Last week I warned about listening to the geniuses on CNBC who say, "Buy, buy, buy," no matter what the market's doing. Well, they were at it again this morning, big time. They had a runner at the bottom of the screen with the traditional, "Time to Buy Stocks?," question for guys like me who usually have the Mute button on. Nevertheless, I turned it off and listened to the conversation. Two pretty good money managers, Mr. Mark Prado and Mr. John Dorfman, both said now was a good time to buy stocks. Surprise. Surprise.

CNBC then quoted Mr. Warren Buffett who had published an Op-Ed piece in the New York Times today, saying, "Buy Stocks. Cash is Trash." His optimism is based upon the credo to be fearful when others are greedy and greedy when others are fearful. He also said that cash is a terrible long-term asset...it pays virtually nothing and is certain to depreciate in value. Wisely, Mr. Buffett made no claims regarding what the market would do today, tomorrow or three years from now. He's just buying value for the long-term. Smart guy he is, indeed.

Finally CNBC brought in Mr. Sam Stovall, a veteran investor. He said this tough market reminds him of the late sixties, but he is buying stocks now. Mr. Stovall didn't elaborate, but the market was pretty hot in the mid-sixties and the Mighty Dow went above 1,000 for the first time. Inflation and interest rates went up in the late sixties and stock prices, of course, moved lower. Although it wasn't a happy time for investors, the market got worse in the seventies.

The Arab oil embargo of October 1973 triggered skyrocketing inflation and interest rates, causing a recession, and the stock market crashed. The Mighty Dow was crushed and it wasn't until August 1982 that it got above 1,000 and stayed there. Can a long, drawn-out dry-spell like that happen again?

You bet it can. The Arab oil embargo was a life changing event and its affects are still being felt to this very day. The current credit crisis is another such event and is also changing the way we live. The Arab oil embargo was not good for America and so far the credit crisis hasn't been either. So how can one imagine that now is a good time to buy stocks?

Last Friday, the Price of the VectorVest Composite closed at $18.59 per share, its lowest level since August 28, 2003. Buying stocks at a five-year low is not a bad time to go bargain hunting. Apparently a lot of investors thought so and the Price of the V V C soared a phenomenal $1.85 per share on Monday. It dipped a little on Tuesday and crashed to a lower low of $18.58 on Wednesday. Yesterday, Thursday, it opened to the downside and moved to an intraday low of $18.01. Then the big boys came back from lunch and stock prices took off. It was a beautiful reversal day and the Price of the V V C closed at its high of $19.23 per share. Last Friday's bottom was tested successfully, our ProTrader graph showed that a perfect Hammer formation had been formed, and the Primary Wave was Up.

As for today, the market opened to the downside, rallied well into positive territory; then pulled back, ending slightly in the red. So the Price of the V V C is up for the week and I believe it's Time to Buy.

FOR BARGAIN HUNTERS ONLY.
You can use either the search function in these Views or go to our blog at www.vectorvest.com to see what I have written on the subject of bargain hunting. Now's the time to do some homework.

I received an email this week chastising me for laughing at the morons on CNBC. I apologize for saying that...but only because I should have been crying. It really saddens me to see how CNBC's "Wall Street" approach to investing has hurt their viewers in this bear market. But CNBC is not alone in this regard, the conventional wisdom teaches us bad practices.

I began investing in stocks about fifty years ago and I've probably made every mistake in the book. My worst mistake was selling all my stocks in December 1974, at the very bottom of the '73-'74 bear market. I was very discouraged because I hadn't made a dime after 15 years of buying and selling stocks. I won't call it investing, but I wasn't a Trader either. Nevertheless, I was so dumb I was lucky I didn't lose my shirt. Yes, I had a broker from Merrill Lynch. Yes, I belonged to an NAIC stock club. Yes, I read books on investing, including Benjamin Graham's Intelligent Investor. Yes, I read Barron's and Forbes and the Wall Street Journal. Yes, I used Value Line. But it didn't do any good because my techniques were bad and I couldn't tell the difference between a Bull market and a Bear market.

For example, my ex-broker always called me when he saw a stock going down in price. He was the expert, so I usually bought it. You know what? It usually kept going down and I was stuck with it. One of my pet peeves with CNBC is that even on the worst down days, they ask, "Is this a buying opportunity? What are you buying now?" It appalls me to see Cramer go into his act, saying, "'Mon back, mon back," urging his listeners to buy, buy, buy on a pullback. Boo-yah, baby...until the falling knife goes through your heart. The bottom line: Never buy stocks on the way down.

Another pet peeve of mine is this business of buy and hold. On June 28, 2008, an article written by Mr. Larry Light appeared in the Wall Street Journal. It was entitled, "What to Do to Survive This Market." It said, "There's a decent argument to be made for buy and hold. Aside from the absurdity of liquidating an entire equity portfolio - the tax headaches would be epic - investors ultimately end up better off than if they had tried to sell at the top and buy at the bottom." Really? I think I'm going to call this guy and introduce him to the "Yellow Brick Road."

Your top priority right now must be to preserve capital. If you haven't already sold your stocks and gone into cash by this time, I don't think you should do it now. But you should learn how to protect your portfolio. Please see my June 29, 2007 essay on Portfolio Protection. Learn how to use Option Collars. If you do, you'll have the money to buy stocks when this bear market ends, producing bargain prices. This is the silver lining. So survive now and be ready to look for The Silver Lining.

