For those in the know, today's financial headlines don't spell disaster--they spell the sale of the century. But it takes a trustworthy veteran of the trading trenches to guide investors through these volatile times. Drawing on his two decades as a financial reporter, plus three recent years working on Wall Street, Ron Insana helps readers restore their depleted portfolios by showing them:
·How to determine reemerging opportunities in submerged markets
·Where to invest in really legit real estate
·How to magnify the magnificent opportunities in municipal bonds and Treasury Inflation Protected Securities (TIPS)
·Where to go mining for the rare gems among the heaps of junk bonds now piling up around the world, and more
Revealing essential tricks of the trade and explaining complex concepts in an easy way, Insana makes Wall Street's lucrative tips accessible to Main Street. For anyone sifting through retirement-account wreckage or a tanking net worth, How to Make a Fortune from the Biggest Bailout in U.S. History is the ultimate rescue manual for reaping rich rewards.
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Ron Insana is an award-winning financial journalist, having worked seventeen years at CNBC and seven years at the financial News Network. He has also managed his own funds business and worked at a major Wall Street hedge fund. He lives in Tenafly, New Jersey.Excerpt. © Reprinted by permission. All rights reserved.:
I want to ask you a few simple questions:
Do you believe the economy will be materially worse or materially better, in the next five, ten, or fifteen years, than it is today?
If you said “Materially worse”—and remember that this is about as bad as it gets—I would move to Montana, buy heavy arms, and stock a multiyear supply of canned goods, because we’ll be back living in caves before long!
But if you said “Better,” which is the correct answer, then, my next question is, “What are you prepared to do about it?”
Are you going to sit back and wait to see proof that the worst part of this recession is over before taking the urgent and necessary steps to improve your financial future?
Or, like the savvy professionals I know, are you willing to use any spare cash you have, or redirect your current investment dollars, to take advantage of some of the greatest investment opportunities you’ll see in this lifetime?
Despite the doom and gloom that you hear about day after day on television, radio, or the Internet, or read about in the newspapers, the world is NOT coming to an end. It’s true that this is a difficult economy, probably the worst recession we’ve seen since the 1930s.
However, all recessions come to an end. And at the bottom of those recessions, where I believe we are now, are the single best values you can find in every asset class affected by the downturn.
Whether the roof caved in on real estate, or stocks came crashing down, or if hard commodities suddenly went soft, or corporate debt turned to junk, it really doesn’t matter. All of that has already happened! That just means that the next big move, over the next five, ten, or fifteen years is UP, not down. Not the next five, ten, or fifteen minutes, but the next five, ten, or fifteen years.
Even the Great Depression eventually came to an end. And despite the Depression, AND World War II, the world didn’t end.
Let me digress a bit and tell you a little story about the end of the world and making a market bet that it is just around the corner.
My longtime friend and colleague Art Cashin, a forty-five-year Wall Street veteran who has spent most of his career on the floor of the New York Stock Exchange, has seen many cycles come and go—good, bad, and ugly. Some so ugly that it seemed that Armageddon was truly at hand.
When training for his job as a broker, at the height of the Cuban Missile Crisis, Art’s class of trainees was asked what an investor should do if the United States and Russia moved to the brink of a nuclear war and missiles were about to be fi red from just ninety miles off the coast of Florida.
To a man, the class said, “Sell!” They immediately stood corrected. The correct answer, they were told, was, “Buy!” They should buy because, even if they were right, and missiles did fly, there would be no one left on the floor to fill their orders and they would lose no money.
If, however, they were wrong and the heightened tensions passed without a rocket being fired (as was the case in 1962), then investors could have bought stocks at panic- induced prices that had nearly reduced them to nuclear waste! And thus the move from nuclear winter on Wall Street to spring again would have been a very profitable one for those who bet against the end of the world.
Art makes the point a slightly different way. The Wall Street veteran has told me, time and time again, that if you bet on the end of the world, you need to be exactly right about the timing, because it happens only once. And even if you are correct, you will never be rewarded for being right!
Applying that lesson to the 1930s, and again in late 2008/ early 2009, when the world also appeared to be ending, it would not have paid to make that same bet at the bottom of either cycle.
If you were still around, still solvent and prescient enough to pick up the broken pieces in the summer of ’32, when the Dow Jones Industrial Average was 90 percent below its 1929 peak, you would have made a fortune.
In fact, when the Dow hit its rock bottom price of 41 in July 1932, it was at the same price at which the “original” Dow closed, on its first day of trading, May 26, 1896!
Imagine buying the 1932 Dow at 1896 prices.
Today, you can buy the “modern” Dow at 1998 prices. Or you can buy some banks and brokers at prices not seen since the early 1990s. Homebuilders are at bargain basement prices and industrial giants are trading at Lilliputian levels.
If, by chance, or by circumstance, you missed the run- up in real estate during this most recent (and historic) boom, you have an unusual opportunity to buy the house you wanted at anywhere from twenty-five to fifty cents on the dollar, depending on the location you desire.
Housing prices, measured by the most widely used barometer, the Case-Shiller Index, are down 25 percent on average across the country. Delinquencies and foreclosures are at record levels, and still rising! Bank sales and government sales of distressed and repossessed properties are surging.
I am not trying to pretend that this is not a painful chapter in our economic history. It is! It has been decades since Americans have encountered a period as difficult or uncertain as this one.
Six million Americans, or about 9.4 percent of the working population, are without jobs, and more than 16 percent are either underemployed or have removed themselves from the workforce altogether.
Economists suggest those numbers will get worse, maybe far worse, before they get better. But that has been true in every recession that I have lived through, that my parents lived through, and that my grandparents lived through. For that matter, it has been true for every generation that has come before us.
Most lived on to tell about it. I suspect that for us, this time will be no different, if history is any guide.
Mark Twain once famously said, “History doesn’t repeat, but it does rhyme.” We are in a rhyming phase of history that is unpleasant, at best, for most; unprofitable, at least, for many; and entirely untenable, unfortunately, for some.
But that doesn’t mean that YOU have to be crippled by what is affecting someone else. Believe me, as someone who has spent a lifetime living through and studying the effects of booms and busts on the average American, I take no pleasure in pointing out that you can profit from someone else’s pain.
But it is one of the hard realities of hard times.
There is a saying on Wall Street, however crude, that you “buy when there is blood in the streets.” It is a rather cruel way of suggesting that when the going gets tough, the tough start investing again.
That’s the message of this book. That at this time, no matter how bad things may appear, NOW is the time to begin accumulating the very things that have collapsed in value and that you fear will keep falling.
There are doomsayers who say that another crash is coming and that this has been just the tip of the iceberg. Sorry, Titanic fans. This iceberg’s already been hit. The boat is foundering but you are not obliged to go down with the ship. It’s time to save yourselves and move on with your lives.
It’s also time to dive into the wreckage and not just salvage what you can, but turn a desperate situation into a more desirable one.
That is what smart investors do in every investment cycle. They jump ship when the great waves are cresting and they bottom- fish after the wave comes crashing down.
You can either sink or swim. The best choose to swim. Sinking is not an option, not if you have a life to live, children to rear, or a retirement to save for.
And unlike prior periods, in which great recessions or depressions were aggravated by unenlightened government intervention, this time there’s a man from the government who’s here to help.
The U.S. government has launched the biggest bailout effort in economic history! And, believe it or not, Uncle Sam wants YOU to prosper again. It’s in his best interests and it’s in yours.
Here are just a few examples of how the lifelines are going out:
It’s your job now not to wallow in tales of woe, but to pick yourself up and dust yourself off.
Take a good, hard look at your financial situation. Retake control of your financial future and tak...
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