Money Show Musings 3

May 17, 2007
By seadmin

Greetings from Sin City!

I am here in Las Vegas for the annual Money Show and I’m pleased to report that I’ve already spoken with many Alert readers since I arrived here on Monday. I want to thank those I’ve spoken with for all of their support and constructive feedback on what we’re doing here in the Alert, as well as in my various investment advisory services.

One of the messages I’ve been delivering over the past several months that seems to be resonating well with Alert readers is my admonishment that this recent gravy train in stocks will eventually come to a screeching halt, and when it does, those who aren’t strapped in likely will be thrown around the car violently.

We already are seeing signs that this rally in the market is starting to tire, as small- and medium-cap stocks haven’t kept up with the Dow’s amazing run. One of the things that I want all of my Alert readers to do right now is to really pay attention to all of the holdings in your portfolio. It’s essential to know precisely what you own, and to know where the vulnerabilities and weaknesses are in your portfolio.

There is no doubt that we are in a global stock market boom right now. There’s tremendous liquidity out there and there’s a lot of private equity money coming into the market taking companies private and reducing the supply of stocks to buy.

But I get the sense from talking to many people here at the Money Show that while they all are happy to participate in the recent upside in equities, they also are really nervous about just how long this bull market will last. They know we’re in the midst of an economic slowdown, rising energy prices and a slowing housing market. They also know that these factors, along with the simple fact that statistically we are due for a sharp pullback, make for a very nervous bull going forward.

When the market pulls back, as it most certainly will, your only form of protection will be to have a preset stop loss on all of your positions. That’s why it is critical that you know what you own, what your cost basis is on each position you own, and at what price you plan on selling that position if this market goes against you.

Planning for the worst is the best way to protect your hard-earned gains, so don’t be afraid to act in defense of your own dollars. I guarantee you’ll be thanking yourself while everyone else is busy kicking themselves for not getting out in time.

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