KEY POINTS:
If fortune favours the brave then this year is the time for investors, large and small, to get active. The secret, say top market-watchers, is to be brave and smart with your investing.
The recklessly brave can still take a bath coming off the worst bear market in decades.
Holding investors back is the fact that diving share prices cut the value of people's portfolios last year.
At the same time, bank savings accounts look less appealing after the Reserve Bank repeatedly slashed interest rates.
The global financial crisis sparked a plummeting official interest rate economists say will hit 3.5 per cent - the lowest its ever been - in the first quarter of the year; falling off a peak of 8.25 per cent in June last year.
Good news is that New Zealand may be ahead of the major overseas markets on the road to escaping the worldwide downturn.
"The reality is we've already got a [historically] high level of employment and there are a lot of things going well," says Commonwealth Bank of Australia's New Zealand economist Chris Tennent-Brown.
"It would be great if, in 2009, people focused on the huge range of positives remaining and didn't talk themselves into having their own disaster."
In these early days, it is worth remembering the country is mired in a comparatively mild recession as against the 1930s. Tony Gibbs, chairman of Guinness Peat Group, says there is no reason anyone in New Zealand should go hungry.
And while international economic meltdown diminished stock markets worldwide, New Zealand's is set to stage a recovery this year.
Shares have a good track record of recovery in the year after a downturn and Russell Investment's Alister van der Maas says the bounceback will see average sharemarket returns at 9 per cent.
Gibbs says there will be abundant opportunity for people to buy shares at half price or less and make "a lot of money" - but you need to be fearless. "We don't know if there's any more serious bad news to come out of the woodwork."
If not, the year presents a once-in-a-lifetime opportunity for investors, Gibbs says, so you wouldn't be selling unless you have to. "Great fortunes are made in times like this, but also lost."
Prudent investing in things you feel comfortable with and know about is the way to go - and remember, the higher the return, the greater the risk, Gibbs advises.
He would like to see the banking system on a stable footing.
Tennent-Brown says the swiftly implemented Government deposit guarantee ensured confidence in it.
He says it is important for policy-makers to act quickly as the crisis continues to unfold; describing government provision of fiscal stimulus as "appropriate".
"One of the lessons from the 30s is, if you're going into a major recession, it's not the time to try to balance your budget.
"You want to act fast to try to keep the economy going."
The April 1 tax cuts will lift the fiscal stimulus to $9 billion over the next three years, which Finance Minister Bill English says is proportionately higher than Australia's and large by international standards.
He expects this stimulus will reinforce the effects of sharply dropping interest rates and lower fuel prices. The Government will also bring forward investment in infrastructure projects in the next six months that will create jobs.
While English says his main concern is combating rising unemployment, the credit crunch and ensuing recession has also spawned threat of an economic phenomenon termed "deflation" or "disinflation" in the US and Europe - a condition where falling prices cause consumers and businesses to delay purchases, fuelling an ever sharper economic slide.
This spectre is yet to manifest on our shores, says Tennent-Brown, because New Zealand sports an inflation rate within target range - but "it's certainly the concern on central bankers' minds as a consequence of the major slowdown".
Falling prices are ostensibly positive for consumers but he says purchasing power is only part of a healthy economic outlook - people like inflation in areas such as wage and house value growth. "Inflation or deflation can be good or bad depending on which way you are looking at it," Tennent-Brown says.
The problem from most people's perspective is, if deflation affects goods prices made by your employer, they're forced to retrench employment levels.
For a retired person, inflation is "pretty ugly", as rising costs erode their fixed income.
If the central bankers hold interest rates too low for too long, it can create inflation, which raises the question: "What do you do when policies work and you have to mop up liquidity?"
Lower interest rates and low property prices ease entry to the property market - but know your ability to service debt.
A year ago as prices rose and people felt secure in their jobs, they were overly liberal in their purchasing decisions, says Tennent-Brown.
This explains also why low-level activity in the housing market persists, despite improving affordability last year. "But you've also got to be looking and, right now, people may find houses that are taking a massive price correction and they can tap into historically low interest rates, so it would be a good time to buy.
"For others, now is the time to be conservative with debt and staying on the sidelines is a good decision - it just comes down to individual circumstances."
* First NZ Capital stock picks
Guinness Peat Group
We assess GPG to be trading at in excess of a 40 per cent discount to valuation and it has a sizeable net cash position on its balance sheet.
Sky Television
This is a high-quality asset with a sound balance sheet and strong cash flows. Relative to the rest of the market, this is one of the safer options and will provide some diversification benefits versus our more cyclical inclusions.
The Warehouse
Valuation is undemanding and the share register has some interesting potential changes in the event that Stephen Tindall, Woolworths or Foodstuffs decide to reconsider their positions.
Sky City Entertainment
Management's actions to lift performance should start to produce visible benefits in FY10, assisted by tax cuts and lower interest rates. Attractive dividend yield in a low interest rate environment.
Fletcher Building
Towards the end of this year, we expect the market will be looking forward to a recovery next year and will begin to re-rate FBU accordingly. In the meantime, FBU has a 12 per cent yield to satiate which, as interest rates continue to fall away, looks appealing.
