Brian Hunt here — CEO of InvestorPlace. I want you to ask yourself a question. If the stock market dropped 41% this year, what would you do? Most investors don’t have the answer to this question. While we spend vast amounts of time and money insuring things like cars and jewelry, most folks go their whole lives without thinking for one second about insuring their wealth … their financial security. This lack of “wealth insurance” is one of the biggest financial mistakes in America. It’s a retirement killer. A quick tour of American history shows how this is the case. From 1900 to 2010, we had the Great Depression, two world wars, the runaway inflation of the 1970s, the savings and loan crisis of the 1980s, the 2000-’02 dot-com crash, and the 2007-’08 financial crisis — and more than 30 more “run-of-the-mill” bear markets along the way. This is where wealth insurance comes in. And for my money, there’s nobody better than Eric Fry to educate you on financial risk and show you how to insure yourself against it. You may know Eric as the editor of The Speculator — one of our premium trading services. A couple of weeks ago, you’ll recall, Jeff told you about Eric showed his readers how to bet against Teva Pharmaceutical Industries Ltd.’s share price in order to make, so far, 131% gains. But Eric is a lot more than a high-flying trader. He’s a longtime investing expert, former hedge fund manager, and author with a legendary status in the financial industry. He has founded his own investment management firm and served as a partner in several others. Thanks to that extensive experience, Eric has a knack for showing investors how to survive — and thrive — during the down times. For example … • He predicted the dot-com crash of the early 2000s — and showed investors how to make 13-times their money not once, but twice, in the aftermath. • He predicted the housing crisis of 2008 … publicly stated that Fannie Mae, Freddie Mac, and General Motors would all go bankrupt (they did) … and even showed properly prepared investors their way to 300% gains. • He told investors to buy resource stocks amid that crisis, and they went up as high as 914%. • He urged investors to buy gold in 2001 as a hedge against a weakening U.S. dollar. Gold soared more than 500% in the years that followed. Once again … there’s nobody better than Eric Fry to educate you on financial risk and show you how to insure yourself against it. That’s why I’ve decided to “up the ante” with Eric — and started publishing Fry’s Investment Report, his monthly guide to making your fortune from the globe’s biggest profit opportunities. And it’s why I charged Eric with producing Bear Market 2020: The Survival Blueprint. Part “diary” and part “owner’s manual,” this book will take you by the hand and walk you, step-by-step, through the simple strategies that will help you and your family navigate America’s next bear market. Full of hard-won knowledge and tactics that Eric has tested in the bloody trenches of firsthand investing, this book is the ultimate resource for helping you craft a bear market survival blueprint that’s right for you. But you don’t have to take my word for it. Over the next few weeks, InvestorPlace Digest is going to be running some excerpts from Bear Market 2020 and Fry’s Investment Report. Today we’re starting out with some very valuable info from the book’s intro. I hope you’ll enjoy it. Thanks, Brian Hunt

It Can Happen Again

You can’t buy fire insurance after flaming embers have landed on your roof — and you can’t prepare for a financial crisis after the stock market has tumbled 40%.

Preparing for adversity doesn’t need to be an all-consuming project, though. And wealth insurance doesn’t have to include basements full of canned food, ammunition, and gold bricks stacked to the ceiling.

Instead, it must include a plan to prosper when the markets are friendly — and to hold your own when the markets are hostile.

That’s what Bear Market 2020: The Survival Blueprint is about.

In it, I detail six proven tactics you can use to survive any bear market or financial crisis. These proven tactics are not complicated, but they do require two key traits that many investors lack: discipline and patience.

With discipline and patience — plus my six survival tactics — you can make more money in the markets than you ever thought possible.

Even in a bear market.

Many of us can’t keep our wits — our reason — at market extremes. We get caught up in the euphoria of market peaks and the panic of market lows.

That’s why my Survival Blueprint is so valuable. It erects guardrails along our investment path so that our emotions don’t drive our portfolios off a cliff.

On October 12, 2007, the benchmark S&P 500 stock index hit a new all-time high of 1,576.09.

At the time, the U.S. economy appeared to be thriving. It had recovered from the 2000-’02 dot-com collapse and the recession that followed. Gross domestic product (GDP) was rising. Home values and stock prices were soaring, creating new paper millionaires every day.

You know the rest of the story.

The healthy-looking economy was a mirage. It was dangerously leveraged to an overvalued real estate market. Individuals and corporations around the world were deeply in debt. The economy’s foundation was crumbling beneath our feet.

Then stock prices collapsed …

The S&P 500 fell from its October 2007 high to an “apocalyptic” low of 666 in March 2009.

That was a collapse of 57.7%.

 

 

As stock market history tells us, something like this can — and will — happen again.

Now, let’s go back to 2007 … right before the last time the market crashed. The economy had been humming along at a growth rate of 2% to 3% for the previous five years, which caused the S&P 500’s earnings to double from the recessionary lows of 2002.

Thanks to these boom-time conditions, the national unemployment rate fell below 5%. Share prices had more than doubled over the previous five years.

But below the surface, trouble was brewing. While the market was busy hitting all-time highs, mortgage, credit card, student, corporate, and government debt were also hitting new all-time highs.

If that scenario sounds familiar, it’s because today’s conditions share some important traits with the 2007 version. The current financial boom is even bigger than the 2002-2007 bull market. This time around, the stock market has rocketed more than 400% from its recessionary lows of 2009.

But despite this prosperity, our economy looks shaky if you examine it up close. Mortgage debt is once again close to the nosebleed levels it hit in 2008 …

 

 

Credit card debt has jumped to a new all-time high of $870 billion …

 

 

Student loan debt has skyrocketed to nearly $1.5 trillion …

 

 

And corporate debt outstanding is hitting new all-time records …

 

 

Still, just like they were in early 2008, stock valuations are high.

To be sure, the stock market could keep rising over the next few months — and even hit new all-time highs. But history shows the risk of a severe selloff is high.

So, it makes sense to make your plan for surviving a bear market now — before it arrives. Whether the next one will be a “whopper” like the 2007-’08 crash or a relatively mild drop of 25%, you’ll want to be prepared.

Winning Big Starts Here

You cannot outperform the market by simply “buying the market.”

You must take only the best risks and say “no” to all the others. Sometimes you have to wait a long time for truly superior investment opportunities to come along.

But that’s okay — they’re worth the wait.

Warren Buffet didn’t become one of the world’s richest individuals by making lots of mediocre investments. He waited for the very best opportunities and then pounced on them.

To emphasize how patiently he awaits opportunity, Buffett once remarked, “Lethargy bordering on sloth remains the cornerstone of our investment style.”

It takes patience and discipline to say “no” to bad risks and avoid big losses.

Winning big begins by avoiding big losses.

The stock market isn’t your “buddy.” It isn’t your faithful golden retriever named Banjo, who lives to fetch your slippers. The stock market doesn’t even know you exist.

It’s more like a great white shark — primal and remorseless.

It eats when it’s hungry and never sheds a tear for its prey. The stock market simply does what it does, without caring which investors win or which ones lose.

That means protecting yourself is your responsibility. No one is going to do it for you.

I’ve designed Bear Market 2020: The Survival Blueprint to help you prepare — to survive and thrive in any crisis.

To find out more about it, click here.

In tomorrow’s Digest, I’m going to share two of my six Bear Market Survival tactics.

See you then.

Regards,

Eric Fry