So says Michael Larson, editor of the Florida-based Safe Money Report, one of the country’s more prominent bearish investment newsletters as reported by Dan Dorfman (www.trimtabs.com) in edited excerpts from his original article.* 

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Dorfman goes on to comment, in part:

Taking issue with the steady barrage of optimistic “things will be okay” comments from European officials, Larson maintains that it should be kept in mind that Europe’s underlying debt problems are far from over. Ditto, he says, the fallout spreading throughout the European economy, with double-dip recessions official in Italy, Belgium, Spain, the Netherlands, the Czech Republic and the United Kingdom.

With Europe mired in a spreading recession and Asia slowing, as well, Larson observes that if the U.S. slows further like the rest of the world is doing, earnings and stock prices here are bound to suffer. In fact, he points out, the ill effects are already being pretty powerfully felt. Indicative of this, he says, U.S. stocks are getting hammered…, commodities are imploding, bank stocks are falling world-wide and some European markets are selling at multi-year and even multi-decade lows.

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The general view among most economists is that the next couple of quarters will see U.S. GDP growth on the order of 2% to 3%. Larson believes that is much too optimistic…[His]expectation: “Ugly under 1% growth over the next two quarters as things overseas affect us.”

If he’s right, and that’s a big if, stock prices would surely take a thumping. Larson points out we’re already seeing clear signs of market deterioration, what with a lot of sectors heading down or threatening to break down. Included are energy, transports, semiconductors, many financials, agriculture, heavy industrial miners and gold miners.

How to Protect & Profit

So how can investors protect themselves in the shabby market environment he envisions?

1. To capitalize on a skidding Euro, he suggests ProShares UltraShort Euro (EUO), a leveraged inverse ETF that he views as a worthwhile hedge, given the massive risks piling up overseas and which is designed to rise 2% for every 1% decline in the value of the Euro against the dollar. Needless to say, if the Euro should rise on any cheerful tidings from Europe, you’re going to lose money. In other words, it’s not for widows and orphans.
2. For those investors seeking higher income…Larson favors Alerian MLP ETF (AMLP), which owns shares of master limited partnerships, companies that store and transport energy products and pay out above-average dividends. Alerian currently yields 6.1%.
3. Short Financial ProShares (SEF) – a bet that financial stocks will head lower – is yet another inverse ETF that Larson is pitching. This ETF is designed to rise 2% for every 1% decline in the value of financial stocks.
4. McCormick & Co. (MKC), a spice and seasonings maker, whose shares recently broke out to an all-time high of $57.13 (up from its 52-week low of $43.36), is one of our bear’s top stock picks. “It’s a steady-Eddie business and the company is firing on all cylinders,” he says.
5. Larson’s final thought, another integral part of his current strategy, is his strong recommendation that investors “take profits off the table now.”

Or, put another way, watch out for that midsummer market nightmare.

Note: The opinions and views in this column do not necessarily represent those of TrimTabs Investment Research

* http://trimtabs.com/blog/2012/05/14/warning-a-midsummer-market-nightmare/  (To access the articles please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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