"Market Monitor"-Frank Cochrane, President of Investment Timing Consultants
Friday, February 29, 2008PAUL KANGAS: My guest market monitor this week is Frank Cochrane, president of Investment Timing Consultants, a financial advisory firm based in Bloomfield Hills, Michigan. Welcome back to NIGHTLY BUSINESS REPORT Frank.
FRANK COCHRANE, PRESIDENT, INVESTMENT TIMING CONSULTANTS: Paul, it's great to see you.
KANGAS: Well, another rugged day for investors on Wall Street. The question is, is the economic news bad enough to justify such a steep sell- off?
COCHRANE: Well, obviously, the market thinks so. I think, Paul, what we're entering here is this is going to be a grinding bear market, something that's going to take many quarters and a couple of years to sort of unfold for a number of reasons, but obviously, housing is sort of the pinnacle of that and the questions there. And that falls on the banks, and so on. So I think we're entering something unlike we've seen in a long, long time, probably the closest I could say was maybe -- other than the early '30s would be the '73-'74 time frame. And I think what we're going to do if I wanted to picture the two up, I would say 2008 will be like 1973 and 2009 will be like 1974 in that 1974 was the worst and that the market declined by almost 30 percent that year. I think that will happen in 2009 primarily because if you accept the theory that perhaps all the stimulus that we're getting now will have been for naught and there won't be that much ammo left in the machine guns, so to speak, to stop these things, and that will cause a problem in 2009. That's where I say the bottom being a place, probably late 2009 early 2010.
KANGAS: And down as much as 30 percent from this level?
COCHRANE: I think you could go even more. It all depends what unfolds and unwinds and so on. What we have now is a very severe credit crisis and lack of liquidity in the market. That's what the mark thrives on. That's the fuel that drives the engine.
KANGAS: What strategy are you using to weather stormy days like this?
COCHRANE: Well, I think what you have to do, first of all is trade the market, but secondly, I would take a more bearish slant and either be short some stocks or be heavily in cash. I think -- and it's not something -- you're going to see some significant rallies. For example, the 2000- 2002 decline, the 80 percent decline in the NASDAQ 100, you saw 35 or more rallies that were in excess of 5 percent. You're going to see some significant rallies in this downturn. However, I think when you look at it now or last October, again, through the end of next year into early 2010, you're going to see a significant decline.
KANGAS: During your August visit the last time you were here, you had three buy recommends for our viewers. Let's see how they've done since then. Ultrashort, Triple Q's (QID) up nearly 18 percent, ultrashort Russell 2000 (TWM). You were a bear then and you're a bear now. That was up 24.6 percent. Are you still with those?
COCHRANE: Yes, Paul, those are trading vehicle for us, but definitely, and that's something -- the very volatiles you can see from the chart and if somebody is uncomfortable with that, you can use a 10 or 15 percent trailing stock to try to mitigate the volatility.
KANGAS: OK, there was one other recommendation that you had back then, Precision Drilling Trust (PDS) and that's up 16.2 percent. Still with that one?
COCHRANE: Yes, nice dividend there. It pulled back a bit after I recommended it, but I think that could go up to the 30 to 35 range over the next couple of years.
KANGAS: OK, our time is drawing short. Any new recommendations, Frank?
COCHRANE: Yes the I-shares silver trust, which is a little bit pricey. It pulled up nicely from the $130-$195 area. That could pull back to $160 if silver goes back to around $16, but I think eventually that could be around $300 to $350 easily a share over course of the next couple years.
KANGAS: Trading symbol SLV.
COCHRANE: Correct.
KANGAS: OK, another one?
COCHRANE: Symbol SDS.
KANGAS: Ultrashort Standard & Poor's -- you are bearish.
COCHRANE: And that, again, is a two times index. You buy this and what it is, as the market down, it increases in values much like the QID and the TWM. So it's an inverse relationship to the market.
KANGAS: You've been making money with your bearish strategy, haven't you?
COCHRANE: Yes, sir. And the thing is, in the big picture I believe that these were things to hold. Again, there are many things you can do, use stops, trailing stops, that type of thing.
KANGAS: Do you personally own the securities you've mentioned here?
COCHRANE: From time to time, Paul, yes, we do.
KANGAS: But that's because you're a trader in and out, back and forth, OK.
COCHRANE: Yes, that's correct, Paul.
KANGAS: I want to thank you for being with us once again.
COCHRANE: Great, Paul, thank you.
KANGAS: My guest, Frank Cochrane, president of Investment Timing Consultants.
