The stock market hasn't hit bottom, but it's going to.
If you knew when that was going to happen, and you had money to invest in stocks, you'd make a terrific amount on the initial bounce and easily double, triple, quadruple, or quintuple your money in the next bull market. The truth is you don't have to know exactly when the bottom's in to make a fortune (but I will tell you when it is). You just need to know that you don't want to miss that first bounce up, and I can help.
Here's why this is setting up to be a generational buying opportunity, how to buy stocks on the way down so you get into them near the bottom, and when we'll see the bottom...
First things first.
In order to take advantage of what's setting up to be a historic fall for stocks and a generational buying opportunity, you must have money to invest.
Now's the time to use savings you won't immediately need (over the next year or two), time to sell assets like that old car you don't use, or artwork - anything and everything you're tired of that you can sell to raise money; it's time to raise whatever cash you can.
If you're not already in the market and have cash to buy in soon, you're in great shape. The more money you have to invest now, the more you're going to make.
If you're about to retire or nearing retirement and can still work, don't quit now. Keep working to add to the capital pile you're going to use for a retirement you probably never dreamed of.
If you were in the market and went to cash before the heavy selling started, you're a genius and about to make more money than you ever made before.
If you sold some stocks, funds, or positions and are still sitting on losses in other positions, think about what else you can sell that you have a profit in, or what you have small losses on, and sell those positions to raise more cash.
If you're still fully invested and haven't sold anything and have to liquidate positions to raise cash, first sell positions you still have a profit in, then sell positions where you have the smallest losses, and lastly, sell some of the losers you don't think will be quick bouncers.
Sell enough to make your new pile of cash meaningful.
With cash ready at hand, start making your buy list. You probably have stocks or funds - preferably ETFs and not mutual funds - that you believe are great companies and funds to invest in at bargain prices, because everything's on sale now.
If you don't have a list and don't know how to put one together, don't worry; not only do you have time, but I'm going to put a big list together, and you can pull from mine.
The reason you need cash, and selling positions at a loss even now to raise cash is important, is that by getting in as the market falls, because it's not done falling, you're going to catch the bounce back and then ride the next bull market up with stocks you buy on the cheap.
Think about it this way.
If you bought a stock for $50 and it went to $100, you'd be up 100%. Then the market collapses, and the stock falls to $75. You're still up 50%, and wished you'd sold there. If the stock drops to $50, you gave up a huge gain but aren't in bad shape because you can sell your stock now and use that cash to buy into new positions at lower levels.
If you wait and sell the stock when it's at $25, you'd be down 50% on your initial investment - that's not pretty. Now, the stock has to go up 100% just for you to break even.
Most people panic here and don't sell, because they "hope" the stock won't go lower and the market will bring their stock back when it rises again, whenever that is.
Then imagine the stock falling to $20, or $15, or lower. You'd be sick.
But if you sold, even at a 50% loss, when the stock was $25, you'd have cash to buy into new positions.
If that company is a great company that just got caught up in the massive market meltdown and you know it's coming back, imagine what kind of position you'd be in, imagine how you'd feel if you bought in again at $15, or $20.
Let's say you miss the bottom at $15, but you buy back in at $20.
If the stock goes up $2, you'll be up 10%.
If it goes up $5 to $25, back to where you sold it for an ugly 50% loss, you'd be up very healthy 25%.
Imagine in a year the stock's back to $50, where you originally got in - you'd now be up a whopping 250%.
Now, think big, think about three to five years from now, if it takes that long, and your stock gets back to $100. You'll be up 400%. That's how you get rich.
Now imagine you buy into a bunch of stocks on the way down and end up buying some shares of all of them near or at the bottom. Imagine how you'll make out in five years.
You'll really be rich, or at least able to retire with a lot more money than you had before this meltdown.
The bottom is coming, and buying into this falling market is a generational opportunity precisely because we're not going to see these cheap prices again for a long time to come, maybe ever.
I'll tell you how to buy in on the way down to the bottom in a minute.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"] Very few people can pick bottoms and tops of markets. I can. I do it consistently.
I picked the top of the bull market that ended in 2008 and told my clients to go to 100% cash before the crisis. No one ever says that. I had never said that, ever. But I did in the summer of 2008. And I was right.
In the lead article for Money Morning at the end of March 2009, I said the bottom was in and a new bull market had begun. Who says that? I did, and I was right - not exactly right - because a couple of years later, the official start of the bull market was identified as March 9, 2009. So, I missed it by a couple of weeks.
I've written about and ridden the bull market all the way up. I've been on financial news programs almost every week since March 2009 and said the bull market was alive and well.
I saw coronavirus as a "this time is different" moment and told everybody I was selling everything on Friday, Feb. 28, 2020. If you follow along, you know I've been warning that a crash was imminent.
Big trends are easy to spot. I've been tracking and trading them since 1982, when I was a market-maker on the floor of the Chicago Board Options Exchange running my first hedge fund.
I'll probably be close to calling the bottom of this meltdown, because that's what it is, folks. I just know we're not there yet.
The bottom this time isn't a line in the sand, though it may coincide with one, meaning some market support level. The bottom of this market is out there over the horizon that sees the dawning of the end of this insanely frightening - I call it surreal - pandemic.
The bottom will probably be the time when the infection rate peaks, when we know there's no reinfection happening, especially in China. That's what markets are desperately looking for.
In the meantime, they're desperately hopeless.
It's almost impossible, though nothing's really impossible, that we'll hit bottom just as the economy's coming to an almost complete stop. Or that we'll hit bottom as infection rates in the U.S. accelerate. Or that we'll hit bottom because suddenly analysts or investors know how to price the equity value of companies that won't have sales, revenue, or profits.
Unfortunately, the bottom's not really in sight. I think we have another 20% to 30% to go on the downside. But that would change if there's good news on the vaccine front or on better virus metrics.
So, this time the bottom's going to be harder to call. But even if I don't nail it, I believe I'll come close.
Back to investing.
Just understand that you and I aren't looking for a bottom to start getting back into stocks. We may nail it, or we may miss it; that doesn't matter this time.
What matters is buying into new positions, starting now, if you're ready. If you're not ready, get ready.
The way to play now is by allocating a defined amount of money to each of the stocks on your list. I recommend an equal capital weighting to each new position, stock, or ETF.
Starting today, if you're ready, or on the next big down day, use 20% of your allocated capital to each new position and buy shares in those stocks or ETFs.
Use another 20% and buy more shares the next time the market's down another 5% from its last low point.
Use another 20% every time the market drops another 5% to 10%. Some bad days it will drop 10% - if you buy in on those days, even better.
That means if the market drops 5%, then drops 5% more from that low point, and then another 5% from that low point, and so on, you'll buy into all your stocks as the market falls another 25%.
If you buy in on days the market's down 10%, whatever the mix of 5% to 10% down days, you'll be in, having "averaged down" into your positions somewhere probably close to the bottom, whether the bottom is 25% or 50% lower.
And if something miraculous happens in the next couple of weeks and markets recover, you'll at least be into all your new positions with your first or second round of allocated monies, near the bottom.
That's how I'm going to play this meltdown. Seriously, I expect to make at least five-fold on my money on this generational opportunity.
I'm here to answer any questions, take any criticism, do whatever it takes to get you through this, not just to the other side, back to the top of the market, so join me for the ride.
In the meantime, click here to check out my coronavirus roadmap to learn how to navigate each of the potential pathways the virus could take markets down. You don't want to miss it...
Follow Money Morning on Facebook and Twitter.
