Avoiding the NEXT Bear Market Trap …

Today, we are in the midst of a savage, secular bear market that has already taken a terrible toll on investors’ wealth.

Globally, $50 TRILLION in net worth has vanished in the past 18 months alone. This includes more than $37 trillion in LOST stock market value worldwide, plus a sharp and ongoing plunge in real estate values both at home and abroad.

Our economy has fallen off a cliff … in fact, we may be witnessing a second Great Depression in America … which could still be in the early innings.

No one can say for sure how much lower markets will fall before reaching bottom, nor can we know in advance how long this crisis will last. But our mission today is to help you escape the dangers, avoid the devastation, and turn this crisis into an equally great profit opportunity in the long run.

If you’re thinking it’s too late to do anything about your portfolio now, think again!

Here’s the important point to understand today, April 6, 2009: Everything we see, know and analyze tells us it’s still not too late for you to defend your wealth from even more potential losses ahead as this secular bear market continues.

Given the dramatic financial and economic meltdown we’ve witnessed, several of my colleagues at Weiss Capital Management joined me recently for a special online Webinar briefing: Phase II: Bear Market Update. Over 12,000 concerned investors registered to view this Webinar, where we discussed:

• How long will this economic contraction last … and what impact could it have on financial markets both short- and long-term?

• Whether massive government bailouts will reverse the economic contraction, or just result in hyper-inflation down the road?

• Most important, we provided details about our Weiss Bear Strategy, a specialty investment program designed to perform in this environment.

If you viewed the Phase II: Bear Market Update video, then you may already be putting into action some of the strategies we discussed. If not, or if you want to review our briefing again to get all the details, there are still two ways to do so.

First, for a limited time, you can still watch an on-demand replay of the Phase II: Bear Market Update by going here. Or, if you prefer, you may read the edited transcript that follows in this special issue of Money and Markets …

Phase II: Bear Market UPDATE
by Weiss Capital Management, Inc.†
Sharon A. Daniels, President
Sebastian Leburn, CFA, Chief Investment Officer
Mike Burnick, Director of Research & Client Communications
(Edited Transcript)

Sherri Daniels: In the past several months, we have reviewed hundreds of portfolios of individual investors coming to Weiss Capital Management for guidance in this difficult investment climate. Can you summarize some of the biggest problem areas we are finding? In other words, what are some of the biggest potential landmines investors need to avoid in their own portfolios?

Sebastian Leburn: We see carnage almost everywhere. Almost invariably, the ones deepest in the red are those that contain some of the most “popular” investments. In other words, some of the same stocks, bonds and mutual funds that have been most widely followed and recommended on Wall Street for years.

Mike Burnick: Unfortunately, I believe far too many investors chase performance … often straight over a cliff. They pile money into yesterday’s winners — whether it’s blue-chip stocks that are supposedly “too big to fail“… OR five-star mutual funds that you are supposed to buy-and-hold, even in a bear market.

But this can be a recipe for failure, because all too often, these widely-held investments just lead to disappointing results.

Sebastian: Here’s a case in point: Citigroup, General Electric, DuPont, American Express, General Motors … what do each of these have in common?

All these companies are … OR WERE, in the select club of stocks we all know as the 30 Dow Jones Industrials. These former blue-chip stocks were highly prized for their size, stability, profits and dividend growth, among other attributes.

But just look at their dismal performance since this bear market began:

• General Electric … DOWN 79%

• American Express … DOWN 81%

• Alcoa … DOWN 84%

• General Motors … DOWN 94%

• And Citigroup — once the world’s biggest bank by market value — now trading at about $2.50 per share.¹

Meanwhile, shareholders of Fannie Mae, Freddie Mac, Washington Mutual, and Lehman, were basically wiped out. Another thing these stocks had in common, besides terrible performance? All of them were routinely recommended by brokers for many years.

These declines of 80% or 90% in value, in just over one year, are more than double the 34% decline in the Dow Jones Industrials last year.² Yet, these are still some of THE most popular stocks in America — widely held by millions of investors. I see them in the portfolios we review for new clients all the time.

Please note: To learn more about the Weiss Bear Strategy, just click here to access our updated Bear Market Survival Kit, at no charge and without further obligation.

