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The debt disease we’ve been warning you about, long subdued and dormant, is returning with a vengeance.
You can see its symptoms everywhere — in the massive losses on Wall Street … in consumer credit turning sour … in collapsing bond insurers … in sinking corporate earnings … in the recession hitting hard.
It’s on the evening news; it’s all over your daily newspaper.
So you don’t need an economic treatise — from me or anyone else — to know what’s happening or to recognize its severity.
This morning, to help underscore the immediacy of these events — and highlight the urgency of your personal action plan — I will be very brief. Here’s what I recommend:
First, don’t underestimate the magnitude, breadth and duration of the debt disease.
The debt disease has already metastasized and spread — from $824 billion in subprime loans … to the entire $13.5 trillion mortgage market … to nearly all other forms of credit markets, including credit cards, auto loans, traditional commercial loans and the nation’s giant derivatives market.
The debt disease has already infected U.S. residential real estate, mortgage-backed securities, collaterized debt obligations (CDOs), high-yield corporate bonds, and a whole series of vulnerable sectors in the U.S. stock market — builders, lenders, technology companies, retail chains and more.
Next, it could strike many investments thought to be in safe harbor: Commercial real estate, investment-grade corporate bonds, tax-exempt bonds, and regional banks.
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Time to Take Action.
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Second, work closely with your broker to sell any vulnerable stocks you may still own, whether at a profit or a loss. There are exceptions, such as those we’ve recommended.
But overall, don’t let anyone talk you out of selling junk. Don’t be afraid to take a loss. And if you have a nice gain, don’t let the inevitable tax bill stand in your way either.
Third, build cash. You can buy 3-month U.S. Treasury bills directly from the government. Or you can use a money fund dedicated to Treasury bills such as Capital Preservation Fund, U.S. Treasury Securities Cash Fund, or Weiss Treasury Only Money Market Fund.
Fourth, to protect any assets in your portfolio that you are unable — or unwilling — to sell, shield yourself against losses with inverse ETFs. For specific instructions, don’t miss my special report, How to Protect Your Stock Portfolio From the Coming Credit Crunch.
Fifth, hedge against the likely upsurge in inflation if the Fed lowers interest rates too fast … or pumps in too much money too soon. For a modest portion of your assets, consider GLD or other natural resource ETFs.
Sixth, stay in touch with your email. With so much happening so fast, we often send out special afternoon editions of Money and Markets. So watch out for the next one.
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 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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