"Market Monitor"-Frank Cochrane, President of Investment Timing Consultants
Friday, July 24, 2009PAUL KANGAS: My guest "Market Monitor" this week is Frank Cochrane, president of Investment Timing Consultants, a financial advisory firm based in Bloomfield Hills, Michigan. And Frank, welcome back to NIGHTLY BUSINESS REPORT.
FRANK COCHRANE, PRESIDENT, INVESTMENT TIMING CONSULTANTS: Great to be here, Paul, thank you.
KANGAS: Is the stock market's sharp run up justified by the recent signs of economic recovery, these green shoots as they call them?
COCHRANE: Short-term, Paul, I would say no. I'm somewhat negative on the outlook for say the next few weeks to a month or so. The market sort of been discounting much stronger earnings. The earnings that came out, they were so low that I think a snail could have jumped over them, the bar in that sense. The fact that credit's going to come back and the consumer's going to start spending. I really don't see that out there. I think basically the market came out there right around 9,000. That's basically where we are now.
KANGAS: Are you telling your clients to ride the rally, nonetheless or take profits?
COCHRANE: Well, I think what we have to do in this environment is you have to trade and that's something I've said for the last couple of years. Where we are in a environment now where I think the top end of the market is 14,000. The bottom end could be 5,000 on the Dow and I think over the next several years what we're going to do is basically trade within that -- within that -- those two numbers.
KANGAS: OK, so in and out and when you got a nice profit, take it. That's it. It's as simple as that?
COCHRANE: Exactly.
KANGAS: All right. In February, you gave -- actually you gave us three possible scenarios for stocks. How have those played out?
COCHRANE: I talked about an L pattern which didn't -- that didn't work out, in fact, we're 900 points on the Dow above there now.
KANGAS: Uh-huh.
COCHRANE: We went down to 6,600 on the Dow and I looked for the S&P to go down to about 650 and that's what we did and then we bounced smartly from there. My outlook right now is, certainly the Dow could move up to say the 10,000, 10,500 level and the S&P up to say 1,100 but in the bigger picture, this is a trading environment. One must trade this market, trade this market, the buy and hold or the buy and hold is not going to work anymore in my opinion.
KANGAS: OK, now you gave our viewers two buy recommendations last February of a bearish nature. Let's see how they've done. We'll put them up here. Pro shares, ultra short obviously, they haven't fared well, down 34 percent. And the ultra-short Russell 2000 down 45.5 percent. Now you are not still holding these, I assume?
COCHRANE: We trade in and out of those things. And as you can see from the chart, shortly after I recommended, they were up about 50 percent. That's what we've got to do with these things is you cannot hold onto them. You must trade them. They are two beta ETF's and that's what they're for.
KANGAS: OK, so you're saying that buy and hold is dead basically?
COCHRANE: Absolutely -- yes, I am. Again, we're unwinding 25 years from '82 of -- you know, too much leverage.
KANGAS: Uuh-huh.
COCHRANE: Too much spending, not enough saving. That's going to take several years, many years, um, to take care of and then so I think you're going to see some very volatile moves, big up moves and big down moves over the course of the next five years or so.
KANGAS: Frank, how about some new recommendations?
COCHRANE: First thing I would do depending on my time horizon is I would have a lot of cash here. I think on a short term, especially if a person is looking for say a one to a couple-year time horizon, I would have at least an 80 percent cash position. If you must buy a stock, I would buy AT&T (T), good dividend, lots of cash in the bank, so to speak and that stock, you know, it looks like it's ready to break out so that's a good, safe stock.
KANGAS: OK.
COCHRANE: And, um, the third thing I would go with is the USO (united States Oil Fund. I think longer term --
KANGAS: This is an ETF, right, ETF?
COCHRANE: That's correct. (INAUDIBLE) I think this one I would hold onto because I think over the course of the next 18 months or so, I think oil is going to head a lot higher, simply based on supply, not necessarily demand.
KANGAS: So the price of USO is directly linked to the price of oil?
COCHRANE: That's correct which I think over the course of the next 18 months is going a lot higher.
KANGAS: Do you personally own the securities mentioned or have other disclosure to make, Frank?
COCHRANE: I do not currently own them but I trade them from time to time.
KANGAS: Well our time has run out Frank, but thanks for being with us once again.
COCHRANE: Thank you very much, Paul, great to see you.
KANGAS: My guest Frank Cochrane of Investment Timing Consultants.
