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Today’s 508-point plunge brings the Dow closer to our long-standing target of 7,200. But to get there, it still has a long way to fall — over 2,200 points.
And if credit markets continue to shut down the U.S. economy, it’s not safe to assume that 7,200 will be the ultimate bottom.
Look. Ever since this credit crisis began 13 months ago, Wall Street has been hoping that Washington could prevent a great fall — that it had the power to pump up, bail out, maneuver, and manipulate.
So as long as those hopes were alive, the stock market held its own … even as the mortgage market collapsed and even as bank balance sheets imploded.
But now those hopes have been dashed.
That’s no surprise to us or to Money and Markets readers. What is surprising is that Fed Chairman Bernanke still thinks he’s learned the lessons of the 1930s. But here’s one of the many lessons he’s apparently missed:
Whenever President Hoover Tried to Give
A Pep Talk, the Market Crashed Some More
After the Crash of 1929, President Hoover called together a group of the nation’s business leaders for a special meeting in Washington. His message to the executives went something like this:
“When you go back home tonight, you’re going to do the right thing for our country. You’re not going to lay off employees. You’re not going to stop hiring. You’re going to do everything in your power to keep the economy going.”
But instead of following his directive, they did precisely the opposite, taking major steps to reduce their work force. Their reasoning:
“If the President is taking the extraordinary measure of calling us to an emergency meeting in Washington … if the president is so concerned that he feels compelled to tell us how to run our business … then that must mean the economy is actually a heck of lot worse than we thought it was.”
The same perverse pattern is spreading throughout the financial markets this time. Two prime examples:
- On Friday, when the President signed into law the $700 billion bailout package, instead of bolstering confidence, it turned out to be a major blow to confidence.
- And today, when the Fed announced it was taking the extremely radical measure of buying corporate commercial paper, instead of reducing pressure on the financial markets, it merely spread the fear.
This is not exactly the recipe for a bottom in the Dow. Quite the contrary, consider any rally — no matter how fleeting — a selling opportunity.
Yesterday, in a special emergency edition of Money and Markets, I gave you a quick five-step guide about what to do and how, with links to more detailed instructions for each step.
Given what happened today, I sure hope you didn’t miss it. But just in case you did, here it is again …
Markets around the world are now plunging into an abyss. But if you have listened to our warnings and followed our recommendations, you’re ready. You have already taken all the protective steps.
Specifically …
You already have most of your money in cash, tucked away in an ultra-safe place where you have immediate access any time.
If not, switch immediately to our favorite money market funds that invest almost exclusively in Treasury securities, such as Capital Preservation Fund or Weiss Treasury Only Money Market Fund. Even if everything else fails, I can foresee no scenario in which these investments will not be 100% intact and immediately available to you.
You’ve gotten rid of all your vulnerable stocks, whether at a profit or a loss.
If not, please see the urgent warnings and instructions I sent you last Tuesday, September 30 — “Urgent from Martin: Your Last Chance to Act.”
You’ve bought inverse investments specifically designed for falling markets — to help offset any losses in other investments, or, better yet, to help you convert this massive crisis into an equally massive profit opportunity.
If you missed those recommendations, see the special report on our website, “How to Protect Your Stock Portfolio From the Spreading Credit Crunch.” It’s dated November 25, 2007. But given recent events, it’s even more timely today than it was then.
Or, you work with a money manager who combines ultra-conservative investments with hedges to give you both relative safety and profit opportunities in the same portfolio.
Just make sure they have a strategy for actually making money in crashes and bear markets. Our separate affiliate recently ran an online conference on this topic. For their transcript, see “Bear Market Defense Forum Transcript.”
Plus, I’m glad to see you have already signed up for the urgent Q&A session we’re holding this coming Friday at 12 Noon Eastern Time.
With credit markets coming unglued and global stock markets crashing, this is one time you absolutely do NOT want to miss this Q&A session on Friday. To attend …
1) Between five and ten minutes before 12 Noon, Eastern Time on Friday, October 10, click on this link.
2) Click the login button, enter your e-mail address, first name and last name.
3) Click “submit” and wait for the program to connect.
To verify that you will be able to view the presentation, please click here. Please note that this is only a test link. You will not be able to access the event through this link.
If the test link does not work or if you continue to have problems connecting, please click here to access troubleshooting FAQs of the most common problems. Or if you need additional assistance, call us at 1-800-291-8545.
To submit any additional questions for the event, click here to send an e-mail to Event0808Questions@weissinc.com.
That’s it! Be sure to print and save this information so you’ll have your instructions and link handy when it’s time to log-in.
Good luck and God bless!
Martin
About Money and Markets
For more information and archived issues, visit http://legacy.weissinc.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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