The Recession Protection Plan
By Charles Delvalle
Dear Reader,
On Thursday morning, I opened up MarketWatch and read
U.S. stock futures wilted on Thursday after a fund managed by The
Carlyle Group admitted it's close to collapse and statistics showed a
decline in retail sales, dragging the dollar below a key level for the
first time since 1995 and lifting oil and gold futures
It's the perfect storm.
The credit crunch is causing all sorts of problems the Fed never
anticipated. Had Bernanke known this would happen, I have a feeling
he would've done something earlier than August.
But he didn't know it would happen, so he didn't act. And now we have
a whole host of problems to deal with because of it.
So the question becomes, how do YOU make money in this market?
I'm going to be frank with you it's going to be tough. You should
be willing to get into certain types of investments that you might not
have ever tried before. But before we get into that, let's talk about
what we know.
How Recessions Affect the Market
As the economy contracts, earnings go down. And as earnings drop, so
does the stock market. But this isn't the only thing we're looking at.
Typically when the economy contracts, the Fed hops in to lower
interest rates. When they lower short-term rates, it usually pushes
down long-term rates, too (20-30 year bonds). But right now, 30-year
mortgages are rising even as short-term rates are dropping.
This ends up doing the opposite of what the Fed wants. It tightens
long-term lending. And tightened lending is one of those things that
helps SLOW the economy, not speed it.
INTERNAL ENDORSEMENT
Recession in 2008?
Here's how to Make a Fortune!
It is often said that stocks take the stairs on the way up...
and the elevator on the way down. It's true. When investors hit the
panic button, look out below. And there are a lot of signs to suggest
more downside is on the way in early 2008.
Are you prepared to profit if this happens? Is your portfolio
protected? Either way, you'll want to learn about a trading service
that can provide protection an advisory that has already produced
gains of 203%... 129%... and 101% in just the last few months.
To learn more, please continue reading...
So it looks like the rate cuts aren't helping the economy as much as
they usually do. And that doesn't even factor in the worst part - the
credit crunch itself.
Leverage has Poisoned the System
You see, banks are highly leveraged (typically 10 to 1). So for every
dollar a bank has in house, it has 10 deployed in leveraged investments.
Now what happens when a bank loses $20 billion? That bank has to shut
down all leveraged investments tied to the money it lost. If they are
leveraged 10 to 1, that means they have to shut down $200 billion in
investments! This is HUGE.
You see, banks are expected to lose $400 billion. That means you can
expect $4 TRILLION in leveraged investments to get shut down.
Just imagine it: $4 trillion evaporating from the markets. What do
you think that would do to stocks, commodities, and financial markets?
It's not pretty.
And that's why you need a way to really secure yourself from what's
possible.
The first thing you need to do is make shorting stocks your favorite
pastime. The trend is down, so make that trend your home boy. In
other words, start playing stocks down. In future issues, I'll talk
more about shorting.
If you don't want to short stocks, you could always get into ETFs such
as the Ultra Short QQQQ ETF (QID). This ETF moves up two percent
every time the Nasdaq moves down one percent.
Another thing you could do is have a position in precious metals. As
more uncertainty hits the financial markets, more and more investors
will look for the security gold and silver will offer them. After
all, if the entire financial system collapsed tomorrow, gold and
silver would still be used as a store of value.
While I happen to think gold and silver are expensive right now, you
could still get into small gold and silver explorers that will help
you leverage the run metals are having. For more information on that,
check out Russell McDougal's Wednesday IDE articles. Small explorers
are his specialty.
The third thing you should do is get into income-paying investments.
I'm talking about safe and steady dividend-paying companies such as
McDonalds (MCD). Not only do these companies fall less during
recessions, but they're also the first ones to shoot up during a
recovery.
Let's not forget the steady paychecks they provide that could help you
offset any price drops you might see. For more information on that,
check out Andrew Gordon's Tuesday issues of IDE.
The last thing you need to do is get out of any investments that have
already lost more than 20 percent of their value. This market could
easily continue dropping for the next year, so you need to protect
your downside.
If you can do all of the things I've outlined here, you'll be able to
protect yourself and even make money from this market crash.
To your success,
Charles
P.S. I just started up a new blog and would love for you to check it
out. Just go to http://stockcharlie.blogspot.com/. I'll be giving
you my unrestricted opinion on economic developments and the effect
politics can have on the markets. Make sure to comment and let me
know what you think!
P.P.S. Just last week, readers of IDE's Global Profits Hotline were
able to capture 35 percent in just one day on a Toyota put. And that
doesn't include the other gains we've made this year of 98 percent and
88 percent. To find out how you can take part in these gains, click
here ]
Market Watch
Ride or Slide: Fording Coal (FDG)
By Charles Delvalle
Bernhard H. wrote an e-mail asking me to take a look at Fording Coal
(FDG). I have to admit, I simply had to cover this stock because I
love, love, love the coal sector.
Why? Coal is undergoing a little renaissance of sorts. And now that
clean coal technologies have become more widespread, electricity
companies are embracing coal even more.
Of course, Fording isn't primarily finding coal for utility companies.
A big part of its sales are of coking coal that is used for steel
processing. That means this company is vulnerable to a U.S. slowdown
(as demand for steel drops).
And it's already affecting this company. Last quarter, their revenue
dropped by 24 percent and earnings dropped by 28 percent. And you can
blame dropping coal prices.
What's funny is that this future slowdown isn't really reflected in
their chart. Since January 22, the stock has jumped 61 percent.
There's a big disconnect here. The fundamentals of the company aren't
reflected in the chart, and that's never a good thing. Eventually the
fundamentals will catch up and this stock could drop.
While I'm bullish on coal in general, right now isn't the time to jump
into this company. So my suggestion is to sit back and watch Fording
Coal (FDG) slide.
P.S. Want to see me cover a stock? Send an e-mail to
[EMAIL PROTECTED]
INTERNAL ENDORSEMENT
Stock Market Shocker: How a Bunch of
5th Graders Made Fools of the Trading Elite
!
Wall Street wants you to believe that you have to entrust your
money with the professionals and all their skills, resources and
systems, if you want to make money in the markets. It's what these
guys do for a living! How could you possibly beat them?!
Nothing could be further from the truth. In fact, I have used an
embarrassingly simple secret to make $15,048 in just 30 days... and
boost my overall account balance 152% in less than a year.
Keep reading to learn how you
could join me each month...
