Michael Shulman

Make Big Profits During Bad Times

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I recently spent some time on the phone with five trusted (and trustworthy) guys who are managing money on Wall Street to learn what they are thinking and doing.

The bottom line: What I heard from them is good news for those of us who are buying put options to profit from falling stocks. And if you haven't yet ventured into what I call the "short side," where we're making some nice dough while others are scrambling to protect theirs, there's still plenty of time to get in on the action.

Here's a summary of what I learned from my friends on the Street:

The Hedge Fund Guy -- He's beginning to look at Rogaine ads because he's running out of hair to pull out. Of course, even some of his short-side plays are not working fast enough for his taste. He entered the business three years ago and focused on the financial fundamentals of little companies and now trades a great deal. He is upbeat but sees only gloom in the market.

The Research Adviser -- He has 14 investment bank/brokerage-type clients and a long-term life sciences focus. The market is confounding him, and his clients are very unhappy with the current environment -- they're not exactly rushing to put more money to work. His clients, however, still live (and invest) by fundamentals.

The Broker/Adviser, Pensions -- He's sitting back. His clients are calm because they have a very long-term perspective. He is a gold and commodities guy -- plus plays on very long-term secular trends. He is relatively unconcerned about markets and focuses on fundamentals as well.

The Broker/Adviser, Individuals -- He's also sitting back, focusing on long-term fundamentals and short-term, short-side opportunities. He still hates the homebuilders and the banks, especially the regionals.

This was this person who first turned me on to the regional banks and homebuilders in the very early days of 2007, leading my ChangeWave Shorts subscribers to gains of 300% in Hovnanian (HOV), 173% in D.R. Horton (DHI), 311% in Centex (CTX) and 223% in Lennar (LEN), among other notable wins. I owe this guy a really nice dinner!