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The Five Financial Crisis 'Aftershocks' Investors Can Play For Profit
By: Money Morning   Tuesday, November 18, 2008 1:21 PM
Sectors: Finance
Symbols: AIG, BAC, C, GS, MER, WFC
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It used to be that buying a stock was like buying a house. You’d find a house that looked super from the street – and inspect it carefully, before committing to a deal.

But what if you couldn’t get inside? Or even worse, what if the property changed after you carefully inspected it, so that you ended up buying a house with a trashed interior, or a crumbling foundation that made the house risky to live in, and virtually worthless to sell? Or what if a new regulation made the house you spent so much for – and had saved so long for – obsolete overnight, so that you were left with nothing to show for the years of saving and investing, possibly even forcing you and your spouse to forgo your long-dreamed-of retirement? Instead, you both have to keep working.

That’s a lot like what we’re seeing in the U.S. stock market right now.

If the “house” I referred to is an analogy for the stock market, we’re all having to watch as government regulations, elected lawmakers, credit providers, rating agencies and others all work to change the way business is conducted – in many cases, changing the game after consumers (investors) spend all their hard-earned savings for that house (major stock or mutual fund purchase).

If that’s truly the case, it’s understandable if most U.S. investors are left feeling burned – or even worse, helpless – to the point that they’ve decided it’s better to just sit on the sidelines. After all, why participate in a game in which there’s no way to win?

But what if you knew, ahead of time, what marketplace changes to expect? Then you’d be in the driver’s seat – right? You’d know what to anticipate, could craft a profit strategy to follow, and then could just sit back, watching and waiting for the events you’ve already positioned yourself to profit from.

Investment expert R. Shah Gilani – a retired hedge fund manager who’s been chronicling the credit crisis as a Money Morning contributing editor – thinks it’s possible to peer into the future and see the changes that are looming. Gilani, the editor of a new trading service called the Trigger Event Strategist, is predicting a series of so-called “aftershocks” from the financial crisis that investors need to watch for.

These “trigger events” are seismic occurrences that will cause major aftershocks. And the fallout from those aftershocks will bring about marketplace changes that, properly played, can be exploited for profit, Gilani says.

“It’s like having a meteor hit the earth,” Gilani says. “Because of the seismic-level events that will result from the aftershocks of this meteor strike, there will be all sorts of other trigger events” that will translate into profit opportunities, if properly played.

Some of these will involve going long – that is, actually buying the stock, option or security that’s likely to benefit the most from the trigger event. But this strategy can also involve short selling – identifying the company, stock, fund or security that’s going to be punished the most, and profiting on that decline.

In this story, we’re going to take a look at five key aftershocks investor can look for. These are by no means the only ones Gilani is predicting: But they are five of the most dramatic, and are among the most important ones investors need to be able to understand and interpret.




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