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This is Your Imperative as a Red-Blooded Profit-Seeking Investor

By Tom Dyson, publisher, The Palm Beach Letter
Monday, March 16, 2009

You define your life by a small handful of very important decisions. We're at one of those decision points right now... 

The stock market performance between March 6, 1999, and March 6, 2009, was the worst 10-year performance in history, including the Great Depression. Excluding dividends, S&P 500 investors lost 46% of their money over this period. 

Now investors are as pessimistic, uncertain, and afraid as they have been in 120 years of stock market history. 

When everyone is bearish like this, it is your imperative as a red-blooded, profit-seeking investor to be bullish

The problem is timing. The market can always fall farther. Buy too early, and you'll lose all your money before the bounce comes. That's why you wait for the market to tell you when its time to buy... 

Richard Russell, one of my favorite stock-market writers, explains how the market reacted at the bottom of the Great Depression...

Prior to the ultimate bottom of the bear market during June and early July of 1932, volume on the NYSE contracted to around 1 million shares a day. On July 8, 1932, the Dow sunk to its final bear market low of 41.22.

As soon as the Dow passed that low, volume on the NYSE suddenly soared to 4-5-6 million shares as the market surged higher. A new bull market had started amid the Great Depression. 

At that time, nobody had any money. The nation was broke. And yet when the market following July 8 turned from bear to bull, volume exploded. The market in its amazing wisdom, immediately recognized the turn. And from a "broke America," money poured into Wall Street as volume on the NYSE surged. I always wondered where that money came from – wasn't it remarkable – and it is a lesson I'll never forgot. When the price is right, the money will be there.
The bottom of the 2000-2003 bear market happened the same way. It was the week the Allies started bombing Iraq. Investors were terrified. They imagined a chemical war was about to break out. There could be terrorist attacks all over the U.S., the newspapers warned. Oil prices were going to skyrocket... 

On March 13, 2003, the S&P 500 sank to 789... its lowest level in six years. This marked the lowest point of the bear market. The next day, the market jumped 3.5% on huge volume. The following day saw a one-point gain. The next day it jumped another 3.5%. Then another 3% rise over the next two days. In all, the market rose 14% in seven trading sessions to announce the new bull market. The S&P doubled over the next four years. 

On Tuesday, the market jumped 6% higher in an explosion of volume. On Wednesday, the market eked out a small gain. Then on Thursday, the market exploded higher again... rising another 4% on big volume. 

We can't know for sure whether Tuesday marked the start of a new bull market... but it doesn't matter. Right now, we must assume Tuesday was the bottom until the market proves otherwise. That means taking an aggressive long position with a stop loss and an extra stream of income...

My readers are playing the rally with companies like McDonald's, Exxon, and Johnson & Johnson. These are the strongest companies in the world and they sell essential consumer products that people have to buy in recessions... like cheap food, energy, and health care.

By selling covered calls, we generate 15% a year in income from these companies regardless of the market's direction. If I'm wrong about the coming rally, and the market keeps falling, we have our 15% income stream to soften the blow and the protection of America's safest companies. If I'm right, and the market rises, it'll give us an added tailwind...

The market is so oversold, this rally could last at least a year or more and retrace as much as 50% of the bear market losses. 

Successful trading is not about predicting the future. It's about placing bets when the odds are in your favor. Right now, the odds are in favor of the bulls, and the market's telling us it wants to rally. As long as you use a stop loss and make sure you're collecting income, it's the right time to buy stocks... 

Good investing, 


Market Notes


AutoZone (AZO)... auto parts
O'Reilly Auto (ORLY)... auto parts
Insmed (INSM)... biotech
ImmunoGen (IMGN)... biotech


Exelon (EXC)... utility
Kellogg (K)... food
General Mills (GIS)... food
Del Monte (FDP)... food
Lexmark (LXK)... printers
Nokia (NOK)... cell phones
Cisco (CSCO)... networks
Raytheon (RTN)... aerospace
Diageo (DEO)... booze
Molson Coors (TAP)... beer
Progressive (PGR)... insurance
LDK Solar (LDK)... solar energy
Hershey Foods (HSY)... chocolate energy
Walt Disney (DIS)... entertainment
InterActive (IACI)... web commerce
Clean Harbors (CLH)... waste management
Republic Services (RSG)... waste management
Waste Connections (WCN)... waste management
Natural Gas, British pound

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