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Keep Your Cool Now for a Big Payday Later |
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.
Now we have a group of pundits telling us that we have another "lost generation" for stocks on our hands -- a la 1970 to 1980 where the Dow (DJI) started at 800 and ended there.
Well, I have some news for you: In 1970, a $1 million balanced portfolio of domestic stocks, international equities and fixed income (adjusted down to only a 5% annual Treasury return to more closely reflect current rates) was worth nearly $2 million at the end of that "lost decade." Not too shabby!
More importantly, if you bought the growth sectors of the market in that lost decade and discarded the low-growth sectors -- as we do at ChangeWave Investing -- your returns would have been more than 300%.
Stay Cool When the Heat is On
The path to profits requires that you keep your head when others are losing theirs.
Circumstances are always different in every bear market -- the one constant is that the business cycle always tops ahead of them and bottoms six to nine months in advance.
I believe we are getting close to the economic bottom for a number of reasons. But the two I like best -- after our ChangeWave Alliance data -- are that we are starting to see the "vulture" funds pick at financials and that the weak players are going bankrupt.
As gruesome as it sounds, this is capitalism at its best!
Capital is being taken away from the weak and going to the strong -- like a forest fire that clears the way for new growth.
As the weak players exit the market, this creative destruction will sow the seeds for the next bull market.
This is exactly how the business cycle should work. All we have to make sure of now is that the government does not interfere too much with this process.
The next bull market is ahead. Join us at ChangeWave Investing to take advantage before the rest of the world wakes up.

Toby
P.S. In order to grow wealth in this bear market, you must keep your cool, roll with the punches and anticipate the next wave of market growth before other investors catch on. Join us at ChangeWave Investing and receive the information and guidance you need. Accept your 90-day, risk-free trial today. |