Most investors have some sort of trading strategy, whether it be complicated transactions involving swaps and straddles, computerized technical set ups or simply following the whatever Jim Cramer has to say in a particular day. Speaking of the madman, did everyone catch his latest advice to “stay with Bear Stearns” right before the stock collapsed and investors lost hundreds of millions of dollars. He then back-pedaled and said that he meant to keep your money in Bear Stearns bank, not their common stock. Well, whatever his intent, his horrendous advice and then attempted cover-up is causing quite a firestorm in the investment community.
I am going to go out on a limb and suggest that you would be much better off to pay attention to the views of Jim Rogers than those of Jim Cramer. In his latest interview on CNBC, Jim Rogers asks some potent questions that are rarely brought up on the mainstream media and expose just how ridiculous and dangerous the Federal Reserve is acting.
Why is it the end of the end of the world if an investment bank goes bankrupt? If XYZ bank needs to go bankrupt, let them.
Where is it the Federal Reserve’s mandate to bail out investment banks? This is not capitalism but socialism for the rich.
Why should 300 million Americans suffer so that we can bail out 2 or 3 investment banks on Wall Street? So that they can all ride around in Maseratis? Why do we need to bail these guys out?
What is so wrong with a recession? They are necessary to clean out market excesses and besides, it costs more to try to prevent it than to let is occur.
He further suggests that the commodities bull will continue due to fundamental supply and demand issues. The debasing of the dollar is just icing on the cake. But my favorite part of the video is when he is asked what would be the first two things he would do if he were in Ben Bernanke’s seat tomorrow morning…
“I would abolish the Federal Reserve and I would resign.” Amen.
Now back to investment strategies and specific ways to protect your portfolio and profit during the current crisis. It comes down to the simple advice in the title of this article and has proven extremely profitable with every move that the market has made. Buy gold on dips and sell stocks on rallies. More specifically, but an equal allocation of gold, silver, energy and agriculture on any dips and go short the general market, real estate and financial sectors every time they rally on the back of another rate cut or bailout plan.
For example, you would have done very well to short financials yesterday during their huge rally, as they turned right around today and gave up the bulk of those gains. Buying commodities on dips can be a bit more challenging, as you never really know how far the dip will go. I respond by averaging in my new positions and continuing to buy in greater increments as the dip continues. Gold will certainly have periods of corrections, but I am convinced we are on a trajectory to $2,000, so am not too concerned about “catching a falling knife.” You can keep things simple by using just a handful of ETFs that cover each sector.
I only employ this trading strategy with a portion of my portfolio and leave the remainder invested in the long term bull market in gold, silver and energy. We are entering very interesting times. Having the correct information and the foresight to use that information to protect your investments will help you weather the coming storm. And for all those thinking we have hit a bottom, please notice my use of “coming storm.” We have only seen the sky turn gray at this juncture, as the eye of the storm is still on the horizon and approaching rapidly. Subscribers are given access to view my portfolio and receive frequent updates whenever I am adding to or reducing positions throughout the month. Subscribe now or read more about becoming a subscriber.