Today's comment is by David Newman, Market Analyst and Membership Director for The Sovereign Society. 

Right now, stocks look uglier than the Wicked Witch of the West having a Bad Hat Day. So what do you do if you're convinced we're in a bear market...and stocks may be at today's levels two to three years from now? Here are your options:

1) Take your lumps. Say you can't really predict the markets, and lose 20% to 30% of your portfolio's value over the next few months (or years). Tell yourself you'll eventually ride the recovery, and after all is said and done you'll average 10% a year or so (6% or so after inflation). Accept that's the best you can do.

My verdict: Hogwash. You don't have to leave your money prone to the big dips. You may not be able to predict every crest and ebb of the market, but you can spot the big trouble heading your way like a pack of sharks, and have the prudence to swim to safer waters.

2) Go to cash. This is where you throw in the towel, accept 2% to 3% yields on safe cash (although you're losing money in inflation-adjusted terms). You wait until you hear the "all clear" signal, and then you cautiously head back into the markets.

My verdict: This choice makes some sense, except the "all clear" signal never sounds as "all clear" as you like. Sometimes the "all clear" can be a false rally, or just another landing on a long flight of stairs down. Or you can wait so long for the rally to be verified that you miss the most compelling values the bear market created for you. We think it's better to stay invested, but stick to the best value markets and sectors.

3) Opt for dividends. Dividends make up around 33% of long-term total returns of the market. So the wise ones in the investment world say you should always go for dividends.

My verdict: It's not always as wise as it sounds. Buffett has never paid a dividend and rightly so. He can reinvest the earnings far more profitably for you than pay them to you in a taxable event. So why not let him? His reinvestments, when done well, will show up in increasing retained earnings and in a greater store of income-producing assets bought with those earnings. Microsoft, similarly, never paid a dividend for 20 years while it was making its investors the biggest returns.

Also, lately blue-chip companies from Sprint to GM have been slashing their dividends to generate some emergency cash. (Last week, Wachovia announced they're cutting dividends to five cents a share to help raise US$5 billion.) So dividends are dandy, but they're not the whole story - especially when companies are taking their dividends back.

So I say, if you can find value with a high dividend during a bear market, take it - particularly if it's a guaranteed dividend that a company can't take away when times get hard. The regular cash payments will help you tolerate the ups and downs of the share price.

4) Take advantage of extraordinary opportunities for high income now. There are certain structured vehicles that will pay far more than even the best dividend paying stocks. In fact, you can collect 15% and 13% on investments related to Apple and Home Depot. You don't get any of the upside, but that's okay. You're not trying to swing for the fence here. You're bear market investing. The main premise is there isn't going to be much of an upside if any at all! And your downside is reduced. On many of these investments, the stock has to fall 20% or even 40% before you risk loss. But you collect 10%, 15%, or 20% in cash all the while, as the market gyrates.

My verdict: This is the best option by far.

Lately, I'm researching some of the special "extreme dividend" payers that give you all the benefits of these extraordinary opportunities. They pay far more than the best dividend blue-chips. Plus, unlike Wachovia or Sprint, these extreme dividend payers can't stop paying you dividends anytime soon.

These types of extreme dividend payers may not be for everybody, but they sure make a lot of sense if you're looking for continued income throughout this bear market. 

Guaranteed Cash Payments, Low Initial Cost, and
100% Investment Protection

As I mentioned, these payers pay out huge "cash dividends" delivered directly to your account every month. All of these extreme dividend payers require very low initial investments. Many offer full, 100% investment protection from any losses.

How about "win - win" investments? If the stock goes up you win...it goes down you still win. Plus, these investments are great for your IRA.

I've only found one drawback to this type of investing. It's that some of these investments have longer holding periods (2 -5 years). But many are totally liquid and are traded on the major U.S. exchanges, so you can easily avoid holding them that long.

Moral: Don't just duck your head in cash or take your lumps in this market. Instead, go far outside the mainstream for greater protection, and guaranteed income with these incredible opportunities.

DAVID NEWMAN, Market Analyst

P.S. I truly believe these extreme dividend payers are the most strategic way to get ahead of the crowd and learn to make big money in any market. So much so, that we've written a special report on these extreme dividend payers. Look for this FREE report coming to your inbox later today.

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Don't Be Fooled By This Misleading Market

Financial stocks continue to rally this month, despite some horrid earnings released for the second quarter. It also looks like the stock market is gradually discounting a recovery over the next several months. The dollar is strengthening, housing and bank stocks are rallying and volatility indexes are trading 30% below their highs over the last 12 months.

But unfortunately, you won't hear the truth about these markets from stocks. On the contrary, the real truth lies in the credit market. Personally, I've got my eyes glued to several key credit indicators to figure out the extent of these economic problems.

I've got many updates I think you'll find quite interesting. All of my indicators are still flashing red - saying the credit crunch is not done yet.

LIBOR Says: Banks Are NOT Ready to Hand Over Money Yet

Since Tuesday's big stock market rally the majority of credit spreads have actually widened, not tightened. If the stock market really was firming up, then we should be seeing a rally in higher risk credits like high-yield bonds, corporate debt and mortgage-backed securities, but we're not. Also, inter-bank lending rates are still high (see LIBOR above).

But on Tuesday, these credit markets posted losses when stocks rallied. That tells me this is NOT a broad-based rally in all markets. It suggests that although some confidence might have returned to the equity markets that is certainly not the case for credit. And credit is where the smart money lies on Wall Street.

Until the credit markets start to stabilize, you should remain under-weighted in stocks. It's still too early to load-up on equities again. Credit markets don't lie. Stocks do.

ERIC ROSEMAN, Investment Director

Once Your Info Is on the Internet, It's There Forever

If you're a regular reader of my articles, you've hopefully deleted any "digital dirt" that may be floating around on the Internet.

Cleaning up some of your digital dirt is easy. It's a matter of point-and-click to delete that revealing photo in your Facebook profile. Or deleting that pictorial record of you passed out on the bathroom floor on your MySpace page.

Problem is it's now possible for researchers to find old versions of websites and extract information from them. You can view web pages that were modified months or even years ago through the Internet Archive, also known as the Wayback Machine, at www.archive.org. When I tested the Wayback Machine to view old versions of my own website at www.nestmann.com, I found more than 100 now-obsolete pages.

With the Wayback Machine, old versions of your website may not look the same as they did when you first created them. And fortunately for those of you who may have posted pole-dancing photos, in many cases, images aren't archived. You can only see text. However, links on archived pages usually will work.

For businesses, threats that are even more serious lurk in archived Web pages. Did you make a claim about a product or service you offered that you later retracted? Did you sell a product that you later discontinued? If you did, the Wayback Machine probably has a permanent archive of it.

Fortunately, while it may be too late to prevent the Wayback Machine from archiving previous versions of your website, you can stop future archiving. All you need to do is add a simple set of instructions to the root page of your website. The instructions tell the various "Web crawlers" that troll the Internet indexing and making copies of Web pages that you don't want a particular Web page, directly, or entire Web site indexed.

The instructions are contained in a file called "robots.txt." To learn how a robots.txt file works, and how to create one, see www.robotstxt.org. Or, ask a web designer for assistance.

MARK NESTMANN,
Privacy Expert & President of The Nestmann Group
www.nestmann.com

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