The old Wall Street adage says to “buy on bad news, sell on good news.”

This simple strategy paid off well for decades.

The cycle was simple. A large-cap company would have one or two bad quarters. Expectations for future quarters would fall. The herd would run away. Once expectations were low enough, the company would be able to beat them. The herd would come piling back in and run up shares. Expectations would rise and the whole cycle started all over again.

It was a near clockwork cycle for most companies and a very profitable one for investors who bought on bad news.

Over the last two years, however, anyone who followed that advice has likely been hammered. Bad news was followed by more bad news which was followed by more bad news. In most cases, the bad news didn’t stop until absolutely terrible news was released.

That’s why in this “new normal” market environment, simply buying on bad news won’t cut it. You have to buy on the right bad news. Because if you can find the right bad news to buy on and position yourself correctly, the next few years will be very prosperous.

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“How can I make a lot of money in this market?”

That’s the question I wake up to every day. Sometimes it’s a real thinker, especially in bear markets. Other times, when there’s a genuine bull market, it’s a lot easier.

Right now, we don’t have either one. We have a flat market. And we will continue to have a relatively flat market.

As we’ve looked at over the past few weeks, there are plenty of ways to beat a flat market. And how to do it without having to take big swings or trade actively.

There’s one more way to beat – more like trounce – a flat market. It’s a simple strategy really...

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If the second half of this year is only one-tenth as volatile as the first half of the year…buckle up!

The way it’s shaping up the markets are in for a stressful trip on a windy road.

This can be good or bad though.

Regrettably, folks investing in the mutual funds, a broad basket of large-caps stocks, and index-tracking ETF’s will likely end up back where they started.

On the positive side, Investors who stick to companies with attributes which allow them to thrive in an economy like this will fare much better.

Basically, over the next few months we’ll start to see a division between poor, good, and great companies. Investors will flock to a company proves it is able dealing with the current and future economic malaise.

Add to the mix a large portion of investors who are still somewhat shell-shocked from recent market “action” and you’ve got a situation where most stocks go nowhere at all, a few will fall by the wayside, and even fewer will do exceptionally well.

Here’s a simple checklist to help you invest successfully, and safely, for the rest of 2009.

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Is your portfolio prepared for the “new normal” economy?

In May Mohammed El-Erian issued a fairly gloomy forecast for the world economy.

The CEO and Co-CIO of PIMCO, a firm which manages $700 billion in assets, said the world economy has entered a “new normal” state.

He predicted, “For the next 3–5 years, we expect a world of muted growth, in the context of a continuing shift away from the [United States, Japan, and Germany] and toward the systemically important emerging economies, led by China.

That’s pretty much in line with what we’ve been expecting. We’re looking at GDP growth of 1% to 2% and single-digit stock market returns in the years ahead. It’s also in line with expectations are a W-shaped recovery or an L-shaped recession.

This is nothing new though. We’ve known the bubble era has been over for a while. That doesn’t mean there’s nothing we can do though. As we’ve been looking at recently, an investor willing to learn new strategies will always be able to find something that works.

One strategy working now (and should continue to work in the years ahead) is in an asset which has outperformed stocks and bonds during the last period of economic malaise. An asset that has handily beaten stocks so far this year. An asset which we have another chance to buy thanks to the current correction.

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“I think we're going to have some of the worst inflation, with all the printing presses around the world running 24/7.”

That’s what leading contrarian investor David Dreman said in an interview two weeks ago.

Now, I know what you’re thinking, classic inflation hedges have fallen out of favor. Precious metals stocks have taken a beating over the past few weeks. And deflation, not inflation, is the fear du jour.

But if you recall, Dreman is a true contrarian and value investor. His success has come from sticking to investment trends through all the ups and downs.

For example, Dreman really made his mark in the early 80’s when...

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