It could be coming here. No, I am not a nut case, but have been a professional financial investor of all types for several decades. Those who are rioting are welfare recipients and union workers who are not getting all the freebies and excessive wages they were promised.

Everyone wants to blame someone. Start by looking in the mirror. It was the politicians who were voted in by the rioters. They promised more than they could deliver. Now those promises cannot be kept so the people are rioting. Very stupid, but that is what happens to every welfare society. Socialism is wonderful until it runs out of your money.

Don’t let this happen to you. Self defense.

I watch the stock market. It has been going up for a year. The Dow Jones Industrial Average broke from over 14,000 to 6,500 and decimated many 401Ks and retirement accounts. The government created what they call a “stimulus plan”. It is money to stimulate the economy. In all of history it has not worked.

That is done by manufacturing money out of thin air by the Federal Reserve. It is also called debt. Any fool knows you can’t spend your way to success by adding to your debt. May I remind you that every stimulus dollar is money taken from you, the taxpayer, who must repay it.

Oh, you didn’t know you had to pay it back with higher taxes. Well, you do. There is no free lunch.

When excess money is created and has no place to go it usually ends up in the stock market. Money is fuel that makes the market go up, but when that money eventually stops coming the market will fall. That is where self defense comes in.

Every investor must protect his retirement plan with an exit strategy. If you do not have a plan to protect your account you will lose your money.

The simplest exit strategy is called a stop loss order placed with your broker. You must decide how much each of your equities you will allow to go down before you sell. If you own a mutual fund you must place the sell order.

For example, if you own a stock you bought at $20 per share and it is now $40 per share you do not want to see it go back down to $20. The prudent trader places a permanent stop loss order at $36 or a trailing stop of 10%. It is not wise to sell out at $40 as it might go to $60 followed by the 10% stop. Let the market tell you when to get out. Listen to the market.

Because of the socialistic programs being promoted by Washington you must become a defensive investor. Do not think about how much money you will make. Think about protecting what you have.

A new investment paradigm is upon us. Become defensive.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.