Advisers Far Apart on S.D. Predictions : Stock Market: Monday’s recovery is either an indication of continued faith or an inability to come to grips with impending recession.

That the stock market did not go in the tank Monday was easily ascertainable. However, San Diego investment advisers hold widely divergent views on the market’s longer-term prospects.

Depending on which local broker you talk to, the 88.12-point rise in the Dow Jones Industrial Average after Friday’s 190.58-point plunge either was evidence of investors’ continued faith in the deep-rooted value of stocks or of investors’ inability to recognize or come to grips with an oncoming recession.

An optimistic interpretation of Monday’s activity was expressed by Peter Hamilton, a broker with Thomas Green/San Diego Securities. Clients who called him Monday generally were “much more interested in where the bargains were� than in cutting potential losses by placing sell orders, he said.

“I expected (the stock market) to open down, then bounce back up, and I saw that,� Hamilton said.

The key factor was that institutional investors and mutual funds did not liquidate their holdings en masse as on Oct. 19, 1987. “Their hands were not forced as in 1987,� Hamilton said, and there was no sell-off.

Hussein Panjvani, branch manager of Private Ledger Financial Services’ Sorrento Valley office, said his clients generally were in a buying mode Monday, placing orders for blue-chip stocks such as Merck, Bristol-Myers and Waste Management, whose prices dipped sharply in the Friday collapse.

“People were anxious to take advantage of (stock price drops) in light of what happened in 1987,� Panjvani said, referring to how prices rebounded after that crash.

James Biddle, president of The Securities Center stock brokerage in Chula Vista, said his clients displayed none of the panic evident two years ago.

“I only had a couple of nervous customers, and they didn’t take any action after a little hand-holding,� he said.

Biddle added that in the current market, he advises clients to buy, “but I’m not twisting anyone’s arm.�

Taking a somewhat darker view was Charles Brandes, president of Brandes Investment Management, a Del Mar firm that manages a $170-million securities portfolio for 500 clients. Although the relative stability of the market Monday was a good sign, Brandes said, he expects the market to trend down in coming months as the economy slips into a recession.

“The market still has some settling out to do, although I’m not forecasting when it may happen,� he said.

Brandes said the most crucial problem for the economy and the stock market is still ahead: junk bond debt that has been used to finance $270 billion worth of takeovers, mergers and leveraged buyouts this year alone.

“The junk bond situation is a bubble, and one day it’s going to pop,� he said.

Companies are beginning to miss payments on the debt, and, as the defaults snowball, some stockholders of companies that issued the bonds will get wiped out, Brandes predicted.

He also said that, because the junk bond market has been eclipsed, so has the takeover binge that pushed stocks up to premium prices. The apparent collapse of a takeover bid for the parent firm of United Airlines, in fact, helped trigger the Friday market collapse.

Michael Burbank, vice president and resident manager of Kidder, Peabody & Co.’s downtown office, said there is less fundamental weakness in the stock market now than two years ago because stocks generally are not selling at the rich price-earnings multiples seen just before the 1987 crash. Price-earnings multiples of average New York Stock Exchange issues these days are 13 times per-share earnings, contrasted with a multiple of 21 times per-share earnings two years ago, he said.

Burbank doubts there will be the precipitate drop as in 1987, if only because so many investors have lived through a crash.

“I use the roller-coaster analogy,� he said. “The first time there is a lot of fear. The second time you know what the ride is like.�

Michael Portantino, a broker at Prudential-Bache’s downtown office, said he believes the market will experience a downturn today but that it was saved when institutional buyers “upped their portfolios for stocks� early in Monday trading.

“My feeling is we will see the stock market soften. People will start to slowly feed in sell orders,� Portantino said. “Why am I pessimistic? Because corporate debt is too high, consumer debt is too high and government debt is too high. As we head into a recession, companies will lay off employees to scale back. Those employees will be selling cars and their houses to pay their debts, driving the market down.�

Echoing other brokers, Portantino said his advice to investors is to “stay on the sidelines� for the time being, or to buy “high-quality corporate bonds.� He predicted that the government will soon be driving down interest rates in efforts to ward off a recession, making bond prices rise.

Although many blue-chip stocks rebounded, several San Diego-based stocks continued to slide. Price Co. was down $2 Monday to close at $41.75, after dropping $1.25 on Friday, and WD-40 slipped $1.125 to close at $34.625 after losing $2.25 Friday.

Molecular Biosystems lost $1 to close at $22 after losing $1.875 Friday; HomeFed Corp, down $.375 at $43.25 after a Friday loss of $1.375; Great American, down $.125 at $10.125 after slipping $1 Friday; Cubic Corp, off $.125 at $16.75, after losing $.625 Friday; La Jolla Bancorp, off $.375 at $21 after an $.875 loss Friday.