The Show

The Show

When Charles and Kim Githler bring their "Wall Street Live" Money Show to Sarasota, home base of their company, Intershow, there is no shortage of attendees. Last week's installment of "Wall Street Live" attracted nearly 500 investors to the Ritz-Carlton, Sarasota, each paying $100 or more, for a day of advice from a cast of nationally known investment managers, economists and strategists.

The short recap goes like this:

• Everyone hailed Ben Bernanke's appointment as chairman of the Federal Reserve.

• China and India will have huge positive and negative effects on the U.S. economy.

• The U.S. economy and consumers are in great shape going into 2006, much better than the malaise that seems to permeate the mainstream media.

• Keep your eye on how the Federal Reserve manages the yield curve and inflation. Its actions will determine whether the U.S. economy continues to grow at above a 3% annual rate or dips into a slowdown. The trouble sign: if and when the yields on three-month Treasury bills exceed those on 10-year Treasury bonds. That's a sure sign of impending recession.

In all, though, the majority of Wall Street Live's nine speakers gave their listeners upbeat forecasts for 2006. The one exception: Greg Miller, chief economist of SunTrust Banks Inc. He sees a slight economic slowdown in 2006. Here's a speaker-by-speaker highlights:

John Dessauer

Editor

John Dessauer's Investor's World

• A sign of the economy's strength: "I would think people would have noticed by now the 17% rise in corporate profits in 2004."

• "If profits are strong, stocks will be strong."

• "Not only have corporate profits not slowed down, they continued to accelerate through the second quarter."

• Why are wages in the U.S. unable to go up? Global competition.

"Because of China's openness, anybody who is competing with them has to stay up with them. That's why (U.S.) labor rates can't keep up - because you have to keep up with China."

• "With China, we have doubled the world's labor pool. But the fall of Communism didn't double the world's invested capital."

• "We've inverted the labor-to-capital ratio." The growth rate of labor has outgrown the growth in invested capital.

• "From here on, the Dow will track the growth in profits. Because the world is so competitive, companies prefer mergers or acquisitions. They're increasing dividends and stock buy backs."

• "Don't worry about the Fed raising short-term interest rates. If short-term rates go up too fast and slow the economy, that's an easy fix. But if you let inflation get out of control, that's a difficult fix."

• "Profit growth will continue."

Joe Battipaglia

Executive vice president and CIO

Ryan, Beck & Co., LLC

• "If you're looking for the perfect economy to invest in, it's like the perfect husband - it doesn't exist."

• "What are we afraid of? We're afraid of ourselves because the economy is doing quite well, thank you very much. We're seeing 3.8% growth in the economy. This is the 10th quarter of above 3% growth. We've gone from $27 a barrel to $70 a barrel, and the economy has kept on trucking."

• "I'm here to tell you the consumer is in very good shape. We've added 2 million jobs the past two years. Disposable income has expanded by $4 billion."

• American consumers have $59 billion in assets, $11 billion of debt and $48 billion of net worth. "The consumer is in good shape."

• Corporations are in good shape, too: They have $1 trillion in cash. Because of that, "mergers and acquisitions are going to be on a tear this year or next."

• "What to do with your portfolio? Shorten maturities in your bond portfolio. Be careful of high-yield stuff. In cases where you are getting a single-digit return, perhaps now is the time to take a profit."

• REITs - "another place to go."

• TIPS market and utilities - "trouble areas."

• "The stock market, in broad brush terms, is cheap ... to me, there's opportunity in the stock market."

• "Small-cap valuations are getting a little rich."

• "Large caps are starting to look better."

• "Banks are starting to sputter. Same with oil companies."

• "We do have 5% in gold. There are new buyers in gold - China, India and Middle East."

• Energy: "Higher energy prices typically beget lower energy prices ... We need to build more [refineries]."

• China: "China to an American is like a roach motel: Money comes in, but it doesn't come out. The opportunity is enormous, but the risks are high. It's a boom-and-bust economy. It's consuming capital, but it's difficult to get your capital out."

