"Street Critique"-Doug Roberts, Chief Investment Strategist at Channel
Wednesday, August 19, 2009PAUL KANGAS: Tonight's "Street Critique" guest says right now the markets are particularly susceptible to bad news even with the economic optimism we've been seeing. He's Doug Roberts, chief investment strategist at Channel Capital Research and author of "Follow the Fed to Investment Success." Doug welcome to the program.
DOUG ROBERTS, STRATEGIST, CHANNEL CAPITAL RESEARCH: Thank you, Paul.
KANGAS: On Wall Street we saw big selling on Monday followed by modest comebacks yesterday and today. What is your take on the current market?
ROBERTS: Right now we've come a long way, Paul, from a period in March we were at an extreme degree of pessimism. People thought the world was falling apart. Now we've been fueled by basically better than expected earnings and also better than expected economic news. Although the absolute news hasn't been particularly good, it has been better than expected. We're now seeing a few chinks in the armor that are appearing as news throws doubt on the question. Although there may be a bottom, the question is how much of a bounce we'll be getting and that's really what you're seeing over the last couple of days.
KANGAS: So you're not a full-fledged bull by any means, are you?
ROBERTS: No. I think I can be bullish short-term. But I think long- term these problems are going to take some time to work out.
KANGAS: I understand you're expecting the markets to suffer from performance anxiety this fall . What do you mean by that?
ROBERTS: Performance anxiety means that the market tends to go up, you're going to have a lot of long only money managers who are going to be forced to participate in this just to keep their jobs. There's a saying on Wall Street that if you're down when everybody else is down you're not going to get hurt, may not get a bonus. However if you're down or lagging when everybody else is outperforming, that's a real danger to your job so, you may have a lot of money managers who are forced to buy into this market if it continues to go up. Even if the numbers -- even if they really don't believe that this is a lasting rally.
KANGAS: Interesting and I think you're right on target there. Tell me about what you call your three bucket approach to investing. What is that?
ROBERTS: Well, in this type of environment where there's a high degree of uncertainty, I believe that investors have to divide their money into three buckets. The first bucket is money that you need immediately and that should be very, very safe and concerned more with preservation of capital and return of capital than return on capital. Then you have your long-term money which can be a bit more aggressive and long-term with. And then the third bucket is really money that you have in the middle and you really have to view that as more trading money, money that you're going to take profits much more quickly as they arise.
KANGAS: Now with that in mind, what is the favorite sector that you have right now in the stock market?
ROBERTS: Right now I believe this is a government trade, really areas that are going to be benefiting from really the government involvement in the economy which is increasingly on life support with government help and that's really technology, since technology benefits from really the fact that you can replace jobs with software, with technology solutions and that's a much cheaper alternative. I think that's going to continue. Also you've seen in health care really that's again a government focus and right now the pharmaceutical industry has determined that they can make money in this environment by lowering their marketing costs.
KANGAS: So technology and health care, pharmaceuticals.
ROBERTS: Exactly.
KANGAS: Very good, Doug, our time is up but I want to thank you for being with us.
ROBERTS: Thank you, Paul, for having me on.
KANGAS: My guest Doug Roberts, chief investment strategist at Channel Capital Research.
