by Sean on Sep.17, 2008
Yes, the bear is back. I’m not talking about the little brown bear that usually comes around every time this year growling about a gloomy market. This is the Big Bad Grizzly Bear… the same bear that came out of hibernation in February, 2000 and ripped the head off the NASDAQ just as it was reaching for it’s lofty all-time high of 5,000. The bear that brought the NADAQ to it’s knees almost two years later when it bottomed out at 1,172.
It’s not a matter of if, it’s a matter of how long it will take and how much lower it will go.
You can count on it.
Not only is this traditionally a bad time of year to be invested (tax loss selling, media hype from the bears in preparation for the Spring / Summer rally etc.) the recent news has some real meat to it. The carnage over the past couple days is a wake up call.
Of course, you can listen to the dumb pundits. “Take deep breaths, reassess your portfolio, wait it out, invest for the long haul.” But, keep in mind that they are just trying to stabilize the market so the professionals can dump their shares. While you are guzzling Alka-Seltzer between deep breaths and waiting, the wall street pros are going to be taking a big long dump. And when it is your turn to dump, you better hold your breath because you’ll find out they didn’t even leave the fan on for you.
The only people who should be buying stocks in this market are the savvy day traders who keep tight stops and know how to spot intraday lows and play the swings. They’ll be playing both directions with an emphasis on shorting and they will be making money.
This is a market of falling knives. Don’t try to lock in the bottom any time soon.
Cash is not king in this market. You put your money in the stock market to make more money. If you stay long, you will lose money. If you cash out, you won’t be making any money. You need to start shorting stocks. If you haven’t already gotten a margin account, get one. Then find stocks that have a market valuation above fair value and that are losing money hand over fist (there are plenty of them out there). Short the $hit out of these stocks. Don’t sweat the small bounces. Just sit back, relax and watch their value crumble as your profits grow. You’ll even do well shorting decent stocks. This market is going lower.
Unless you enjoy wringing your hands, acid reflux and insomnia, sell your freaking stocks.