Are You Ready for Another Lost Decade?

How to Prosper in the Current Bear Market

By: Evaldo AlbuquerqueEditor of Retirement Strategist

Perma Bear Perma Bull

Buy & Hold Doesn’t Work in Bear Markets

• Understanding secular bull and bear markets• Six reasons why secular bear market isn’t over• What could cause the next downturn• Why you need a flexible investment strategy– Using the six stages of business cycle

• Three investment ideas

Buy and Hold Works in Bull Markets,But Not in Bear Markets

Secular Bull Markets:• Multi-year uptrend• Few recessions• Low volatility

1,220%

Secular Bear Markets:• Multi-year downtrend• Frequent recessions• High volatility

S&P 500 Index is up 2% in Last 13 Years

The Debt Super Cycle

U.S. Debt as a % of GDP

P/E Ratio Says Bear Market is Not Over

25

5

33

9

23

7

44

23

Dividend Yield Says Bear Market Isn’t Over

DividendPrice

= Dividend Yield

3.3%

8%

3.2%

7%

1%

6%

3%

Tobin’s Q Says Bear Market isn’t Over

Why This Bear Market Could Last Until 2018

• Average bear market lasts 18 years…• And has four recessions• Current bear market started from extreme levels

What Could Cause the Next Downturn?

• European Debt Crisis• Chinese Real Estate Bubble• Another Sovereign Crisis (Japan?)• A Decline in Profits• The End of Fed’s Money-Printing

Profits are 70% Above Historical NormsCo

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The Money-Printing Boom

• “Devaluing a currency is like peeing in bed. It feels good at first, but pretty soon it becomes a real mess.”

• —Francesco Guerrera, The Wall Street Journal

"Nobody has the experience of successfully navigating a return home from the place in which we now find ourselves. What I'm concerned about is that we may be painting ourselves into a corner. We've done a lot ... It's not clear to me how we are going to get out of this.“

Should We Trust Bernanke?• October 2005: “Housing price increases largely reflect

strong economic fundamentals.“• February 2006: “House prices will probably continue to

rise.“• March 2007: “Problems in the subprime market seems

likely to be contained.”• January 2008: "The Federal Reserve is not currently

forecasting a recession.”• June 2008: "The risk the economy has entered a

substantial downturn appears to have diminished over the past month or so."

Why Jim Rogers Isn’t Buying Stocks

“It is very artificial. If you give me a trillion dollars, I'll show you a good time too and a lot of people are having a good time. I know it's going to end badly. I'm certainly not investing in the U.S., because the U.S. is making all-time highs based on money printing.”

"Mr. Chairman: Do I Still Have Time To Get In The Market?"

Option #1: Buy and Hold

Option #2: Get Out of the Market

Option #3: Flexible StrategyStage I Stage II Stage III Stage IV Stage V Stage VI

Example of Stage V in 2007

S&P 500 Index

Energy StocksCommodities

Where Are We in the Business Cycle?

3 Ways to Play the Stage III

• Gold Miners– Market Vectors Gold Miners ETF (GDX)

• Platinum & Palladium– Sprott Physical Platinum and Palladium (SPPP)

• Short the Japanese Yen– ProShares UltraShort Yen (YCS)

Buy & Hold Doesn’t Work in Bear Markets

• Understanding Secular Bull and Bear Markets• Why the secular bear market isn’t over– P/E ratio is too high– Dividend yield is too low– Tobin’s Q ratio is too high

• Why you need a flexible investment strategy– Using the six stages of business cycle– Using dividends as a cushion