When the market starts acting as poorly as this one has, market participants start looking for ways to protect themselves from further losses. The two most talked-about alternatives are buying so called "safe" stocks and hedging....

In a bear market, there really is no such thing as a safe or defensive stock. The logic behind most of these stocks is that certain businesses, such as food, are not affected by the economic cycle. Hence those stocks will hold up better than others.

The problem is that they may have better relative strength, but in a poor market they are still likely to go down....

For a mutual fund that is forced to be invested at all times, that is a benefit, but for the individual investor it is not nearly as good as being in cash. Just keep in mind when the market is acting poorly that almost all stocks will suffer, and there is no requirement that you need to be invested...

Hedging is another approach to staying in the market when things get rough. The idea is to short an index in sufficient quantities that the gains from the short will offset the losses you incur on the long positions you continue to hold...

If you are an individual investor who isn't managing huge sums, you should avoid these complicated approaches to being defensive and simply sell down some long positions. It's safer and easier and can be quickly undone...

Nothing is safer or more effective than cash in a poor market.

Cut and pasted from Rev Shark at www.Realmoney.com

I can't short or hedge in the 401 as it is configured now. Neither do I have a "safe, defensive" fund. So whereas "My Cash Wuz Nothin' But Trash" in a bull market, now it's money in the bank in a bear market. "My Mind Starts Relaxin' When I Start Seein' Pictures of Jackson."

Long old Rock 'n Roll.....


Chartzes and Table Zup!!

More to come. Prolly this weekend...Check it out!!!

NOTE
My data looks wonky and if you are spread out among different funds, your's does/will too. Here's why...

For those who are unclear on what happened; the typical mutual fund has one portfolio of stocks/bonds but many different classifications. Some investors pay a load (commission) upfront, some pay it later on sales, some pay a higher commission, some pay a lower commision, etc. Some of the holders of the fund have to pay taxes on capital gains and appreciation on sold positions and some don't. Pension funds tend to use the institutional classification shares of the fund and so probably, most likely, pretty much everyone in this "r or x " classification fund, like 342 members, is in a nontaxable income/capital gains situation. But maybe not everyone. To make the whole thing easier and somewhat transparent, especially given that taxable and nontaxable entities may be in every class of fund, every year about this time, the fund takes the capital gains and dividends made over the past year out of each account in each classification, subtracting the value from the NAV (net asset value). So the price per share takes a hit. In the next coupla three or four days after, they rebate the capital gains/dividend taken out of each account back into the same account but in shares instead of dollars, at the price that the fund was when they subtracted the cap gains... After it is all over, you have the same amount of money but in more shares of a less expensive fund and the goverment and you have the capital gains/dividend number reported in terms of a dollars/shares number if you indeed have to pay taxes on it. For the 401a, it ain't no big thing. You pay no taxes, you do nothing. For the taxable accounts, they use the cap gains/dividend number to report. Note it and stay cool. But it'll get your heart pumping the first time you see it, until you look at the calender. Expect to see it happen once in each fund, providing there are indeed capital gains to report

Calamos share price took a hit a week ago as they deducted capital gains/dividends. My account balance took a hit too. Then they paid me the gains and all was well. Now it's American Fundz turn and EuroPacific shares price took a hit as they deducted $3.63 from the price. It'll be paid out to shareholders next week. Watch for this to happen to various fundz between now and Jan 1st.

http://www.washingtonpost.com/wp-dyn/co ... 01522.html

http://longorshortcapital.com/lame.htm

http://www.signonsandiego.com/news/busi ... tlook.html

http://www.rgemonitor.com/blog/roubini/232729


Here's where I'm at... Check out the stock charts on my website. We've had the new funds for a little over three years, since late 2004. Hell, we got them about two years late. A bull market started in 2002 and we were stuck with the McMorgan crap. Life has been good ever since with the new fundz. Load up the stocks and ride the slope up. But nothing goes forever. I think the end is here. I've gone to cash a number of times for short periods over the last two years when I thought things got dicey. I did alright, but things turned out OK and I got back into stocks big time an' quick. Here we go again. Is this time different? I know how to get defensive with the 401. I've done a number of times. And I know how to correct it when it's the wrong move to make. So I'm going to start to go to cash like I've done before. I'll watch for signs that it is the wrong move and I'll undo the move quick if/when it makes sense to me to do so. But if things turn to shit long term, getting heavy cash is Just Alright With Me. And I'll expect short, vicious, bear market rallys to appear if/when we get a confirmed bear market. And I'll take advantge of them if I can. I'm in the game for the long haul and ya play what's dealt. Fifteen to twenty percent average gains per year over three years in a bull market is pretty cool. Let's see what I can do if/when they change the game over to bear...