Aftershock E-Book

David Wiedemer

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 658

Veröffentlichungsjahr: 2015

Beschreibung

Secure your financial future before the next big bubble bursts Aftershock provides a definitive look at the economic climate still ahead in 2015--and beyond--and details the steps you can take now to secure your financial future. Written by the authors who accurately predicted the financial crisis of 2008 and 2009, this book serves as both a warning and a game plan for investors looking to avoid catastrophic loss. This updated fourth edition has been expanded with new actionable insights about protection and profits in an increasingly confusing investment environment, and includes the latest data, updated charts and tables, and brand new coverage of monetary stimulus. With a look back at the domino fall of the conjoined real estate, stock, and private debt bubbles that triggered the last major crisis, this book paints a vivid picture of what to expect the next time the world's economy pops. You'll learn how to protect your assets before and during the coming fall, and how to capitalize on the opportunities everyone else is missing. The housing bubble has popped, toppling banks and sending shockwaves of stock market misery around the world. It may seem like the worst is over. It's not. This book shows you what's still to come, and how to ride the crest instead of being sucked under. * Learn when, why, and how the global bubble will burst * Understand the repercussions that will reach into your accounts * Get up to date on the data, with expert analysis and insight * Start protecting yourself now with a few smart investment moves The stock market, real estate, consumer spending, private debt, dollar, and government debt bubbles will burst, driving up unemployment, devaluing the dollar, and causing deep global recession. Aftershock helps you fortify your assets before the wave so you can enjoy clear skies after the storm.

Leseprobe

Aftershock

PROTECT YOURSELF AND PROFIT IN THE NEXT GLOBAL FINANCIAL MELTDOWN

FOURTH EDITION

David Wiedemer PhD

Robert A. Wiedemer

Cindy S. Spitzer

Cover image: © Getty Images Cover design: Paul McCarthy

Copyright © 2015 by David Wiedemer PhD, Robert A. Wiedemer, and Cindy S. Spitzer. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

The Third Edition was published by Wiley in 2014.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

ISBN 9781119118503 (Hardcover) ISBN 9781119122777 (ePDF) ISBN 9781119118510 (ePub)

CONTENTS

Executive Summary

What Is a Bubble?

What Is a Bubble Economy?

What Is the Aftershock?

Acknowledgments

David Wiedemer

Robert Wiedemer

Cindy Spitzer

Preface to the Fourth Edition of Aftershock

Introduction: Your Guide to the Fourth Edition of Aftershock

Part I: The Coming Aftershock

Chapter 1: This Recovery Is 100 Percent Fake

Isn't a Fake Recovery Better than No Recovery at All?

If the Aftershock Has Not Been Canceled, Why Hasn't It Happened Yet?

Still Not Convinced This Recovery Is 100 Percent Fake?

Don't Believe the Stimulus Has to Eventually End?

Wondering Why the Aftershock Hasn't Happened Already? “Animal Spirits” Are Keeping Us Going

Please Prepare Now

Chapter 2: America’s Bubble Economy

Because Our Earlier Books Were Right, Now You Can Be Right, Too

Didn’t Other Bearish Analysts Get It Right, Too?

How the “Experts” Got It So Wrong

Predictions from Ben Bernanke and Henry Paulson—We Trust These Officials with Our Economy

Where We Have Been Wrong

Chapter 3: Phase 1: The Bubbles Begin to Burst

Bubbles “R” Us: A Quick Review of America’s Bubble Economy

From Boom to Bust: The Virtuous Upward Spiral Becomes a Vicious Downward Spiral

Pop Goes the Real Estate Bubble

Pop Goes the Stock Market Bubble

Pop Goes the Private Debt Bubble

Pop Goes the Discretionary Spending Bubble

The Biggest, Baddest, Bad Loan of Them All

Chapter 4: The Market Cliff

The Market Cliff Won’t Be Just a “Down Cycle”

Hitting the Market Cliff

The Last Resort: A Stock Market Holiday

When Is the Best Time to Get Out of the Stock Market?

Chapter 5: Massive Money Printing Will Eventually Cause Dangerous Inflation—So Why Hasn’t It Happened Yet?

What Is Inflation?

What Exactly Is Money Printing?

How Does Money Printing Cause Inflation?

Central Banks Gone Wild: The World Is Printing Money

Where Is Inflation Hiding?

The Arguments against Future Inflation Simply Don’t Hold Up

This Is Not a Plan—It’s a Panic!

The Real Problem with Rising Future Inflation: High Interest Rates

The Fed’s Big Blind Spot: They Don’t Understand Where Growth Comes From (Hint: It Doesn’t Come from Rising Bubbles or Massive Money Printing to Support the Bubbles)

When Will Inflation Begin? When Group Psychology Turns Negative after the Market Cliff

The Inflation Deniers Are Liars!

