2 Ways to Profit from a Bear Market

In 1994 when I was starting out in stocks, I asked an old, grizzled — yet highly successful — commodities trader for his secret to surviving a bear market. “Son,” he replied in a cigarette-hoarsed voice, “it’s quite simple. My first course of action… a bear market is like dealing with a crazy wife. Don’t waste your time trying to rationalize with her, because it’ll never work. A crazy wife is a crazy wife. A bear market is a bear market. Accept it for what it is… and run.” Advertisement I’ve uncovered a photograph that could hand you $277,000 by this time next year… I don’t blame you if this sounds far-fetched… In fact, if I hadn’t met the man who traveled 1,400 miles to track me down — just to hand me a photo — I wouldn’t have believed it, either. But once you take a peek at the snapshot, as well as the three reasons it could make you rich, I have no doubt you’ll change your mind. He continued… “Rule #2 — and this is very important, so listen closely — hide your cash.” I began to laugh. “Your first survival response will be to throw money at her… hoping that the new pumps she buys off of QVC will make her happy. But nothing is further from the truth. The euphoria she gets from getting your money is like a sucker’s rally in a bear market. It doesn’t last very long.” Finally, he left me with this… “When the bear market ends… just like your marriage, you’ll know.” What’s next for the market? Unfortunately, I think this dance macabre market will continue until the end of the year. There are two events coming in the second half of 2010 that could prolong the bear market: A new wave of Option ARMs to rest starting in 3Q10 Bush tax cuts set to expire on December 31, 2010, and democrats have no intention of extending the tax cuts Check out the graph below. As you can see, Option ARM resets start to become an issue during the third quarter of this year, and really shoot up in 2011. As Wealth Daily ’s resident housing and mortgage expert Steve Christ has pointed out numerous times in these very pages, most Option ARMs are negative equity. The prevailing interest rate isn’t likely be a problem, since mortgage interest rates are lower now than they were five years ago… The problem…

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2 Ways to Profit from a Bear Market

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