2008 outlook: Fasten your seatbelts

Market strategists expect a volatile year for stocks and that the housing market will swoon. Sound familiar?

Wall Street's top forecasters have some good news and bad news for 2008. Many think stocks will head higher but that unemployment will rise and the overall economy will slow.

In other words, 2008 is going to look an awful lot like 2007. Despite falling housing prices and the subprime mortgage meltdown igniting fears about a broader economic slowdown, stocks pulled off a winning year in 2007.

For 2008, experts said investors need to be prepared for more woes in the slumping housing market and a slight rise in unemployment.

"2008 will be a sluggish year," Abby Joseph Cohen, Goldman Sachs' chief U.S. investment strategist, told CNNMoney.com. She said many investors are concerned about what could be weak earnings growth in 2008.

"Portfolio managers sense that 2008 will be a very difficult year for corporate profits," she said.

But Cohen believes that stocks could finish 2008 in the plus column as investors anticipate better news in the latter part of the year.

"We believe that the worst time is right now. The worst numbers will be at the end of 2007 and in the first half 2008. We expect an improvement in the second half," she said.

Fortune's best stocks for 2008

Cohen isn't the only strategist who feels this way. Research firm Thomson Financial pointed out in a recent report that Wall Street analysts expect profits for the S&P 500 to increase in just the single-digits in the first two quarters of 2008 but that overall earnings for the year will be up nearly 15 percent.

With this in mind, Cohen expects the Dow Jones industrial average to end the new year around 14,750, a gain of more than 10 percent from current levels, and that the S&P 500 will close at 1,675, up nearly 14 percent.

Analysts at Thomson Financial are predicting a more modest rise for the market, however. The firm believes the S&P 500 will end at 1,580, a gain of 7 percent.

Still, how can stocks have a good year if so many market strategists are predicting a rough year for the economy?

In a recent report, Cohen wrote that the market is relatively cheap when compared to previous periods of comparable inflation and that stocks are priced for the worst case scenario, i.e. a recession.

But Cohen thinks the economy will not slip into a recession. And one big reason for her optimism is that she thinks the Federal Reserve is likely to keep lowering interest rates in order to make sure the economy doesn't grind to a halt.

Investors like interest rate cuts since they tend to lead to more borrowing by consumers and businesses, which in turn helps to boost economic activity and corporate profits.

"Recent speeches and policy actions suggest that the Federal Reserve is paying close attention...to the smooth functioning of markets and recession avoidance," Cohen wrote.

The Fed cut interest rates three times in the second half of 2007, lowering the key federal funds rate from 5.25 percent in August to 4.25 percent by the end of December.

Economists at Lehman Brothers wrote in a report that they expect the Fed to cut rates several more times in 2008, perhaps to as low as 3.25 percent. The Lehman economists suggested that the economy "may bend but not break" in the new year.

How they got housing wrong

But much of 2008 could be rough. Though the economy is expected to begin to rebound later in the year, economists believe that the slumping housing markets and credit crunch will continue throughout at least the first half of 2008.

Standard and Poor's predicts that the housing market will not finally bottom until October.

Home prices are expected to fall 11 percent over the course of 2008, according to Standard & Poor's.

As the housing market continues to slump, economic growth is expected to slow in 2008. This year, gross domestic product, or GDP, was aided by a strong third quarter, and analysts believe that at 2007's end, the economy will have grown 2.2 percent from the close of the fourth quarter in 2006.

At the end of 2008, however, Lehman Brothers predicts 1.8 percent overall growth, and Merrill Lynch believes that GDP growth in 2008 economy will be only 1.4 percent. Thomson Financial more optimistically expects GDP to grow between 2 percent and 2.5 percent over 2008.

Many analysts point out that although the economy and housing market will struggle in the new year, this may not necessarily result in recession.

Hiring in '08: Slower but steady gains

But other economists warn that there is still a high risk of recession. "We are at the brink of a recession," Standard and Poor's senior economist Beth Ann Bovino told CNNMoney.com. "We are certainly concerned about the 2008 economy."

Standard and Poor's thinks there is a 40 percent chance of a recession in 2008.

And as the economy slides in 2008, unemployment is expected to increase as well. Standard & Poor's is predicting an unemployment rate of 5.2 percent by the end of 2008, up from the current rate of 4.7 percent. Goldman Sachs expects the unemployment rate to be between 5.5 percent and 5.8 percent.

Nonetheless, Goldman Sachs' Cohen thinks consumer spending and confidence will pick up in the second half of 2008, despite the rise in unemployment.

And analysts at Thomson Financial wrote that they also think the consumer will stay afloat. The firm is forecasting monthly same-store sales growth of about 2 percent to 5 percent throughout the year.

So even though the financial headlines for 2008, particularly the ones about the housing market, may be as scary as the ones from 2007, many investors and consumers could do reasonably well. Just like in 2007
(source money.cnn.com)

LAUNCH SQUAD

The press release has been around for a hundred years. “It’s been the main vehicle for disseminating information in the public relations business,” says Jason Throckmorton, a founding member of LaunchSquad, a San Francisco-based PR firm. “For many purposes it’s still a great tool, but we envision other means of getting our clients stories out there, from working directly with bloggers and new media to creating blog, podcast and video content of our own.”

LaunchSquad deals in emerging technology companies and startups. They were recognized by Business 2.0 for their work and they’ve crafted campaigns for HP, Palm, wOz, Wine.com, NewsGator and others. Recently, The Holmes Report, a PR trade publication, ranked Launchsquad as one of the top 15 World’s Fastest Growing Public Relations Firms in 2006. Their clients have cutting-edge stories that are best told with dynamic techniques. “We focus on helping those companies get their stories out to the world,” says Jason Mandell, founding member of LaunchSquad. “We want people to get excited about these new ideas and technologies, and build awareness about them.” To do it, the 30-person firm channels its creative energy through Macs.

