In a nasty and prolonged bear market, it's hard to make suggestions about picking stocks.  The buy-and-hold brigade, of which I'm a member genetically, advocates that we should just keep buying and ignore the trend. We are assured that everything is going to come out in the wash. Sadly, that's really not so comforting when all you see is over the rim of a precipice into the bear market chasm below.  Even when we ride a roller coaster, which we know is unlikely to hurt us, our instincts still give us those extreme pucker moments that make many such rides lose their attraction. It's the same with stocks; not many of us are cut out to see losses rack up for the causes of market theory and buy and hold.  Market randomness and associated theories are very good friends in investing. It's much harder to lose your shirt by loosely adhering to these theories, rather than to the plethora of other ideas, gimmicks and general flimflam about how to make money investing and trading. However, in times like these, buy and hold as an unvarnished strategy just doesn't feel right.  Pouring money into the index is certainly one way to go, but in a recession that could be of epic proportions, which index would you choose?  The crash of 2000 is an interesting example. Dow Investors did a lot less badly than those in the NASDAQ. Tech investors were skinned alive, while adherents of the stodgy, statistically quirky Dow got off comparatively lightly. That's not to say Dow investors had it easy, they simply were not actually wiped out.  The credit crunch has effectively taken $10 trillion out of the world money supply. In other words, the liquid assets that people owned, could sell, could borrow against and feel good about have fallen by $10 trillion or more. That is clearly a massive drag on the world economy, and one that is not going away any time soon.  The ability to borrow money has significantly dried up. The current credit drought is putting the West into recession and will almost certainly pull the emerging markets down with it. Perhaps something great will emerge to relieve this bleak picture, but unlike in Hollywood, there is seldom a hero to save the world in the nick of time.  This crash is all about debt, the twin of cash. Need debt? Sorry, you are out of luck. Got cash? That will do nicely. Are you a corporation that has to roll its huge loans? Oops, Chapter 11. Got piles of cash on your balance sheet? Hello, cheap takeovers of distressed companies.  So against this dark background, what is a determined stock picker to do? Where can we find cash-rich, debt-light companies?  Technology has a fine capability of withstanding recessions, because in hard times companies need the edge to stay afloat, which comes from its latest developments. In tandem with this, consumers always go crazy for the latest thing, and in the end, a recession doesn't really affect the bulk of people in the West too awfully much. While those on the margin get crushed, the normal family tightens their belts and rides out the storm with little more than a mountain of worry to contend with. As such, there will still be queues for the latest toy, gizmo or fad.  With this in mind, hardened buy and holders should look to the NASDAQ to outperform both the Dow and the broader market S&P 500. Even those who see a bleak picture in the U.S. and Europe, but a rosy picture in emerging markets, can look to technology as a play on developing economies, because in such a picture, tech companies will outperform the broader U.S. economy.  It doesn't take much expertise to build a portfolio of the best of breed. The NASDAQ has a unique selection of Internet stocks like eBay (nasdaq: EBAY - news - people ) and Amazon.com (nasdaq: AMZN - news - people ); chip stocks like Intel (nasdaq: INTC - news - people ), software goliaths like Microsoft (nasdaq: MSFT - news - people ) and Oracle (nasdaq: ORCL - news - people ); and technology entertainers such as Activision (nasdaq: ATVI - news - people ) and Electronic Arts (nasdaq: ERTS - news - people ). A stock picker has endless choices when it comes to tech and the NASDAQ.  The true dyed-in-the-wool buy and holders can simply buy the PowerShares QQQ (nasdaq: QQQQ - news - people ) and sit on this tracker during the storm. But for the rest of us, we should be in cash at least until late September. The weeks coming on either side of the Olympics are going to be critical.  Clem Chambers is CEO of stocks and investment Web site ADVFN. For free real-time stock prices go to: www.advfn.com. E-mail: clemcham@advfn.com More Adviser Soapbox Columns
Cash may be your best short-term investment, but a recession is a great time to buy Nasdaq stocks.