Economists painting mixed picture

DANVERS – Individuals and businesses must take steps to protect their investment portfolios from inevitable inflation and soaring interest rates, while America must consume less and invest more in emerging global markets to ensure future prosperity.That was the crux of the presentations given by a panel of local economists at a breakfast forum of the 2011 North Shore Chamber of Commerce Exposition Tuesday morning at Crowne Plaza in Danvers, moderated by Rosalin Acosta, wealth market leader for New England for TD Wealth Management.Robert Lutts, president and chief investment officer of the Salem-based Cabot Money Management and a frequent guest on national cable TV business shows, gave a bullish outlook on stocks.”There’s a great deal of opportunity in our economy today. Stocks are safer than most people think and bonds have more risk than most people think,” Lutts said. “There’s more liquidity in our economic system and that’s quite positive for equities.”We believe the market could increase anywhere between 10 and 20 percent this year.”Since the bottom of the recession in 2009, Lutts said there has been a tremendous flow of assets out of the stock market and into the bond market, spurred by investor jitters and historically low interest rates.”When there’s too many investors on one side of the boat, bad things happen on that side of the boat,” he said. “We think it’s likely interest rates could advance substantially over the next few years and that’s why we’re very cautious on long-term bonds.”And inflation, he said, is all but certain in the coming months and years.”There’s been a lot of money put into our system by the government. Let’s face facts, they’re printing (money), and there are more dollars chasing the same amount of goods and services. You need to prepare yourself for a negative impact on your dollar. That dollar in your pocket, unfortunately, is buying less goods every day and I don’t think you fully appreciate how significant that currency debasement can be.”Over the past 50 years the purchasing power of your dollar has declined 90 percent in value. I think that may look good compared to the next 15 or 20 years.”In order to protect assets relative to inflation, Lutts recommends investments proven to keep pace with inflation. He suggested gold and diamonds as “a good place to start.” He also recommends avoiding long-term U.S. treasury bonds in favor of investing in international bonds in emerging markets – Brazil, Singapore and China – and investing tech stocks including Internet companies and green-and-renewable energy firms.Sean Tesoro, president of Salem Five Investment Services, said the U.S. economy is resilient with a GDP of $14 trillion and remains, by far, the biggest in the world.Given widespread fear of depression just two years ago, Tesoro said, “It’s amazing what we’ve come back from and how quickly we’ve done it.”Fifty percent of the economy, he said, is comprised of small businesses with 100 or fewer employees. And between now and 2018, he said, women-owned small business will be responsible for more than half the job growth in the nation.Tesoro said Salem Five is focused on helping small businesses protect their assets. He is concerned about the trend of U.S. government jobs increasing sharply at the same time private goods-producing jobs decline. If that continues, he said, “The economy is not going to be in a great place.”Individual investors, Tesoro suggests, should look to put their money into dividend-paying companies, which he said are typically run better than those that do not pay dividends, and over the past 10 years have yielded a greater percentage return.The final panelist, Carol McMullen, president of Wealth Management for Eastern Bank, joked at the onset of her presentation, “This is the best meeting I’ve been at in a long time. Rob and Sean have convinced me that bonds are boring, women are going to rule the business world and you need to invest in gold and diamonds, so go to it.”Mc