Wednesday, October 28, 2009

I Own Stock, NOW What Do I Do?

So, here we are, another down day in the market. What can we possibly do with all this stock that we own?

First, you have to decide if we're done going up for the year or if this rally has one more good leg in it to get us back above 10,000 by the years end.

While we think it has become a much scarier place in the market these days, and sentiment has turned faster than a double agent...we think ultimately, by January, we're back above 10,000 in the DOW and 1,100 in the S&P (PENDING some terrible event, like accelerating unemployment, which actually could happen). If we get a surprise bad event, all bets are off down to 9,000.

How do you protect yourself against such an event? You must own puts. In order to make money in a down have 3 choices: Buy short ETFs, sell stock short, or get long puts. That's it. It used to be you could hide out in bonds...not anymore, welcome to the world where it's the dollar versus everything else.

I think if you have big positions you'd like to hold on to, you really need to be long puts. If you are looking to just simply make money, I'd rather you pick an inverse ETF with a tight stop than to short individual stocks. This market has shown us that while the broad market might decline, individual stocks are back on their own...until it changes again.

If you have some nice big gains, 30-40%, please, take some off the table and hold some cash. Get out your shopping list and if something hits your buy level, pull the trigger for gosh sakes. IF YOU ARE AN INVESTOR...traders, sorry, you're on your own. If you are a trader, you probably want to play the short side for now. But, if you are an investor, and you're in this thing for the long run, then listen up to good advice: Doug Kass may be right, that we've seen the top for the year, but I think he was also right in March, when he said we may never see prices like this ever again in our lifetime.

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