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Good morning!
I just got back home from Brazil, and I’ve spent the weekend planning a monumental online event for January, which I’ll invite you to in a moment.
In the meantime, I sure hope you’ve been reading our daily emails faithfully — and acting on our warnings promptly.
Because the markets aren’t waiting for you. They’re moving in the direction we anticipated. And they’re doing so with ever greater momentum:
• U.S. tech stocks have just suffered their biggest single-day drop since September 17, 2001, when they reopened after the 9/11 attacks …
• The Nasdaq has just had its worst opening three days of a new year in its 36-year history …
• The Dow Jones Industrial Average has just seen its worst new year’s start in 103 years, and …
• The U.S. currency is now the weakest it’s been since the collapse of the Continental 227 years ago!
In contrast,
• Gold is close to blowing away its great epic highs of 1980 …
• Oil is about to surpass its historic highs even in inflation-adjusted terms …
• And the real fireworks have barely begun!
Look. Wall Street didn’t understand the potential for a 2008 political upheaval until Thursday night … and didn’t realize the stark reality of a U.S. recession until Friday morning. So investors have barely begun to act on the consequences.
What about you? Have you missed some of our recent warnings? Have you acted on all our instructions? If not, here are the steps to take:
Step 1. Start immediately to protect your stock portfolio!
For many weeks, I’ve been exhorting you to hedge against a U.S. stock market decline by buying inverse ETFs — exchange-traded funds that are designed to rise in value when a market index or sector declines …
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That’s why last fall I sent you a free report, “How to Protect Your Stock Portfolio From the Spreading Credit Crunch,” complete with detailed instructions.
That’s why I included a Comprehensive List of Inverse ETFs.
And that’s why I urged you take protective action over and over again — on December 19 (Wall Street Downgrades about to Hit Hard), on December 24 (Ratings Collapse), and on December 31 (Epic Battle of a Lifetime).
Now, the expected events are unfolding. So don’t dilly-dally one day longer. Download my free report. Read it carefully and follow the steps I outlined.
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For example, consider ProShares’ UltraShort Technology (symbol REW on the Amex), the inverse ETF that Mike Larson selected a couple of months ago to recommend in our Safe Money Report.
We think ETFs like this one are made to order for the tech stock bust that’s beginning to unfold.
Reason: For every 10% fall in the Dow Jones U.S. Technology Index, it’s designed to rise 20%, giving you double protection against the decline. And sure enough, as tech stocks crashed, the value of this ETF has shot up by 14%, just in the first three trading days of the year.
My recommendation: If you still have exposure to tech stocks, this kind of protection is an absolute must.
Step 2. Start immediately to heed our persistent recession warnings!
On October 1, when we wrote you that a 2008 recession will be “hard to avoid,” Wall Street and Washington were still bullish on the U.S. economy. So I can understand your hesitation.
Or, on November 12, when we wrote “evidence of an imminent U.S. recession is now piling up high,” Fed Chairman Bernanke would admit to no more than “a slowdown.” So I can see why you might have waited.
And perhaps you missed our November 19 missive warning that “the housing bust, mortgage meltdown and credit crunch guarantee a U.S. recession” … our November 20 flash announcing “the beginning of an imminent, unavoidable, potentially deep recession in America” … or our December 31 email alerting you to “one of the worst recessions since World War II.”
That’s OK. It’s water under the bridge. But no more. Now, prudent investors dare not ignore these recession warnings one day longer.
Reason: Friday’s shocking unemployment report delivered the most blatant, widely-accepted recession signal of all. It confirms and double-confirms the onset of a potentially rapid and devastating contraction in U.S. construction, retail, autos, and technology.
Plus, it signals the onset of a new vicious cycle — (a) layoffs, (b) more home foreclosures, (c) more home price declines, and (d) still more layoffs.
My recommendation: Move more of your funds to Treasury-only money market funds such as American Century’s Capital Preservation Fund, U.S. Global’s U.S. Treasury Securities Cash Fund, or our affiliate’s Weiss Treasury Only Money Market Fund.
And to offset the risk of a continuing dollar decline, allocate a portion of your money to foreign currencies, using instruments like Rydex’s Japanese yen ETF (FXY).
Step 3. Start immediately to protect yourself against rising inflation!
If you think inflation is never a problem in a recession, think again.
When a nation’s central bankers try to combat the recession with the greatest outpouring of paper money in modern history …
When a nation’s government lets its currency decline rapidly in value …
And when other rapidly growing nations around the world are still bidding up the price of world commodities, then …
You can expect one of the worst recessions AND some of the worst inflation at the same time.
That’s what I experienced first-hand in Brazil when I was a young man. That’s what we saw countless times in developing countries in the last century. That’s what we are witnessing in countries like Zimbabwe right now.
And although the U.S. is far from the extremes of 20th century Brazil or current-day Zimbabwe, that’s also what we’re about to experience now: Recession plus inflation.
Want hard evidence of inflation? OK. Then …
1. Take a moment to review my recent report, “Double-Digit Price Inflation Returns” …
2. Look at my chart showing the worst wholesale price inflation in 34 years …
3. Consider the fact that, already in November, the jump in the U.S. Producer Price Index exceeded the largest single-month rises of the Bush 2000s … the Clinton ’90s … the Reagan ’80s … even the Carter ’70s, and …
4. Contemplate the consequences of the November surge in wholesale gas prices — 34.8%, or an annualized rate of more than 417%!
Or …
Look at what’s happening right now in inflation-leading markets like crude oil and gold bullion.
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Last week, just as Larry and Sean told you it would, oil hit $100 per barrel for the first time in history, eclipsing its November peak … defying the pundits who said it would “never” happen … threatening to kick off a whole new round of worldwide inflation.
And even when Friday morning’s U.S. unemployment report sent shock waves of recession fears to the four corners of the globe, the oil price retreat was moderate. All it did was stabilize on par with its November high mark.
Similarly …
Also last week, just as Larry and Sean told you it would, gold surged past $870, coming within a hair of its all-time high, again signaling a new round of worldwide inflation.
And in a pattern similar to oil’s, gold’s retreat after the negative unemployment report was barely enough to show up as a tiny tick mark on its daily chart (see chart to right).
These are two unambiguous signs of resilient, accelerating inflation ahead. All happening even before the Fed responds to the latest news with a new round of rate cuts and money pumping.
My recommendation: To convert these major dangers into massive profit opportunities, join me and my team in our gala online conference this month.
| The date: | Tuesday, January 22 |
| The time: | 12 Noon Eastern Time |
| The title: | PREVIEW 2008: Major Dangers and Massive Opportunities Ahead! |
But be sure to register online now.
There’s no cost to attend. Please accept it as my New Year’s gift — to help give you a clear vision of what’s coming in 2008, and what to do about it.
Good luck and God bless!
Martin
About Money and Markets
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, Tony Sagami, 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 John Burke, Amber Dakar, Adam Shafer, Andrea Baumwald, Kristen Adams, Maryellen Murphy, Red Morgan, Jennifer Newman-Amos, Julie Trudeau, and Dinesh Kalera.
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