The Crash of 1997 (Part 2 of 4)
As Mark Twain said "I am more interested in the return OF my capital
than the return ON my capital". With the crash nearing, that is good advice. What could be a safer investment than good old cash, be it in a boring passbook account, or in a fund that invests in U.S. treasury
bills or notes. The rate of return is low, but when the market tumbles, you will sleep much better knowing you have avoided major losses, and be prepared for the next buying opportunity.
The following are speculations that may appreciate dramatically in the
anticipated stock market crash. None of them are recommendations.
All have a great chance of eventually becoming worthless, and are
extremely dangerous to speculate in. I would never have greater than
5% of my portfolio in them. They are not stocks or mutual funds that
are bought and forgotten about, checked once a week. They are to be monitored constantly by pros that know what they are doing. Stop
loss orders are a must. Let us monitor these speculations in the Journal to see how they perform.
1) S&P 100 or 500 put options, Dec 1997, or into 1998 or beyond.
2) Short SPDR (AMEX). Mirrors the S&P 500. Currently 92 21/32.
3) Silver call options, March 98 and/or May 98 or beyond. Monitor the
silver market around Sept 19-22 as silver appears to be ready for a major breakout to the upside over the next few months. The March 98 options expire in early Feb, which looks like the time for a on correction.
4) Gold call options Feb or April 98, or beyond. When the Dec 97
contract closes above $332, revised from $337, this is the time to
enter. Pay close attention to trading on Sept 22.
5) Selected gold and silver stocks and funds should do well during the
upcoming correction, they may initially fall along with the rest of
the stock market. With margin calls and panic selling, individual
investors and institutions will be desperate to meet margin calls
and raise cash. Precious metal investments will eventually be
recognized and be the place to be in entering 1998.
6) Soybean calls, July 98 or beyond. Enter when May 98 hits 650. This could be the most explosive move up since Nov. 1988.
I expect the crash to commence within 3 weeks. We shall see how
accurate these predictions are. Some possible precursors could be
a drop below 17,000 on the Nikkei, bond yields above 7%, natural
disaster in the U.S., confessions by Bill Clinton, panic in the
Asian markets, or some other unforseen event. Don't marry investments and speculations. Date them. |
