Bear market is here! Are you prepared?

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Bear market is here! Are you prepared? <-- source
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Mike Larson | Friday, October 7, 2011 at 7:30 am

Have you viewed the brand new video presentation Martin Weiss and I have put together yet? Have you clicked here to watch America’s Financial Doomsday — at absolutely no cost?

I sure as heck hope so. Because I’m convinced more than ever that we are entering a new bear market, and a double-dip recession. And if you do NOT follow the powerful, step-by-step instructions we give here — to both protect your wealth and profit — I believe you’re going to regret it.

Why do I say that?

Because the evidence of a renewed bear market and economic slump is irrefutable. Just consider:

* The Dow has dropped 2,000 points in less than three months …

* The S&P 500 has dropped roughly 20 percent — the classic definition of a bear market …

* The Russell 2000 Index of smaller capitalization stocks just dropped to the lowest in 13 months …

As if that weren’t enough, the cost of obtaining dollars to pay off dollar-based loans is surging to three-year highs in Europe. Credit default swap costs for insurance on bank bonds — and European sovereign debt — is at or near record highs. Junk bond yields are soaring, while issuance of mortgage bonds and leveraged loans is plunging. Those are straightforward credit market indicators of extreme stress.

Meanwhile, on the economic front:

* The Conference Board’s index that tracks how tough it is for consumers to find a job surged to the highest since 1983 …

* Challenger, Gray & Christmas tracked more than 115,000 corporate layoff announcements in September, the most since April 2009!

* Home construction dropped 5.3 percent in August, pending home sales fell for the second month in a row, and new home sales slumped to the lowest since February.

Why a Replay of 2008
Is All but Inevitable!

Why are we back in the soup again? Why did the great post-recession rally fizzle out? Simple: We tried to paper over our problems with the same failed policies that got us into the mess in the first place!

We tried to combat a debt crisis brought about by borrowing and spending too much money we didn’t have by borrowing and spending even MORE money we didn’t have!

We tried to combat excessive leverage brought about by keeping interest rates too low and money too easy by pushing rates even lower and easing monetary policy even further!

We tried to deal with mega-banks that had delved too deeply in complex financial instruments by bailing them out and merging them into even BIGGER mega-institutions, rather than letting weak banks fail and chopping them up into more manageable entities!

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Most importantly, and tragically, policymakers from Washington to Frankfurt to Tokyo learned the wrong lesson from the 2008 meltdown. They decided we should have a policy of “No more Lehmans” — regardless of the costs.


“This crisis has the potential to be a lot worse than Lehman Brothers.” — George Soros, hedge fund investor.
So now rather than just having a bunch of troubled banks dragging us down, we have troubled banks AND troubled sovereign nations! Greece is already on the verge of default, while Portugal and Ireland aren’t far behind.

Italy’s debt rating was just slashed three notches by Moody’s, while France’s debt costs are soaring due to fear its AAA is in jeopardy. Even the core of Europe — Germany — is taking heat as its potential bailout tab climbs sky-high!

Your Crucial Steps
for Self-Defense!

Nobody would like to be optimistic more than me. But as I’ve said repeatedly, when it comes to the markets, I have to be a REALIST. Hope has no place in investing strategy. So I continue to counsel you to:

Eliminate most of your stock exposure, taking advantage of bear market rallies to do so at better prices.
Eliminate exposure to real estate and riskier bonds, with the understanding that higher REIT or junk bond YIELDS don’t mean squat when the PRICE of your income-generating investments is tanking.
Add inverse ETFs as hedges and profit-generating vehicles on rallies until the big-picture fundamental and technical outlook changes.
Again, you’ll find much more detailed instructions in our America’s Financial Doomsday video, accessible online for free here.

Until next time,

Mike

Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money, Safe Money's Crisis Trader, and LEAPS Options Alert. He is often quoted by the New York Sun, Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.