From the November 2008 issue of Research Magazine • Subscribe!

November 1, 2008

Looking Ahead

We all know we live in a fast-paced world, but very few 12-month periods have seen as much change and commotion as the recent year. Dow 14,000 captures the headlines in October 2007 with predictions of Dow 20,000 and higher. Oil at $147 was felt by everybody a few months ago in July. Goldman Sachs and others forecasted $200 a barrel oil.

Gold was the topic of the moment in March. A quick spike to over $1,000 an ounce was followed by a correction of more than 30 percent. Silver slipped over 60 percent and sits now below $9 and ounce. All time highs in the price of corn, rice and wheat moved giant retailers, Costco and Wal Mart to limit sales of rice to two per person.

Of course, all of us are painfully familiar with the developments in the financial worlds. Domestic and international financial centers have been hit by what's been dubbed the "perfect storm", a toxic combination of extreme optimism, lack of perspective and greed.

In times like this, it's tough to adopt a "glass is half full" attitude. Nevertheless, there is a silver lining. Even though we might not see the amount of "blood on Wall Street" that 19 Century London financier Baron Rothschild referred to as a buying point, we must be getting within reach. This bear has been ferocious, but no bear can run continually without break.

Take heart, investors around the globe: A base to serve as a springboard for a counter trend rally is being formed. Surely, this won't usher in a new bull market, but it will bring must needed relief and the opportunity to unload unwanted holdings at a higher price. It will be the time to lighten up on popular short ETFs and perhaps look at some leveraged long ETFs.

ProShares and Rydex offer leveraged ETFs tied to the S&P 500 (ProShares Ultra S&P 500, SSO, and Rydex 2x S&P 500, RSO) along with leveraged sector ETFs. Leveraged financials might be worth a look, if the bounce is anything like the decline.

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