Mike: It’s the same story with mutual fund performance. The fifty largest mutual funds by assets were down almost 40% in 2008 — once again, that’s worse than even the Dow’s dismal performance.³

Some of the biggest and most popular funds fared even worse…

• Janus Twenty Fund … DOWN -42%

• Hartford Capital Appreciation … DOWN 46%

• Fidelity Magellan … down 49%

• Fidelity Growth & Income … DOWN over 50%!⁴

Sebastian: What’s most striking in reviewing other portfolios is the lack of basic protection. It seems as if nobody on Wall Street knows how to play defense in a bear market. Very few of the portfolios I review contain ANY “hedges” at all — such as inverse funds — which can help protect you in declining markets.

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Mike: In fact, even when investors ask brokers about using a hedge to help protect their wealth, you know what they’ve been told? “We DON’T use hedges.” It’s NOT part of their business, to hedge their clients against bear market declines.

Sherri: Incredible — even worse — some investors say it’s difficult getting information from their broker. They’re paralyzed by this market volatility — afraid to make any move. They are told to “just sit tight” because, “markets always come back.”

It’s shocking that even after one of the worst bear markets in history, many brokers continue to preach nothing but buy-and-hold. In fact, very few, if ANY money managers I’m familiar with even offer strategies that use inverse funds the way we do in our Weiss Bear Strategy.

But another way to help protect you in a bear market is to just sit on higher levels of cash and wait it out.

Sebastian: And we’re seeing some cash in new client portfolios, but for many it’s not nearly enough. You know, stock mutual funds did raise cash during 2008 … they increased cash from 4.1% in January up to 5.2% by December — that’s it! They boosted cash just 1% during last year’s harsh market decline!⁵

Sherri: In other words, if you hold any stock mutual funds in your IRA or 401k, you were probably 95% exposed to last year’s devastating bear market decline — and you may not have even realized it.

Granted, few of the “experts” in our industry had forecasted a decline of the magnitude we’ve experienced, but still — it was quite obvious that at least some defensive actions were warranted — either reducing exposure to risky securities and raising cash or adding some type of hedge.

Sebastian: Perhaps these portfolio managers were trying too hard to beat the market. So they took on more risk, after all, the depth and swiftness of this declined surprised many. Indeed, even at Weiss, some of our growth portfolios declined more than we would have liked, yet our higher levels of cash still helped considerably.

Sherri: That’s right. At Weiss, for example, we held significant cash levels across nearly all of our strategies last year — at times as high as 40 or 50% in cash — a few times even more than that.

Mike: It’s a shame that so many investors — both individuals and professionals alike — failed to cut losses and reduce risk, even with multiple warning signs.

Sherri: What investors need today are unique tools, such as inverse funds, AND investment strategies that are flexible and able to raise cash when market conditions obviously warrant a more defensive posture — rather than being fully invested all the time. I’m more convinced than ever that a proactive strategy like this is crucial to help preserve your wealth in today’s market.

Mike: It’s clear to me that we’re locked in a secular bear market, and all the rules have changed. You need to change your investment assumptions too, or risk devastating losses. First, it’s critically important to recognize that this is a bear market with temporary rallies. So, you need to be more active in seizing shorter-term profit opportunities.

Sebastian: You’re right, the rules have changed, and in fact the very game has changed. Typically, the goal of a stock portfolio is to beat the index by a few percentage points over the long run. But if an index is plunging in value — as we’ve seen the past 18 months — that’s just not good enough.

Mike: Second, your goal cannot be to lose LESS money than the broad market — your goal should be not lose ANY money if possible. I’m afraid the conventional wisdom of “stocks for the long run,” and “buy and hold” goes right out the window at times like this.

Sherri: For instance, during a sharp market decline, you may be able to “hedge” your portfolio from big losses using inverse funds. Let’s run through a hypothetical scenario to illustrate this point.

Sebastian: Sure. If the S&P 500 Index falls 30% in value, and you’re invested in the index on the long side, you’ll lose, about 30% too … or perhaps even more based on the poor performance of so many stocks and mutual funds last year.

But with an inverse portfolio, instead of losing 30%, you could potentially earn gains of, say +15% on your money over the same period. Now, you’d be beating the market by +45 percentage points — and turning a sharp loss in your wealth — into a possible gain instead.

Sherri: Why only +15%? If the market falls -30%, why wouldn’t you gain the same amount in an inverse fund, or +30%?

Sebastian: Too much risk.

