Stock Markets crash! Here's what to do
Stock-Markets / Analysis & Strategy Feb 28, 2007 - 10:09 AM
Yesterday's market crash struck Wall Street like a bat out of hell — the Dow down 416 points, the S&P 500 off 50 points, and Nasdaq pummeled by a whopping 97 points Virtually every investment under the sun — blue chips and tech stocks ... large caps and small caps ... domestic stocks and international stocks — even gold and silver — got hit hard.
But the most dramatic event came at about 3 o'clock in the afternoon Eastern Time: Just when many Wall Street traders figured the worst was over and started packing up to go home, Dow Jones was running into a technical computer glitch. It lost track of the averages and had to catch up suddenly. Result: One moment the Dow was off 200 points; the next it was off another 200 points, and soon, down 546 points!
Yes, the market managed to recover from its extreme intraday lows. But yesterday's action is clearly not just your normal, everyday correction. It's sending you — and anyone who will listen — the signal that ...
There Are Real Risks in Our Financial Markets That MUST Be Cleaned Out!
Unfortunately, most of Wall Street is not listening. They're not ready for a clean-out process. They don't want to face it. Or worse, they don't want you to face it.
And fortunately, that's what separates us from them.
We have been writing you about these risks week after week. We are ready to confront them head on. And we are here to help you find the most prudent path around them.
Just last Friday, Mike Larson warned you about a dangerous central bank party . And the week before, he warned you about a subprime debacle unfolding as expected . Nor was this a sudden revelation. Our editors and I have been continually writing about these and similar dangers for over two years.
Meanwhile, the portfolio managers at our separate money management affiliate, Weiss Capital Management, Inc., have also been diligently preparing for this situation.
They have been advising their clients about the heightened complacency in the market and taking action to shield investments. They diversify across many asset classes. They have both conservative strategies to help weather market corrections and bear market strategies designed to benefit during longer declines. They even manage the Weiss Treasury Only Money Market Fund dedicated to capital preservation.
Now, Here Are Some Basic Steps YOU Can Follow ...
Step 1. Do not take this lightly. Don't put faith in those that pooh-pooh these dramatic events. Don't let anyone persuade you that they're “nothing to worry about.”
Step 2. Make sure you understand one of the primary sources of yesterday's decline: Precisely the risk factors we've been warning you about in Money and Markets:
- The continuing slump in the U.S. housing market, which has lead to ...
- The huge losses at America's non-prime mortgage lenders, which has spread to ...
- Other financial institutions holding other risky derivatives, which has triggered ...
- Panic selling of other assets, even if they're unrelated.
The process of unraveling these risks cannot happen overnight. It's bound to take some more time.
Step 3. Continue to diversify across a broad spectrum of asset classes:
- Not just stocks — but also investments based on gold, oil and other natural resources.
- Not just U.S. dollar assets, but also assets that are supported by the world's strongest foreign currencies.
- Not strictly U.S.-based investments, but investments that take advantage of the continuing, fundamental strength of foreign economies.
Important: This is not a situation in which everything will go down or up in unison. Quite to the contrary, it's a critical juncture in history when the good investments will part company with the bad.
Step 4. Continue to keep a substantial reserve of cash in the safest investment you can find. Despite any decline in the dollar, I feel that should still be U.S. Treasury bills or a Treasury-only money market fund.
Step 5. Don't throw out the baby with the bath water. That's what most other investors are doing, which is why some of the best assets in the world also tumbled yesterday.
Instead, with the continual warnings and analysis you have been receiving from us, you have the ability to clearly distinguish between ...
- Investments that have long-term, powerful megatrends behind them vs. those that have been — and remain — vulnerable to long-term declines.
Examples: Scarce natural resources vs. U.S. real estate.
- Investments that can lock you in to a buy-and-hold trap ... vs. those that give you the flexibility to exit nimbly — so you can take out nice profits, or cut your losses short.
Examples: Mutual funds that charge a big penalty for selling early ... vs. ETF-based programs that you can adjust at any time.
Step 6. Get ready to turn lemons into lemonade. In every single one of our investment strategies and programs, we have been waiting — and hoping — for this kind of a correction.
We don't have a crystal ball that tells us what day it begins or what day it ends.
But we know how to handle it when it comes. We have solid plans for protecting your capital and for transforming declines into opportunities.
That's our specialty.
That's what made my company a leader during some of the worst market turmoil of the past decade.
That's why we were able to help our readers make money even while nearly everyone else was losing.
And that's a goal we achieved at a time when we had far fewer profit opportunities than we have today.
Your final step: Read everything we send you, especially over the next 24 hours. We will include further instructions on how to handle investments we've been recommending. And we will point you toward new profit opportunities that are already in the making.
Good luck and God bless!
By Martin Weiss
http://www.MoneyandMarkets.com
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