Investing in a thrashed market

Depending on what you read, we're either headed for a return of the '30s and another depression, or a return of the '70s with serious stagflation, both of which are terrible for investments. So, given the fact that I have no training at all in the financial sector, I've decided to put together a 2009 portfolio allocation that will (I hope) soundly beat the market. By doing this, it'll (again I hope) prevent me from making dumb, impulsive trades mid-session.

Note that this assumes first that we're not headed for another Great Depression, and that after what will undoubtedly be a tough 2009, there will be some hope of recovery. All signs are that our government will try and print dollars to get us out of this mess, so let's see where that takes us.

For a longer-term horizon with a decent appetite for risk, a general 85% stocks, 15% bonds allocation is good. I'll also throw in some other investments for more diversification. Here's my call for 2009:

It's looking like the market is really betting on deflation for an extended period. Check out the charts below for the 30-year bond yields over time.















Goverment bond yields are at extreme lows, not surprising with a 0% Fed target rate. I see a lot of risk to losing money in goverment bonds (we're pretty much at the end of the line with rate cuts, for one), and am actually looking to short them and put money into investment-grade and junk bonds, which may pay well even with a lot of defaults. It may take all year for this to play out, but I'm betting it will.

Intermediate-term Investment-Grade Bonds: 7.5%
High-Yield Corporate "Junk" Bonds: 7.5%
Ultra-Short Treasury Bonds (TBT): 5% (changes 2X the opposite direction of 30-yr gov't bonds)

Also, I usually stay away from gold as an invesment--it doesn't do anything useful like grow or pay dividends and are taxed as regular income, but in this uncertain environment where the dollar may dive and inflation may rise, it could be a good hedge.
SPDR Gold Shares (GLD): 5%

I still can't stay away from stocks, since you really never know when there will be a recovery, but I will lean heavily towards recession-friendly sectors like Health Care and Consumer Staples.
Vanguard Health Care: 10%
Vanguard Consumer Staples: 10%
Vanguard 500 Index: 10%
Vanguard Total International: 20%
Vanguard Emerging Markets: 5%
Vanguard Small-Cap: 10%

Throw in some Real Estate for more diversification:
Vanguard REIT: 5%

That's my guess for 2009--let's see how it all plays out!