Going 100% short using inverse funds is basically the same mistake (in reverse) that many investors make by staying fully invested in stocks and mutual funds most of the time. You don’t want to risk 100% of your money by just buying and holding a selection of inverse funds. Markets are simply too volatile for this approach.

Instead, the idea is to properly hedge your bets, using only a portion of your investment portfolio. You also want to take your profits on these inverse funds along the way, since volatile markets can have many twists and turns. That’s why I’m talking about a +15% gain instead of a +30% gain using inverse funds.

But even capturing only half-as-much profit as the market is losing, created an impressive +45 percentage point performance difference for your investments.

Sherri: That’s a great example Sebastian, because in reality, the returns you describe are almost EXACTLY the same as the ACTUAL performance difference between the S&P 500 last year (down -37%) and our Weiss Bear Strategy (up +15.08%) during 2008.⁶

I want to get into more details about how you’re successfully navigating these treacherous markets using the Weiss Bear Strategy in just a few minutes.

Please note: To learn more about the Weiss Bear Strategy, just click here to access our updated Bear Market Survival Kit, at no charge and without further obligation.

But first, let’s discuss our big-picture outlook for the markets and the economy.

In other words, why do investors today NEED a bear market defense strategy as a key part of their investment portfolio?

Mike, earlier you mentioned that we are still “locked in a secular bear market.” Please explain why you believe this market could still have a long way to go on the downside.

Mike: I’ve written before in Weiss Advice, despite the greatest government bailout efforts of all time, the sorry reality on the ground is that the economy has fallen off a very steep cliff.

We’re in the midst of an unprecedented economic contraction, triggered by massive debt-deflation … and sadly, it seems there’s nothing anyone can do about it!

Washington has quickly piled up a total bail-out bill so far that’s nearly $9 TRILLION in government spending, lending, and other commitments. Think about that … $9 TRILLION is enough for the U.S. Treasury to send every man, woman and child in America a check for $29,400 each!

But, in spite of throwing this massive amount of money at the problem, the economy and financial markets seem to be weakening at an even faster pace.⁷

Take a look at this chart of soaring credit default swap prices. These are essentially “life-insurance” policies against default by some of America’s biggest corporations.

As you can see, the cost of protecting against default recently surged to new highs, indicating the highest risk yet of bankruptcies since the crisis began!

This is telling me we’re not out of the woods yet … not even close.

Sebastian: It’s clear that last year’s financial panic has spilled over with full-force and is hitting Main Street Americans very hard. Much of the U.S. financial sector is still teetering on the brink of insolvency. The housing market remains in free fall, and our economy is on track for its longest recession since the Great Depression.

Mike: We’re seeing more and more comparisons between the current crisis and the 1930’s — a Great Depression II, if you will — and that may not be far off the mark. In fact, none other than Paul Volker, the respected former Federal Reserve Chairman, recently weighed-in.

He said, and I quote: "I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world." These are very negative comments from a man who knows economic history better than almost anyone else.⁸

Sherri: We analyze and discuss all of the incoming economic data during our regular Investment Committee Meetings at Weiss. Let’s briefly review some of the indicators that are most revealing about the current state of our economy.

Sebastian: Many of the real-time indicators we follow, such as corporate bond spreads, credit availability, jobless claims and housing prices … to name just a few … are telling us that any rally we experience in the stock market is likely to be ONLY temporary.

Take a look at the leading economic indicators (above), which should tell us where the economy is headed, not where we’ve been … these are signaling the deepest contraction in half a century.

This tells us that conditions are deteriorating extremely fast — so fast that government officials can’t even keep up with the plunging economy.

This also goes to show that you can’t always take the raw data at face-value, or rely on it when making your investment decisions. It takes a lot of experience to interpret this information correctly and make it useful.

Mike: What’s most striking to me is the sheer MAGNITUDE of the contraction in our economy, measured by multiple data points, not just one or two. We’re seeing a lot of “historic records” being set; unfortunately they’re ALL records of the WRONG kind.

Consider these:

• Consumer spending — the heart and soul of our economy — is plunging at an unprecedented rate of nearly -9% annually … the largest decline ever recorded.

• Discretionary spending is tumbling at a -15% rate. We have NEVER before seen such a steep fall-off in consumption as we’re witnessing today.⁹

• Soaring unemployment: 6.7 million full-time jobs have been LOST since this recession began — the steepest decline since the 1940s … and 3.5 million Americans are out of work in just the past 3 months alone. That’s another record of the wrong kind.¹⁰

Sherri: But many Wall Street analysts are asking, “Hasn’t much of this bad news already been discounted by the market — isn’t it already priced in?”

