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Whatever your personal opinion is about this proposed bailout, you can't deny Monday's negative vote has smacked the stock market with a hammer.
But then the Dow sprang back, posting a gain of almost 500 points yesterday and recovering almost all of its losses from the one-day freefall. But no one's lighting Cuban cigars just yet, as we have another vote in the works for today.
So what can you do? Where can you run and hide when the market experiences confusion like this? After all, it could be days, (more likely weeks) before the stock market settles down again.
Answer: You dive into a few key risk-adverse investments, including specific currencies, as fast as you possibly can. In fact, I call these investments "rip cord currencies" because you should only buy them when the stock market is skydiving.
First of all, you won't find a better "rip cord" investment than the Japanese yen. The yen is the ultimate risk-adverse investment. It responds faster and more violently to stock market drops.
The yen has a low interest rate yield, so traders tend to pass this currency up for higher-yielders when markets are calm. But as soon as markets start to drop, traders rush back into the yen, to take whatever interest they can get.
Along with the yen, there's another low-yielder that tends to prosper during rough economic times. Of course, I'm talking about the "safe haven" currency - the Swiss franc. For years and years, gold partially backed the franc, so traders ran to it as markets sank. Well, even though it's not backed by gold anymore, traders still run to this low-yielding currency in times of uncertainty...out of habit.
Bottom line: Cling to the low yielders like the yen and the franc as markets hit the drop zone.
SEAN HYMAN, Currency Analyst
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