Is there hope for stocks in 2009?

At all?

A University of Iowa business professor things so, and he claims he has the data to prove it.

It’s all about upside potential – and the fact that Wall Street has already baked a lot of the bad news into the trading mix.

Says Todd Houge, assistant professor of finance at U. of Iowa's Tippie College of Business, “despite a long string of bad economic numbers in the past two months, most major stock indices are continuing to trend up from the lows they hit in November.”

Houge makes his case thusly: On Nov. 21, the S&P 500 closed at 740 points and the Dow Jones at 7,400 points. Since then, the government announced gross domestic product has plunged, hundreds of thousands of jobs have been lost, banks and financial institutions struggle despite government efforts at stabilization, mortgage foreclosures continue to climb and Bernie Madoff was revealed to have run a Ponzi scheme of epic proportions, among other bad economic news.

Yet, despite all that, at the close of trading Friday, the S&P 500 sat at 868 points, up 17 percent from its November low, and the Dow Jones was at 8,280 points, up 12 percent from its low.

"That makes me a little optimistic that the market has factored in a lot of bad news already and will continue to climb," he said.

Houge says he has more ammunition. He notes that last week, the government announced U.S. GDP had shrunk 3.8 percent in the fourth quarter of 2008, the worst performance in 27 years. Houge points out that most market indices opened higher that day despite the news, before falling in later trading.

Houge says the market increases don't necessarily reflect a strong economy today, which he said is in poor shape, and is likely to get poorer. However, he said the upward trends suggest that the markets are taking bad news in stride.

"Consumer and investor sentiment is mostly very negative still," he said. "I do believe, however, that there is a lot of cash sitting on the sidelines waiting to move back into equities at the first signs of an economic turnaround."

Elsewhere, you might have seen that ubiquitous commercial for Hula.com, where Alec Baldwin turns into a lizard explaining the joys of “payless” television. Turns out there actually might be something – web-based video sites are reporting upward spikes in usage – but that doesn’t mean Americans are shutting off their cable and satellite TV subscriptions.

Bernstein Research analyst Craig Moffett says that the U.S. based cable, telco and satellite TV companies that have reported Q4 results to date actually added an aggregate 441,000 subscribers in the quarter:

It breaks down like this:

-- AT&T +264,000
-- Verizon +303,000
-- DirecTV +301,000
-- Comcast -233,000
-- Time Warner Cable -119,000
-- Charter -75,000

The same set of company’s added an aggregate 396,000 in the year ago quarter: in other words, as a group they are modestly picking up steam, rather than accelerating.

“All this suggests that video cord cutting … remains the province of urban myth,” he writes. “It certainly sounds plausible enough… but there’s simply no empirical evidence that it actually exists. And there’s pretty good empirical evidence of its absence. ”
What people are dumping, on the other hand, are wired phone lines.

Here’s a look at Q4 line losses:

-- AT&T -1,017,000
-- Verizon -670,000
-- Qwest -173,000
-- Embarq -116,000
-- Time Warner Cable +130,000
-- Comcast +344,000
-- Charter +75,000

That amounts to 1,427,000 lines cut, compared to a loss of 618,000 lines in the same period in 2008.

So what do we have? Consumers are looking to cut household costs, but are deciding to do so via landline phone usage, but are drawing the line, so to speak, at their cable TV’s. That doesn’t mean Hula.com and the like won’t prosper.

It just means they won’t be prospering any time soon.