Chances are growing for my 2 year old prediction - physical will the REAL winner in the outcome. It is nice not to be alone.
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<<THOM Chttp://cbs.marketwatch.com/news/story.asp?dist=dhtml&siteid=mktw&guid=%7B4F12142E%2D379E%2D48CE%2D9834%2D676B1D275F51%7DALANDRA'S STOCKWATCH
There's safety in numbers
Tips for managing the coming crash; plus -- Prechter
By Thom Calandra, CBS.MarketWatch.com
Last Update: 12:41 PM ET Sept. 5, 2002
SAN FRANCISCO (CBS.MW) -- In the coming bad months and years, a period that will annihilate nearly all paper assets and shrink the oceans of debt and credit sloshing around the world, investors and workers will be asking what they can do to sidestep a meltdown of their personal portfolios.
"It a question everyone should be asking themselves right now, and it's not too late," Elliott Wave International forecaster Robert R. Prechter Jr. told me Thursday. "What's going to happen when the stock market finally bottoms? You'll be able to go in there and buy stocks that used to trade at $85 a share for maybe half a dollar or a quarter of a dollar." View: Prechter forecasts depression, Part I.
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The coming meltdown, in the eyes of Prechter and others alarmed by the global credit expansion of the 20th century, will include homes, bank deposits, insurance policies, even paychecks. Here are some starter-tips, gleaned from many fine sources, including the Weiss Safe Money Report, Prechter's new book, "Conquer the Crash," and "Crisis Investing" author Doug Casey's International Speculator.
Do investigate the integrity of all money markets, bank deposits and other cash instruments at your disposal. Not all money market accounts or funds are created equal. Those that are based on risky short-term paper, from corporations or even government agencies, probably won't allow you peace of mind in the event of a fiscal meltdown. Several sources, including the Weiss Safe Money Report, Bankrate.com and Grant's Interest Rate Observer, examine safety and liquidity issues surrounding commercial banks and the fund companies that manage money markets.
Do investigate cash equivalents that exist outside of your home country, in the event of political risk. Switzerland's bank reserves, unlike those in the United States, are backed by a 25 percent savings rate that is required of citizens by law.
Do sell all stocks that are losing you money. Do sell all stocks that are making you money.
Don't consider buying any stocks, or bonds, or anything considered a paper asset, unless you are prepared to take a 25 percent loss. Or unless you are prepared to hold for 15 years or longer (just ask the folks who still own Ford Motor (F: news, chart, profile) shares.)
Don't be lulled into a sense of false security by the interim rallies staged by Wall Street. The rallies are perfectly normal in that they allow sellers to exit with just a bit more cash than they had a month ago, but not nearly enough to make up for losses in this, a third consecutive year of falling equities.
Do buy gold and silver -- coins, bars and even some bullion proxies, such as Central Fund of Canada (CEF: news, chart, profile), if personal storage of the metal is a challenge. If currencies self-destruct from the drag of decades of credit issuance by national and corporate treasuries, bullion almost certainly will become a commodity with monetary status.
Do eliminate as much debt as you can -- credit cards, automobile loans, margin interest, mortgages, second mortgages. The credit overhang in the United States, more than $30 trillion owed by U.S. companies, individuals and the government, is three times gross domestic product, the highest ever. Besides saving you or your home from personal bankruptcy, default or repossession, your elimination of debt will be a service to this country's economy.
Keep your day job, sell the gas-guzzling SUV and if you really see the red writing on the wall, start short-selling some of the major equity indexes, especially the price-weighted Dow Jones Industrial Average's exchange-traded Diamond Trust (DIA: news, chart, profile) and its major components, like high-priced 3M (MMM: news, chart, profile).
"Why should you be taking a risk with your college money, your retirement money and all the money you worked so hard to save?" Prechter says in the CBS MarketWatch interview. "First thing is, you need to get out of those very risky areas. The stock market is the No. 1 (risk) in a deflationary environment. No. 2 is the real estate market. And the third one is in bonds that have been issued by risky enterprises."
On Friday, I'll have more from the interview with financial forecaster and author Robert Prechter. View the Prechter interview.
Purchase a profile of Prechter's Elliott Wave newsletter, from Hulbert Financial Digest.
Desmond's 90-90 update
Noted researcher Paul F. Desmond of Lowry's Reports Inc. confirms the first levels of panic selling in the U.S. stock market since April 2001. Desmond sees further panic selling for the American stock market. See: Panic selling on NYSE |
