Insider Christopher Byron |
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How to Spot a Bear Opportunity
What can you do when the market starts to collapse? The answers is plenty. You just have to recognize opportunities when you see them.
So let us consider the investment gift now being presented us by buying the cheapest stocks in one of the most misleading stock market indicators around: the Dow Jones Industrial Average -- the so-called Dogs of the Dow strategy.
As soon as the Average falls into a pattern of loses, you can hear debates raging all day long on CNBC as to whether we're heading into a bear market or actually in one already. Yet investing in the bottom one-third of this index after it has been bear-mauled may actually be a smart move.
EVALUATING AN OLD-LINE DOW
For reasons that really don't matter for our purposes here, the 113-year-old Dow Average has long been the media's (and thus the public's) most popular indicator of stock market performance. But the U.S. economy is no longer an industrial economy, and the Dow Average -- though it has been revised more than 40 times -- no longer reflects either the growth (or the risks) in that economy.
There are no Internet stocks in the Dow 30, one computer software company, no cable companies, no HMOs, no biotech or genetic engineering firms -- in short, none of the small, dynamic, fast-growing companies that powered the U.S. economy through nearly the whole of the '90s bull market.
A Flight to Quality Stocks
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