Chapter 6: Phase 2: The Aftershock

The Dollar Bubble: Hard to See without Bubble-Vision Glasses

The Government Debt Bubble Pops

The Aftershock

The Six Psychological Stages of Denial

Is There Any Scenario for a Soft Landing?

Chapter 7: Global Mega-Money Meltdown

The United States Will Suffer the Least

Think of the World’s Bubble Economy in Two Categories: Manufacturing and Resource Extraction

How the Bursting Bubbles Will Impact the World

If the World’s Bubble Economy Is Hit Harder than the U.S. Bubble Economy, Won’t That Be Good for the Dollar?

If the Rest of the World Is Collapsing, Won’t That Be Good for Gold?

International Investment Recommendations

Chapter 8: “You're No Fun”

Florida: ”You're No Fun”

Philadelphia: Wharton Meets Wall Street

Green Bay, Wisconsin: I Can Be a Cheerleader, Too—in the Right Places

North Carolina: People Know in Their Gut that What I'm Saying May Be Correct

New York City: The Turkeys Were Living the Good Life Until …

New York City Again: When You Abolish Failure, You Institutionalize Stupidity

One Last New York Story: Is He Really Smart or Really Stupid?

A State of Extreme Denial Exists in Parts of the United States

What's the Smart Money Doing Now? Just What They Did Before the 2008 Financial Crisis! Same Denial Now as Before

The Sun Will Shine after Every Storm (From My Hotel Room in North Carolina)

Part II: Aftershock Dangers and Profits

Chapter 9: Covering Your Assets

The Three Rules for Not Losing Money

These Rules Are Simple but Not Easy!

Long Term versus Short Term

Rule 1: Exit Stocks Well Before the Market Cliff

Rule 2: Stay Away from Real Estate Until after All the Bubbles Pop

Rule 3: Avoid Bonds and Most Fixed-Rate Investments as Interest Rates Rise

Where's the Best Place to Stash Cash?

How Long Must We Follow These Three Rules?

Letting Go Is Hard to Do

What Else Can I Do to Protect Myself?

Remember, Your Net Worth Is Not Your Self-Worth

Chapter 10: Cashing In on Chaos

Plenty of Profit Opportunities, but They Will Feel Quite Uncomfortable, Even Scary at Times

This Economy Is Evolving; Your Investments Should Evolve, Too

Three Goals of an Evolving Aftershock Investment Portfolio

Reducing Risk with a New Kind of Diversification

Two Other Aftershock Investments after the Bubbles Pop: Foreign Currencies and Foreign Bonds

Timing Is Everything before the Bubbles Pop, but Your Timing Won't Be Perfect

Putting It All Together

Chapter 11: Aftershock Jobs and Businesses

The Rising Bubble Economy Created Huge Job Growth; Now the Falling Bubble Economy Means Fewer Jobs

Conventional Wisdom about Future Job Growth Is Based on Faith that the Future Will Be Like the Past

Why Conventional Wisdom on Jobs Is Wrong

What's a Savvy Aftershock Job Seeker to Do?

The Falling Bubbles Will Have Varying Impacts on Three Broad Economic Sectors

Should I Go to College?

Opportunities after the Bubbles Pop: Cashing In on Distressed Assets

Dig Your Well before You Are Thirsty

Chapter 12: Understanding Our Problems Is the First Step Toward Solving Our Problems

If You Don’t Understand Why an Economy Grows, You Can’t Understand Why It Doesn’t Grow

You Need to See the Big Picture before You Start to Focus

Key Breakthroughs in the History of Economic Thought

Economics Needs a Breakthrough Big-Picture Idea like Geology Needed Continental Drift

So Why Aren’t We Getting an Alfred Wegener or a Breakthrough Idea like Continental Drift?

Economists Have Become Academia’s Version of Financial Cheerleaders

The Demands to Get Tenure and the Rewards of the Good Life after Tenure Have Delivered a One-Two Punch to Creative Economic Thought

Where to Now? Answer: Economics Needs to Move from Being a Collection of Competing Philosophies to Being a Unified Science

Four Key Elements for Making Economics More of a Science

Where Do We Stand Today in Making This Transition?

The Economics Profession Does Not Want to Make This Transition

The Solution to the Lack of Interest in Making Important Changes in Economics: The Coming Aftershock

Chapter 13: Our Predictions Have Mostly Been Accurate, So Why Do Some People Still Dislike Them?

It’s Not a Cheerleading Book

It’s Not a Complex Book (Although It Is Based on Complex Analysis)

It’s Not a Crazy Book

It’s Not an Academic Book

It’s Not Suggesting Armageddon

It’s Not a Reality-Denying Book

Us versus the Comforters: How Aftershock Stacks Up against Other Bearish Books

Appendix: Are the Bond, Stock, and Gold Markets Manipulated?

