Keep Cool Now for a Big Payday Later

By Tobin Smith

Keeping your cool when others are in panic mode should be your No. 1 investment strategy.

Buying stocks at the appropriate times in business and stock market cycles has created more millionaires than almost any other investment strategy I know of. And we are nearing one of those buying opportunities that only come along once or twice every 20 years or so.

Thanks to the power of our ChangeWave Alliance research network, we were able to make a recession call in early January, and our survey data has been on point throughout this continuing slide.

But what we are now looking for in our research is not the point at which things start looking up, but the point at which things stop getting worse.

No one is going to "ring the bell" at the bottom of the business cycle, but that's great news for us. We use our proprietary economic forecasting edge to make our subscribers millions of dollars in profits while the majority of investors are still waiting for an "all clear" signal.

In March 2003, we were able to jump on some great bargains when our Alliance intelligence alerted us that the economy was about to turn around. And I think we're getting close to that magic moment in this bear market.

We are 10 months into the current bear market -- and bear markets have lasted about 15 months (on average) since World War II.

You must remember that these bear markets arrive every four or five years and are healthy for the markets and for investors. They clean out the excesses in the markets and are necessary for stocks to maintain sustainable gains. Plus, they give us unusually low entry points to buy into growth companies at great discounts or to pick up cyclical companies at the low end of their valuation range.

The Same, but Different

Every time we have a bear market, many despairing investors conclude "this time is different -- this is the beginning of the wealth-destroying bear that cleans me out!"

Well, I've got news for you: I've lived through many since I started investing in the '70s, and every bear market differs from the previous one.

Today's housing and foreclosure situation, rising unemployment, higher oil prices, inflationary pressures, tensions in the Middle East, unbridled and irresponsible government spending, impaired financial institution assets, and writedowns and write-offs appear to be dilemmas that we have never seen before.

But I've seen every one of these economic catastrophes before -- and much, much worse!

As I write this, I have market data in front of me that goes back to 1927. Besides the Great Depression and its 25% unemployment, 40% foreclosures of property and multiple years of contracting growth, we have seen it all.

We've made it through World War II and the Korean and Vietnam wars. We've lived through the '70s oil embargo, government price controls, 18% mortgage rates and double-digit inflation. And we've survived a California real estate meltdown, the '80s and '90s savings and loan crisis, a five-year decline in housing starts from 1.8 million a year to 1 million a year from 1986 to 1991, and untold changes, good and bad, to our tax laws.