Fundamentals fine, but bailout essential

The government needs to pass the bailout package being debated this week or the stock market could drop another 15% in two days, a financial strategist told about 1,000 attendees at the opening of the Investment Management Consultants Association conference today in Denver. “I would argue that the fundamentals are fine,” said Jonathan Golub, former chief investment strategist at The Bear Stearns Cos. Inc. of New York, “but the credit crisis is the only thing that is relevant right now.” He believes the stimulus package will pass, causing credit spreads to come down. “We should see mid- to high-mid-single digit returns over the next 12 months. The U.S. returns will be significantly better than [those for] the developed world and emerging markets. The result will be that the dollar strengthens and long-term bonds go up in yield,” Mr. Golub said. If the bailout doesn’t pass, “No one will be able to buy the extra real estate because they can’t get credit,’ he said. “That will create added pressure. You’ll see bank failures and a downward spiral. I don’t think [Congress] has an option.” Denver-based IMCA, which has 7,000 members, provides investment consulting and wealth management education and designations.