That well-known quote is usually attributed to Baron Rothschild,  member of the famous banking family, who reportedly made a fortune buying bonds that fell in a panic following the Battle of Waterloo.

In today’s parlance it refers to buying stocks when the market is crashing.  After the crash of 2008, you could have bought into the best of the Dow stocks when the Dow was at 6600 and today you would be sitting pretty.  Today’s meltdown is probably just a precursor of worse things to come.  The debt crisis in Europe is far from over and the Stupid Committee was not able to come to an agreement to reduce the rate of debt growth by $1.2 Trillion. This could lead to further downgrade by the rating agencies.

So the blood in the streets right now is really just a few drops.  Real arterial bleeding will come soon and that will be a major buying opportunity.  The next leg of the financial crises will be INFLATION. And, where you get high inflation the dollar drops and stock prices surge until the Fed moves in and raises interest rates.  Since this Fed has said many times they are not worried about inflation, it could go on for a while until the Fed moves in.

So now is not the time to buy –but it will come soon.  Keep your powder dry and get out of stocks and into cash.  There will be rallies along the way but this market is headed down –perhaps as much as another 2000 points.  And that will be the time to buy.

This is also not the time to buy Gold and Silver.  Those will be hit hard as investors move into cash which is happening now. And with the foreign credit crisis money flows into the dollar which always drops the price of gold and silver.  I think you will be able to buy back into gold at the $1620 level and silver as low as $21.

Today’s post is a guest post by Jack Crooks from Money and Markets

How to Avoid The 6 Traits of Market Fools
by Jack Crooks

In my Money and Markets column each week I tell a story, or give a prediction about the future. Hopefully it makes for interesting reading. And maybe some of it is even helpful and plays out in the real world to make you some money.

But forecasting is a mug’s game when it comes to making money in the market. The reality is you don’t have to forecast to make money, but you do need to control your risk.

Traits we all exhibit at times are what swiftly separates us from our money — traits of an “acute successful randomness fool,” as defined by Nassim Taleb, author of the excellent book, Fooled by Randomness.

Today, I’d like to examine these common traits. Because if you can identify and recognize the traits of fool, and apply some simple principles, you’ll have your own built-in risk management system in place.

Keep in mind, though, that even some of the best traders in the world are prone to these mistakes, as we see so often in the blow up of funds and firms. So if it can happen to the pros, it can happen to you.

After each of the traits of market fools I provide an example that perhaps you can all relate to, and a reality bite to show the proper perspective and simple ways to avoid these mistakes.

Trait #1 — An overestimation of the accuracy of their beliefs in some measure, either economic or statistical

Example: The U.S. dollar MUST fall because the current U.S. account deficit is rising. Reality: No it doesn’t have to fall. If money pours into the United States from international investors for whatever reason (stocks, high yield deposits, real property, etc.) the dollar will rise regardless of what the current account deficit does. Develop reasons, but don’t be dogmatic.

Trait #2 — A tendency to get married to positions

Example: The dollar sold off even though the jobs report said employment is strong. I’m right, the market is wrong. Reality: It’s always about price action. There is much going on in the market, and a lot we will never know about. Price action tells us that our reasons may be wrong, no matter how much evidence we gather. Listen to the market. It’s your only master.

Trait #3 — The tendency to change their story

Example: You are a short-term trader and the market just moved against you on a key daily report. You rationalize that it’s okay, because “I’m in this trade for the long haul, and sooner or later I will be right.” Reality: If you develop reasons and time frames, stick with them. If the market gives you information that says your view is wrong, get out! You can always re-enter. Getting out will at least give you an opportunity to more objectively evaluate new information.

Trait #4 — No precise game plan ahead of time as to what to do in the event of losses

Example: You enter the trade thinking you’re going to make big money — all you think about is your reward. Reality: You should always think of your risk before you enter a position — that’s what professional traders and speculators do. You must consider your risk beforehand because if you wait until you have already taken a position, you tend to lose your objectivity.

Trait #5 — Absence of critical thinking expressed in absence of a “stop loss”

Example: You liked owning the euro when it was at $1.40 against the dollar, you will love it at $1.35 — the average down mentality. Reality: This goes to point number 4 above; set your risk parameters ahead of time by establishing a stop-loss level to exit a trade and stick with it — don’t rationalize. The euro at $1.35 may indeed prove to be a bargain. But it may also be the start of a major decline that can significantly damage your capital or wipe you out if you are trading with high leverage.

Trait #6 — Denial

Example: Well, I really got hosed on that trade — it was bad luck. Reality: There is usually a very good reason why you lose money. Take the time to try to understand it. You learn more by objectively analyzing your investment mistakes than you do by studying your winners.

