Forecast For 2009 Includes Clouds, Rays of Sunshine

Forecast For 2009 Includes Clouds, Rays of Sunshine

January 14, 2009

CHICAGO - “ University of Chicago Booth School of Business professor of finance and entrepreneurship Steven Kaplan chose to quote poet A.E. Housman when describing how to prepare for 2009. The 2007 IVCA award winner said: - œTrain for ill and not for good.- 

The IVCA and NASDAQ OMX on Jan. 6, 2009 co-hosted a luncheon entitled - œForecast For 2009: A Political, Economic & Markets Perspective-  that was moderated by David Greising of the Chicago Tribune.

The panel, which can be listened to here, also included predictions and commentary from Kaplan as well as Northern Trust chief economist Paul Kasriel, DWS Vice Chairman Bob Froehlich and NASDAQ OMX chief economist Frank M. Hatheway. Kaplan is an internationally recognized expert of the venture capital and private equity industries.

- œIt's going to get worse - “ maybe much worse,-  said Kaplan, who predicts a continued recession of - œmedium to high severity-  throughout 2009 with continued declines in housing and the economy at large since the Troubled Assets Relief Program (TARP) was implemented in 2008.

Though Kaplan and the rest of the panelists are not overly enthusiastic about government involvement in regulating the economy, he noted: - œIf Congress doesn't act, they can really mess things up.- 

Kaplan's prescription for recovery is to continue to support solvent financial institutions, shut down financially insolvent banks and roll their assets into survivors and allow the automotive and other industries to restructure in Ch. 11 bankruptcy.

- œBail out the banks rather than the automotive companies,-  Kaplan said. He added that the regulatory environment will require close attention because - œRepublicans don't want to give to anybody and Democrats don't want to give to everybody- .

Kasriel and Froehlich were more bullish for 2009 and beyond. Kasriel noted that while this economy is worse than any since the Great Depression, employment and other indicators will not be nearly as bad at that time due to lower taxes, favorable interest rates and economic stimulus programs.

Froehlich (a mainstay on CNBC) is bullish for 2009 on infrastructure, health care, technology and financial services. He cautions to avoid automotive and - œanything coming out of Detroit- . Froehlich added that a - œbenign inflationary environment-  and interest rate reductions that can take 12 to 18 months to take effect will also have a positive impact on the economy.