Exceptional Bear Market Letter - Exceptional Market Letter

Optimal Positioning for the Bear Market

Whether you're an investment professional, determined to make money in a Bear Market, which according to Bob Prechter, is "something that no money manager has ever done" or an individual who just needs a little help squeezing the most out of the Grizzly, the Exceptional Bear Market Letter will support you in reaching your goals.

Our e-Market Letter is geared to market timing and strategic asset allocation for money managers, individual investors and students of the Wave Principle. Published once a week, with interim bulletins as necessary, it includes everything you'll need to be optimally positioned for the Bear Market. Optimal positioning translates into optimal profit.

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What differentiates Exceptional Bear?

1) Real-time, intra-day market updates to make sure reversals are spotted and acted upon in a timely manner.

2) Coverage of several of the most profitable market sectors with just one subscription.

3) Direct and to-the-point buy & sell recommendations for each market sector.

4) Proven track record of excellence as evidenced by TimerTrac verification.

Final Blow-out Stage

The Bear Market Rally which began in 2004 is not over. We must complete a Blow-Out phase to new highs in the Dow before the peak is in. We estimate that will come in the 3rd Q of 2009. Once the current base bottoms, in the next several weeks (11-25-08), get ready for the Mother of all Bear Market Rallies, where profits accrue beyond belief. You will want to be in on it early, to reap the big gains. In the interim, we can guide you to making the most of the Bear. As you can see in the Timer-tracked link our performance has been superlative for any market.

How do we know the Bear Market began in March 2000, and still has a long way to go?

See the Big Picture

Recession/Depression proof Investments

The Exceptional Bear Market Letter focuses on guiding you with recession/ depression-proof investments for superlative Bear Market performance. What are recession and depression-proof investments you ask? For the most part they are inverse funds and short positions which appreciate as the market declines. Bear Markets tend to be much more volatile than bull markets, we intend to participate in the upside moves, as well as the downside.

Make no mistake, "With good timing, optimal positioning and a bit of judicious leverage, the next 12-15 months will be profitable beyond your wildest dreams, as long as you're positioned to take advantage of the frequent reversals."

Buy & Hold vs. Timed Trading

Anyone who held stocks through the 1929 Crash would have lost more than 90% to the bottom in 1932. It would have taken another twenty-five years just to break even, and that's assuming no holdings of companies that went belly-up, which is highly unlikely. Again between 1968 and 1974 the average stock in the value line index fell 74%, and the inflation-adjusted Dow fell 75%, this time it only took two decades to get even. What most people don't consider that the averages only reflect those companies that survive, they omit all the ones that went bankrupt, so statistics like these grossly understate the potentially ruinous effect on your net worth. What's more, in a depression, jobs are scarce and most people need to draw upon investments. If you needed to withdraw funds near the bottom of the market, there would be no possibility of recovery. Now I don't know about you, I certainly don't invest to get even. Holding long positions now is setting yourself up for life-shattering losses.

Mediocre Returns in US stocks over the next 10 years

According to a recent research study by Dr. Prieur du Plessis and Jeremy Grantham's GMO the expected return on US stocks over the next ten years is 5.7% based on historical P/E ratios and 4.5% based on dividend yield, with a probability of high volatility and negative returns. Meanwhile, our Exceptional Bear analysis projects a 17% minimum decline this year. The fundamentals behind this analysis are clearly the tremors being felt in the financial system over the sub-prime contagion. These tremors are early warning signals of a major earthquake in the Financial system. So why would anyone in his right mind set himself up to lose under such odds? It's totally unreasonable. To paraphrase the legendary value investor, Jeremy Grantham, you might beat the odds one year, but longer term you're bound by mediocre returns at best, and tragic losses at worst.

Stock Picking vs. Market Timing

In Bull Markets, as we have seen for most of the last 72 years, picking the best stocks and holding them for a long time made allot of sense. Those times were ideal for the likes of Warren Buffet and my former boss, Mario Gabelli. However, trying to outperform by picking stocks in a declining market is like trying to grab a falling knife, no matter how lucky you are, you're bound to get hurt. That's why, as we enter the third leg of the Bear Market - Market Timing is absolutely crucial for success. Picking stocks in an attempt to outperform in a falling market will simply mean losing less, since everyone holding stocks will lose. Warren Buffet & Co. prepare yourselves for a dramatic reversal of fortune!

"No one can time the Market"

Because most market participants can't time the market, they can't imagine that anyone else has the capacity to do it either. A bit arrogant, wouldn't you say? Timing the market is difficult, and in in the words of Robert Prechter, "only one in a thousand can do it well". While we don't attempt to catch every turn, we can time the big one well enough to save you from catastrophic losses, and most likely make more money in the next twelve months than you've made cumulatively in the past three years.

Diversification

Diversification for its own sake is for those who don't know what they're doing. We identify trends and make money by focusing on the very best of them, those in the third wave. In today's "Flat World", as so eloquently described by Thomas Friedman, all markets are highly correlated, meaning they will all likely rise and fall all at once, so diversified portfolios are guaranteed losers. The notion that diversification will allow you to offset losses in one market with gains in another, is false and highly treacherous to your net worth. In the third leg of the Bear Market, the person who has all his eggs in a basket of well-timed, intelligently selected shorts, will do very well, while everyone else gets killed.

When the market bottoms, we likewise have the road map to time the reversal, and get in early to reap the big gains. When everyone else is pessimistic we'll be going long, in time to catch the third wave up of the next Bear Market Rally.

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