Investing During a Recession

Jeff Siegel

Written By Jeff Siegel

Posted August 8, 2011

Never have I been more certain of Washington’s incompetence than after witnessing the debt deal fiasco last week.

Patting themselves on their backs, lawmakers from both sides of the aisle carried on about how, when called to make tough decisions, Washington can get things done.

What they “got done,” I have no idea…

And as the campaign trail heats up, sadly, most Americans will find themselves playing into the media taunts that instigate trivial debate.

Cut here, tax there, rein in government spending, make the rich pay their fair share — it’s all empty rhetoric that results in the masses taking sides and the politicians hunkering down in their big plastic bubbles, insulated from the real world.

Unemployment numbers aren’t coming down. Housing is screwed. And whatever cash you have lying around is decomposing by the day. How do we fix it?

We don’t.

Look, no matter how you slice it, it’s every man for himself…

The dolts in Washington cannot possibly fix this economic mess that’s been in the making for decades. I’d be surprised if half of them could even fix a flat tire if they needed to. But that won’t stop them from feeding you lie after lie in hopes of distracting you from an economic erosion that is simply unstoppable.

They’ll continue to sell you their new and improved magic beans. And rest assured, the poor will get poorer and the rich will get richer.

So the question is, Which will you be?

Don’t Hate the Player, Hate the Game

Last Thursday, the Dow fell more than 500 points. This was the biggest one-day drop since December 2008.

A lot of folks were having some very uncomfortable flashbacks, and panic was a popular emotion that day.

The media blowhards and armchair analysts all chimed in about what happened. Yet, you know not a single one of them knows a damn thing.

I could sit here and give you a laundry list of possible reasons for the drop, but none of them could be completely accurate because the whole thing is really nothing more than a giant algorithm-controlled manipulation.

As the global economy sinks further and further into the abyss, it’s going to be increasingly harder for the average Joe to not only to profit, but to actually hold on to what little he still has.

Now I don’t mean to sound uncaring, but only a fool would allow himself to be an “average Joe.” Who would want to be average, anyway — in anything?

I feel bad for the poor schmucks who keep getting the rug pulled out from under them, but I won’t hesitate to allow their losses to become my gains. As I said, it’s every man for himself.

And right now is absolutely the worst time to become lazy and emotional.

Paranoid or Preparedness?

Now, I’m not suggesting the entire global economy is going to implode overnight, and we’re all going to be walking around like zombies in dimly-lit streets while looters scavenge for food and flat screens…

But the days of “hands-off” investing and just overall financial complacency are over — at least, for anyone who has any intention of not living like a pauper for the next ten years.

These days, it’s all about being proactive and nimble. It’s about taking profits any way you can, protecting every asset you own, and insulating yourself from the proverbial poop storm that’s hovering over us at this very moment.

I actually made this very statement while speaking to an investors group last weekend.

The guy who organized the group and brought me in to speak asked me to share my strategy for dealing with this crisis that is now upon us. Here’s what I told him…

  1. Short the sh%# out of anything that looks like a limping gazelle being chased by a ravenous lioness. European ETFs and crippled housing financials have been my drug of choice for some time now. I definitely benefited nicely from Ian Cooper’s call to buy Homebuilders (NYSE: XHB) puts.

  2. Pounce on dips in oil; it’ll prove to be one of your best insurance policies down the road.

  3. Don’t trivialize the value of gold and silver.

  4. Pick up cheap shares of the companies that are taking the lead on alternative energy development: Trina Solar (NYSE: TSL), Maxwell Technologies (NASDAQ: MXWL), Suntech Power (NYSE: STP), just to name a few. In a year or two, you’ll be happy you got shares of these companies at such deep discounts.

  5. Invest in your own personal protection against soaring power and fuel prices. Get your home an energy audit and get some solar on the roof. Grow your own food, and that which you cannot grow, buy directly from a local farm that doesn’t ship garlic in from China or beef from 2,000 miles away. Your local farmer should be your friend today, because he will be your only source of cheap food tomorrow.

I know not everyone will agree with what I laid out here. And that’s fine. In fact, one gentleman at last week’s meeting suggested that I was being paranoid.

But what he calls paranoid, I call preparedness.

You wear a seatbelt to protect your life. You lock the door to your home to protect your property. Why would you not take the appropriate measures to protect your wealth?

But some people just don’t get it.

And next year, while they’re waiting in line for food stamps (assuming they’ll still be available), I’ll be on my way to the beach house, cruising by in my Tesla Roadster.

To a new way of life, and a new generation of wealth…

Jeff Siegel Signature 

Jeff Siegel
Editor, Energy and Capital

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