Making Money When the Going Gets Tough How

Making Money When the Going Gets Tough

How Deep Is the River?

January Omens q Worst five trading days in history q 1, 395 new lows on NYSE (Jan. 20) q SPX and many other indexes broke August lows q “Best three months” a loss

Recession Watch q Industrial production already below prior recession thresholds q Jobless claims creeping up, recently just below 300, 000 “red zone” q Blowout in credit spreads

Distress for Junk Bonds Four-year high!

3 Key Mental Habits q Safety first! q Avoid complacency (bullish or bearish) q Look for an edge

Play Defense Now q Balanced portfolio (bonds vs. equities) q Adequate cash reserve q Trim vulnerable stocks and funds q Emphasize dividend-rich names

Aggressive Asset Protection q Put options q Short sales q Bear funds

Inverse ETFs q Pro. Shares Short S&P 500 (NYSE: SH) q Pro. Shares Short S&P Russell 2000 (NYSE: RWM) q Pro. Shares Short MSCI Emerging Markets (NYSE: EUM)

When to Hedge q Wait for rebound to area of breakdown (SPX 1970 -2020) q VIX below 18 q Divergence: SPX versus HYG or USO

Gold Expensive vs. Oil

Bear Beaters q Johnson & Johnson (NYSE: JNJ) q Nestle (OTC: NSRGY)

Fat Dividends q Arthur J. Gallagher (NYSE: AJG) q Met. Life (NYSE: MET)

Worth a Bite Apple (NASDAQ: AAPL) q $205 billion of cash q 11% free-cash-flow yield q A “Microsoft moment”? q

Mutual Fund Gem q Vanguard High Dividend Yield Index q VHDYX or VYM (exchange-traded) q Low expenses; 3. 3% yield q Outperformed 98% of peers (5 years)

Finally, Remember… “It always stops raining. ” J. P. Morgan

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