March 13, 2007 – In a Special Bulletin that I sent to maalamalama members only last week I wrote, “If you go back and check archived news in the U.S. financial media you will actually find stories of financial journalists who wrote about the correction in the U.S. markets being a one-day event. I noted that this was foolish and that sustained weakness was far more likely.” Well now that the second huge drop in global markets has occurred (and is occurring as I write this), is this proof that more sustained weakness is ahead? While it is not proof, just as I cautioned our members that the bounce we were seeing was most likely temporary before the resumption of a correction that was merely taking a breather, I still believe this to be the case and the most probable scenario.
I believe that traditional stocks are still very much at risk, that great caution is merited, and that as I had been advocating for the past several months here on my blog, that you should have been slowly building good positions on inverse funds that basically rise when the markets drop. As I noted just a couple entries back, beware the perpetual bulls. Interestingly enough, I stumbled across an article today that discussed five top investment newsletters (newsletters being one of the greatest perpetrators of eternal optimism and bullishness). The article stated that “immediately after the February 27th market drop of 416 points, all five were bullish..It turns out that all five remain just as bullish today, Tuesday’s big drop not withstanding.”
This comment epitomizes the reasons to remain skeptical of many investment newsletters. Not only do they refuse to spread caution when caution is merited, but they provide no advice on how to position your portfolio to hedge against what seems to be a more likely occurrence than not. So what about gold? Well, if you are a maalamalama member, than you received our commentary regarding how to interpret the accompanying corrections in the gold market as well. Stay tuned, however, for another special Members Only bulletin this week that will shed more insight on how to play gold stocks for the immediate future.
[tags]wealth literacy, investment strategies[/tags]
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J.S. Kim is the founder and Managing Director of maalamalama, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to yield 25% or greater annual returns.