Mike: No. If anything, certain sectors such as housing, where this deflationary spiral began, appear to be getting even worse, not better.

What we’re experiencing right now is nothing less than a secular change in the way people think about money. Investors are changing their attitudes about spending, savings, investment, and debt. Notions such as “stocks for the long-run” are being severely called into question.

You can bet it will impact financial markets for years to come.

Sherri: Mike, given this outlook, what do you see as the biggest risk investors face right now?

Mike: In a word: complacency.

Lately, we’ve heard a lot of talk about how stocks have already fallen so much — we may be at or near the bottom … or, the economic news is so bad — the worst of this recession may already be over, and we’ll see recovery in the second-half of the year.

Well, maybe. But I wouldn’t bet what’s left of your life savings on it!

Sherri: In other words, there could be many false starts that fool investors into believing that the worst is over, but only results in disappointment and more lost wealth, as the economy rolls over again. That’s the definition of a long-term secular bear market.

Sebastian: We’ve had secular bear markets in the past, and typically they DO NOT end after 18 months … or even several years. For example, the 1930s and 1940s was one long, secular bear market for investors. After the 1929 peak, stock investors were trapped for 27 years before they finally broke-even … in 1956!

In 1966, the Dow peaked near 1000. It was 15 years later, in 1982, before the market finally moved beyond that level for good. There were many ups and downs for stocks in between, but the market essentially went nowhere for a very long time.

In Japan too, a secular bear market took hold in 1989 when the Nikkei peaked near 40,000.

There were huge rallies from time to time … 40%… 50%… even 60% moves to the upside — some that lasted for a year or more,¹¹ but the overall trend was DOWN.

This secular bear market continues to this day, with the Nikkei now at 7,300 – down over -80% from its peak value 20-years ago.

You see, secular bear markets aren’t that uncommon. We are experiencing another one right now that began in 2000 and it may last well into the next decade. So complacency, as Mike said, may be an investors’ worst enemy right now.

Sherri: We hear some analysts saying that stocks are cheap again at today’s levels. But are valuations attractive enough to dive back in, or is this just a “value trap?”

Sebastian: To determine whether stocks are really cheap, on a price-to-earnings (P/E) basis for instance, you’ve got to know what the earnings number is going to be.

Unfortunately, that’s a moving target right now, because there is so little visibility in the outlook for profits during this steep economic contraction. For example: In October 2008, Wall Street analysts expected S&P 500 earnings to GROW +46% in the fourth-quarter … but profits plunged -67% instead.

Also, at historic market bottoms of the past, valuations were even cheaper than they are today. This graph, courtesy of BCA Research, shows the S&P 500 P/E ratio going all the way back to the 1880s — that’s more than a century of data.¹²

You can see that several times stocks weren’t really cheap until we saw single-digit P/E ratios. Unfortunately, with the S&P 500 at about 16-times earnings now, we just haven’t reached this valuation trough yet.

Mike: In terms of historic valuation, here’s another interesting graph that shows the Dow Jones Industrial Average adjusted for inflation.

What you’re seeing here is the real return of stocks factoring in purchasing power changes over the years.

You can see the extremes quite clearly, the 1929 extreme high was above the upper trend line, and the bottom that followed in the early 1930s touched the lower boundary.

The last time this lower boundary was reached happened during the early 1980s, at the end of the secular bear market that began in the mid-1960s … 15 years before.

Sherri: Right now, stock prices are about in the middle of this range — not at the low-end at all.

Mike: And keep in mind, secular bear markets often overshoot “average” valuation levels on the downside … so a return to the BOTTOM of this range can’t be ruled out. That would mean the Dow falling to 4,000 according to this chart, which means about 400 or so for the S&P 500 Index.

Sherri: Given this unprecedented scenario, what can you do as an investor to seek protection for your portfolio, AND potential growth of capital too? To help answer that, let’s revisit the Weiss Bear Strategy as one potential solution.

Sebastian, as the portfolio manager for the Weiss Bear Strategy, what moves are you making right now?

Please note: To learn more about the Weiss Bear Strategy, just click here to access our updated Bear Market Survival Kit, at no charge and without further obligation.