The bottom line of all this is that you can never keep from being fooled by the market. But you can control your risk. And if you can control your risk and stay in the game to fight another day, your chances of winning will increase dramatically.

Its that time of year again — we have until December 7th to find or change our Medigap policy.

Consider this:

Right now, for example, a 71-year-old woman living in Dayton, Ohio will have to pay an exorbitant $3,372 per year with Humana Insurance Company for a Medigap Plan C. But if she goes with Gerber Life Insurance Company, she’ll pay only $1,585 for the exact same policy.

Can you believe that? With Humana, she’ll wind up paying more than DOUBLE the premiums she needs to pay. In contrast, with Gerber Life, she’ll save a whopping $1,787 per year, and still get the same benefits!

Her 82-year-old husband can save even more — $2,927 per year, for a total of $4,714 in savings between them.

That’s just for one year! Over the next 10 years, the couple could save $47,140 with Gerber Life. And at 3% interest, those savings alone would pile up to $61,997!

THAT’S A LOT OF MONEY !!!

Like you I have been to those websites that allow you to compare policy coverage and costs –and I still ended up paying over $900 to much last year for exactly the same coverage I have elected this year.  When my wife turns 65 that will double.

Not exactly penny change!

This is just one case. So don’t take this as a recommendation for Gerber Life — because in YOUR particular case, they could be the MORE expensive option.

But also consider the case of a 76-year-old male smoker living in Flagstaff, Arizona.

With Standard Life & Accident he’d pay $4,580 for a Plan C Medigap Policy. But simply by switching to Government Personnel Mutual Life Insurance Company of Omaha, he can get the same policy for just $2,280.

That’s not just a 15% savings like some auto insurers rave and rant about all the time on TV. It’s a savings of 50.2%!

How to save money on Medigap Insurance

One of the people I respect and follow is is Marty Weiss who runs Money and Markets.  Marty is a financial guru and adviser.  I have subscribed to his advice for about 4 years now and he has both made and saved me a ton of money.  Marty has just come out with a new report and service that can help you save hundreds –or even thousands of dollars a year on your Medigap plan.  And the best news of all. If he can’t save you money he will give you a free refund –good for one full year.

Go here to read about Marty’s report and his own family’s experience with insurance plans.  You won’t regret it.  Remember, Marty’s report comes with a 100% guarantee.  And while you are there, be sure and sign up for his free Money & Markets Newsletter.  You won’t regret that either.

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Will Social Security be there when we need it?

This morning I read a report on new Social Security Statistics.  The Department of Labor and the Social Security Trust Administration released figures that show that there are now only 1.75 people working full time for each person receiving Social Security

This is from Nilus Mattive at Weiss Research:

Fact #1. As recently as 2009, the Social Security Administration was predicting that the program would begin taking in less than it paid out in 2017.

Fact #2. Then, just one year later in 2010, the Social Security program took in less money than it paid out. (The first time since the 1980s.)

Fact #3. This annual shortfall was blamed on the poor economy — i.e. fewer employed people paying in and others choosing to retire early, thus increasing the amount of money being paid in benefits.

Fact #4. At the time, the Social Security Administration said it would only be a temporary slip and that a permanent state of deficits would actually begin in 2016. (Note revision from previous estimate.)

Fact #5. In 2011, the Congressional Budget Office came out and said that the Social Security program had already entered a permanent state of annual deficits. (Woops again.)

Source – Link to full story:  http://www.moneyandmarkets.com at Money and Markets

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The politicians keep telling us that people on social security don’t have to worry that coming reforms will only affect the young.  But with facts like these I am not so sure.

The huge blow off in the market today is probably just a glimpse of things to come, but most analysts agree that we will get some up days before we get more down.  Obama didn’t help matters with his speech today. Every time he speaks my IRA drops.  Barring any bad news, I suspect we will see some bargain hunting tomorrow.

My strategy for the past two weeks has been to sell 1/2 of my stocks  to raise cash for a huge buying opportunity to come.  I have also done well with gold.  Currently I am holding gold as 15% of my portfolio.  Gold will probably correct soon and I think it could go all the way down to the low $1500s.  It will need to do that to build a solid base before the next leg up which could be huge.

So now is the time to sit on your cash and wait patiently for opportunity. Then move into rock solid dividend paying stocks once the Dow bottoms out –probably in the 9500 range.  The Fed will start easing and printing money again and may even buy assets and that will set off a stock market boom like you haven’t seen in years.  I think the Dow could hit 20,000 before the elections next year.

