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Protect Yourself From Dow 8,500

October 08, 2008



Watch a video of Toby's rant. Or listen.

One of my favorite authors, William Blake, had it right when he said, "The road of excess leads to the palace of wisdom."

Well, based on the level of excesses we've seen in our financial system, we're going to have one hell of a palace -- but it ain't ready yet.

For months I've been telling you that a big part of your portfolio should be comprised of short-side investments and hedges as protection against the financial meltdown. My own portfolio is currently more than 70% short, and my trading capital is about 90% short.

I hope that the last few trading days have proved why it is so important to hedge your portfolio.

Slowdown Turns Into Recession

Many people are calling for a bottom here, but don't believe them. Sure, we'll see big up days, but they will only be bear market rallies.

The slow-moving market crash that we have witnessed up to this point has kicked into high speed. Until now, the economic slowdown in the United States and Europe was a slow-motion decline, but it's turned into a fast-moving one. The contraction rate of our economy has doubled in speed since early September, and the market knows it.