Sebastian: Sherri, we were fortunate to successfully navigate many of the market’s twists and turns last year, with a gain of over +15% in the Weiss Bear Strategy during 2008, as we discussed earlier. Meanwhile, the S&P 500 Index declined -37% for the same period last year.

On a year-to-date basis in 2009, through the end of February, the Weiss Bear Strategy gained over +8%, while stocks slid even further. That said, I think it’s important to point out that this is an aggressive strategy and so it’s not for everyone. There’s no guarantee that past performance can be repeated, and you can lose money in this program, just as with any investment. 

But since inception in December 2000 through 12/31/08, the Weiss Bear Strategy gained +41.7% compared with a loss of -20.9% in the S&P 500 index — that’s a 60% performance differential in favor of the Weiss Bear Strategy. And that’s through the complete market cycle — both bull and bear markets.

Sherri: That’s impressive performance to be sure, my hat’s off to you Sebastian. Of course each investor’s performance depends on when they enter the Weiss Bear Strategy, but our clients should be very pleased that they have some refuge with positive returns in this difficult market.

Sebastian: Thank you Sherri, but the credit really goes to the disciplined strategy we designed and have successfully followed since 2000 — this methodology serves us well.

Last year alone, a hypothetical $100,000 invested in the Weiss Bear Strategy would have returned $115,080, while the same amount invested in the S&P 500 would have shrunk to only $63,000 by year end 2008. Of course, actual investor returns could vary based on many factors, such as when they entered the Weiss Bear Strategy.

And since the program’s inception, a hypothetical investment of $100,000 in the Weiss Bear Strategy in December 2000 would have grown to $141,770 by the end of last year — while the same amount invested in an S&P 500 Index would have withered to just $79,080.

Sherri: That’s a swing in potential wealth of more than $52,000 — in just one year — and an even bigger difference in wealth since 2000! Please provide us with more details on how this strategy works.

Sebastian: The Weiss Bear Strategy is specifically designed to stay in the relative safety of cash during periodic rally phases in the market. Our methodology tells us when it’s time to effectively “go-short” using inverse funds, and when it’s time to stay on the sidelines. The results, over the past 8+ years speak for themselves.

Sherri: There are very few, if ANY, investment professionals I know of that even offer a program like the Weiss Bear Strategy. Many Wall Street brokers seem to have followed little more than a buy-and-hold strategy during this bear market.

They rarely talk about protection — let alone the potential for earning profits in a bear market — but isn’t that the whole idea behind the Weiss Bear Strategy?

Sebastian: Right, the Bear Strategy has two Big Picture goals:

#1: To provide a “hedge” for a portion of your portfolio to help protect your wealth during a bear market decline.

#2: To turn falling markets into potential money-making opportunities.

Sherri: We’ve had a BIG and consistent surge of interest in the Weiss Bear Strategy, for obvious reasons recently. But a question we often get from our clients is one of timing: is now the best time for investors to take advantage of a bear strategy like ours?

Sebastian: Well, the worst time to be aggressively “short” is when stocks are severely oversold already … when investors have just suffered through a steep decline. Psychologically, investors might think this is the time to “go-short,” because all the news is negative and it’s hard to believe stocks will ever rally again.

But the worst thing you can do now is let your emotions take control. Markets don’t move in a straight line — either up OR down — your timing is critically important during a bear market.

Sherri: So right now, after the steep decline we’ve suffered already, it pays to be cautious when “hedging” your investments by going short.

Sebastian: Exactly. Look, the S&P 500 is already down 50% from its highs, and we haven’t seen much more than a brief 20% rally in the past 6 months or more. So, you have to wonder how much more downside we’ll see before we get a powerful bear market rally.

Mike: A rally certainly seems overdue for stocks — even during the Depression, stocks rallied 40% or 50% at times — and we saw exactly the same pattern in Japan during its long bear market, as Sebastian pointed out.

Sebastian: That brings me to what may be the best time to take advantage of the Weiss Bear Strategy: AFTER stocks have just enjoyed one of these powerful bear market rallies — this is perhaps the best time to go short.

In a bear market, one of the most common triggers for a short, sharp rally is when investors have reached the point of maximum pessimism, and it looks like we reached such a point today.

Sherri: So right now, you’re expecting a bear market rally, perhaps a sharp move to the upside, at least in the short run.

Sebastian: I believe there’s a high probability of just such a rally developing at any time. To illustrate just how oversold stocks are right now, an astounding 40% rally from the lows set recently on March 6 would ONLY take the S&P 500 back to where it was in January, just 3 months ago! 

