INVESTMENTS

In the face of such a negative long-term outlook for the U.S. economy and financial markets, where can one successfully invest? Fortunately, there are alternative investments suitable for extended bear markets and hard economic times.

One strategy is to invest between the Rydex Nova (Nasdaq ticker symbol: RYNVX) and Rydex Ursa (Nasdaq ticker symbol: RYURX) stock mutual funds. The Rydex Nova is geared to make amplified moves of the S&P500 so that better-than-market returns are achieved in a bull market. The Rydex Ursa fund (Ursa is Latin for "bear") is geared to move the opposite of the S&P500 so that one can reap a positive return during a bear market. An ideal strategy for investing using the Rydex funds is to stay invested in the Rydex Nova fund as long as a bull market is intact according to Dow Theory. In the event of a Dow Theory bear market signal, invested monies should be switched out of the Rydex Nova fund and into the Rydex Ursa fund (at present, this would be when the Dow Transports fall below 3300 and Dow Industrials fall below 10400). Again, the strategy would be to stay invested in the Ursa fund as long as the bear market is intact according to Dow Theory. When a Dow Theory buy signal is generated, money should be switched back into the Nova fund.

On top of Rydex Nova, there are mutual funds managed specifically for bear markets and/or contrarian investment strategies that might be considered as decent investment opportunities. One such fund is the Prudent Bear Fund (Nasdaq Ticker Symbol: BEARX). If there is a prolonged bear market in stock prices, this fund is geared to profit from it. In anticipation of the coming Grand Supercycle bear market, the Prudent Bear Fund should be considered a decent long-term investment opportunity. (The opposite investment strategy of buying-and-holding stocks for the long-term.)

Another investment strategy in the face of a major cyclical downturn in stocks and the economy is investing in gold and gold mining stocks. Gold is a traditional investment safe haven when there is economic and financial turmoil and uncertainty. Should there be a mass exodus from paper assets like stocks, bonds and currencies, then people are likely to place their money in tangible investments like gold. Thus, if the Kondratieff Wave and Elliott Wave Principle are correct in projecting financial panic and economic depression in the U.S. and worldwide, then a major bull market in gold and gold mining stocks could lie ahead.

A couple of well established gold mining companies that might make decent investments are Homestake Mining (NYSE ticker symbol: HM) and American Barrick (NYSE ticker symbol: ABX) . In recent years, while stock prices in general rose sharply, the price of Homestake Mining shares fell from a high of 23 (dollars per share) to below 10. Likewise, the price of American Barrick has dropped from a high above 30 to a low just above 15. American Barrick is currently trading above 17. Should the U.S. stock market generally trend lower, then gold stocks like Homestake Mining and American Barrick will likely rise, possibly as sharply as they have fallen in value in recent years.

Some highly speculative gold stocks that might offer extraordinary returns and, accordingly, could serve as effective hedges against global financial turmoil are Agnico Eagle Mines (NYSE ticker symbol: AEM), Echo Bay Mines (NYSE ticker symbol: ECO) and Greenstone Resources (NYSE ticker symbol: GRERF) (list from lowest to highest risk, respectively).

While the stock market has climbed exponentially higher, these gold mining stocks have been hard hit. Agnico Eagle Mines came down from a high of 20 to a recent low below 5 and is currently trading just above that level. Echo Bay Mines has dropped from a high near 15 to below 2. The stock is now trading just above a dollar per share. Greenstone Resources has fallen from a high above 10 to a low of 1/16th (this company could go belly-up if the price of gold doesn't eventually rebound). Given how far down the prices of these stocks have come from their highs, they have a lot of room on the upside for rebounding. Furthermore, if a new bull market gets underway in the gold market while the stock market enters a major bear market, then shares of Greenstone Resources, Echo Bay and Agnico Eagle Mines could feasibly climb to new all-time highs. Thus, investing in these companies promises a potential four-fold, six-fold or even greater return in the months and years to come.

In conclusion, the outlook for the U.S. stock market and economy is very negative. Following fifteen years of steadily climbing stock prices, pervasive investor optimism and stock market over-valuation have developed that are characteristic of important tops. If the stock market reverses courses and enters a major bear market, particularly after a Dow Theory sell signal is generated, a multi-year, if not multi-decade, decline in stock prices should follow. According to the Elliott Wave Principle, this decline should carry the DJIA to 4300 or lower. Furthermore, the Kondratieff Wave theory suggests that any such stock market decline will be part of an economic depression similar to what happened during the 1930's. Some alternative investment strategies in the face of a bear market for stocks and economic depression is to invest in contrarian stock mutual funds that rise when equity prices generally fall and/or to invest in gold and gold mining stocks.

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