FTSE Nosedive : how you should prepare

How You Should (and shouldn’t) Prepare for a FTSE Nosedive

Date 29/08/2008

The Right Side

Ben Traynor

Today we’re tackling perhaps the most fundamental question in investment. What’s going to happen next?

I could embark on a truistic homily about how it’s not given to man to know his fate... how we must play the hand we’re dealt... or something along those lines.

But you already know all that. So... what do we think will happen next?

I cornered Theo Casey, The Fleet Street Letter’s investment director, and asked him a monster question.

What will be the next big move for the stock market?

"Well," he answered, in his typically cautious, investorish manner. "I wouldn’t want to pin my eyeballs to this... but a fall below 5,000 is a real possibility."

The FTSE 100 is, at the time of writing, at 5,628. A fall below 5,000 would be calamitous.

"Of course," adds Theo, "I do hope I’m wrong. But I’m preparing in case I’m right."

Theo’s not alone in this view. Several prominent analysts have expressed similar concerns. It raises the obvious question - is there anything we can do about this?

Well, there is one obvious answer - one that tends to get forgotten. You can simply hold cash. I’ve already told readers of The Fleet Street Letter that there is nothing wrong, at times like this, in holding more cash than you’re used to.

That may not be terribly exciting advice. But, to me, it makes sense.

"But you don’t have to completely cash out," adds Theo. "There is a way you can prepare. However, I fear many investors will do the one thing they shouldn’t, mistakenly believing it’s the best way to minimise risk."

Read on to discover what investors should - and shouldn’t - do to prepare their portfolios

Why Garry White believes Iran will be bombed at Christmas

"It may be the Israelis that do the actual bombing," writes Garry White, "but the Americans, British and French will be major players. They’ve just finished practising their plan."

Garry reckons Iran will be bombed at Christmas. And when it is, the oil price will soar.

"Why Christmas, Garry?" I asked him.

"Well," he said, "it won’t happen during the election campaign. If Republican President Bush orders it, that would risk harming McCain’s chances."

It’s also unlikely that a new President would want his very first act to be an act of war.

"However," says Garry, "there is a one month interregnum that comes after the election but before the new Commander in Chief is inaugurated. It’s the perfect opportunity for someone to lob a bomb with minimum political fallout."

Garry reckons the US and its allies have a lot to gain by bombing Iran... more than you may think.

And, he says, they’ve already begun preparing.

Find out why our man reckons oil investors need to prepare now for a military strike

Until tomorrow,

Ben Traynor
Editor

The Daily Reckoning - Badness in economic terms means either inflation or deflation - or both What are we reckoning with today?

"Market buoyed by strong GDP report," says a headline.

Yesterday, the Dow managed a strong rise - up 212 points. Oil fell back to $115. Even with a hurricane whipping up the waters of the Gulf of Mexico investors figured oil was a sell.

The dollar rose to $1.46 per euro. And gold rose too - plus $4.80, to $838.

Gold seems to have bottomed out at $784. That might have been the best buying opportunity we will have for many years. Time will tell.

We’re not bothering to guess. To us, gold is a good thing to have when things go bad. And after such a long period when so many things went so well, we suspect it’s time for them to go bad - and in a big way.

Badness in economic terms means either inflation or deflation - or both. And both is what we’re seeing.

You can read the Daily Reckoning in full here

P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.

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