Keith Fitz-Gerald

Four Ways to Sidestep the Street's Big Money Bulldozer

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As the worst financial crisis in market history rocks Wall Street, millions of investors on Main Street are asking one question: When will this end?

The market volatility is unprecedented: Where professional traders once ranked a day as "wild" if we witnessed a 300-point swing, in recent months we've seen 600- and 700-point swings on a regular basis. On Oct. 9, a Thursday, we rode out a record-setting swing of 1,000 points.

That wild backdrop is bad enough. At the same time, however, the major market indices are heading lower -- at times with a speed and ferocity never seen before. But the real killer is that there is seemingly nowhere to hide.

This is what Wall Street's Armani Army doesn't tell you about traditional diversification: It doesn't work when everything goes down at once. (The one exception is the specialized inverse investment vehicles that we've repeatedly counseled you to employ precisely to prevent this kind of total freefall. Two examples that we've mentioned numerous times were the Rydex Inverse S&P 500 Strategy Fund (RYURX) and the ultra-aggressive "2X" ProShares UltraShort Financials (SKF) exchange-traded funds).

Most noticeably, of course, was trading on Friday, Oct. 24, which began after an overnight bloodbath in the markets overseas. A notice from the CME Group Inc. (CME) that stock index futures contracts were "limit down" -- meaning they'd achieved their maximum allowable downward move before U.S. stocks even started trading for the day -- didn't help much.

While much of this is commonly explained away as economic panic, the reality is that it's primarily a financial panic that's driving this market action lately. And, just in case you recall my comments a few weeks ago about not having seen the "hair on fire" selling I thought lay ahead, this is exactly what I was referring to.

This time around, ironically, it's not panic from normally flighty retail investors that's causing the markets to go haywire. Instead, it's the big boys that are apparently panicking.