Where to invest in a bear market?
I've been a bear for at least a year now. I've read contrarians from the Mogambo Guru to Bill Fleckenstein since September 2005, have a small stake in GLD, think res housing is a very risky investment in Seattle, and am working on building a bunker in my backyard. Maybe I've been brainwashed, but it makes sense to me that the subprime market is about to tip our economy over into recession, and I know that a recession is a healthy thing for an economy.
But how do I position myself to make money during the downturn?
I've never been an investor during a recession. Eleua, synthetik, others of you who have experience...what is your advice? Everbank currency CDs? Gold? Oil? Bonds? Cash?
But how do I position myself to make money during the downturn?
I've never been an investor during a recession. Eleua, synthetik, others of you who have experience...what is your advice? Everbank currency CDs? Gold? Oil? Bonds? Cash?
Comments
I'm not qualified to give you advice, but I could refer you to a broker who specializes in bear market investing. I know two that are local here in Seattle I'd feel comfortable referring you to.
If I had to give some advice, this is it:
Look for long term buying opportunities as the market corrects in commodities like Gold (GLD), Silver (SLV) & energy, especially crude oil (USO) and companies that service or mine them (PAAS, NEM, GG, etc). I'm in the Jim Rogers camp, that we're in the early - mid phase of a 20 year commodity bull market that started in 1998. I see oil producting leveling off and even decreasing (see bottom of post) and worldwide demand increasing (see China, India).
I'd probably buy some physical gold and silver, and while we'll likely see a 10-15% correction I see a lot of room to the upside.
If you decide to short the market I think we'll see a lot of pain in the banking side, especially lenders that are heavy in ARM and Negative Amortization. WM, BKUNA, CFC, WFC, Wachovia, NDE, RWT. I first thought we wouldn't see issues with these until late 07' but this thing is unraveling much faster than I'd thought. Next up to bat might be: CC, BBY, LOW, HD, TXN, AMZN, RIMM, WHR... GOOG, etc.. not sure what is safe after June or July?
What will Monday look like? How BIG is this sub prime news? The ceast and desist orders after the bell for NEW (New Century) and FMT (Fremont General) on Friday will have to send a huge ripple through the markets but honestly I have no idea. The volatility is still present and really should be there for quite some time. I wouldn't want to be sitting in mutual funds right now.
My 5-10+ year outlook is bearish on the market without factoring in the two big heavyweights I see that are looming: Peak Oil and Climate Change. How do you think the USA and other industrialized countries will react to these issues when they start to become apparent. Have they already?
Saudi Arabia oil declines 8% in 2006
When you understand what SA means to world oil production the data isn't pleasant to think about. Have a great day!
As far as being qualified to give advice or not, I promise not to tell the SEC or Ardell DeLablahblahblah that you have an opinion. Because god forbid you should post such a thing in a public forum. Speaking of opinions...
Eleua should have spilled his guts by now! Or at least provided some links to spillage elsewhere.
Another question: how do you figure out how exposed a finance company is to the subprime market?
Count the number of times the CEO/spokesman goes on bubblevision (CNBC) to testify that their company has no exposure to subprime...
(See CFC)
One place would be http://www.ml-implode.com, other than that I just try to pick up on things in various media or blogs.
K
PSQ,QID,DOG,DXD,SH,SDS,MYY,MZZ,RWM,TWM
the "ultrashort" ETFs in that list try to be 2x leveraged, so if you have conviction that the S&P500 is going to fall you'd buy SDS rather than SH.
standard disclaimers apply.
Longs:
GLD 65.31 to 92.29, 42% gain
SLV 139.01 to 180.15, 30% gain
PAAS 28.60 to 39.30, 38% gain
USO 49.35 to 87.19, 77% gain
NEM 46.51 to 46.56, --flat--
GG 28.67 to 40.63, 42% gain
Shorts:
WM 45.23 to 11.88, 74% drop (100 Jan 35 Puts purchased for 1.25 on Oct 16 would have paid out $250,000 before Jan 08 expiration a cost of only $12,500)
BKUNA 26.48 to 4.51, 83% drop
CFC 41.70 to 5.90, 86% drop
WFC 35.60 to 30.26, 15% drop (still heavily short)
WB 57.90 to 27.48, 53% drop (still heavily short)
NDE 37.88 to 4.51, 89% drop
RWT 61.63 to 31.61
CC 21.29 to 4.45
BBY 50.07 to 42.19 (still short!)
LOW 33.44 to 23.33 (still short)
HD 41.44 to 27.67 (still heavily short)
TXN 30.78 to 29.55, flat
AMZN, 40.06 to 74.39 (ouch! hope you didn't short this one)
RIMM, 45 to 120.98 (ouch! ouch! Yeah, I many thousands already)
WHR, 93.61 to 87.05 (heavily short still)
GOOG, 469 to 439.16 (not short anymore, still a great short)
I hit some home runs with all my longs, hit grand slams with the lenders, hit a triple with retail and struck out on the MOMO (momentum stocks, RIMM, GOOG, AMZN)
What am I short today? Here are my current shorts, listed from greatest $ value to least:
WFC
NCC
IYR (Commercial RE ETF)
VNO (Commercial RE)
BXP (Commercial RE)
IBM
MS
BAC
COF
AMZN
CTX
JPM
RIMM
RTH (Retail Holders ETF, sucking wind thx to scum-sucking WMT)
RCL
BBY
IBM
MA
URBN
LM
HD
CCL
JOE
AAPL
GYMB
CRM
CMG
RYL
SPG (Commercial RE)
LOW
JWN
Keep in mind that most of these are LEAPS, so I have about 10 months before they expire. I'm also likely to lose my ass if the FED is somehow able to bail out the entire system, which looks more likely to completely implode. I generally trade in and out of these stocks and don't hold to expiration. Which is why I missed out on most of the $$ gains on WM, CFC... I'm trying the "hold to expiration" on NCC, been heavily short via PUTS on that sucker for 6 months and will try to ride it down to $3-4/share.
Get your soap and gunpowder ready ladies and gentlemen.