February 7th 2008

It is probably best to describe this last 3 months as the worst I have seen on the investment markets since 9/11 in 2001. The volatility has been out of control and many investors, in fact most investors have been punished. However, we should always keep in mind that periods like this are normal and they will come along every 5 to 7 years. It’s simply part of the larger economic cycle.

While the downside is very obvious, the upside is often lost during these worrying times. You see, we all fear the worst, we think that this will never end. Let me tell you some of the comments I have heard in the last few months, and my comment.

“The US economy is terrible, weighed down with massive debt, and the US dollar will collapse!”

Yes, the US economy is carrying high debt, most of it corporate (just like Australia I might add). Yes, the debt has brought about a degree of slowing in growth. Yes, the US dollar has been in decline for sometime. However, US exports are starting to boom because of the US dollar’s decline. Trade deficits are beginning to turn around and corporate debt is reducing and getting cheaper all at the same time. So, bottom line, the US economy is being primed right now for a surge late in 2008 and early 2009.

Do you really think the US economy will fall over? People have been predicting it since the cold war and it still hasn’t happened, nor is it likely. You are seeing it at it’s worst right now. If you were to remove oil imports from the US economy, they would be running a trade surplus and inflation would be less than 1%. US inflation is still very low, they nearly have full unemployment, interest rates are low and exports are booming – Fact! That’s not a scenario where economies collapse. If you reverse each one of those facts, then you have a good argument.

“The world is heading for a depression!”

What rubbish, where do people get these ideas? From aliens? In fact, an investing legend, Jim Rogers, has been making calls like these recently. In fact, he’s abandoning the US and moving to Singapore. He believes there is nothing but bad news out there and the centre of the world is now Asia. Yeah, good on him! Where does he think Asia exports to? Where does Asia get it’s commodities? The Chinese even admit, if the US falters, so will Europe, and therefore, so will China. So, Asia has not “de-coupled” from the US economy at all as Rogers claims. Everybody is entitled to their opinion.

“This is a crash and the stock market won’t come back for 3 years or more”

Heard this one on the “Idiot Channel”. It’s also known as CNBC. Funny this Wall St guru hasn’t been back on for a week now. Wonder why not? Where do they get these people from? You know what? If you keep saying the world will end long enough, it probably will. Of course until you are proven to be right you may be proved wrong several million times. I remember a book that came out by Dr Ravi Batra, “The Great Depression of the 1990’s”…. what happened? The opposite.

Well, my advice is, realise that the bad times will always appear at sometime. When it comes to the stock market it will be painful for only a relatively short period. This is when you ignore your “flee” instinct and instead “fight”. Which means when people are running scared and dumping perfectly good stocks, you buy them. Eventually the mob will return and offer you a good price to buy them back. Always stick to the to some strict trading rules, such as the ones that I use on my Trident Confidential Portfolio where I have been able to protect my capital and profits. Then at the moment things seem “terminal” and things seem to be close to the "end of the world as we know it", act, with both hands. The old masters of Wall St always used to say, when there is "blood on the streets", buy!. Haven't you ever noticed in hindsight how the best time to buy was when things were really crappy and the outlook was awful?

Have a look at the long term trend of the stock market in the US or Australia, you’ll see there is nothing to worry about. Right now we are seeing the very beginning of a recovery in markets around the world, even though some days you wonder.

How and why can there be a "recovery" when nothing has changed?

Firstly, the sub-prime problem still exists and the losses and bad news will continue all of 2008, after which it will ease. So, why a slight recovery? Well, confidence in the US Federal Reserve has been restored that they will move quickly to alleviate any credit liquidity and interest rates problems. The most important thing here is that banks feel confident to lend money again to businesses and lower rates encourage this. Economic growth comes from people spending, the banks have the money.

Secondly, the stimulus package from the Bush government, while lame, was at least something and it was supported by both parties. This gives the market confidence.

Thirdly, the market likes certainty, even if it’s bad news. They just  don’t like “not knowing”. Now, they know. So, they always move in anticipation of a recovery. The market is always six months ahead of a recovery. So, you have to act quickly when things are really bad. Yes. An unnatural act I know. Even, I had some sleepless nights. I’m human after all, but after a few stiff drinks went down to my office and 4am and started placing buy orders on really bad days as you know. No, I wasn’t still drinking at 4am, but it did seem like a good idea at the time.

And lastly, companies profit announcements and guidance has been better than many thought would be the case. Optimism has begun to return. No the sky didn’t fall….see?

Is this the "Bottom"?

