How to Prepare for Another Banking Breakdown
So now what?
Well, if the data is even halfway accurate with regard to what it suggests, then stocks likely will retest their March 2009 lows. That means the Dow Jones Industrial Average could fall to the 6,600 level, while the Standard & Poor’s 500 Index drops to 683 and the Nasdaq Composite Index slinks all the way down to 1,293.
Gold likely will head in the opposite direction to $2,500 an ounce or higher, and 10-year Treasury bond yields might drop as low as 1.5%.
More immediately though, I expect central bankers to attempt one more Herculean effort to “save” things. Whether that intervention will take the form of a third round of quantitative easing (QE3) or another federal “stimulus” plan is unclear.
But regardless of what happens, these are the steps you should take:
- Sell weaker positions and transition that money into companies you really want to own — particularly if they are the “glocals” I talk about so frequently, and especially if they have high dividend yields.
- Begin tightening up your protective stops so that you can both capture gains and protect your capital as the market rolls over.
- Buy commodities including gold, silver, oil and pharmaceuticals.
- Invest in the specialized reverse exchange-traded funds.
- And, most importantly, keep buying — but change up your tactics to include dollar cost averaging. There’s no sense in making all-or-nothing decisions when that type of thinking doesn’t fit market conditions.
Remember, you miss 100% of the shots you don’t take, so getting to the sidelines is not a profitable plan. Staying in the game always has been, and always will be, the way to profit.