Remember – I am not a registered investment adviser so you always want to do your own research and make your own decisions –just be careful listening to brokers.  I always advise looking for independent advisers who don’t make money when you buy and sell.

The debate in Washington over raising the debt limit has highlighted something that most of us (and the folks in Washington DC) have known for a long time.  There is simply not enough money in the world that can pay all the future bills of Medicare, Social Security and Medicade –Let alone Obamacare that will add another Trillion Dollars in unfunded liabilities over the next ten years.

I can’t remember who did it, but one of those Washington think tanks did a study where they calculated that you could raise the tax rate to 90% on every single American –rich, poor and middle class, and you would still not have enough money coming in to pay for all of the entitlement spending at current and projected levels.  So yes.  Social Security and Medicare too will have to be cut.  And the cuts will have to be deep.

Here is what the cuts will probably look like.  They will consist of some or all of these steps. (Note: I am not suggesting we should do these things –just saying this is what the folks in Washington are considering).

Social Security Cuts

• Raise the retirement age to 68 now and later to 70.
• Eliminate early retirement at age 62
• Adjust inflation indexing downward
• Extend the tax rules on retirees earning over $14,000 a year to age 70. (Each $2.00 of income you make over $14,000 a year, reduces your payment by $1.00).
• Some type of means test based on total retirement income from all sources (dividends, other retirement plans, military retirement and withdrawals from IRAs and 401Ks.  Those with a total retirement income over a certain level (the betting is $30,000) would receive a reduced payout.

Medicare Cuts

• The Justice Department will set up a special Medicare/Medicaid fraud unit with a goal to reduce fraud by $100 billion per year  (about 1/3rd of the current estimated fraud).
• The Government will hire an outside auditing firm to audit Medicare claims to prevent fraud and general misuse.
• A deductible system will be introduced based on retirees total income from all sources.  Those whose only income is SSI would be left alone. Those whom have additional sources of income would have to pay a deductible and perhaps even co-pays based on the size of their income.
• Institute medical review panels to limit care to end of life situations
• Allow Medicare to negotiate rates with drug companies and medical supply companies as is now done by the Veterans Administration.  This one step alone will save $70 Billion/year.

All of these steps combined could reduce SSI and Medicare payments by about $500 Billion per year by 2015.  That will still leave a shortfall, but it will be more manageable and could be covered by a combination of economic growth and increased taxes.

I would love to hear your comments.  How would you fix the problem of a $5 Trillion shortfall over the next 15 years?  Please use the comment form below.

Note – All comments have to be approved so they will not show up instantly. I only kill comments that are either spam or contain objectionable material so feel free to vent –but I would really like to hear some positive ideas.

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Learning how to buy and sell scrap gold jewelry is a perfect home business for seniors.  No heavy lifting, quick profits (avg 1 week) and very low risk.  See the next post below for some great info on this business.

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If you are retired –or about to retire from a state or city government, your pension is at risk.  Here is a great article by Nilus Mattive, author of Dividend Superstars Newsletter.

Dead ahead: State and city pension FAILURES!

Nilus Mattive

Last week The New York Times dropped a bombshell, reporting that “policy makers are working behind the scenes to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.”

This is truly huge news, with far-reaching consequences. But it shouldn’t come as a surprise if you’ve been reading my columns …

Back in July, I explained how state pension funds around the country had essentially blown their fiduciary responsibilities to retirees and their broader constituencies.

Specifically, I wrote:

“They have been consistently underestimating how much money they’ll need down the line. In essence they are pretending that inflation doesn’t exist …

“Second, despite the major losses they actually experienced in their portfolios, they are acting as if those losses haven’t completely happened yet. Instead, they are basically just figuring that things will turn around if they wait long enough …

“And interestingly enough, when these same investors were winning big a few years ago, they put off contributing more of their current earnings into their accounts … essentially letting their profits carry the day, or even borrowing money from their accounts!

“Even today, with their balances way off what they should be, they are failing to contribute to their accounts. Some are even playing ‘shell games,’ by moving money around to make it look like they’re in better shape than they really are.

Then, this past September, I discussed some of the specific state pension plans at risk of imminent failure, along with arguments and steps legislators were employing to wiggle out of past promises.

Now, you’ll get no argument from me that many employee organizations expected — nay, demanded — far too much every time they went to the negotiating table. Yet I still place most of the blame for this impending crisis on career politicians.

Like coddling parents who never say “no” to their children, they were willing to promise anything to get elected and then to stay in office …

They were happy to ignore budgets and dole out money that wasn’t even in the kitty yet …

And they stubbornly put off pending problems, acting as if the piper would never show up asking for payment.

