By Al Thomas
As my long-time readers know I have told investors to get out of the market in 2000 and 2008 as I saw signs of collapse.
The indicators this time are different, but investors are about to lose their money again. Only this time there will not be a rally back.
No, I donít see the exact top. What I see is the momentum run we are in now is drawing in more and more fools. Donít expect any help from your broker to protect you on this next downfall. He has been taught to buy and does not know when to exit. I dare you to ask him if he has an exit strategy. Make him put it in writing on company letterhead. He wonít.
Do you remember when gold originally shot up to $800 and then for years slowly agonizingly worked its way down to $250? Look at a chart of that last 800 year. It was almost straight up.
My guess, and I always say Iím guessing, is the Dow Jones and Standard & Poor 500 are going to take off in that same type of run. It always sucks in the late-comers. Only the smartest investors with trailing stop loss orders will survive.
On the recent run of gold to over 1900 I was running a $100 trailing stop on most of my positions. I still have 2 small positions and am waiting for the next run up that I seriously doubt will make a new high.
As the DOW makes new highs each week brokers and financial touts will be having financial orgasms. It will be fun while it lasts.
History has shown that bull and bear markets run in 16 to 18 year cycles. It is my contention the bear actually started in 2000 and knowledgeable investors target 2016 to 2018 as the next potential bottom. Those who use demographics target 2023. I donít pretend to know until it gets there.
When the exit sign lights up as the market turns over I will see it and buy what is called bear ETFs and mutual funds. These will make money as the stock markets around the world slowly crumble. Ask your broker about them. If he pooh-poohs them you better find a new broker. Most of these equities pay very little, if any, commission. Hmm!
China is about to experience a housing price implosion that will make the one we had look like a pimple on a bull. Their fools are still rushing in.
One of the reasons parabolic run-ups are so dangerous is everyone is wildly bullish. If an investor expresses caution or negative sentiment he is shouted down. Mob psychology has taken over.
Donít wait. Now is the time to plan an exit strategy.
Al's new book, "If It Doesn't Go Up, Don't Buy It!", 3rd edition, Chapter Two shows in detail a method that made 400% during the 2000-2010 period with only 7 trades, no losses and paid no commission. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2013 Williamsburg Investment Co. All rights reserved.