By Jen Bawden
December 24, 2007
Yes, foresight itself presents opportunity, but human nature is interesting. People do not want to hear bearish views, they think it will somehow jinx the market.
The bulls have been running so furiously they do not know how to react, nor do they understand any of the signs in a bear market.
Meanwhile just to be safe in the worst scenario (that I hope will not unfold), I flew to Switzerland several weeks ago to open an account at one of the worlds safest banks in case things unwind. “Hope for the best and plan for the worst” is my new motto. Of course, my life long mantra has been “have your cake and eat it too”.
The obvious domino effect from the turmoil you now see will lead to continued seizing up of Real Estate loans and, in my opinion, a fall in residential Real Estate to below 2001 prices.
I sold my Palm Beach apartment yesterday for $70,000.00 less then what I bought it for 4 years ago! Even though I knew this Real Estate disaster was coming, I was in Toronto and New York and did not get it on the market soon enough and I’ve been chasing the market down ever since. The price started at $450,000 and I accepted $242,000!
I sent my last newsletter out 24 hours before the Canadian market fell 500 points. You may recall I was stumped at why gold went down with the market. Well it has done so on each dip. I believe that the markets will continue to throw the baby out with the bath water as they scramble to cover margin calls.
If gold plummets when the market crashes a good bet would be HGU Gold Bull (the Canadian ETF that tracks gold.) Gold will undoubtedly rebound very quickly in a fear-based stampede for safety.
In a market where cash is king, gold will be emperor! That being said, the charts show we could have a last bull rally in gold. We have seen the start of it today and on Friday. I think it will continue into January.
I also like the ETF (TWM) Proshares that shorts the Russell 2000 as well as the ETF’s shorting the financials and US Real Estate. I figure in difficult times the Russell 2000 will get hit worse than blue chip.
I am putting together my shopping list. If the market has its ‘surprise’ 08 correction I will be ready to pounce. There are only a few areas I would want to be in. If they crash to bargain prices, (I suggest only the leaders in each area) Solar, nuclear (Blue chip utilities in emerging markets only), commodities and some good Canadian Gold Juniors that the world hasn’t discovered yet (and they will if we continue down this road).
If the dollar rebounds I would buy Australian Gov. Bonds and Swiss Franc Gov. Bonds. I do not want to be in US dollars for long so I have found currency ETFs you can get in and out of easily. If you have not discovered ETFs yet you need to, they are fantastic vehicles.
I figure Australia and Switzerland are less linked to the US and Australia is commodity rich. Both currencies would hold up against others if the global market slowdown materializes. Canada is rich in oil and gold but it is too interconnected with its neighbor and the mother of all flu viruses that America is percolating will quickly infect it.
I am forecasting some bullish weeks in January followed by the other shoe dropping (a lead toed army boot.) It will be a miracle if we do not see a 20% correction for the first time ever in an election year. There you have it. Wishing you a great Christmas.