From capitol to capitol, it was just one big game of musical chairs. Now the needle has careened off the record with one last deafening screech.

Worse, the States Are Just One Facet of

This Massive National Pension Crisis!

Similar pension problems are emerging among U.S. cities, too — where local governments can already declare bankruptcy and, in some cases, hang pensioners out to dry.

And even in places where constitutions currently protect pensions, mounting problems at the state level may ultimately unravel — or at least sharply impact — retirement benefits at the local level.

Just take a look at the latest headlines and you’ll see just how widespread the problems are …

In New York City, pension costs have more than quadrupled in the past decade, from $1.5 billion in 2001 to $7 billion this year! That’s why Mayor Bloomberg recently echoed Governor Cuomo’s state-level battle to rein in pension costs, threatening huge layoffs unless unions accept drastic retirement reforms.

Meanwhile, in Cincinnati, lawmakers currently owe retirees about $1 billion more than they have socked away. And as this story explains, it’s a real mess.

Just some of the highlights:

* “[There are] policies that allow some workers to retire with pensions of up to 90 percent of their three highest years’ salary, guaranteed 3 percent annual increases, lifetime health coverage at negligible cost and other benefits far beyond those found in most private and public retirement plans.”

* “From 2000 to 2009, investment earnings failed in half of the years to meet an 8 percent [return] goal.”

* To solve the problems, “trustees are considering proposals to raise retirement ages, lower annual cost-of-living adjustments, shift a greater share of health costs to retirees and alter pension calculation formulas.”

Look, we’ve already seen this movie with corporate pension problems over the last decade. Countless plans failed … countless more were shuttered for current employees … and a whole mess of people lost important benefits there were counting on.

Plus, as I’ve noted in the past, the government’s backup insurance plan for these failed private plans is itself underfunded by many billions.

With these same issues appearing in cities and states from one coast to the other, a lot of folks have been asking if Washington will step in.

Well, if that New York Times article is any indication, the answer is yes — Washington may step in to LET state and local governments renege on at least some of the benefits they owe retirees!

It’s not like Uncle Sam really has a choice. In addition to owing private pensioners more than what’s in the kitty, there’s also that pesky issue of massive shortfalls in the Social Security program.

So What Can You Do to Protect Yourself?

It doesn’t matter if you’re a government worker or just a regular citizen … this national pension crisis is going to affect you — directly or indirectly.

It may mean a sharp decrease in your retirement benefits. Or it could reduce the public services available in your city or town. And it will almost definitely lead to higher taxes.

So I suggest you get as much information as you can on the rapidly developing state and local debt crises striking our nation … and learn how to hedge against these problems with new investments that are now available.

In addition, I consider it absolutely critical that build up your own income-generating portfolio as quickly as possible, preferably in tax-sheltered accounts.

I’m helping my own dad do this right now, because we recognize that his state pension is no more guaranteed than anyone else’s.

As the latest headlines demonstrate, past promises to retirees are no longer sacred and benefits are no longer guaranteed. So if you’ve been putting off your personal protection plan, please make it your first priority in 2011.

Best wishes,

Nilus

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

You are probably thinking “If inflation is here, why didn’t we get an inflation adjustment on Social Security this year?” Well there are a couple of reasons. First of all the SSA doesn’t include food and energy in their calculations –and of course those are what’s going up. Who ever said our government was honest?

The other reason is the soft economy. Despite rising prices it is difficult to raise prices in a slow economy, so stores are having sales and making do with smaller margins.

What we have seen so far is nothing, however. Remember the Jimmy Carter days. This looks like it could be a repeat.  Rising prices in a slow economy had a name –they called it Stagflation.  If you look at underlying material prices you can get some ideas of what is coming.

• Industrial materials prices (copper, steel, zinc, etc.) are up 29% since July (See chart below)
• Cotton prices at the mill are up 90% to an all-time high. This will soon be reflected in clothing prices.
• Corn prices are up 30% in the past year. Corn is used in the manufacture of thousands of industrial, food and consumer products.
• Oil is now around $82 a barrel. That is up from the mid-60′s a few months ago. I have seen several credible forecasts that predict it will be over $150 barrel within the next year.
• The US Dollar has rallied a bit in the past week or so, but the long term trend is still down. A falling dollar makes imported products more expensive. Before long all those dollar stores who import cheap Chinese junk will have to start calling themselves Two-Dollar Stores.

Basic materials prices since July 2010

• Do not store metal cans on metal shelves.  Metals can react with each other and affect the integrity of the can
• Always check the expiration date and arrange your foods by expiration date so you are eating the oldest ones first
• You can store grains, flour and rice a few months beyond the expiration date if you are very careful.

