After watching my ROTH IRA fall more than 55% from my contribution balance, I have decided to take some extraordinary measures to try to get it off life support.

I currently have a portfolio of three mutual funds (Janus Orion, Janus Life Sciences and Fidelity Gold), ABB Ltd, Evergreen Solar, Emcore Corp, Canadian Superior Energy and Lundin Mining.

This is an absolute travesty of a portfolio on all stocks crushed by liquidations and naked short selling and lousy mutual funds.  I am young, I thought I would speculate for the real long term but instead I was buying companies headed towards 0. 

I know for sure I won't be able to breakeven for at least 3-5 years..but what I'll now try to do is take advantage of some extreme inefficient pricing in Closed-End Mutual Funds and sell my bum holdings 20% at a time. 

If you go to ETFConnect.com you can look at closed-end mutual funds sorted by discount and yield. 

You will find some emerging market debt funds and realty funds that are trading at 50% discounts and yields well over 20%.  That's a little too scary for me.  How can anyone value emerging markets high-yield debt or realty limited partnerships? 

Then you'll find municipal and high yield funds trading at 40% discounts to NAV, but how are NAV calculated when the credit markets are frozen and you cannot obtain any real trading value for the underlying securities?  Again too scary for me.  But if you believe we won't have a rash of municipalities going under, this maybe very intriguing.  At some of these discounts, it already prices in lots of defaults. 

Then you find some intriguing stock-based closed end funds, at least for stocks, NAV calculations are legit.  I really like the ones from ING and Eaton Vance.  EOI and EOS are twin stock funds from Eaton Vance that own large-cap stocks and sell covered calls to generate income.  It was at $18 in June and currently trades at around $9.  IGD is a closed end mutual fund that invests in an basket of international stocks and also selling covered calls against the positions and also some put options too.  It trades currently at a 40% discount to NAV and has a 25% dividend yield.  IRR is a commodity stock based ETF that trades under similar terms to IGD.  These funds have a small hedge built in from the income generated from covered calls, and it reality should be safer than open-ended mutual funds. 

With these closed-end mutual funds, you are not waiting for the market to recover.  You are waiting for some sanity to occur and knock some of these discounts down a notch.  And you are paid a very handsome dividend to wait.  You have no such luxury with open-ended mutual funds, where you are always paying NAV. 

These do not trade with much volume so I would advise on using limit orders only.  These are on somedays so illiquid that your order will affect the price, even for 100 shares or so.

I am also intrigued by DIG (Proshares Ultra Oil & Gas) which is currently at $29 down from $131 in just 3 months...and also Preferred Stocks which are paying dividends in the 8-20% ranges or higher and your only real risk is the company going bankrupt or cutting the dividend completely off on the common stock (Healthy 8% dividend on ATT (AT&T) and 24% dividend on INZ (ING). 

I wish I had a large sum of money to be able to diversify...but I feel much more comfortable with these instruments than just buying common stock of companies now. 

Who knows...if credit default swaps continue to form mushroom clouds all over the world, I think losing my IRA completely is the least of my concerns.  But people have predicted doom after Y2K, World War III after 9/11...so an overreaction is more likely than not.

For all those bears out there who made a killing, congrats but stop wishing for doom in my country.  I tried legitimately going bearish on many different occasions due to valuation (August 07, Jan 08 and July 08) but the Feds kept jamming me out with either surprise rate cuts, changing short selling rules but mostly I was jammed by dumb institutions who keeps chasing the so called "early sector trades" where they buy up financials and retailers on the false assumption that the recession is over before it even started.  Like Wachovia surging from 25 to 39 in January and Ryland Homes surging from 22 to 38 and other nonsense trades.  What was really painful was HSBC being jammed up from 72 to 82 in July.  Bears had a reason to be furious and this week they let it all out with a vengeance.  Too bad I wasn't able to.  Fund managers love to play this game with Carnival/Royal Carribean, Barnes and Noble, Williams Sonoma, Guess, Ryland, Meritage Homes, Deckers, Simon Property Group and other stocks that are priced at insane levels more often than not.

Fund managers are dumb dumb dumb.  They keep buying high and selling low.  I wish much of these institutional buyers got permanently flushed out so that the retail investors can have some control.

Might look at OIH (Oil Service Holders) also. They are down to 87ish from 200ish 3 months ago. I think Oil would be a good thing to have in your holdings over the very long term, sence you are young. Oil, reguardless of bio fuels, synthetic fuels and such, will always be used. After all, tires, plastics, rubber will always be around.