Casino Bet With Odds In Your Favor

The money making trade (in the short term 3 - 6 months) with the odds in your favor is shorting the stock market, and profiting from the decline that could be heading our way at the end of this year and into 2010.

Why would this be a good trade? Below are my top 3 reasons.

Reason #1:

Based on the last ten years, the "January Effect" has led to stock declines nine out of the last ten years. Much selling occurs in the final week of December and into the month of January. All this selling, causes stock prices to pull back a bit. Below is a chart to illustrate the January Effect over the past decade.


Reason #2:

As of late there has been a strong inverse correlation between the dollar and the stock market. If the dollar increases in value the stock market decreases and vice-versa. As such, the dollar has been losing much value as of late, and a short term dollar rally might be in the cards.


Reason #3:

The appetite for risk is going to lessen because of what is happening around the world. There is Dubai defaulting on their debt, which is not too significant if it was an isolated event that did not affect other parts of the world. Greece just recently received a debt downgrade from Moody's, and the Baltic area in general is experiencing many economic and social issues because of the huge deficits they have. Also, Spain just received a debt downgrade from Moody's. These occurrences are not isolated to the countries with which they happen, there will be worldwide effects from these issues with debt whether it is big or small.

Bernanke Is Right - Weak United States Dollar Not Going Anywhere

In a recent PBS interview, Bernanke stated that "a strong dollar will come when we have a strong economy". How do I understand this statement? A weak dollar is here, and it is going to be here for awhile until we can turn this economy around. A strong economy will attract foreign investors, and this is what we need in the United States for a strong dollar.

How has our economy been doing lately? According to the Bureau of Economic Analysis, "our Gross Domestic Product (GDP) has decreased by over five (5) percent in the first quarter of 2009". The United States unemployment rate per the Bureau of Labor Statistics is at about 10%, which is probably lower than it really is. What is made in this country anymore? Take a look at the product(s) you buy and find out where it is made. You might have a difficult time finding a product made in the good ole' US of A. According to BBC news, "nearly two million manufacturing jobs have been lost in the US in eighteen months".

There is hope though! If the US can lead the world in "green" innovations, maybe we can start producing our "green" goods and revitalize our manufacturing sector.