Howard Ruff, A PEAKING STOCK MARKET

The stock market has had a spectacular short-term run, based on unjustified optimism. Most commentators are claiming the economy is beginning to recover. The stock market has been reflecting their optimism for several months. As the optimism has finally begun to be tinged with pessimism, the stock market has topped out.

You can now bet against the stock market. I don’t usually make “short-term” calls like this, but the stock market has made such a big, unsustainable rally, it will cave in big time.

If you carefully read the history of the Great Depression of the ‘30s, you will see that at least twice during the Depression the stock market had a rally equal to the one we just had in the last few months. If you are a short-term trader, which I am not, you could probably make a lot of money. But those rallies were transitory, and the Depression wasn’t over until WWII brought us out of it.

Buy Rydex Inverse S&P 500 Strategy (RYURX). It’s cheap right now because of the rallying stock market and Rydex Inverse goes the opposite direction of the stock market. How much should you buy? At least as much Rydex Inverse as you have in stocks or other mutual funds, if only to offset the losses you will take in your portfolio over the next little while.

If you really want to profit big time, cut way back on your stock-market holdings and increase your Rydex Inverse holdings. There are two ways to bet against the stock market: 1) sell stocks; and 2) use Rydex Inverse Strategy as a contrarian bet.

Gold and Silver

Gold and silver have been rallying, and gold seems to want to hold above 1,000 and silver above $17. They have performed at least as well as the stock market, even during this rally. Increase your bullion holdings.

Jim Raby, my stock broker, believes the bankers will try to hold gold below 1,000, and he makes a pretty good case for it. However, it doesn’t seem to be working that way, so I would increase my bet on the metals, especially silver, because a big new player has entered the game – China.

China is now a big buyer of gold and silver for their banks. Chinese TV has been recommending that everyone should go to the bank to buy gold and silver. That’s 1.3 billion people getting propagandized. This is a major bullish factor for gold. Perhaps the bankers have met their match.

Increase your holdings of gold and silver bullion or coins. Take a whirl at the mining stocks as outlined in The Ruff Times.