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These are the views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

Notwithstanding the bounce in November consumer confidence on Tuesday, the tightening in broad financial market conditions has been continuing of late. The latter is mainly related to the ongoing sovereign risk irresolution in the euro zone and the growing probability of tail risks associated with significant financial and banking system exposures to the 17-member group.

The financial imprint combined with greater risks of U.S. fiscal tightening at the outset of 2012 should ensure that the downside risks to growth in subsequent quarters persist.

A simple regression exercise that takes into account broad financial market conditions and basic “adverse feedback loop” assumptions shows that if market conditions remain tight or tighten further in the current environment, real GDP growth could potentially downshift and slip into negative territory as early as summer 2012.

(An adverse feedback loop is defined as a situation whereby initial financial market strains weigh on the macro economy, and a weaker economy raises further uncertainty about the financial backdrop, which results in additional financial tightening, greater deterioration in growth, and so on.)

Our proprietary Financial Market Conditions Index, or FMCI, which exemplifies broad financial market conditions in the foregoing exercise, reached a peak around the second quarter of this year and trended lower in recent months. A negative smoothed growth rate of the FMCI is usually an indication of tight market conditions broadly. The FMCI dipped into negative territory in August 2011 and remained in sub-zero territory through November.

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

At times of peril, when all around are panicking, the person who stays calm can see the facts, act prudently, and not merely survive, but prosper. No doubt, readers have heard that before, but this is a good time to remember it.

The markets are behaving like it is 2008 again, but it is simply is not. Continue reading…

These are the personal views of Sharon Snow, chief executive officer of Metropolitan Capital Strategies, an SEC-registered investment adviser in Manassas, Va.:

Metropolitan Capital Strategies believes there will be a positive market in 2011 primarily due to the increase in earnings of the S&P 500. Some experts are expecting operating earnings at $96/share for 2011 (Citigroup Global Markets, “US Portfolio Strategist,” Jan. 6) compared with $85 in 2010 and $62 in 2009.

This increase in earnings is a result of cuts in employees, brick-and-mortar stores and other expenses for the companies that make up the index, but regardless, revenue and earnings are two of the top fundamentals for a bounce in the equity markets.

The market will recover due to the increase in earnings and revenue, though revenue of individual companies may still be off a lower number. Some uncertainty has been cleared up for the time being, including the midterm elections and change in power, the continuation of quantitative easing with QE2 and talk of QE3, the federal government’s continuation of permanent open market operations and no change in the mark-to-market rules for the banks. This expansionary policy should assist the U.S. recovery.

The underlying “true” U.S. economy may remain weak, with the GDP projections for 2011 of 2.5%. U.S. employment and underemployment will remain weak but the stock market is forecasted to increase, with experts predicting between 1325 and 1400 for an end of the year number on the S&P 500.

Every investor should have a strategy that employs two things: the ability to make money or generate alpha, and the ability to keep that money or protect those profits once they are realized. Most investment strategies only focus on the making money side. A good New Year’s resolution for all investors would be to incorporate both into their strategy.

Looking ahead, Metropolitan Capital Strategies believes opportunities for double-digit returns with the corresponding high confidence will be found in 2011 in the broad-based U.S. stock market as well as in several sector ETFs. It could also occur in the global emerging market and some select countries. In the next five years, we could also see opportunities in commodities, bond ETFs, possibly inverse ETFs and the currency market.

An investor should always employ capital appreciation and loss avoidance or risk management in his or her portfolio.

Every asset class has risk at some point in time, even money markets and Treasurys, which are both assumed to be low risk but have lost money. It is important to keep a balance of short- and long-term goals for your money and use patience and discipline.

All market cycles go up and down, and investors should prepare for and expect that.

1056 GMT [Dow Jones] STOCK CALL: Melco Crown’s (MPEL) refinancing package of US$600 million senior notes due 2018 at gross interest cost of 10.53% “very expensive” vs its existing City of Dreams project financing at LIBOR +2.75%, other recent financing obtained by competitors, says Credit Suisse analyst Gabriel Chan. Notes Sands China (1928.HK), Galaxy (0027.HK) obtained project financing at HIBOR/LIBOR +4.5%. Says two material benefits from deal are avoidance of breaching loan covenant in 4Q10, lengthening of company’s debt maturity. Still, believes “costs of such a financing package are likely to outweigh the benefits it brings to the company.” Says new financing package has “significantly cut the chance of MPEL reporting a positive bottom line in the next two to three years,” cuts target to US$4.80 from US$5.60, keeps Neutral rating. MPEL closed 1.2% lower at US$4.23 overnight. (kathryn.okeeffe@dowjones.com)

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Finally, some good news from labor markets – job losses are slowing, recovery is in sight, and the stock market is poised for robust rally.

The Labor Department reported the economy only lost 345,000 jobs in May, down from 504,000 in April and 2.1 million the prior three months.

Clearly, the economy must stop shedding jobs for the recession to end but a slowing pace indicates the bottom is near.

The consensus among forecasters is the economy will contract less than 2% in the second quarter, squeeze out less than 1% growth in the third quarter, and expand at about a 2.5% annual pace after that.

That is a very modest pace after such steep decline and much less than the 3.5% or 4% necessary to power rising living standards for most workers.

Why are prospects so limited? What does it mean for the stock market? Continue reading…

By Geoffrey Rogow
OF DOW JONES NEWSWIRES 

NEW YORK — The Dow Jones Industrial Average is likely to have a member that is operating under bankruptcy court protection in the coming days, though only briefly.

General Motors Corp. (GM), a member of the 30-company index since 1925, is expected to file for Chapter 11 bankruptcy protection by Monday, a development that would automatically disqualify the company from ongoing membership in the Dow. However, there is a customary lag time of five trading days between any announcement of a change in the Dow and its implementation.

“Should GM go bankrupt, that forces our hand,” said John Prestbo, editor and executive director for Dow Jones Indexes. He added that, as a preemptive measure, GM could also be replaced in the DJIA before any filing is made. He declined comment on which company would replace GM, as speculation has ranged from another auto maker to a technology concern. Continue reading…