• Deficits and debt: The United States is in the best condition in the world - government debt to GDP is 36%; in Europe it's 56%; and in Japan it's 72%.

• "U.S. industry and the consumer are in great health going into 2006."

Robert Stovall

Managing director

Wood Asset Management

• We don't trust the Chinese market, so we don't buy Chinese stocks."

• "You buy when the cannons are firing at you, and you sell when the trumpet of victory is sounding."

• "What moves stocks? Earnings per share growth."

• He predicts a 5% federal funds rate.

• Bubbles: Real estate, China and hedge funds. "Real estate won't be a bubble that pops. It will deflate."

• Federal Reserve: "We look to the end of the Federal Reserve tightening at the beginning of next year, and then six months after that look for the Fed to start loosening."

Greg Miller

Vice president and chief economist

SunTrust Banks Inc.

Miller focused on four issues:

Economic shocks

• "They are an economic way of life. What is different now is their frequency. It used to be we had one every years. Now we have three in one year."

• "The economy has re-accelerated from 3.5% growth to a 4% run rate. But at 4% or more, it tends to generate inflation."

Energy

• "History tells us when we have hyper events in oil, the economy slows. Each $10 increase in the price of a barrel of oil equals 1% decline in the U.S. economy."

• "Somewhere in the middle of '06 we'll have a slowdown in the economy. I'll be surprised in the next year if we don't see a couple of quarters of below 2% growth."

Inflation

• "Eventually it happens. The CPI is now near 5%. The PPI (Producer Price Index) two years ago was deflating. Now it's near 7%."

• "When the PPI is rising faster than the CPI, you have the real prospect of making it harder to make a profit."

On Ben Bernanke

• "Inflation is rising, and growth is slowing. [Bernanke] is going to have to make a choice."

• "He will continue to raise the Fed funds rate to 5% in mid-2006, and if I'm wrong, I'll be wrong on the low side."

• "We're one Federal funds rate move away from inverting the yield curve (when short-term interest rates are higher than long-term interest rates). If that happens, history tells us a recession follows."

Jack Ablin

Harris Private Bank

• He is neutral on stocks and bonds, although more optimistic on large-cap stocks.

• "Very optimistic" on international stocks.

• "High-yield bonds unsafe at any speed."

• Neutral on commodities.

Joe Gandolfo

Owner, Joe Gandolfo, Ph.D. & Associates

Nationally known as an adviser on how to lower estate and income taxes, Gandolfo entertained the Wall Street Live audience by lacing a prelude to his afternoon seminar with jokes and blunt talk.

• On his Ph.D., he said it stands for "pile high and deep."

• He told the story of how he and his brother became orphans after both their parents died from illnesses before they were teens. He said he remembers how his uncle, the executor of his parents' estate, took his parents' wealth but refused in front of a judge to agree to take in and care for Gandolfo and his brother.

Boomed Gandolfo: "I found out at an early age that people change when people die." And for emphasis he said it again: "People change when people die."

Moral of the story: Make sure your wills and estates are in good order before you go.

More Gandolfo advice: "Never own anything jointly with your spouse," and "I'm the most hated man in America - I make sure everyone gets into pre- and post-nuptial agreements."

The proof of his advice? Gandolfo says none of his clients pays more than 18% income tax.

Robert Schumacher

Executive director and chief strategist

Van Kampen Investments

• Schumacher's message focused on the "yield curve" - the difference between interest rates on the 10-year Treasury note and the three-month Treasury bill - and how it is used to predict recessions.

• Watch for what Federal Reserve rate watchers call the "inverted pyramid," when short-term interest rates are greater than long-term interest rates.

Says Schumacher: If that happens, "there's a 95% probability of going into a recession in the next four quarters."

As of this week, the yield on the three-month and 10-year Treasuries were 3.95% and 4.56%, respectively.

Battipaglia's STOCK picks

Cisco

Microsoft

MicroStrategies

Motorola

Cardinal Health

Varian

Dow

Parker Hanafin

GE

Ablin's 2005

Investment Rankings

1. Emerging markets

2. Developing markets

3. Commodities

4. S&P 500

5. Russell 3000

6. REITs