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Is The Worst Over?
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]plunging lower on Monday, they sent it across the psychologically important 10,000 level. The last time the blue chip index closed in this territory was October 26, 2004.Some strategists tell us that people are scared and the only thing they're doing is selling. As a result the Dow is breaking all kinds of technical support levels and the momentum, they think, remains to the downside.
However, others are taking an unusual degree of comfort in the selling. This is the blood and panic they’ve been waiting for that typically marks the bottom.
So which is it? Is the market going down further or have we reached the bottom? For insights we turn to celebrated contrarian investor Bill Fleckenstein to find out if he would still short this market.
The Next Stop
“It’s difficult to have a strong opinion about where the market is headed considering there are so many moving parts as to what the government continues to throw at the market,” he says.
But Fleckenstein believes the fundamental problem hasn’t changed. And that’s the housing crisis. “I think the underlying problem is that houses are priced wrong as compared to people’s incomes and the economy is not as strong as most people thought because it was fueled by people taking money out of their house."
Short Position
If you subscribe to this thesis then you want to get smaller. “I’ve cut my short position by two-thirds. I’m holding a great deal of cash and gold,” Fleckenstein reveals. For example, “I’m short IBM [IBM
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] and I own some puts on that name as well because their customers are hurting."
But don't take that to mean short every tech stock. "Apple [AAPL
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] is different," he says, "although I can’t tell you who is going to buy their stuff.”
Rough Ride
Unfortunately, there could be another shoe to drop. Fleckenstein isn't a fan of government involvement in the markets. “I think (regulators) are going to create another epic problem although I can’t tell you what it’s going to be,” Fleckenstein says.
As a result he expects a rough ride in the days to come. "One thing that’s clear is that the economy is in for some rough sledding.”
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Trader disclosure: On Oct.6, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (UUP), (MSFT), (WMT), (MCD), (BNI); Pete Najarian Owns (AAPL) And (AAPL) Puts; Pete Najarian Owns (IYR) Put Spread; Pete Najarian Owns (MS) And (MS) Puts; Pete Najarian Owns (RF) And Is Short (RF) Calls; Pete Najarian Owns (GS) Call Spread, (RIMM) Call Spread, (WB) Call Spread, (XLF) Call Spread, (NCC) Call Spread; Pete Najarian Owns (BIIB) Calls; Finerman Owns (GS); Finerman's Firm Owns (MDY), (SPY), (IWM), (MO), (JNJ), (MSFT), (DEO); Finerman's Firm Is Short (BBT), (COF), (IYR), (IJR), (USO), (SPG)
Fleckenstein Is Short (IBM); Fleckenstein Owns Gold
GE Is The Parent Company Of CNBC
Data is a real-time snapshot *Data is delayed at least 15 minutes
