Market Monitor- Douglas Jimerson, editor and publisher of "National Trendlines"
Friday, May 12, 2006PAUL KANGAS: My guest market monitor this week is Douglas Jimerson, editor and publisher of "National Trendlines." Welcome back to NIGHTLY BUSINESS REPORT, Doug.
DOUGLAS JIMERSON, "NATIONAL TRENDLINES": Thank you, Paul, back with a vengeance.
KANGAS: Well, you`ve been a vengeance, you`ve had a vengeance for bearish thought. Is the reason for that for so long is that the kind of sell offs we`ve seen the last two days, you figured this was going to happen?
JIMERSON: Yes, I hate to say I told you so. You know, I have felt that there was danger in this market. The NASDAQ 100 topped back in early January. When I was here in November, I said be in a short NASDAQ 100 index fund.
KANGAS: well, it`s led the way down, there`s no question about that.
JIMERSON: Yes indeed.
KANGAS: What`s behind the selling?
JIMERSON: Well, I think the main problem is that the Fed has been hiking rates and we finally got to the point of breaking. We`ve got the discount rate reaching 6 percent for the eighth time in history of the Federal Reserve and each time they have reached 6 percent or higher, we`ve had a major top in the market.
KANGAS: Are we going to go higher still on Fed funds short-term rates?
JIMERSON: I think we could go higher on short-term rates. I think the long-term rates have reached a near-term peak. KANGAS: How about oil? Has that reached a peak?
JIMERSON: Oil reached a psychological level of $75 a barrel. I think that`s probably topping out.
KANGAS: Well, how low can the stock market go on this correction that you`re calling for?
JIMERSON: Well, it`s hard to say. It`s an intermediate term correction that should last into the fall, 15 percent or more and we`ll just have to see how it unfolds.
KANGAS: Well, gold is telling us inflation is in our future. Do you believe that?
JIMERSON: Well, I think that gold has been running up on concerns about the dollar and other uncertainties. I don`t see inflation as a problem but gold I think also may be topping out having surpassed that $700 psychological level.
KANGAS: The last time you were with us in early November, you recommended buying two funds that deal in Japanese stocks. Let`s see how those funds have done since then. Rydex a very nice move, 26.5 percent to the good and Fidelity Japan fund up nearly 24 percent. Congratulations on two great calls there. Are you still with them? Would you buy them here?
JIMERSON: I would. You know, there`s going to be a correction there but again, the Japan market is recovering after that prolonged sleep, slumber and, you know, I think the icons on Wall Street have some gall to be so bullish on U.S. stocks. This is probably not the place to be investing.
KANGAS: So you`re staying with the Japanese stock market?
JIMERSON: Yes.
KANGAS: How about some new recommendations, Doug?
JIMERSON: Well, I think we can also look in Asia at the China market through the Fidelity China Fund. And this, of course, has been moving up.
KANGAS: We can see that.
JIMERSON: There will be a correction of some sort, but I think the longer picture looks good for this. KANGAS: Boy, that`s had a very strong chart, no question about it.
JIMERSON: No question.
KANGAS: How about another recommendation?
JIMERSON: And I think that the U.S. Treasuries are an important buy here and so I would recommend the American Century Target 2020 fund.
KANGAS: What does that have in its portfolio?.
JIMERSON: It has U.S. Treasury strips with a target maturity of 2020. So they`re long term.
KANGAS: Long-term bonds basically but this specific fund deals only in that.
JIMERSON: Right. So it`s skidded for quite a while now and this is a buy point.
KANGAS: You think this is the turning point?
JIMERSON: I think this is the turning point.
KANGAS: OK.
JIMERSON: And for the dollar, you know, a lot of these markets are in a turning point and here`s another one. We look at the NASDAQ, where actually the NASDAQ 100 peaked the first week of January, but this is a good buying point for the short Profunds ITC short.
KANGAS: So this is a bearish fund? So you`re expecting the NASDAQ 100 to go lower and that way you profit.
JIMERSON: Correct.
KANGAS: OK. So you`re staying with the NASDAQ bearish.
JIMERSON: Yes, that`s right. I recommended that in November and now we`re really seeing the opportunity.
KANGAS: OK. Any of these securities you`ve mentioned, do you own them personally?
JIMERSON: No, but our clients do have these funds and the other position we have is money markets which are now yielding 4.65 percent, hard to beat that. KANGAS: OK. Doug, thanks very much for your input. We appreciate it.
JIMERSON: Thank you.
KANGAS: My guest, Doug Jimerson of "National Trendlines."
