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Today marks the first day of the next phase of the credit collapse we’ve been warning you about: The failure phase.
The first victim: Bear Stearns.
Bear Stearns is the nation’s fifth largest investment bank. For 86 years, it has been a venerable bulwark of Wall Street.
Bear Stearns is also the same firm that shocked Wall Street last year when it was one of the first to reveal mega-losses from mortgage-related disasters. Now it’s doing it again, but this time, in a far more advanced stage of the crisis — the threat of bankruptcy.
Right now, virtually everyone on Wall Street is stubbornly trying to avoid that “b” word. But the undeniable reality is that:
- Bear Stearns is in serious trouble — so serious, in fact, that it has required the emergency bail-out by both the Federal Reserve Bank of New York and JPMorgan Chase. To us and anyone who will level with you, that means that bankruptcy was — and is — very close.
- Bear Stearns is not alone. As we warned our subscribers in our latest issue of Safe Money Report, other major Wall Street firms could be headed for bankruptcy. Indeed …
- Major, Herculean rescue efforts — whether by the Fed, by big banks or both — are not going to stem the crisis. They’re not going to stop home prices from falling. Nor will they prevent debts from defaulting or the economy from sinking into recession. Quite to the contrary …
- The Fed’s cures are worse than the disease, driving the U.S. dollar into a new, dizzying tailspin. And …
- As the dollar falls, our favorite counter-dollar investments are surging.
Bottom line: This is not the climax of the story. It’s just the beginning. When it strikes with full force, watch out below!
What To Do Now
Step 1. If you own vulnerable assets, don’t be afraid to dump them. If you’re taking a profit, pay the taxes. If you’re taking a loss, bite the bullet and move on. In either case, just sell. And if you have a personal adviser, be sure to work as a team to reduce your exposure.
Step 2. Get your money to safety as quickly as possible. Years ago, for maximum safety and liquidity, short-term U.S. Treasury bills would have been all you needed. Today, given the threat to the dollar, we feel you need a prudent balance among:
- U.S. Treasury bills or Treasury-only money market funds such as American Century Capital Preservation Fund (CPFXX), Dreyfus 100% U.S. Treasury Money Market Fund (DUSXX), Fidelity U.S. Treasury Money Market Fund (FDLXX) and Weiss Treasury Only Money Fund (WEOXX) plus …
- Strong foreign currencies like the CurrencyShares Japanese Yen Trust (FXY), plus …
- Gold, using an ETF like streetTRACKS Gold Trust (GLD).
Step 3. For protection — and profit — seriously consider inverse ETFs. For months now, I’ve been sending readers a link to my special report on what they are, who they are and how to use them. I’ve posted it prominently on our Web page. And I have made it free.
Did you use it to build a firewall of protection around you? If so, great. If not, what are you waiting for?
The title is How to Protect Your Stock Portfolio From the Spreading Credit Crunch.
To review it immediately, along with the accompanying list of inverse ETFs, just pull it up on your screen with this link:
http://www.moneyandmarkets.com/files/documents/
MAM767_Special_Report.pdf
I leave you with one final thought you should never, never forget: No matter how dark things get in the days and weeks ahead, it’s not the end of the world. Our country has been through worse, and we survived, even thrived.
You can do the same, especially if you take prudent, protective action today.
Good luck and God bless!
Martin
About Money and Markets
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, Tony Sagami, and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Adam Shafer, Andrea Baumwald, Kristen Adams, Maryellen Murphy, Red Morgan, Jennifer Newman-Amos, Julie Trudeau, and Dinesh Kalera.
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