Market off to bad start in '09

Dow, S&P have worst Januarys on record
By BOB RATHGEBER • brathgeber@news-press.com

The Dow Jones Industrial averages and the S&P 500 index had their worst January performances in history, and February is not starting out any better.

Monday, in the first day of trading in the new month, the Dow fell 64.11 points and the S&P dropped 44 cents.

So, where can investors turn to make some money, even just a little? Good question, and the answers aren't particularly appetizing.

"Save your money, stay in cash," said Richard Schmidt, a professional money manager who lives in Bonita Springs.

David Jones, a Florida Gulf Coast University professor and long-time Wall Street figure, has another take on how to protect your money:

"You can resort to TBills, but they pay almost nothing. CDs, they don't pay anything, either. ... FDIC guaranteed senior unsecured debt of major Wall Street companies."

In January, the Dow dropped 8.8 percent, topping a record set in 1916 (8.6 percent), and the S&P 500 sank 8.6 percent, a full point higher than in 1970.

And historically, the market's performance for the full year follows January's lead more than three out of four years, according to Standard & Poor's Corp.

Since 1940, the S&P has had a full-year loss 20 times, and 16, or 80 percent of those, started with a negative January.

Usually, a couple of strong factors keep the bulls in charge most Januarys:

• Investors who dumped their holdings in year-end tax-loss selling often re-establish positions.

• Pension funds and people who earn year-end bonuses often add to their stock holdings.

But these are not normal times, for sure.

Schmidt doesn't see much hope in making money anytime soon in the stock market.

"Six months, a miracle. Twelve months, a little more hope. Eighteen months, a little better."

Jones, who made his living for more than three decades trading bonds, said at some point stocks will return to favor. But when?

"Right now, we're playing with a different playbook," he said. "Bonds are better now."

According to most economists, when the stock market falls in January, it means people are making conscious decisions not to buy stock, and those kinds of a decisions are not quickly reversed.

A hint of optimism rang in the new year but is now in full retreat.

"The mood is just as gloomy as at any point in this whole bear market," said Stuart Schweitzer, global markets strategist at J.P. Morgan Private Bank. "The economy just keeps on weakening while the financial crisis just keeps on going.

"It's unlikely that the broad market has yet seen its lows. There are more disappointments ahead."

But when those disappointments end and the economy eventually cuts loose, there is a ton of money currently benched waiting for action.

The Investment Company Institute estimates that almost $4 trillion is warehoused in money market accounts and CDs.

Until then, though, Schmidt says to tread carefully.

"The key is to make money carefully and in small amounts."

There will be those, however, who try to read another kind of history - the Super Bowl tea leaves.

The belief says that if a team from the old American Football League wins, the stock market will fall that year. Should the victory go to a team from the old National Football League (the Pittsburgh Steelers, for example), the market will rise.

Investors can only hope that the Steelers victory Sunday means more this year than 70 years of S&P history.

- The News-Press wire services contributed to this report.

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The Billion Dollar Question is, When will the market bottom out???
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