What the Pros Say: Buy a Mattress!
Uncertainty over Washington's bailout plan is running high and volatility is likely, so investors should stick to the safest bet, experts told CNBC on Thursday.
Signs of a Stabilization
"Markets are reacting to good news," says Jordan Kotok Barclays Capital global head of technical analysis. And if you look at bank stocks, “they’re actually outperforming the broader market.” And that, he says, “is a pretty good sign.”
Cash is King
"Cash is king at the moment, it's very unstable, equity markets are very volatile, at least for a short-term period. On a longer-term view, we have private equity which could be a great opportunity…I think next year's going to be a great year for private equity, there's a lot of distressed situations on the market that can be picked up," Karsten Schroeder, CEO of Amplitude Capital said.
Look at the Market Places
“To truly price many of these illiquid assets right now,” says Jon Najarian, OptionMonster.com co-founder, “you need a structure.” And that’s why investors should look at stocks like the Nasdaq and CME Group. “It is incumbent on us to get the best price we can for these assets,” he says. “You do that in a big marketplace.”
Buying the Bailout
With Congress set to pass bailout legislation, it’s time to look for a CA homebuilder with a good balance sheet, says Mad Money’s Jim Cramer. The one best positioned to benefit is KB Homes. "It’s the quickest way to make money" off the plan, without taking on the added risk of investing in a bank. And if you’re looking for a play where you don’t have to worry about earnings: CSX, says Cramer.
"I think the market is neither cheap, nor expensive, I think it's range trading. Stay in cash, is a good solution. Whether you want to be in bonds, it may be a good idea," Jacob Schmidt, CEO at Schmidt Research Partners told "Worldwide Exchange."
"There's a lot of low risk (trading) taking place; positions are very light. It is quite a difficult environment to have quite a clear 12-month outlook from here. I think the outlooks have shortened," Thanos Papasavvas, head of currency management at Investec Asset Management said when discussing currency investments.
Stay on the Sidelines
Stay on the sidelines when, and if, the bailout plan gets pushed through, advises Kirby Daley, senior strategist at Newedge Group.
As Safe as Cash?
It won't be hard for the U.S. to sell its treasury bonds to raise that $700 billion it needs to finance the bailout plan, says Magnus Prim, chief strategist Asia, trading strategy at SEB Merchant Banking.
Gold Under Your Mattress
"Anyone who's sold houses in the last little while, anyone who's successfully been in and out of the commodity markets, etc, has piles of cash, and keeping it in the bank is a risky business," Merryn Somerset Webb from Money Week said. "We do have the (UK) government's bank, Northern Rock which offers fantastic rates of interest."
"There are a variety of gold funds…, there are various gold-related ETFs and you can always buy it physically and keep it under your mattress – it would be the safest possible thing you could do," Somerset Webb advised.
"All you can do in a situation like this, as a retail investor, is preserve your capital, and that involves not going near the equity markets not going near the property markets and maybe buying a few Guilts."
S&P Could Rally to 1,260
The S&P 500 will likely try to rally back to around 1,260 after the bailout package emerges, despite bearish signs in the index's chart patterns, Clive Corcoran from Tradewithform.com told CNBC Thursday.