by James Corbett, The International Forecaster:
In over 25 years of personal investing, the single best year we’ve ever had was by being short the market during the 2008 – 09 “crash”.
We had been preaching for quite some time that the wheels were going to fall off the market, and the real kicker to me was one day watching that carnival barker Jim Cramer screaming in November of 2007. He was saying something to the tune of “yeah I know the market looks extended, but this isn’t over by a long shot and I’m telling you to buy buy buy!”
I looked at my charts. I looked at the disconnects. I decided that night that it was time to start scaling into shorts and puts.
Knowing that it was the crashing housing market that was pressuring the banks so badly, we got especially aggressive there. We used a vehicle symbol FAZ, which is a 3X inverse ETF of the financial sector. If the financials were going to get blown up, we figured that would be the best return.
But we didn’t stop there. Although I said we were “short” that time period, short actually encompasses a lot of options for investors now adays. In other words you can buy put options which rise if the underlying asset falls. You can buy the inverse ETF’s, where you’re actually buying ‘long” as the ETF will go up if the underlying assets it tracks go down. You can sell call options. You can just sell short the shares.
We had also bought put options against the SPY and the DIA. The SPY is the proxy for the S&P 500, the DIA’s are the proxy trading stock for the DOW. While there were some other things we did during the year of 08 – 09, such as sell short the IWM ( the ETF for the Russell 2000) and sell short the semi conductors via the SMH, we also bought long in gold, silver and some mining stocks.
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