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What the Pros Say: Swap Jitters, Bottom Searches

Even though world stocks slumped to their lowest levels in five years Friday. Even as measures from the U.S., UK and other countries to fight the worst financial crisis in 80 years have failed to calm credit, money and stock markets, and quell investor fears.

WALL STREET IN CRISIS - A CNBC SPECIAL REPORT
WALL STREET IN CRISIS - A CNBC SPECIAL REPORT

Lehman Credit Default Swap Jitters

One key focus for the market is the pricing of Lehman Brothers credit default swaps. A possible scramble to cover obligations there has some market participants worried about a sell-off.

"It's very clear from the net open interest that a lot of the market is already settled or bought the bonds ready to settle now," said Tim Backshall, Credit Derivatives Research.

Bureaucratic Lag

Experts said the market was aware that any government actions are some time off, so participants will likely focus on fundamentals and the upcoming earnings season.

"How far down do earnings need to be cut in order to to get to fair value?" asked Phil Orlando, of Federated Investors.

Looking for the End

Most of the day the experts were preoccupied with whether or not the market would reach the end of its ongoing fall.

Art Hogan, managing director at Jefferies, said today the market will hit a bottom.

Other experts may disagree, and their solutions are below:

Hogan Calls a Market Bottom

Jefferies managing director Art Hogan went way out on a limb to call the market bottom today. "This market is indiscriminately selling and ignoring good news out of IBM, GE, and ignoring good news on the monetary policy front," says Hogan. "all of that's being ignored while we're in liquidation mode." As a result, Hogan believes the pendulum's ready to swing the other way. "I think if you look at all the carnage we've done to the major indices, the bottom gets put in today."


The Market's Ready To Take Off

"Monday or Tuesday could be the bottom of the market," says Neil Hennessy of Hennessy Funds. "Quarterly statements are just starting to hit households across America today. Once people open their statements and see they're down 40 or 50 percent, they're going to have the queasy feeling of 'Oh, my God, what have I done? Why did I get out?'" As a result, says Hennessey, initially, you're likely see more selling. But, he adds, "it's almost, almost over." Hennessy says if you go through the last three bear markets, it's interesting to see how well the market does in the ensuing 12 months. During the Depression, he says, it was 171 percent; 1973-74 it was 38 percent; 2000-02 it was 34 percent. "I think we're poised and ready to take off."

Dow May Break Through 7,500

The Dow's next support level is 7,500 points, says Ron Ianieri, chief markets strategist at the Options University, after the index plunged below 9,000 points Thursday. He tells CNBC it won't take too much for the Dow to get there.

Hang Seng Index May Fall Below 13,000

The Hang Seng Index's next support level is 13,000, says Steve Tse, research manager at BEA Union Investment Management.

Too Late to Sell, But is It Time to Buy?

It is far too late for investors to sell, says Geoff Lewis, head of investment services at JF Asset Management. He advises investors to think long-term instead, telling CNBC that Asia presents good long-buys for brave souls.

Not the Right Time to Sell

"Selling in this situation is not the right thing, of course it's not very nice to see money going away everyday," but the more nervous investors get the better the chances of finding some stability in the coming months, Ascan Iredi from Deutsche Postbank Financial Services told CNBC.

Use Put Options to Capitalize on Market Falls

Use put options to trade on the negative moves in the global markets, advises Ron Ianieri, chief markets strategist at the Options University.

Trek into Tech

"Longer term this will represent some sort of a buying opportunity because everything has sold down," Philippe Gijsels, senior equity strategist at Fortis Bank said, adding that there might be bargains in large caps like Microsoft , Intel , Cisco and Vodafone but it's still risky.



Finding the Gold-en Opportunities

Gold and agriculture are looking still attractive, according to Stephen Gollop, CEO of Tyche.

Gollop also sees value in China and Brazil's stock markets, and advises investors to remain in Western markets if they are currently invested there, but to stay far away from them if you aren't in them already.

Healthy Companies Make Wealthy Investors

Look at the financial health of companies to make sure that their dividends can be paid next year, advised Wouter. Weijand is overweight telecoms, seeing a lot of good dividends there.

High depositary, retail banks like JPMorgan Chase , ING , KBC, HSBC, as well as certain Scandinavian and Greek banks, still hold value, Weijand told CNBC.

Predictable Stocks for Unpredictable Times

"The focus has to be on quality and predictability," Hank Smith, CIO of Haverford Investments said of the investment strategy you should have.

Traditional consumer staples companies with predictable earnings streams, like Procter & Gamble , Johnson & Johnson and Colgate , are where investors need to be, according to Smith.

Markets Are Near Capitulation

The markets are near capitulation, says Peter Cardillo, chief market economist at Avalon Partners. Kirby Daley, senior strategist at the Newedge Group agrees. But he warns that there may be further downside after the markets reach capitulation.

CNBC Special Report: Bank Crisis Strikes Europe
CNBC Special Report: Bank Crisis Strikes Europe

Recession Unavoidable

The global coordinated rate cut won't stop the recession, said Paul Donovan, senior international economist at UBS.

"At some point too, even policymakers are going to have to accept; 'look we've put in place enough but we've had to pay for the massive stuff ups of the last decade.' And that's going to mean substantially higher unemployment, it's going to mean significant losses in pension funds.It's going to see massive losses in confidence right around the Western hemisphere, and increasingly it seems in parts of Asia as well. We're going to have to pay for it and as we pay for it, I think we're going to see stock markets selling off," James Shugg senior economist at Westpac Bank said.

Contact Europe: Economy

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