The Economy: Finding a Bottom

So, I've lost my ass in the stock market recently, along with 99% of everybody else, but things are getting cheap enough that I feel it might be time to make a move. The problem is, it's still hard to see just how much more the world has to de-leverage, unwind - whatever you want to call it - before we reach the next local minima, to put it into annoying math terms.

I'm still a bit nervous to jump into a select few stocks or even an index for that matter; however, you shouldn't invest with fear and you should fear not investing. I like the idea of putting a limit order in to buy should things go even lower. Better yet, I would love to get paid to put in a limit order to buy if things get worse. Enter, the cash secured put.

Because of the unprecedented volatility, you almost feel like a sucker buying anything right now because it could swing down 5% for as good of a reason as America had invading Iraq. So instead of sweating bullets praying that you got lucky, why not keep your cash and say, "okay market, I'm not going to buy today, but if you pay me a little I'll promise to buy in if things go lower." So pick a stock using your favorite screener that has a low P/E, a profit margin of any kind, a low price/book ratio, low debt to equity ratio, and maybe even a positive yield, and oh yeah, a stock that is more volatile than the indexes, and you've found a good candidate to "not" invest in.

That's right, you can make a cool 5-10% by fairly conservatively betting stock XYZ won't go down 20% in 2 months. We've seen plenty do it, but if you set your screen right, then do the homework on the results, you should be able to beat the Vegas Odds.

This will put more money in your pocket, turning you into one of those mythical good Americans that buy flatscreen TVs and Corvettes.

Well that's the direction I'm going to go, I think. And another tip on picking a company... there's a 1001 companies that have fallen to fraction of what they were just a short while ago. Some deservedly so and others not so much. How do you get that extra edge to know which ones are being bullied. Look into the insider buying. If a bunch of execs are pouring money into the stock, it gives a heck of a lot more of a fighting chance.

Hope this helps someone out there make a few bucks back from the crooks.

Take Care,
Brian