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| Click to buy |
Note that's not "if," but "when." Rothchild makes clear that steep and prolonged market drops have long been a regular occurrence, except in the '90s so far. History shows that when optimism reigns as it seems to now, the carnage is likely to be all the worse. Not a happy message, but maybe an important one. Looking back on past bear markets, Rothchild suggests where to find safe harbor, pointing readers toward certain stock sectors, some foreign markets, and bonds. Perhaps surprisingly, gold does not make the list, and Rothchild explains why. Even the most bullish will enjoy Rothchild's acerbic observations on market psychology and his good-humored tweaking of various famous market commentators and other Wall Street emperors whose nudity, when it comes to foreseeing the future, Rothchild is happy to point out. --Barry Mitzman |
There are strategies that allow you to make money when the market is going down. Short selling, buying put options and selling covered calls are three methods for making money when the market is going down. To learn more about buying puts and selling covered calls, we would recommend the book Getting Started in Options by Michael C. Thomsett. Short sales are confusing and may take time to understand. The way it works is that you borrow a stock from your broker and sell it. Then at some time in the future you buy the stock to pay back the broker for the stock they've lent you. This is selling short. OK, that probably confused you, here's an example. You feel that Yahoo is overpriced at $120 so you "sell it short." 100 shares. This means you will borrow the stock from your broker and sell it to the public at $120. This means you will receive $12,000 from your broker. In three days the stock hits $100. So you "buy to cover" your short sale. You pay $10,000 to buy the stock, $100 x 100 shares. This means that you made $2000 in the trade. So you can make money when the price of the stock goes down. The big risk with this type of trade is that you have unlimited upside risk. If the stock goes up instead of down, say the stock goes up to $1000, because yahoo just invented the mental telepathy web browser. You can buy the shares for $100,000, which means you lost $88,000.
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Over the last 100 years there have been 29 serious stock market corrections, with declines averaging 31.6%. There were ten in which the declines averaged 49.4%. In those, investors lost half of their invested assets. Yet, in the upside of every cycle, the endurance of the bull market transports investors into a state of confidence where they believe this time will be different. The record-breaking bull market of the 1990s certainly has had that effect, the excitement enticing investors into the market as never before, carrying them away on a euphoric wave of confidence that they've discovered something new, a risk-free money machine. History shows otherwise. Eighty percent of public investors wind up losing money in the stock market over the long term, because few emerge financially intact from the periodic bear markets. Riding the Bear is aimed at ending that vicious cycle for its readers. It explains clearly why bear markets are inevitable, why the next one is just around the corner, and will be the longest and most severe since 1929. But Riding the Bear is not just about bear markets. Readers learn how to maximize profits in a bull market, and unlike buy and hold investors, keep those profits, and go on to make more in bear markets. It introduces a simple, mechanical system, discovered during the research, that over the last 35 years would have almost tripled the gain of a buy and hold strategy, and with half the risk. It should work for the next 35 years. Riding the Bear also reveals the truth about Wall Street, its misleading propaganda and deceptions, and teaches its readers to be street smart. As subscribers to Sy Harding's Street Smart Report have come to expect, Riding the Bear tells it like it is, in plain English. Just two chapters "Public Investors versus Wall Street" and "What Causes Bear Markets" are more than worth the price. |
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