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  • October 7, 2008 11:19 AM EDT by Cody Willard

    Chill Out, Man: Tops and Bottoms Are Processes, Not Points

    Yesterday is dead and gone and tomorrow's out of sight
    And it's sad to be alone. Help me make it through the night. - Kris Kristofferson

    Here's the most frequent question from readers and viewers lately:

    The Wall Street Bailout Bill is passed. Cody, what do you suggest we do now?

    You guys know that I've been saying we'd head much lower when this TARP bill passed...and indeed, the markets are 1000 points lower since its passage Friday already. Unfortunately, I tend to think we've probably got yet more downside ahead. Oh, as a trader, I'd probably look to buy panics such as those that we had yesterday. Indeed, you can forget what I've been saying for months -- that you don't wanna be very long much of anything since we're in a clear bear market. More to the point, I've been arguing that this is a market in which all rallies should be shorted and I no longer believe that is the case.

    While I'm far from turning bullish and not ready to proclaim that "The Bottom" was put into these stocks markets yesterday when the DJIA hit 9500, I do think it's going to be tough making money on either the long or short side unless you're actively trading it. Feet to fire, I figure that we're stuck in a range bound market between 9000 and 10,500 for the next few weeks at least.

    If you've got a five, ten or twenty year time horizon, I'd actually start buying some of the most-trashed non-energy/non-financial big cap names. Pfizer yields 8% right now -- about 20 times as much as you'll get in Treasuries, and the company's cash flows and balance sheet seem pretty darn solid for the foreseeable future. Microsoft is yielding more than 2% right now -- about five times Treasuries.

    Google and Apple and RIMM are still in secular growth mode even as that growth will be slowed some by the recession/depression we're already in and the stocks are down more than 50% in just a few months' time. (Remember when Google was supposedly the "safe" haven for investors at $700? Remember when Barron's was quoting hedge fund managers as saying $25 was "fair value" for Google back when it was trading at $200? My how things cycle...Too bad Bernanke and Paulson don't realize that things cycle, but I digress...)

    I've been saying that I'll get much more bullish as prices come down and as time passes on. We've got much lower prices. And even though everybody's now wanting me to try to catch "The Bottom", I'm not sure we've put in enough time to get that bottom fully put in place yet. Besides, "The Bottom" will be a process, not a point.

    If you'd sold everything back in May 2007 when the DJIA average first hit 13,500, you'd have felt like an idiot for the next year, as the DJIA roamed above 14,000. But fast forward to today, and with the DJIA below 10,000, you'd feel like a genius regardless of missing that last few percent to the upside. You didn't need to sell everything at 14,000 to nail the top. You just needed to get out at any time as the topping process put itself in place over a year and a half.

    So too should you realize that you don't need to catch the exact bottom. Yes, the market's likely to see 10,500 sometime in the next few months. But it's also likely to drop below 9,000 over that time period too. And you'll simply want to start buying stocks perhaps about now. And give yourself lots of room and lots of time to build those positions up as the bottoming process puts itself in place over the next few months, quarters and years.

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Hillbilly #9413456

If you folks think LIBOR is issue check out mid feb. 2008 global change on SDR's to paper. Maybe Peter has it all wrong over their at MarketWatch ! NOTHING is backing gold right now. Guess it takes time for the poison to work its way into the system before the central nervous system shuts down

October 8, 2008 at 6:07 am

Hillbilly #9413456

from article: Yesterday is dead and gone and tomorrow’s out of sight And it’s sad to be alone. Help me make it through the night. - Kris Kristofferson I'd say this guy had a failing temporal model. There is no night on the sun

October 8, 2008 at 6:03 am

Rich P

HOW TO KNOW WHEN THE BOTTOM HAS ARRIVED: it's easy !! Just watch for the last person who has any money left (even if it's just pocket change) and wait till those with the greed level that is beyond infinity find him and relieve him of all his worldly possessions and cash. Then, having no more victims to rob they will make the market go up to set us up for their next attack.

October 8, 2008 at 5:19 am

A.J

What I can not reconcile is that maybe 5% of homeowners can not pay their mortcages and we have financial meltdown.With the value of an average house of $ 200,000 and 5% default rate (App.3 million houses times 30% drop in value) this represent a loss of app. 180 billion dollars.We just spend 150 billion dollars on stimulus package and 700 billion on rescue package.Eve if these houses are worth zero it still does't come to 700 billion.Can somebody explain us why we need 700 billion to save our markets. Am I wrong that the congress which is in the hands of democrats in the last 2 yers is supose to controll the financial institutions and FM and FM.Why somebody is trying to confuse us with the half truths.Or are we afraid of finding the facts.Why does't somebody ask our presidential candidates to tell us the facts.It would be very interesting to watch.Watching the C-Span where our representative are asking the experts about our state of economy pains me.After all we deserve them.We elected them. We should not complain and pay the bills for our own incompetence to elect incompetent people to our congress.And yes,maybe even to our highest office.

October 7, 2008 at 5:32 pm

Harold

Your advice is sage for those whose horizon is several years out. How about we who have arrived at our horrizon and still have a goodly part of our portfolio in equities? Why, you ask, are we still in equities? Well, there is a great dispariety in our ages. I am 75, and my wife just turned 50. A portion of that portfolio still has to grow to take care of her after I'm gone. Harold PS I'm in great health

October 7, 2008 at 4:41 pm

TPC

Cody, ya got full bragging rights, and "I told ya so's." It's going just as you predicted. All the more reason to tune in every weekday and get our Cody and Rebecca fixes. If we mention the amount of money we've seen evaporate from our accounts no one would believe us. Vast amounts. Looking forward to the future Happy Hour program where you see the light at the end of the tunnel and tell us you spot the true "recovery" coming

October 7, 2008 at 3:17 pm

Justin

Prepare for MAJOR stagflation. The world's central banks are pumping trillions of dollars into the financial systems in efforts to ward of a deflationary death spiral. Load up on energy, precious metals, agriculture, and other commodities now. Rural real estate too. There is a shadow run on the banks occuring right now. It's about to hit the fan.

October 7, 2008 at 1:15 pm

John

I'm glad to see you feel this way. I've long believed the same. I guess what I'm most frustrated about is the "chicken little" syndrome. I have parents who are retired and of course I worry about them, but I know that they are savvy and informed so they'll be fine. Not gold plated toilet fine, but fine nonetheless. This whole scenario reminds me of my ex-girlfriend who would get HYSTERICAL when something didn't go her way. It's just one of those things that we, in a free market capitalist economy, have got to go through. You can't have an UP without a DOWN, and vice versa. So... to wrap this up. C'mon, we've been in excess playing with borrowed money for years and now it's time to pay up. Fine, settle the debt, put a bandage on it, and get back in there for the next play. The crying and whining and doomsdaying is just getting ridiculous. Take a little accountability and realize that this is just an ebb in the cylce. My God people, MAN UP!

October 7, 2008 at 11:53 am

about this blog

  • Cody Willard is an anchor on the FOX Business Network. Willard is also the principal of an investment management company. He was a long-time featured columnist for the Financial Times and TheStreet.com as well as a regular featured economist and stock picker on CNBC's ''Kudlow & Company."

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