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You could still make major gains in the coming stock market bust...even if it's not a major bust.Even after billions more in bank losses...even as foreclosures continue to soar...even as commercial real estate begins to default..even as stocks on Wall Street stumble and fall apart. In fact, in spite of those things. With a lot less risk. And plenty of confidence that you’re doing the right thing. All you have to do is follow seven steps (or maybe eight) to learn how to protect your wealth (and turn a very nice profit) in the stock market volatility and eventual meltdown which is closer than you might think.
Today, Treasury Secretary Henry Paulson said that the worst of the credit crisis is over. Such comments seem outrageous given the latest batch of painful headlines from UBS, Fannie Mae, Legg Mason, Lazard, et al. But hope springs eternal on Wall Street, and the reality is the crisis in the debt markets seems to have eased since the Fed bailed out Bear Stearns, which Paulson called "an inflection point." (Critics have used similar terms, but with a far different meaning.) Do you know when White House officials are lying to us about the economy? Do you trust them? In the old Soviet Union, the comrades used to say, "Nothing is ever more certain than when it has been officially denied." But you can only fool some of the people for so long. Mall traffic is down. Last year's holiday sales were flat. Car sales are still off. Ford and GM, once the most important companies in the world, are actually flirting with bankruptcy. Even Chrysler just laid off 23,000. Meanwhile, foreign investors are running from the U.S. dollar. How "fine" does that sound to you? You don't need to look far for the real truth. As recently as 2000, you paid only $273 for an ounce of gold. Today, you're paying more than $900. Back then, you also paid only a little over $1 for a gallon of gas. Today, get used to paying more than $4. Back then, even a barrel of oil cost only $22. Now we pay well over $120 per barrel. Meanwhile, in downtown Oakland, Calif., half-finished condo projects dot city streets. Builders couldn't afford to finish them. Not far away, foreclosure rates have tripled. And the number of bank-owned properties in other areas is up 10-fold. How "healthy" is that? I'm disgusted. And you should be too. But don't let government statistics lie to you any longer. Gold, oil, and the collapsing worldwide faith in the U.S. make it plain: We are a nation in financial trouble. And we're only heading deeper. Think the politicians can help? Don't bank on it. Brace yourself for roaring tax hikes. And forget bottom-fishing for bargains. To save us, the Fed is killing the dollar. Now everything will cost more than it ever did. How bad could this get? Pretty bad. Oil at $125. Gold at $1,250. Could you be paying as much as $5 per gallon for gas by the end of summer? Absolutely. We're in for rough economic seas and crushing market conditions for as far as the eye can see.  That's why I URGE you to take steps right now to protect yourself. You'll find a complete set of those must-take steps in the Strategic Financial Survival Library. You just have to give me your permission. You can do that by going to their web site at www.AgoraFinancial.com and order a one year trial subscription to Strategic Investing. Make sure you also ask for the Strategic Financial Survival Library. Back to the subject. Here are the 7 Steps to Protecting Your Wealth During Market Meltdowns. 1. Have Plenty of Cash: It takes money to make money. With credit now harder to come by, you need to ensure that you'll have enough cash on hand to cover your expenses. Sell things you don't need. Get a second job. Ask for an advance on your inheritance from parents and grandparents (they can gift you, tax-free, a part of their estate). If the market meltsdown unexpectedly (remember Sept. 2001 and Oct. 2002, not to mention Feb.-March 2003?) you'll be able to scoop up some of the blue-chip, best-of-breed, dividend-paying "cash cow" stocks at a deep discount. But it takes cash buying power to be able to seize the day when the market goes on a "deep, discount markdown sale". 2. Invest according to your needs: It's essential that you determine when you'll want to tap your portfolio for living expenses. If you have plenty of time until then, you can afford to take the long view, regardless of short-term market fluctuations. But if you have a only a few years until you draw on your assets, you need to minimize your risk with that portion of your wealth. 3. Maintain Trailing Stop-Losses on your equity position: You can discuss this with your financial advisor. It means you should be able to determine how much downside risk you are willing to take with a stock position before you bail out. Some people use a 10% trailing stop-loss and others are comfortable with a 20 or 25% one. If you don't know what a trailing stop-loss is, call your brokerage firm and find out. The old maxim in investing is "cut your loosers and let your winners run". Trailing stop-losses can be helpful in this regard. 4. Manage risk wisely and regularly: Rapid change is now a fact of life where your financial assets are concerned. It's essential to make periodic adjustments to grow and protect your wealth. For example, are you taking profits, limiting losses, diversifying enough and putting enough cash on the sidelines to take full advantage of downturns in the market. Know yourself and know what your risk tolerance is. 5. Protect Yourself Again Inflation and Stagflation: For the first time since the 1970's, inflation poses a significant threat to your financial security, and it is probably going to get a lot worse before it gets better. You need enough inflation hedges like precious metals, industrial commodities and treasury inflation-protected securities (TIPs). There is even an exchange traded fund that invests in TIPs., the iShares Lehman TIPS Bond fund (NYSE:TIP). One of the most reasonably priced hedges against inflation is silver. You can begin now to invest in silver easily by using the ETF that invests in physical silver, the iShares Silver Trust (AMEX:SLV). Silver might outperform gold in the years ahead. 6.Reduce your reliance on financial salespeople: Whether it's a stockbroker, mortgage broker, or insurance agent, realize that these people are mainly salespeople, and they want to sell you something so they can earn a commission. What they offer might not be appropriate for you or the best investment product in that category. Be careful and do your own due diligence. Develope relationships with investment-saavy people who don't have a conflict of interest. Find some financially successful investor-mentors who are very experienced and fiercely independent. That why we subscribe to some excellent investment publications like Leeb's Income Performance Letter (www.leebincomeletter.com) or Dan Ferris' Extreme Value letter (www.stansberryresearch.com). The Oxford Club is another possibility (www.oxfordclub.com). Ask around, try a trial subscription of The Hulbert Financial Digest Monthly Newsletter. It's a completely independent, impartial and authoritative rating service that arms you with the facts about stock and mutual fund investment letter performance. You can check out this valuable service at http://www.hulbertfinancialdigest.com/ . 7. Don't overload your portfolio with shares of the company you work for. If the company runs into trouble {remember Enron and Worldcom} you could lose both your job and much of your financial worth. Every company suffers periodic down periods. Worse, the preciptous declines of many stocks of seemingly well-established companies over the years illustrate the risk of placing too many eggs in one basket. Diversification of investments is a way to minimize risk, and that could be rule #7 as well. Many employers offer company stock at discounted pricing either through their 401(k) plan or through an employee stock purchase plan. Take advantage of it if you can, but diversify as you get older and have less time to make up possible losses. If your company's doing well, all the more reason to take some profits and put them someplace else. Step # 8 could be "Don't take anything for granted when it comes to your wealth and your investments". Be extremely cautious, ask loads of questions, get counsel from more than one trusted, independent, objective advisor and remember Murphy's law, "If anything can go wrong it probably will". Never before has it been more important to follow sound financial and investing principles to responsibly grow and preserve our money, which is our tool to survival, financial freedom and sleeping well at night. May this article be just a starting point for you as you become wise, wealthy and extremely prudent.
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