“The Macs are really at the center of our business,” says Throckmorton. “They are easy to use, reliable and fun. That drives collaboration and creativity in our office and allows our people to produce better work more efficiently. That’s a big deal and it helps make us competitive in the industry.”

The Macs are also at the center of LaunchSquad’s new strategies. “We’ve started building stories about our clients using new communications channels such as blogs and podcasts,” says Throckmorton. “We’ll use GarageBand to create content that people can listen to on the web to complement or even replace a press release. We’ll also make video content with iMovie, giving our clients even more ways to get their stories told. And we couldn’t do it without the Macs.”

Done Differently

LaunchSquad is 7 years old, but the company office still crackles with the raw energy of a startup. “We do things differently here,” says Mandell. “Everything revolves around teamwork and collaboration. The more people work together around shared goals, the more positive the environment will be.” To enhance the creative flow, LaunchSquad has torn down all the walls — literally. The main workspace is open, employees working side by side without cubes or offices.

“It enhances collaboration,” says Mandell. “You don’t have to knock on someone’s door. We can hear each other pitch stories and have conversations with clients. It facilitates elbow-to-elbow learning.” The firm’s Macs are an essential part of that collaborative environment, a simple tool that doesn’t get in the way of creativity or productivity. “People really enjoy being on a Mac,” says Throckmorton. “They’re intuitive and easy to use. They’re not problematic; there aren’t issues with viruses or technical problems. The Macs take all the hassles away from using a computer. They just help you get the job done, which makes us more collaborative, productive and efficient.”

Easy networking is key to collaboration in any office, and especially at LaunchSquad. The company set up their own network; a cloud of notebooks linked via Apple Airport wireless and simple File Sharing. “We’re a 7-year-old company and for six years we had no central data infrastructure,” says Throckmorton. “We just used basic File Sharing to trade documents, and that comes on every Mac. We have had virtually no IT or networking expenditures and that has allowed us to focus on what we’re doing as a company.”

The company is in the midst of deploying an Xserve as a central repository for their files. The new system will make networking and file sharing even more efficient.

New Directions

LaunchSquad’s latest PR tactic involves using audio, video and other Web 2.0 techniques to supplement traditional PR tools that relied heavily on written text. It’s all part of the Squad’s commitment to innovation. “We like to empower people to take risks, try new things and grow in their professional and personal lives,” says Mandell. “These new tools and tactics are part of that.”

It just makes sense to reach out to new media players like bloggers, podcasters and videocasters. “We’re in the process of building a more formalized set of services around social media,” says Throckmorton. “How can we become content creators and help our clients build and distribute content on their own? We recognize GarageBand and iMovie as important solutions. They come out of the box with our computers, and to be able to sit at your desk and chop up a movie without having to use any professional services is huge for us.”

The Squad has created some podcasts and videos for its own blog called Exclamation, found at its website, and has hired a media director to head up its efforts. The team plans to make full use of iLife applications, but it also could also reach for pro solutions like Final Cut Pro and Soundtrack Pro. “There are really no limits to where we can go,” says Mandell. “I envision us creating and distributing high quality videos for our clients that will allow us to reach their target audiences directly in addition to going through traditional media channels. That’s an exciting step for us.”

LaunchSquad also uses video to stay in touch. The company has four employees in their New York office and uses iChat for videoconferences. “I frequently do video calls with our Manhattan office using iChat,” says Mandell. “It’s fast, interactive and also free. And it makes a big difference to have that face time. We’ve also used video iChat when people are on the road. They can just log in from wherever they are and they’ll be in the meeting.”

Rock-Solid Reliability

In the deadline-driven world of PR, computer crashes can cost clients. LaunchSquad simply can’t afford down time. “It’s a very deadline driven business and we cannot be hamstrung by our machines,” says Mandell. “With the Macs, we just don’t have to worry about it. They don’t crash and we basically don’t need to spend time or money on IT problems.”

“Reliability is huge for us,” says Zoe Vandeveer, a member of the Squad. “In my previous job, my PC would crash all the time and I was constantly going to tech support. Here, no one’s computer crashes. That lets us get our work done without stressing over computer problems.”

The company hasn’t needed an IT department and has utilized a consultant very sparingly during the last seven years. “It’s relieving to not have to worry about computer issues,” says Mandell. “We’re a services firm and we need to be accessible to our clients. It’s going to impact the company negatively if we have to worry about computer problems and spend a lot of time figuring them out.” Mandell estimates that the Squad has saved big money over the years. “It’s far less expensive in the long run to go with Macs,” he says. “Especially when you figure out all the ancillary costs — IT and tech support — that you would incur with PCs. I estimate that we’ve saved tens of thousands of dollars.”

LaunchSquad’s troop of notebooks also has to be rock solid. Employees are free to tote their machine and use it anytime, anywhere. “We really encourage people to take their laptops home,” says Throckmorton. “They like having a machine that’s enjoyable when they take it home. They can take advantage of it for their personal lives, for whatever they want.”

“Macs are just fun,” says Vandeveer. “I had a PC at my last job, I didn’t want to take it home. Here I want to take my Mac home. It’s a computer that you want to use all the time for work, or not for work, or a combination of the two.”

That same freedom and reliability has fueled LaunchSquad’s success. “No one here is a computer scientist,” says Mandell. “We’re marketing people, English majors, writers. No one here wants to worry about computer problems. They’re an annoyance and they create negativity. The Macs are freeing because nobody has a computer issue. The Macs just work.”

(source: apple.hotnews.com)