"Market Monitor"-Frank Cochrane, President of Investment Timing Consultants
Friday, February 16, 2007
PAUL 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: Thank you, Paul. It's great to be here.
KANGAS: The stock market has racked up some impressive gains this week, especially the blue chip Dow, which of course has reached three records in a row. Do you think these price levels are getting a bit rich in relation to the condition of the economy or is the market fairly priced or even under priced?
COCHRANE: Well, certainly, the highs that we made back in 2000 as far as the NASDAQ’s concerned, we’re not even half way there. The Dow’s just started late last year, this year to make new highs. But I believe that the bearish case, or the benign case for the economy is actually a bullish case for the market. If we look at the economic data that's come out with respect to retail sales, consumer confidence and certainly housing starts today, which were abysmal, that lends itself to a very friendly fit and the Fed itself has basically said that we're seeing benign inflation – a little higher than they'd like to see, but I think overall, the economy is just at that sweet spot and that should continue for some time.
KANGAS: Goldilocks is here, correct?
COCHRANE: I think so.
KANGAS: When you were with us last in mid-August, you correctly predicted that the Federal Reserve would leave interest rates unchanged. Do you see any changecoming in the foreseeable future? Apparently not.
COCHRANE: No, Paul, I think over say, the next six months or so, I think it will be steady-Eddie. Rates should stay pretty much where they were.
KANGAS: Also in August when oil was around $75 per barrel, you predicted it would fall into the 50s and that was one reason why you were so bullish on stocks back then and you really were bullish. Those are two great calls. Where do you see oil headed now?
COCHRANE: I think we're at near the upper end of the range. We could maybe go as high as 65 to maybe 70, which would obviously be a little higher from here. But I wouldn't be surprised longer term, going into late this year, that we go back Tuesday towards the 40s. I think from a technical basis, that's entirely possible.
KANGAS: And that's good for the stock market.
COCHRANE: Absolutely.
KANGAS: On your last visit, you had three buy recommendations. Let's see how they've done since mid-august. We had Semiconductor Holders, an ETF, up 4 percent. And then the NASDAQ, the quadruple Q’s up 15.3 percent. Those did very well for you. And the third recommendation was Pulte Homes which is up 8.2 percent. Are you still with all three or have you gotten some money off the table?
COCHRANE: As far as the high-tech stocks, the semiconductors, and the triple Q’s, I would -- I would take the money off the table there. I think the technology areas should be somewhat weak, looking into the spring and summer. And I like the big blue chip stocks, and we'll talk about that in a moment. As far as Pulte Homes is concerned, I think the dirge is playing there and I would buy home builders here, and Pulte is certainly one I would hang on to. It’s certainly at the low end of the range and I think that they should see nothing but up. It may take some time to get there but it should start moving higher shortly.
KANGAS: OK. Do you have some new recommendation? We have just a little over a minute.
COCHRANE: Sure, Paul. The first one is SSO. This is the Profunds two times. Now if, for example, the S&P 500 is up 1 percent, this will be up 2 percent. So it's twice the pain or twice the gain, depending on which side of the market --
KANGAS: So it's a leveraged situation. COCHRANE: Leverage the S&P 500. That's correct. I’m very bullish on that over the course of the next several months. Secondly is MVV, which is the same thing, Profunds, but for the Midcap 400. Again, another leverage situation. And if you're bullish on the market, which I am, I think that that's a good place to be.
KANGAS: OK.
COCHRANE: Third one is ADRE, Bank of New York emerging markets, ADR for the emerging markets 50. Again, they have some international flair in there. That's one that I would buy. Finally Beazer Homes, BZH. Again, I believe home builders, much longer term -- this is not a short-term trade -- are certainly a good core holding in a portfolio because again they're scraping the bottom in terms of the (INAUDIBLE).
KANGAS: All right Frank, do you personally own any of the securities?
COCHRANE: No, I do not, Paul.
KANGAS: OK. Listen, our time has run out, unfortunately. But I want to thank you for being with us again.
COCHRANE: Great, Paul, thank you.
KANGAS: My guest Frank Cochran of Investment Timing Consultants.