PLANNING YOUR RE-ENTRY.
We were hoping to go long two weeks ago, on Friday September 26th, when stock prices went down instead of up. They got crushed the following Monday and havoc has reigned supreme ever since. So why didn't we go short and make a lot of money? Simply because the Buy/Sell Ratio, BSR, closed at 0.09 on Monday, September 29th, and our experience has shown that it's not a good idea to go short when the BSR is below 0.20. In fact, it's the time to think about going long and that's what we've been doing. But we're not going long until we see solid signs of a sustainable recovery. First I want to see an explosive rebound. Then I want to see a good follow-up day. Finally I want to see the Primary Wave flash an Up signal.

If I've heard it once, I've heard it a hundred times. "Has the market bottomed?" CNBC commentator, Mr. Mark Haines, believes it bottomed last Monday. His colleague, Mr. Joe Kiernan, isn't so sure. Both of these gentlemen have logged thousands of hours watching the market and listening to stock market experts present their views, and yet they can't agree on whether or not the market has bottomed.

Of course they can't. Neither of them is paid to interpret the market and they don't have the tools to help them do so. To make matters worse, they are required to listen to an endless parade of ill-informed, biased guests who do little more than confuse everyone. So we can't pay much attention to CNBC. We need a fact-based system to analyze the market and one that has been shown to work. Fortunately, we have one.

Last week I said we were going to let this downturn play itself out and watch our Market Timing Indicator, MTI, and Buy/Sell Ratio, BSR, very carefully. Now if one looks at a five-year display of our Market Timing Graph, they could easily see that the MTI goes down to or below 0.60 at the bottom of every major downturn. It hit 0.69 last Monday. That isn't low enough to make me feel comfortable that we have seen the bottom of this downturn. Furthermore, I have stated on a number of occasions that a downturn is essentially completed when the BSR goes below 0.20. It closed at 0.38 last Monday. This, too, is not low enough to say the bottom has been reached.

Ah ha, you say. Everyone has gotten bullish since Monday and stock prices have been moving sharply higher. What do you have to say about that, smart guy? Well, no downturn goes straight down from peak to valley. Just look at last May, for example. The Price of the VectorVest Composite fell sharply for eight of eleven days before rebounding. Then it fell for seven straight days to the low point on June 13th, when the BSR hit 0.10. Similar patterns have been seen in virtually every major downturn in the past. So I'm not going to feel comfortable going long until I see the BSR go below 0.20. It's the key to Calling A Bottom.

P.S. Mr. Gordon White will illustrate how to call a bottom by using the Market Timing Graph in this week's "Strategy of the Week" presentation.

While the talking heads on CNBC were going ga-ga about the Mighty Dow hitting six-year highs, it's up only 11.4% since we signaled the beginning of the uptrend on October 21, 2005. The iShares MSCI Brazil, (EWZ), soared 44.94%, iShares MSCI Korea, (EWY), rocketed 36.89%, and the iShares S&P Latin Am, (ILF), exploded 36.52% over the same time period. Stock markets around the world have out-performed the U.S. market by a wide margin. So how does one get in on the action? This question is like asking who's buried in Grant's tomb. Use ETFs, of course.

I first wrote about ETFs on September 9, 2000. Back then, we had only 67 ETFs in our database, but they were increasing in popularity. Today we have 228 ETFs in our database and are adding more regularly. We accumulate them in an Industry Group called Market(Baskets). So they are easy to find and use. It is important to know that we do not attempt to assess ETFs for Value or Safety, but we do track their performance with our Relative Timing indicator, RT. We also give Buy, Sell, Hold ratings on each ETF. We demonstrated how one might manage a portfolio of ETFs in last week's "Strategy of the Week," which you may see by visiting the VectorVest University.

ETFs are portfolios or baskets of stocks, having something in common, which are traded just like common stocks on the American and New York stock exchanges. Many of them have options. The theme or common factor identifying an ETF is usually obvious from its name, and range from countries, to businesses, to commodities and to mimicking indexes. They offer the benefits of trading select mutual funds at less cost and more convenience. And they provide investors with an excellent way of diversifying their portfolios, reducing risk and entering hot markets or market sectors that they otherwise would not. I particularly like to invest Around The World With ETFs.

MICROSOFT'S MISERIES.
Bill Gates and his buddies were at the right place at the right time in the 80's and they did the right things. They were fabulously successful. This success allowed them to write the rules and dominate their industry. Like several other great American companies, they were sued by the U.S. government for having monopolistic powers. Although they ultimately settled this and many other lawsuits, they were never the same.

Clearly, Microsoft needs better management. I'm not talking only about their inability to get quality products to market on budget and on schedule, I'm also thinking about their financial management. In 2004, they chose to issue a cash dividend of $3.00 per share. Total cost was about $32,000,000,000. As I predicted, the cash dividend did nothing to raise the price of the stock.

I would have preferred that they spend the money buying back their own stock and institute a regular program of buybacks. Although they have over 10 billion shares outstanding and they say they need to spend more money to fight Google and Yahoo!, they still generate billions of dollars of cash each month. By now, they could have reduced the number of outstanding shares by as much as twenty percent. It seems to me that its stock price would not be languishing at $24 per share had they driven their earnings per share up by an additional 20 percent.

Now they have another $50 to $60 billion in cash. They should use it to drive up the price of their stock. Otherwise, their shareholders will continue to suffer from Microsoft's Miseries.