Co, (NYSE:ABX) Barrick Gold Corp,
Quote.com News Item #5578123
Headline: Market Monitor, Frank Cochrane Of Investment Timing Consultants
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PAUL KANGAS: My guest Market Monitor this week is Frank Cochrane, the
president of Investment Timing Consultants, an advisory based in Farmington
Hills, Michigan. Welcome back to NIGHTLY BUSINESS REPORT, Frank.
FRANK COCHRANE, PRESIDENT, INVESTMENT TIMING CONSULTANTS: Great to be here,
Paul. Thank you.
KANGAS: This market is unbelievable with its upward momentum. For the month
of February, the Dow gained 639 points or 8.1 percent. Last Friday, third
straight record high. NASDAQ, and practically all the other indexes hitting
record highs almost on a daily basis. Are we really getting in an
overextended and vulnerable position?
COCHRANE: I think we're in very thin air here. And the plurality of the
market is somewhat narrow. For example the Dow Industrials in this most
recent move, you've had basically 12 stocks accounting for a majority of the
move which on a weighted basis accounts for about 60 percent, 67 percent of
the Dow Industrials. So the plurality's not there. Secondly, the confidence
numbers which are coming out with respect to the economy are strong, very
strong, in fact the highest in 40 years in consumer confidence. I think
that's going to make interest rates move higher therefore that will be a drag
certainly on the stock market. Thirdly, Asia. That question is still out
there, has been for the short term placed on the back burner. However that
may negatively impact earnings. That's still a big question that looms.
KANGAS: But if earnings slowed downed so should the economy. And interest
rates shouldn't go up, should they?
COCHRANE: That's true. But the thing is the economy is, is strong. That's
the fact that remains.
KANGAS: And labor markets are tight.
COCHRANE: Very tight. I think you'll see a-
KANGAS: How big a move are you looking for in the long term, the 30-year bond
interest rate to go?
COCHRANE: I would expect bond yields to move towards this, the end of this
year towards the 7 percent level. So I'm looking for a very significant
level, move up. And once we get above, significantly above the 6 percent
level, we sort of toyed around with that today, that'll make people a little
bit nervous on the March Bond Contract Futures down below 120. I'm looking
for a significant move up in rates.
KANGAS: Last time you were with us, September 5 of last year, the Dow was at
7822. You were still bullish on the big blue chips of the Dow stocks, but
much more so on the high tech issues particularly the
NASDAQ leaders. You recommended Microsoft (NASDAQ:MSFT) at 68. It's now 85
considering the two for one split. Dell (NASDAQ:DELL) at 87. It's now 138.
And
Intel (NASDAQ:INTC) at 94. It's now about 91. Are you selling into the
strength,
the recent strength in these issues?
COCHRANE: Absolutely. And I think probably Intel tells you a big story.
Intel at that point and time was in the 94, 95 range.
KANGAS: Right.
COCHRANE: Today we're at the high. It closed I think in the high 80s. That
stock has not moved up although the NASDAQ 100, the NASDAQ Composite has moved
up and made new highs. That
stock for example maybe a short sale candidate to pick up 10 or 20 percent or
so-
KANGAS: You are getting negative, again.
COCHRANE: Oh, absolutely. In that situation you've had a few stocks moving
the NASDAQ higher. A few moving the Dow higher. A few moving the S&P higher.
Plurality is not good. Therefore at this particular point in time with the
Dow at 8550 liquidity is paramount in my mind.
KANGAS: How much liquidity? What would be the amount that you would have in
cash?
COCHRANE: Our current asset allocation is 70 percent cash reserve, T- bills,
that type of thing.
KANGAS: Nothing out further than what, two or three years?
COCHRANE: Correct. And shorter in some, in some cases. That's, that's the
bottom line is liquidity is paramount. I would have- buy some resource
stocks, gold stocks, that type of
thing-
KANGAS: Gold stocks? Again? Frank?
COCHRANE: Well the last time I think I meant silver, not gold.
KANGAS: Your name is Frank, not Warren.
COCHRANE: But one stock, one recommendation I would make would be Euro-Nevada
(EN.TO). That stock trades around $20 a share, Canadian. So you're buying it
at $13, $14, U.S. It trades on the Toronto Exchange.
KANGAS: But you liked back then in September Newmont (NYSE:NEM), Homestake
(NYSE:HM),
Barrick (NYSE:ABX). They're all down significantly. And you even liked Pegasus
which went bankrupt.
COCHRANE: Well, you know, the way that our clients participate in gold, gold
shares is through mutual funds. That's the definite way I'd recommend doing
it.
KANGAS: The advantage of diversification?
COCHRANE: Absolutely.
KANGAS: Right.
COCHRANE: And in that situation, certainly that's the way I would play that
market. However, if people want individual stocks, certainly there are those
out there to purchase.
KANGAS: So you're not giving up on gold. You think it still has a chance to
make a strong rebound?
COCHRANE: Yes I do. The inflation numbers should slowly start up ticking
with the economic strength. Asia, we'll see what happens there with respect
to earnings. But I think the big story here is how strong are the economies.
Look at the GDP numbers today, the strongest in 9 years. That's really
telling a story.
KANGAS: All right. A very negative Frank Cochrane. I haven't seen you like
this in quite some time. But we appreciate your view. And thanks for sharing
it.
COCHRANE: Thank you, Paul.
KANGAS: My guest Market Monitor, Frank Cochrane, president of Investment
Timing Consultants.
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