Do I think this is the end of the volatility? No, No, No! This will continue for another 6 months I suspect, so be prepared. But I do think the trend is now up, rather than down. There is a general belief among several well respected Wall St investors and analysts, that we may be very close to a "bottom". I believe we are very close as the market is now only listening to bad news. Positive earnings reports are being pretty much ignored and all the focus is on bad news. Bad news is expected. When this occurs and everyone is "bearish", then you are close to a bottom.

There could be one more test of the market, and after that I suspect there will be a very strong rally. However, you never know, the last test may have already occurred and the next rally could be on its way.

We are living through history

We are now looking at a HISTORIC buying opportunity in the stock market.  You probably won't see an opportunity like this for many years. I have never seen so much negative sentiment. This is definitely a Bear Market. A US recession is completely factored in and what we are seeing now is “capitulation” of weaker investors and a clean out of speculators.

The next few months will be rough and scary, the bottom of bear markets always is, and we are currently bouncing on the bottom, or very close to it. This is “almost” as bad as it gets. It still could get a little worse… maybe 5% to 10%. So, don’t leap in with all guns blazing just yet, take your time and buy say 25%-33% allocations of each stock holding rather than 100% of a stock all on one day. This way you’ll get the best average price. Only do this on bad days, don’t buy into a bounce just yet.

Think about the future….

It’s not about what the stock price will be in 2 or 3 weeks but what it will be in 6 months. Markets are not perfect - they are imperfect and sometimes, most of the time, they get it wrong. Fundamentals are always right.

The Return On Investment is all that matters and that comes from growing and sustainable earnings!

How to play the market and take advantage of this situation....

There are fabulous bargains out there in the market at the moment, investments that will soar in 2008. Some already are, this is my list of purchases for January - February 2008...

Trident Confidential Subscribers were told about each one of the these stocks before I bought them by the way....

Profits as at February 5th 2008

Solar Industry             Profit   8%

Infrastructure              Profit   2%

Internet                         Loss    6%

Engineering                Profit   32%

Semiconductors        Profit   8%

Infrastructure              Profit   26%

Infrastructure              Profit   27%

Aerospace                   Profit   10%

Aerospace                   Profit   12%

Steel                              Profit   27%

Defence                        Profit   20%

Alternative Energy     Profit   22%

Mining                           Profit   25%

Healthcare                   Profit   23%

Infrastructure              Profit   16%

Electronics                  Profit   29%

Managed Fund           Profit   4%

Infrastructure              Profit   17%

Telecom                       Profit   5%

Agriculture                  Profit  15%

Heavy Engineering   Loss   2%

Medical Tech.             Profit   6%

Software                      Profit   6%

Agriculture                  Profit   13%

Corporate                    Profit   3%

So, as you can see, you can make money, even in this market. There are still some bargains going begging in my Trident Confidential Portfolio, so if you'd like to get access right now and find out what I'm currently "scooping up" at what price, click here and you'll be ready for some bargain hunting. You'll also receive The Ultimate Wealth Library on CD as part of your subscription. It now includes my latest book, The Best Stocks for 2008 and Beyond.

Like to know more about Trident Confidential and The Ultimate Wealth CD? Click on the links below.

Another way to take advantage of the markets.....

The latest editions of High Yield Investments Volumes 1 and 2 have just been released for 2008. They are packed with investments from all over the world (including the best Australian investments). Right now, investing in some these managed funds and stocks my be the best idea you'll have for 2008. These books are also included in The Ultimate Wealth Library on CD. If you would like to get hold of these books at a very special price (ebooks available too) - Click here to buy and to find out exactly what's in the books.

Also, I have just released the 2008 Edition of The Wealth Solution - This is a book you definitely need to read in times like this. It tells you exactly what to do in a crisis and how to find the bargains I have been buying. Click here to buy and to find out exactly what's in The Wealth Solution.

The other alternative?

Do nothing! Swear off equity investments and the stock market! Never go near them again. "The easiest way in the world to lose your shirt!" you'll hear people say. You know what? These people are in the majority. True! Just look at what has happened to he markets, they have plummeted as people are getting out. True! Many people are getting out or are already, and they'll probably stay there while they lick their "financial wounds".

Yes, these people are the majority, they get in when the markets booming and get out when the market's collapsing. They Buy High and Sell Low. The minority, are getting in now. We Buy Low and Sell High. I'm not alone in these sentiments, a bloke by the name of Warren Buffett is buying the same US financial institution (mentioned in the latest Trident Confidential of course) I am at the moment. I reckon I'll make around 50% on my money this year from this investment.

Mr Buffett's a smart man. He's also very rich. Do you know how he became so rich?  He was buying when everyone else was selling.

Stay the course! Don't lose your nerve!  Remain unemotional, if you can.

Kind Regards

Lance Spicer