- In the coming bad months and years, a period that will
annihilate nearly all paper assets and shrink the oceans of debt and credit
sloshing around the world, investors and workers will be asking what they
can do to sidestep a meltdown of their personal portfolios.
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- "It a question everyone should be asking themselves
right now, and it's not too late," Elliott Wave International forecaster
Robert R. Prechter Jr. told me Thursday. "What's going to happen when
the stock market finally bottoms? You'll be able to go in there and buy
stocks that used to trade at $85 a share for maybe half a dollar or a quarter
of a dollar."
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- The coming meltdown, in the eyes of Prechter and others
alarmed by the global credit expansion of the 20th century, will include
homes, bank deposits, insurance policies, even paychecks. Here are some
starter-tips, gleaned from many fine sources, including the Weiss Safe
Money Report, Prechter's new book, "Conquer the Crash," and "Crisis
Investing" author Doug Casey's International Speculator.
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- Do investigate the integrity
of all money markets, bank deposits and other cash instruments at your
disposal. Not all money market accounts or funds are created equal. Those
that are based on risky short-term paper, from corporations or even government
agencies, probably won't allow you peace of mind in the event of a fiscal
meltdown. Several sources, including the Weiss Safe Money Report, Bankrate.com
and Grant's Interest Rate Observer, examine safety and liquidity issues
surrounding commercial banks and the fund companies that manage money markets.
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- Do investigate cash equivalents
that exist outside of your home country, in the event of political risk.
Switzerland's bank reserves, unlike those in the United States, are backed
by a 25 percent savings rate that is required of citizens by law.
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- Do sell all stocks that are
losing you money. Do sell all stocks that are making you money.
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- Don't consider buying any
stocks, or bonds, or anything considered a paper asset, unless you are
prepared to take a 25 percent loss. Or unless you are prepared to hold
for 15 years or longer (just ask the folks who still own Ford Motor.
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- Don't be lulled into a sense
of false security by the interim rallies staged by Wall Street. The rallies
are perfectly normal in that they allow sellers to exit with just a bit
more cash than they had a month ago, but not nearly enough to make up for
losses in this, a third consecutive year of falling equities.
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- Do buy gold and silver --
coins, bars and even some bullion proxies, such as Central Fund of Canada,
if personal storage of the metal is a challenge. If currencies self-destruct
from the drag of decades of credit issuance by national and corporate treasuries,
bullion almost certainly will become a commodity with monetary status.
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- Do eliminate as much debt
as you can -- credit cards, automobile loans, margin interest, mortgages,
second mortgages. The credit overhang in the United States, more than $30
trillion owed by U.S. companies, individuals and the government, is three
times gross domestic product, the highest ever. Besides saving you or your
home from personal bankruptcy, default or repossession, your elimination
of debt will be a service to this country's economy.
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- Keep your day job, sell the gas-guzzling SUV and if you
really see the red writing on the wall, start short-selling some of the
major equity indexes, especially the price-weighted Dow Jones Industrial
Average's exchange-traded Diamond Trust and its major components, like
high-priced 3M.
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- "Why should you be taking a risk with your college
money, your retirement money and all the money you worked so hard to save?"
Prechter says in the CBS MarketWatch interview. "First thing is, you
need to get out of those very risky areas. The stock market is the No.
1 (risk) in a deflationary environment. No. 2 is the real estate market.
And the third one is in bonds that have been issued by risky enterprises."
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