"Market Monitor"-Frank Cochrane, President of Investment Timing Consultants
Friday, August 22, 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: Great to be here, Paul, thank you.
KANGAS: Since early this year when the Dow was around 12,500 and the Standard & Poor's 500 around 1330, you have been very bearish on the stock market and indeed, it has been no bowl of cherries. You predicted their would be many sharp rallies on the way down. So the question is, was today's upturn just another pause in what is still a long-term bear market, in your opinion?
COCHRANE: Yes, Paul, I think longer term we are definitely in a protracted bear market that will extend into late next year, early 2010. However, that being said, for the very short-term and I am talking about into the late September, perhaps early October time frame, I think the market will go considerably higher, I think the Dow could move up 1,000 to maybe 1,500 points.
KANGAS: What are the main positives, Frank, setting the stage for this short-term rally? What are the main positives?
COCHRANE: Well, certainly oil, oil is the big thing. Based simply on a chart pattern, I am not an oil analyst, it suggests to me that oil, and if you look at today the biggest dollar drop since 1991, I think it is headed back towards say 90 to 100. I think that is a big thing. If you look at the dollar, the other side of that trade, the dollar to me appears as though it has broken out and appears in a significant up trend. Whether it is long-term only time will tell. Sentiment is still very, very negative and therefore from a contrary standpoint, that a bullish thing and the inflation statistics, although at 27 year highs, I think we are going to find that over the next few months and the market being a leading indicator reacting before that, we will see the inflation specifics go lower and therefore not be a big a concern to the Fed which right now is neutral. I think the Fed is not going to do anything throughout the rest of the year and into next year given the overall economy.
KANGAS: What would change your outlook to bullish for the long-term?
COCHRANE: Housing. I think housing is the key here. With housing goes the financials and with the financials goes the stock market and so on, sort of a domino effect. I don't think the overall picture in housing is completely bottomed yet. It wouldn't surprise me to see another 10 to 15 percent move down and one more leg down as we go into 2009 so I think that is going to be the last straw, if you will, for the market for the stock market, and the economy as we go into 2009 and then after that, also we are going to have the election results as well.
KANGAS: OK. On your last visit in late February you gave our viewers two recommendations. Let's see how they have done since then. These were trading recommendations, and the silver trust shares (SLV), they had a 10 for one split, I understand, was a lot higher than this but they're still down 32.6 percent from where you recommended them back in February.
COCHRANE: That is a position that we were out of long, shortly after that recommendation and the commodities to me basically are imploding here. I think that is going to continue. I would not be buying gold or silver here. Certainly if you look at for example the situation that went on with Georgia and Russia and the metals react the way they typically do that is telling you that things are not going the right way, at least for the gold and silver bears.
KANGAS: And you were short an ETF back in February too and that's up about a tenth of a percent. Are you still with these securities?
COCHRANE: We trade in and out of them, Paul. That particular one, the SDS is one that we bought, because it is an inverse two times the S&P 500.
KANGAS: Frank, how about some new recommendations. We just have a minute.
COCHRANE: Given the fact that I think that the dollar is on an upward trajectory if you will, I would go with the FXE, which we're going to short that particular one and that is going to be shorting of the euro dollar. I think that right now is at $1.48 and change. That could move down to say the $1.30, $1.35 area and if it breaks out, it will go lower.
KANGAS: Quickly now, a second choice.
COCHRANE: UYG, this is a turbocharged one of the financials. I believe that the financials will bottom short-term, a trade up to say 25 to 27 area, certainly if it gets up there you want to lighten up on that one, but I think we are seeing some type of bottom process and certainly with the news of Lehman today too, that helps.
KANGAS: OK.
COCHRANE: The third one is certainly a fallen angel and one that is not widely liked but being from Michigan I think General Motors (GM), although it may take an L-shaped bottom and may bump along here a little while, I think GM around $10 a share is extremely cheap, attractive and it is a good stock longer term.
KANGAS: Do you personally own any of the securities, yes or no?
COCHRANE: From time to time, Paul, yes, we do.
KANGAS: OK. Frank, thanks for being with us, once again.
COCHRANE: Thank you, Paul.
KANGAS: My guest Frank Cochrane, president of Investment Timing Consultants.