1. Place the bags of rice and grains in your freezer for a couple of days. This will usually kill any vermin or eggs.
2. Keep them in their original bags and place the bags in Ziploc bags and squeeze out as much air as possible. Now place the Ziploc bags in sealed 5 gallon buckets (you can get these at Ace Hardware or get them from most bakers who give them away freely).
3. Before you seal the bucket sprinkle 1/2 a cup of Kosher salt in the bottom to soak up any moisture.
4. Another thing you can do is put a small piece of dry ice in the bucket just before sealing.  As dry ice melts it gives off carbon dioxide that can kill any little critters that are in the bucket.
5. You can also purchase food-safe oxygen absorbers [Bj5] available from food storage supply stores online.

• Almost everyone our age knows how to can. So buy any fresh vegetables or fruit you can find (Costco and Sam’s Club are great places to buy good quality fruit and vegetables in large quantities) and start canning.  This is a great activity to do with friends, family and neighbors. My late Grandmother used to have canning parties. Everyone would bring something different and then they would trade with each other so everyone had a nice variety.
• If corn and grain prices continue to rise then meat prices will follow.  Meat prices are already up this year but that could only be the beginning.  I was talking with my butcher and he told me his meat suppliers are predicting increases of 50% or more in the coming year.  The solution to this is a freezer if you live in an area with stable power.  But if you live anywhere that storms can knock out power for days at a time, you will want a generator or just store dried or cured meats.

So those are my tips.  If you want really good detailed information, here is a free eBook you can download: Prudent Storage Facts Version 4.0

The other thing you can do is convert some of your savings to silver and gold.  There is nothing that makes the price of gold and silver rise faster than inflation and a falling dollar.  Gold and silver are going through a normal price correction now, so there will be some good buying opportunities in the weeks ahead.

If any of you have ideas and suggestions on food storage, please leave a comment.

Guest Post by Jason Holmes

5 Ways to Supplement Your Income After Retirement

You may have planned your retirement and may even have saved for it, but with the increase in inflation it is very difficult to tell if your savings will be enough to pull you through your retired life. You may find out that it is very difficult for you to make both ends meet after retirement, merely with your retirement savings. If you are unable to pay for your basic necessities, you may not be able to take care of your medical expenses that rise with your age.

Surviving on a fixed budget, you will have no other option left but to go into debt. If you do, you will have to plan to pay it off. With little funds and rising debts the only option open would be to consider debt solutions such as debt consolidation, debt settlement, etc. However, if you are willing to put in a little effort, there are many ways in which you can have a regular income even if you are retired.

Some ways in which you can supplement your retirement savings and income is as follows :

1. Investment options: Whether you are employed or retired investing correctly is very important if you want to earn that extra bit of money. If you are retired, then it is even more important for you as these investments offer you a regular income. There are various schemes that are especially formulated keeping in mind senior citizens. Look for these schemes and invest accordingly. There are various choices that you may choose from. You could also take the help of a financial planner to help you make these choices.

There are many traditional options available such as stocks and bonds. However, you may also consider a few new options. Immediate annuity is one such plan, it is a single premium plan but also allows the investor to draw the pension amount immediately. Reverse mortgage is another option that you can consider. This allows you to earn income without having to pay it back. You get this mortgage on your home and after your death the bank that provides you with the loan takes over your property.

2. Making money by blogging: One of the best ways in which senior citizens can make money online is via blogging. It is very easy to open your own blog and then keep on writing content for it. As far as topics are concerned you can write on anything that you want to. There are many topics that can draw the interest of readers, you just have to keep on posting and earn money from the comfort of your own home.

3. Offering services on the internet: You can become a freelancer and can offer services that you are good at. It could be any thing in which you think that your skills could help others gain knowledge about something or be helpful in some way to them. If you are good at writing, then you could offer that service for article writing or report writing on the net.

4. Doing online surveys and reviews: There are various companies that conduct online surveys. They offer money for these surveys. You can easily enroll in these sites and start doing these surveys. You could also do product reviews. It is a very simple way to make money as you just have to review products. However, you should be very careful while doing this as many of the survey sites are scams. You must research well and find out the legitimacy of the company before you associate yourself with it.

5. Tutoring children: You could tutor children at your home or near by areas. All you would need to do is set up fliers for your sessions. It is better if you can arrange for the kids to come to your house rather than you having to go out.

Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like ‘Credit Score The Quintessential Therapy for a Happy Pocket’, Take Creditors and Collection Agencies to Small Claims Court’ and, My Story- From Depression To a Smile’.