Americans trying to weather the still-worsening recession should create diverse portfolios and expand into global markets, agreed a panel of experts.

“The trigger was when the housing market turned and we are learning just how long the tentacles from housing might be,” said Carl R. Tannenbaum, an economic consultant, speaking at the Naperville Area Chamber of Commerce’s regional economic forecast seminar at the Holiday Inn Express in Naperville.

The United States has not felt a deep recession for nearly a generation and it looks as if the current incarnation will follow suit.

“It’s going to be a fairly weak recession,” said Todd J. Barre, vice president Harris Private Bank. “I think there are some pretty strong counter-balancing forces.”

While the housing and automotive sectors are pulling down the economy, other markets, like manufacturing, are prospering from the weak value of the American dollar.

“Housing and automotive today only make up 9 percent of the economy,” said John P. Calamos, chairman, CEO and CIO, Calamos Investments. “We look at it as a rolling sector type of recession rather than the whole economy being soft.”

That being said, the decline of the housing market, in which sub-prime lending acted as a catalyst, is causing serious stress to the economy. In the last few years, housing sales have dropped by 35 percent, including 10 percent over the past 12 months, with another 5 to 10 percent left to go in some areas.

“These are the kinds of things that come as shocks to the system,” said Tannenbaum.

Through foreclosures and bad lending decisions, many of the nation’s largest financial institutions have had to recognize significant amounts of loss, noted Tannenbaum, which means investors have become more risk averse and are now holding money very close to the vest.

“When credit is not flowing through our economy well, businesses are going to have to pay a little bit more to borrow and are less likely to expand, less likely to hire people and less likely to buy more equipment,” Tannenbaum said. “That’s the kind of behavior that can slow the pace of economic growth.”

The panel agreed that sub-prime lending, which lenders participated in an effort to reach out to communities that traditionally did not have many homeowners, has caused the housing crisis.

“Our government has always promoted home ownerships,” said Tannenbaum. “Yet this process was clearly taken too far.”

During the sub-prime surge, lenders began to reach out to perspective borrowers who were unaware that their low introductory rate was going to multiply significantly after the first few years and were counting on the fact their homes would increase in value by 10 percent each year.

“Some of those lenders lost their way, focusing less on the borrower’s ability to pay and, in essence, became real estate speculators themselves,” Tannenbaum said.

“At the borrower level, it’s clear we need to reinforce people’s understanding of some very basic financial concepts. They need to be helped along the way so they don’t end up in some bad situations.”

This sub-prime dilemma has put the government in a precarious situation, the solution to which is not easily agreed upon. Based on historical study, the Federal Reserve will most likely continue to lower interest rates in an effort to boost the economy but that strategy may need to be rethought.

“The sub-prime problem was the result of interest rates being too low, resulting in people taking on leverage and speculating in the market,” said Calamos. “I’d hate to see the government bail them out. I think that sends a really poor message.

“If you bail out the people who take these risks, what you get in the next cycle is a bigger bubble. You set up this super cycle and it’s kind of like a house of cards.”

This situation has created an uncertain environment for investors, who must now decide how to traverse their way through an unstable market. One strategy is to look overseas for investment opportunities.

“All diversified portfolios should have a position in international stocks,” Barre said. “International investing has been far more profitable than the U.S. domestic market over the last five years.”

The common perception is that when the U.S. sneezes the rest of the world catches a cold. Yet, considering the weak value of the American dollar, this currently does not appear to be the case.

“Our economy may slow down but other economies will continue to do well,” said Calamos. “If you can take advantage of this great global economy, I think you should do so.”

U.S. companies that do have a global investment strategy are doing very well, as confirmed by America’s trade deficit falling in 2007 for the first time in 12 years.

“The dollar is very weak which helps us sell our products at more competitive overseas prices,” Tannenbaum said. “I always recommend to people that the world does not end at the borders of the United States. There are lots of opportunities overseas.”

Boosting the global economy are the emerging markets in Asian countries like India and China.

“Those citizens for the longest time could not afford many of the products and services that we sell,” Tannenbaum said. “Now, as they are emerging and earning greater wealth, there is a community of people that can afford those prices. Car sales in China are growing rapidly and there are a number of American parts in those vehicles.”

Calamos confirmed the value of emerging markets overseas.

“Globalization is great in the sense that it’s really creating two or three billion middle classes all over the world. That buying power is just terrific.”