Safe To Swim?

Lots of traders are wishing they’d called in sick, this week. Within the span of a just a few days the stock market has been whacked with two huge life-changing events.

First, authorities took over Freddie and Fannie essentially thrusting America in a brand new direction, we mean toward socialism. The government now holds about half of all the nations home mortgages.



Then Lehman Brothers , a prestigious and premiere investment bank, suffered such a loss of investor confidence that it can probably no longer keep going.

As investors struggle not only to digest the news but figure out what it means going forward, where on earth do stocks go from here?

For insights we turn to Dover Management CIO Doug Cliggott. (You might remember he called the Market Massacre in 2000)

Is the bottom near?

"I do not think we are near a bottom – either in terms of the market level or in terms of time,” Cliggott tells Fast Money. “My guess and hope is that the market bottoms some time in 2009."

He thinks the S&P 500 is very expensive now given how high profit margins are relative to their long-term average.

“For stocks to begin a sustained uptrend, we either need much better valuations than we have today or a sustained sequence of positive earnings surprises. I definitely do not expect the latter with leading economic indicators pointing down and very ambitious earnings expectations for Q4 and 2009 as a whole.”

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What to do?

”My first thought is to stay away from financials – it is very unlikely this sector will be a leader in the next bull market so there is no reason to try and pick a bottom here”

Cliggott also thinks technology is the least attractive sector in the market. “It is over-owned, has very ambitious earnings growth expectations for 2009 and has a tremendous amount of global exposure and in some cases product obsolescence risk.”

If you’re looking to get long, Cliggott recommends health care and consumer staples, the classic defensive, non-cyclical areas of the market. “We know it is boring, but we think for the next 12 months or so preserving capital will be the most important goal,” he concludes.

What do you think? Tell us now!


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Trader disclosure: On Sept 11, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WMT), (UUP), (MSFT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (AKS) Call Spread; Najarian Owns (MER) Put Spread; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (XLF) And (XLF) Collar; Terranova Owns (AAPL), (EOG), (FCX), (GS), (NOV), (KOL), (POT), (RIMM), (SA), (X), (VLO), (YHOO); Terranova Owns (AIG) Puts And Owns (AIG); Terranova Is Short December 2008 Dollar Index Futures

Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (BRE), (CNTY), (CNW), (CLB), (OFC), (DLM), (DRH), (DLR), (EPR), (ESS), (EXR), (AGM), (FL), (GBL), (GNET), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (GWX), (SSYS), (SKT), (UA), (BIV), (VV), (BLV); Phoenix Investment Partners Owns More Than 1% Of Goldman Sachs Financial Square Fund - Money Market Fund; Phoenix Investment Partners Owns More Than 1% Of Seagate Technology Tax Refund Rights

Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)