That’s how far stocks have fallen in a very short time. If you watch CNBC for just 15 minutes, all you’ll hear is doom-and-gloom. I’m not saying it isn’t justified. It is, for all the reasons we have discussed. Investors face a very long, hard road ahead before the economy fully recovers.

Stocks could certainly move much lower from here, before finally hitting bottom, but this process may happen over time, not overnight.

Sherri: If we are close to a strong rally, what could be the trigger?

Sebastian: Anything could trigger it. For example, there’s a mountain of cash sitting on the sidelines right now …

A total of $3.6 TRILLION in retail and institutional money market accounts – that’s an all time record high.

And it’s a lot of potential fuel that can move stocks higher quickly.¹³ Remember, for a rally to develop, we don’t need to actually see GOOD news — we just need news that is NO WORSE than before.

Mike: So, if the news flow gets “less bad” it could trigger a strong rally however misguided it may be based on long-term fundamentals.

Sebastian: That’s right. Even if a powerful rally occurs, that doesn’t mean the market has reached THE bottom, just a bottom from which to bounce. What I’m saying is: if stocks do move higher in the months ahead, that could hand you an great opportunity to prepare for the next phase of this bear market, by positioning yourself for another short-selling opportunity using the Weiss Bear Strategy.

Sherri: I think that’s an important point, Sebastian. Please elaborate.

Sebastian: The Weiss Bear Strategy is not a one-size-fits-all “model” portfolio that you’re left to follow on your own. This is a professionally managed strategy that seeks to take advantage of ever-changing financial conditions by adjusting to subtle shifts in market trends.

• If you have money in our Weiss Bear Strategy, and the market is heading down, our goal is to earn PROFITS using inverse funds to effectively go short.

• But, if markets are going up, we switch gears and the goal is interest INCOME in the relative safety of cash.

In other words, we look for key turning points in the market cycle so you don’t have to guess the market’s next move. Instead, we act on your behalf, buying or selling according to our signals when the timing looks right.

This is where our professional oversight comes in — by strategically purchasing inverse funds only when the potential for reward appears greatest — our goal is to outperform a strategy that just buys and holds an inverse fund for the full duration.

Sherri: That’s an important point, because the last thing an investor wants to do is add insult to injury by going “short” at just the wrong time and losing even more money should stocks rally. The Weiss Bear Strategy has been designed to help guard against this.

Sebastian: That’s right Sherri. As we discussed, there could be many false starts in the economy and financial markets, as we work through this long-term, secular bear market. We have seen extreme volatility already, and trying to successfully navigate these twists and turns could prove too difficult for many individual, and even some professional, investors to handle.

Sherri: And when we DO get the next signal to “go-short” the market, you recently fine tuned the Weiss Bear Strategy to include even more opportunities to earn potential profits during the next phase of the bear market decline…

Sebastian: Yes, and I believe it’s quite an improvement to our strategy. Since the beginning, the Weiss Bear Strategy basically relied on two inverse funds to produce profits: one fund is designed to rise in value when the S&P 500 Index falls and another is designed to rise in value when Treasury bond prices fall — and interest rates rise.

But these are only two of many potential financial markets that could suffer in the next phase of this historic bear market.

So recently, we expanded our universe of investments in the Weiss Bear Strategy, giving us the opportunity to take advantage of sell-offs in MULTIPLE markets outside of blue-chip U.S. stocks and Treasury bonds.

For instance, we added an inverse fund that tracks major foreign stock markets outside the U.S.

As we discussed, this economic collapse is not only limited to the U.S. In fact, it’s even more severe in parts of Europe and Asia. Now, we use an inverse fund that targets these areas too, so we can potentially take advantage of declines in overseas equity markets.

We’ve also added inverse funds that track other major domestic indexes, such as the technology sector, for instance — and another that focuses on small-cap stocks.

Bottom line: the Weiss Bear Strategy has performed well since inception. This track record was built using just two inverse funds. But starting now, we have significantly increased the universe of inverse funds we can use going forward to provide important diversification, and multiple opportunities to profit.

Sherri: Sebastian and Mike, thank you for your detailed insights.  

No doubt, these are very challenging times, but at Weiss Capital Management, we believe our investment solutions can help you navigate markets more effectively than many other firms — because we’ve done so in the past.

