No News Would Be Good News

The steady drumbeat of bad economic headlines is spooking investors and taking a toll on the stock market. Whether it's long lines of worried depositors at the failed IndyMac Bank (IDMC), additional questions about Freddie Mac (FRE) and Fannie Mae (FNM), or grim forecasts from Fed Chairman Ben Bernanke, bad news appears to be everywhere you turn. But we know investors can't afford to run and hide. Watch today's Rant and discover how you can make big profits, even in the market's darkest hours.

Toby

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Cashing in on Bad News

Watch a video of today’s rant.
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I've been searching for some good news in the markets, and here it is: Bear markets give us a wonderful opportunity to buy great secular growth companies at 40% to 50% discounts.

In other words, the seeds of tomorrow's profits are sown in the depths of bear markets.

Unfortunately, right now I can't come up with any scenario that would lead me to call a bottom. Instead, I see evidence of 10% more downside in the major indices, and another 30% to 40% downside for the financial services companies. These wounded institutions are only about 40% of the way through the trillion dollars worth of bad loans that need to be written off.

There is no reason to believe that this bear market will be an average one -- i.e., a 30% fall from the previous market highs that lasts about a year and a half -- because none of its causative elements are average.

Bear markets that anticipate recessions are typically caused by the Federal Reserve raising short-term interest rates too high to fight inflation, or by the bursting of an asset bubble like we saw in 2000-2003.

It's true that this bear market and economic slowdown were caused by an asset bubble bursting -- subprime mortgages and the housing market in general -- but this time the Fed has no silver bullets left to get the economy back on track.

We're sailing in uncharted economic waters, folks. Let's call it the first bear market of the global age.

Traditionally, when the Fed cuts rates significantly, it kick-starts a homebuilding cycle, which boosts the durable goods cycle, mass layoffs turn into mass hiring, automobile sales take off, and this all gives way to a new economic expansion. 

Yet, we have none of those economic catalysts today.

Rather, we have 12 months worth of housing inventory (the normal level at a recession bottom is about two months), $4-per-gallon gasoline (it cost $2 per gallon in 2003), and a credit rot that has spread to credit cards, auto loans and home equity loans.

So, we're missing the near-term catalyst that could create the next expansion.

The Fed could lower short-term interest rates to 1%, but with the amount of credit banks are extending to customers down 9% year-over-year, credit is not getting to the market. Plus, further cuts would hurt the U.S. dollar, which would cause oil prices to go even higher.

And with deleveraged financial institutions, lower short-term rates are not translating into lower mortgage rates, especially in jumbo loans.

That's all bad news, but it shouldn't stop you from making money now. As a matter of fact, we're making a ton of money taking advantage of these tough times. 

Caution: Rough Road Ahead

Before I get to how we're making big profits in this bear market, I want to tell you what's ahead.

First, we will see a bunch of real estate-oriented banks go belly up.

I just went through a list of these public and private banks with a very well-known bank analyst, and I'd say you should expect to see 80 to 100 of them go under in the next 12 months.

Granted, that's nothing compared to the 1,000 banks that failed in the Resolution Trust days. And while it's bad news for the financials, keep in mind that the FDIC insures more than 8,000 banks.

When these institutions do fail, the big vulture money will come in and buy these banks -- let's let capitalism work.

Given the current state of the market, my downside targets are 1,100 for the S&P 500 (SPX), 10,000 for the Dow Jones Industrial Average (DJI) and 2,000 for the Nasdaq (NASD).

Two-Pronged Strategy for Success

When stocks are unambiguously cheap, we'll be aggressive buyers at ChangeWave Investing. But the best way to make money now is to take advantage of falling financials, retailers and other victims of this recession with our ChangeWave Shorts service.

ChangeWave Shorts Editor Michael Shulman will show you how to make 50% to 250% profits from falling stocks. Using simple, easy-to-follow put option plays, you can limit your risk, while capturing huge gains. 

Michael's subscribers have had 26 money-doublers so far this year, and there's plenty more on the way, particularly in the banks and financial institutions. (Get our special, limited-time offer today.)

I'm advocating a two-pronged strategy here: Use ChangeWave Shorts to make money now from falling stocks, while positioning yourself on the long side in the best secular growth stocks in the ChangeWave Investing portfolio so that you are ready for the rebound when it comes. And it will come, boys and girls, but it won't be next week or even next month.

In the meantime, if you're not playing the short side with ChangeWave Shorts, you're missing out on a once-in-a-lifetime opportunity to make quick, easy profits in this bear market.

Toby

P.S. You should be using bad news and down days to position yourself on the long side for future gains, but if you want to see profits constantly rolling in, you need to play the short side. Take advantage of our special offer to try ChangeWave Shorts for two months for just $99 to start doubling your money today.

July Hot Summer Days Sale

You can try the red-hot ChangeWave Shorts options trading service for two months for only $99. Subscribers have had 26 money-doublers so far this year!

I guarantee this is the lowest price you'll ever find, and it's only available until July 20, 2008.

If you want to find out how you can position your portfolio for money-doubling profits, keep reading.

Ask Toby: Three Shipping Plays

Watch.
Or listen.

In today's video, Toby gives you his take on DryShips Inc. (DRYS), Frontline Ltd. (FRO) and Diana Shipping (DSX).

Watch 'Bulls & Bears' on Fox News

Be sure to tune in to Fox News Channel this weekend and join Toby and the crew on "Bulls & Bears" for their weekly market roundtable as they kick off the Fox News Channel business block on Saturday, July 19, at 10 a.m. Eastern. ("Bulls & Bears" replays at 4 p.m. Eastern, Sunday, July 20, and 4 a.m. Eastern, Monday, July 21.) Or you can catch the show Saturday evenings at 6 p.m. Eastern on the new Fox Business Network.

Check your local cable listings or satellite guide to find the Fox News Channel location and times for your area. NOTE: These shows are NOT on your local Fox network station. They are on Fox News Channel on your cable or satellite system (Channel 360 on DirecTV, Channel 205 on Dish Network). Keep in mind that these schedules are subject to change, and the Fox News Channel business block and other programming may be pre-empted for breaking news events.

Proof-Positive You Must Own Apple

If you own Apple (AAPL), don't sell. In fact, you may want to buy more shares. At ChangeWave Investing, we have a unique research model that's the key to our success, and it's telling us that Apple shares may see another 80%-100% gain.

Keep reading to get the full story and the proof to back it up.

Wine Find: Not Your Average Merlot

The St. Guilhem Merlot from the Rhone Valley's Domaine de la Patience is a big, round wine, with a touch of tar and smoke that makes for a very interesting taste. The 2005 vintage retails for about $10 per bottle, so pick one up today.

Remember, sports fans, if you like reading my tips, don't forget to send in your own finds!

To share your favorite wine or food experience, e-mail me through the form at: www.changewave.com.

Join ChangeWave at the San Francisco Money Show

Ignite your portfolio and boost your investment savvy at this four-day event filled with opportunities to gain profitable insights and advice.

Join us in the heart of downtown San Francisco, Aug. 7-10, at the San Francisco Marriott.

Don't wait. Accept your free tickets today.