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I just put the finishing touches
on my presentation for our Money Crisis Survival Summit in Las Vegas next
weekend.
I hope to see some of you there,
because the clock is ticking...
The Federal Reserve's next
policy meeting starts Sept. 21, right after the event. The meeting was only
supposed to last a day, but with poor economic news still piling up, the Fed
announced its meeting will last two days.
Front and center
will be talk of the Fed's next move to prop up the economy.
It "worked" last time,
so why not another round of government bond buying?
I used quotes because the Fed's
$600 billion debt buying program led to a 28% rally in the stock market. But
without the firm foundation of a stable economy, the bottom is already
starting to drop out from under the market.
Friday, the Dow closed down
2.69%. The S&P 500 dropped 2.67%, and the Nasdaq
fell 2.42%.
Since the Fed's bond buying program ended in June, this
is how the market has performed:
The major indexes are down
between 7% and 11%.
Last Thursday, I talked to you
about a charting technique that is predicting a big rally before the end of
the year. If that coincides with another round of debt buying, you need to
protect every bullish move you make.
We've given you no shortage of
ideas.
Covered
Calls
Zachary Scheidt,
editor of New Growth Investor, showed you how covered calls can
protect your profits and give you additional income.
In our Smart Investment Strategies edition from July 20,
Zach said:
Covered call positions were some
of our best moneymakers at the long/short fund I
managed. We would typically buy a few thousand shares of different stocks
that we believed had a good chance of trading higher (or at least not trading
lower), and then we would sell covered calls against that stock.
Over a period of two months, a
typical call option will give you only a modest percentage return. For
instance, if you were to buy Allied Nevada Gold Corp. (ANV:NYSE) today at $40, and sell the $40 calls
at $3, you would be locking in a 7.5% return over the next 60 days. That
sounds a bit boring, right?
But what if you could generate
7.5% during every 60-day period over the course of a year? The compound
annual returns would add up to 54%! And this is in a stock portfolio that
actually holds less risk than a typical account that doesn't use covered
calls.
The covered call strategy is
used by major hedge funds and other Wall Street institutions, but that
doesn't mean individual investors can't get in on the action. Zach says,
"These hedge fund tools offer plenty of ways for investors to cut back
on their risk, add to returns, and create a stockpile of wealth -- even in a
turbulent market!"
Precious
Metals
We've been harping and harping
on this form of protection. We hope you've been listening. This chart says it
all.
This is the SPDR Gold
Shares ETF (GLD:NYSE),
the iShares Silver
Trust (SLV:NYSE), and the iPath Platinum ETN (PGM:NYSE).
Precious metals will continue to
be an important protection tool against market downturns. If you're not
holding any in your portfolio, consider adding some on price dips. If we do
get a market rally toward the end of the year, we could see gold, silver and
platinum prices come back out of the clouds.
That might be a great buying
opportunity -- for profits as well as protection.
Portfolio
"Insurance"
In August, Justice Litle, editor of Macro Trader, told
you about portfolio "insurance." Specifically,
Justice showed you how to use inverse ETFs. "Utilized properly," he
said, "portfolio insurance doesn't create catastrophe. It prevents
it."
Here's what he means:
Inverse ETFs are designed to
rise in value when an index or a sector declines. There are a wide variety of
inverse ETFs, covering everything from sectors and indexes to commodities and
even currencies.
Three quick advantages of the
inverse ETF are (1) you can purchase them in a retirement account, (2) you
can buy quickly, and (3) there is no direct exposure to time decay as with
options.
For example, if you find that
you have a lot of big-name, blue chip companies from the Dow in your
portfolio, take a look at the ProShares UltraShort Dow 30 ETF (DXD:NYSE). This ETF
moves twice as much as the Dow -- in the opposite direction. On Friday, when
the Dow dropped 2.69%, this ETF climbed 5.37%.
Keep a
Close Eye on the Markets
Now that you have three
different portfolio protection tools to add to your arsenal, keep a close eye
on the markets... particularly after the Federal Reserve meets next week.
Don't make any bullish moves without protection.
A rally could be in the mix over
the next couple of months, but it could be nothing more than an over-inflated
balloon. When it bursts, those unprotected could see massive losses in their
portfolios.
P.S. This Is Rising Faster Than
Gold and Silver... The price
of this rare material doubled over two weeks in June. If that happened to
gold, it'd be worth $3,200 in two weeks. Imagine how much money that would
make investors.
Well, that's exactly the kind of
profit you could make by playing this unique commodity
market.
Sara Nunnally
Taipan Publishing Group
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