In my experience, there are few brokers, fund managers, or other financial advisers who know how to handle a bear market environment the way we do.

We’re here to help you manage your investments and achieve your long-term financial goals — a service we feel is especially vital right now. In this market climate, the Weiss Bear Strategy can help you achieve these goals for several key reasons:

• First, the Weiss Bear Strategy may help you hedge a portion of your core, long-term investments, which could be vulnerable in the next phase of this bear market.

• Second, you may be able to earn short-term profits during the next steep bear market selloff, which could come at anytime.

• Third, when the market trend shifts into rally mode, even if it’s ONLY a brief, bear-market bounce, we’re confident the Weiss Bear Strategy can adjust by shifting to cash as it has in the past, to help protect your gains.

• Fourth, The Weiss Bear Strategy has greatly EXPANDED its selection of investments — offering you more ways to potentially profit from a decline in multiple markets — not just U.S. stocks and bonds alone.

• Fifth and perhaps the most important point of all, with the Weiss Bear Strategy you ARE NOT on your own — you have an entire team of dedicated investment professionals guiding your portfolio at all times. In today’s volatile investment climate, this peace of mind has NEVER been more important.

Please keep in mind, however that not every investor interested in the Weiss Bear Strategy can be accepted into this specialty program due to suitability requirements. That’s why it’s important you consult with one of our investment advisors to see if this strategy is right for you.

To establish a relationship with Weiss Capital Management, the minimum household investment is $250,000 and you can choose from a number of our investment strategies that are a good fit for your financial goals, including the Weiss Bear Strategy. 

Please note: To learn more about the Weiss Bear Strategy, just click here to access our updated Bear Market Survival Kit, at no charge and without further obligation.

This kit contains detailed information about the Weiss Bear Strategy, plus the forms you’ll need to get started right away. Or, if you prefer to talk with us one-on-one, please call: 1-800-814-3045, to speak with a Weiss Financial Advisor right away.

Best wishes,

Sharon A. Daniels
President
Weiss Capital Management, Inc.

P.S. With the next phase of this financial crisis likely to unfold soon, you need a BEAR MARKET defense plan. To get your free Bear Market Survival Kit click here!

†Weiss Capital Management (an SEC-Registered Investment Adviser) is a separate but affiliated entity of Weiss Research, the publisher of Money and Markets. Both entities are owned by Weiss Group, LLC.

The preceding is a paid for editorial that may contain forward-looking statements regarding intent and belief with regard to Weiss managed strategies and the market in general. Readers are cautioned that actual results may differ materially from those statements.

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Important Disclosures

Past performance is not indicative of future returns and, as with any investment program, it is possible to lose money by investing in the Strategy.

The Weiss Bear Strategy is suitable for investors with an aggressive risk tolerance. The program has a recommended holding period of three-to-five years. There are no guarantees that the program will be able to achieve its stated objectives.

Before investing, please read the Firm’s ADV Part II and all program materials.

*Weiss Bear Strategy Complete Performance:

PERFORMANCE: Returns are based on a composite of actual client accounts. Individual client returns may vary depending on, among other things, account opening date, contributions, withdrawals, and fees. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. Net returns cited include actual management fees, commissions, and other similar fees charged on transactions, and reinvestment of dividends, income and capital gains.

BENCHMARK: The S&P 500 Index is a capitalization-weighted index that consists of 500 large-cap US stocks, which assumes the reinvestment of dividends and capital gains, and excludes management fees, transactions costs and expenses. It is not possible to invest in an index. Index return data source: Bloomberg.

ENDNOTES (Other Sources):

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¹ Ibid

² Ibid

³ Morningstar Direct 12/21/08

⁴ Ibid

⁵ Investment Company Institute: Trends in Mutual Fund Investing, 2/26/09

⁶ Weiss Capital Management Inc., Bloomberg data: 12/31/08

⁷ New York Times: Adding Up the Government’s Total Bailout Tab, 2/4/09

⁸ Reuters: Soros sees no bottom for world financial “collapse”, 2/21/09

⁹ Merrill Lynch: Fiscal plan little help to earnings, 2/2/09

¹⁰ Merrill Lynch: Market Economist, 3/6/09

¹¹ Bloomberg data: 3/13/08

¹² Bank Credit Analyst: February, 2009 pg. 24

¹³ Merrill Lynch: Market Analysis Comment, 3/9/09

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