Thursday, September 17, 2009

Buy, Hold or Go Broke

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Thursday, September 17, 2009

Editorial Director’s Note:

“Turning Japanese” is no longer just a catchy ‘80s pop song... it’s a real risk for the debt-laden U.S. economy. Today we have a special guest, seasoned trading veteran Christian DeHaemer, who is here to tell you why “buy and hold” is such a bad idea (and what you want to be doing instead). Christian will be sharing the details of his new proprietary system over the next few weeks – if you have any questions or comments, send ‘em here:

Taipan Daily: Buy, Hold or Go Broke
by Christian DeHaemer, Editor, Crisis Trader

How the mutual fund industry has sold you a bill of goods, how you can get your money back and make a fortune on top of it.

You’ve heard it all before: A serious-sounding actor on TV will tell you that the way to get rich and secure your retirement is to “invest in a well-diversified mutual fund and hold for the long term.”

Sure, he has a nice suit and a trustworthy face, but the cold, hard fact is he is lying to you. If you invested in the S&P 500 14 years ago – back when I started in this business – you would have about the same amount of money you have now.

S&P 500: 14-Year Chart

View S&P 500: 14-Year Chart
View larger image here

In fact, given the current suckers’ rally, I would hazard a guess that we haven’t seen the worst.

Why are mutual fund companies lying to you? It’s simple. They make money off of “cash under management.” It is in their best interest that you give them your money so they can hold onto it for decades.

Sure, there have been unique periods when stocks went up over long periods of time, such as the years following the Great Depression and World War II. But those days are over, and may never return in our lifetime. Right now, the U.S. market is analogous to what happened in Japan after its massive real estate bubble popped 20 years ago.

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If you remember back in 1990, the “Japanese miracle” was on a roll. Japanese companies such as Toyota, Nintendo and Sony were invading the world. There was lots of hand-wringing because Japanese investors bought up Rockefeller Center in New York City.

At the time, real estate had gotten so expensive in Japan (due to crazy mortgage policies) that one square block in Tokyo was worth more than the entire state of California!

Then, Japan’s real estate bubble broke. The Nikkei 225 index fell from almost 40,000 to 15,000, and has been bouncing like a ball down the stairs ever since.

View NIKKEI 225 (^N225) Chart
View larger image here

Japanese experts and politicians did what U.S. experts and politicians are doing now. They cut their interest rates to zero and started spending money. They built bridges that no one used, and highways that went nowhere. They spent and spent.

According to numbers from Bloomberg, Japan’s debt-to-GDP will be 147% this year. It now must use 65% of its tax revenue just to make interest payments on its staggering 20 trillion yen in public debt.

Does any of this sound familiar?

The U.S. is exactly one decade behind Japan in its path to self-destruction. And this is Japan we are talking about – a country full of smart, motivated people. These guys make the Lexus. If it can happen there it can happen here.

And it will… heck, it already is… According to John F. McManus in the New American:

Look at what America’s experts have done in response to our nation’s recession. In every detail, they did exactly what Japan has been doing for 17 years. They cut interest rates, launched public works programs, handed out business loans and bailouts, and created stimulus packages, while the Fed manufactured trillions out of thin air. The result: our nation remains mired in our own slowdown. What happened in Japan is being repeated here.

I know what you’re thinking. And if you are like me, you’ve probably fired off a couple of angry e-mails to your senator.

But the sad truth is that very few of us have the power to change the direction our country is heading.

What you can do is get your own house in order. You can fix your net worth.

You just have to recognize that the market isn’t going to magically go up like it’s 1998 again... The simple truth is that “Buy and Hold” doesn’t work and more.

What does work, though, is “Buy and Sell.”

This is a “buy and sell” market, and the great news is that this is just the type of market in which you can make a fortune. I’ve recently developed a market trading system that reaps huge gains on just these types of dramatic turnarounds.

In just the past few months this system has returned:

Chesapeake Calls (CHK JE), 191% gains in one week…
Cisco Calls (CYQ JX), 66% gains in 40 days
QLT Inc. (QLTI), 68% gains in two months…
Chicago Bridge and Iron (CBI), 82% gains in two months…
I2 Technologies (ITWO), 61% gains in 45 days…
Agfeed Industries (FEED), 76% gains in 31 days…
XLE calls (XBT FF), 79% gains in 27 days

And that’s the short list.

How does this system work, and how can it work for you? I’ll tell you more about that next week.


Christian DeHaemer

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