked Congress that figures to continue to provide little or no meaningful legislation over the next couple of years.

Still, some market watchers, fired up by improving economic fundamentals -- which have driven up the Dow from 10,000 in late August to around 11,400 (now 11,192) -- are looking for say another 5 percent to 7 percent gain in stock prices over the next few months.

San Francisco money manager Gary Wollin sums it up: "Santa Claus is coming to town. Or more aptly put, he's coming to Wall Street."

While some pros argue that the market is overbought, rising too far too soon, and vulnerable to a sell-off, Wollin, who manages a tad above $100 million of assets under the banner Gary Wollin & Co., disagrees. He thinks there's more upside over the near term, namely a further rise in the Dow to 12,000 by year end.

Wollin, who has deftly caught a number of up and down market moves in recent years and astutely turned bullish in March of 2009 with the Dow at around 6,500, points to a somewhat perkier economy and huge liquidity on the sidelines, especially in low-yielding fixed-income investments, as the major spark plugs for his 12,000 projection.

Another, he says, will be the likely re-entry into the market of the individual investor, who, he notes, is feeling a lot wealthier now than at the end of 2008, a year in which the Dow fell about 34 percent and closed at 8,776. Indicative of this re-entry is the fact that individual investors have plowed money into stock mutual funds in three of the past four weeks. Retail sales gains in both August and September, it's pointed out, also reflect this wealthier view.

Though a bull, Wollin worries that inflation could take hold sooner than expected because of excessive money printing. Likewise, he thinks retail sales could turn sluggish after Christmas because of continuing high unemployment.

A blue chip stock player, he rates a winning equities portfolio over the next 12 months as one that contains such names as AT&T, Exxon Mobil, Microsoft, UPS and Federal Express.

Bob Doll, the chief investment strategist at BlackRock, a global investment manager with more than $1 trillion of assets, echoes Wollin's market exuberance. Pointing to improving economic signs, the $600 billion economic-boosting QE2 (quantitative easing) package, the GOP's conquest of the House, strong earnings growth and attractive stock valuations, Doll says it all adds up to higher stock prices.

Chuck Carlson, an editor of the Dow Theory Forecasts, one of the nation's leading investment newsletters. takes note of another bullish signal -- a rise in two Dow averages (the Dow Transports and the Dow Industrials) to two-year highs, which means, he says, the primary market trend should be regarded as bullish under the Dow Theory.

Taking note, too, of the tremendous cash on the sidelines, a gradually, but slowly growing economy and stepped-up corporate stock buybacks, Carlson says he's reasonably optimistic that the trend is up for the balance of the year. Like Wollin, he also thinks a 12,000 Dow before Jan. 1, 2011, is a reasonable expectation.

His top stock picks for the next 12 months, all rated as market outperformers, are Aflac, Newmont Mining, Apple, IBM recommend and CSX.

Whether our three bulls are on target or full of bull remains to be seen. But a couple of studies, based on historic patterns, strongly support the advent of another Santa Claus rally.

One study shows that since 1986, December is an outperforming month for the market, having averaged a 1.4 percent gain, versus an average 0.5 percent rise for all non-December months. The other study shows that since the end of World War 11 through 2001, the Dow averaged a 9.1 percent gain from its low in November or December to its high in December or January. In some cases, these gains were double-digit, ranging from 10.7 percent to 22.2 percent.

What do I think? Put me in the skeptical camp. When a dry cleaning store out of the blue feels compelled to call up my wife, Harriet, and tell her "we could use your business," that's something to worry about.

Likewise, when I see a growing number of reasonably well dressed people panhandling at restaurants, hotels and places of worship, and hear of more and more people griping that they can no longer afford the maintenance charges on their apartments, it tells me the economy is still struggling pretty badly, more so than many of us think.

On top of this, 43 million Americans are now on food stamps, there's an inventory of 4.2 million empty homes looking for buyers and 14.8 million unemployed looking for work. Actually, it's 25 million if you factor in the underemployed -- people who have left the labor force and part-timers who can't get full-time jobs.

Any way you look at it, such shortfalls are hardly the stuff of what economic recoveries and bull markets are all about.

But just maybe I'm too much of a worry-wart. Perhaps, judging from the way our trio of pros see it, John Wayne had the right idea when he said "courage is being scared to death...and saddling up anyway."

What do you gthink? E-mail me at Dandordan@aol.com

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