By top I mean when the smart money is selling to the less knowledgeable investors. That does not necessarily mean good ole Joe Sixpack. It means any money manager, broker, mutual fund manager and financial planner who has not learned his trade well enough to know when to sell. There are about 8,000 mutual funds and 8,000 hedge funds and 250,000 stock brokers as well as untold number of so-called financial planners.

From personal experience I have learned that more than 98% do not know how to protect clients’ capital. Pretty shocking!

When stocks are being distributed by the smart money guys those other 98% are looking for ‘opportunities’ to buy. Big brokerage houses are feeding juicy information that makes a stock they want to get ride of seem to be “attractive”.

The average mutual fund manger is paid $300,000 per year. The amount paid to a supposedly smarter hedge fund manager is unknown, but is surely much more.

Today we hear of multibillion dollar hedge funds being “rescued” by their country’s central bank. During the formation of a market top with its wide swinging prices the shrewdest of money managers become trapped in the propaganda of market manipulators. Investors do not recognize that the best place for their money is in a government T-Bill paying almost nothing.

Market tops take quite a while to form. In all of history there cannot be found one top that went up as a spike then lost 40% or more. The longer a top takes to form the worse will be the break when it comes. The current top formation presages a horrific market decline.

No one can predict how far the downslide will carry, but if the few who waited it out in a money market or government bond fund that could be several years long this time they will find real bargains.

A favorite at the bottoms are preferred bonds that pay a nice dividend that can be converted to company stock as it rises from the carcass of the dead bear.

Characteristic of market tops are wide swings in all major indexes with huge volume. Brokerage companies will be touting various stocks and corporate executives will be interviewed about the rosy outlook for their stock “next year”.

Financial planners and other mavens will constantly talk about investing “for the long haul”. That’s so you won’t sell that dog as it drops into a black whirlpool. Remember 2000 – 2003.

Brokerage companies are not there to make you money. They are there to make money off you. If they choose not to recognize a market top then it is up to the Investor to do so and protect his capital.

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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 2006 All rights reserved.

Copyright 2007 Albert W. Thomas All rights reserved. Author of "IF IT DOESN'T GO UP, DON'T BUY IT!"