Bond Market Manipulation

Stock Market Manipulation

Gold Market Manipulation

Market Manipulation Summary

Investment Impact

Bibliography

Epilogue: Say Good-Bye to the Age of Excess

Index

EULA

List of Tables

Chapter 5

Table 5.1

Table 5.2

List of Illustrations

Chapter 1

Figure 1.1

Massive New Money Printing

Figure 1.2

Pulling Back the Curtain on Unemployment

Figure 1.3

Household Incomes Are Languishing

Figure 1.4

Increase in GDP Growth versus Increase in Government Borrowing

Figure 1.5

GDP Growth versus Current Government Borrowing

Figure 1.6

Assets Up, Economy Flat

Figure 1.7

The Fed Prints Money, Stock Rise

Chapter 3

Figure 3.1

Income Growth versus Housing Price Growth, 2001–2006

Figure 3.2

Price of Homes Adjusted for Inflation 1890–2006

Figure 3.3

Dow Jones Industrial Average 1928–2007

Figure 3.4

Rise of the Financial Assets Bubble

Figure 3.5

Growth of the U.S. Government’s Debt

Chapter 5

Figure 5.1

Around the World, Central Banks Are Printing Money

Figure 5.2

The Rise of M1

Figure 5.3

Increase in the Monetary Base 1984–Present

Figure 5.4

Decrease in Home Values When Mortgage Rates Increase

Figure 5.5

Slowing Productivity Growth (Using Total Factor Productivity)

Figure 5.6

Real Median Family Income, 1965–2012

Chapter 6

Figure 6.1

Ratio of U.S. Government Debt to Tax Revenues, 2014

Figure 6.2

Recent Rise in Annual Government Deficit

Figure 6.3

U.S. Balance of Trade 1980–Present

Figure 6.4

Interest Costs of U.S. Government Debt

Chapter 7

Figure 7.1

China’s Exploding Total Debt (Total Bank Assets)

Chapter 8

Figure 8.1

The S&P 500 from 1980 to 2000

Figure 8.2

Oil Prices, 1979–2003

Chapter 9

Figure 9.1

Correlation of Quantitative Easing (Fed Money Printing) and S&P 500

Figure 9.2

Farmland Prices Up Dramatically since 1990

Figure 9.3

New Household Formation Has Dropped Sharply since the 2008 Financial Crisis

Chapter 10

Figure 10.1

Gold Has Increased About 300 Percent since 2001—Nasdaq Has Been Flat

Figure 10.2

Demand for Gold Coins and Bars Remains Elevated

Figure 10.3

Silver More Volatile than Gold

Chapter 11

Figure 11.1

A Big Hole to Climb Out Of: No Net Job Growth from 2000 to 2010

Figure 11.2

Gains and Losses by Types of Jobs, May 2007 to May 2013

Guide

Cover

Table of Contents

Preface

Pages

xiii

xvii

xv

xvi

xvii

xviii

xix

xxi

xxii

1

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

191

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

215

216

217

218

219

220

221

222

223

224

225

226

227

228

229

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

246

247

248

249

251

252

253

254

255

256

257

258

259

260

261

262

263

264

265

266

267

268

269

270

271

272

273

274

275

276

277

278

279

280

281

282

283

284

285

286

287

288

289

290

291

292

293

294

295

296

297

298

299

300

301

302

303

304

305

306

307

308

309

310

311

312

313

314

315

316

317

318

319

320

321

322

323

324

325

327

328

329

330

331

332

333

334

335

336

337

338

339

340

341

343

344

345

346

347

348

349

350

351

352

353

354

355

357

358

359

360

361

363

364

365

367

368

369

370

371

372

373

374

Acknowledgments

The authors thank John Silbersack of Trident Media Group and David Pugh, Tula Batanchiev, Laura Gachko, and Joan O'Neil from John Wiley & Sons for their relentless support of this book. We would also like to thank Stephen Mack and Jeff Garigliano for their help in writing this book. We thank Jim Fanzone and Jay Harrison for their work on the graphics. We also want to acknowledge Christine Peglar's and Jennifer Schoenefeldt's help in keeping us organized. A very heartfelt thanks goes to John R. Douglas for his very special role in making our books a reality.

David Wiedemer

I thank my co-authors, Bob and Cindy, for being indispensable in the writing of this book. Without them, this book would not have been published and, even if written, would have been inaccessible for most audiences. I also thank Dr. Rod Stevenson for his long-term support of the foundational work that is the basis for this book. Dr. Jeff Williamson and Dr. Lee Hansen also provided me with important support in my academic career. And I am especially grateful to my wife, Betsy, and son, Benson, for their ongoing support in what has been an often arduous and trying process.

Robert Wiedemer

I, along with my brother, want to dedicate this book to our mother, who inspired us to think creatively and see the joy in learning and teaching. We also dedicate this to our father, the original author in the family and to our our brother, Jim, for his lifelong support of the ideas behind this book.

Chris Ruddy and Aaron De Hoog have been enormous supporters of Aftershock, along with Christian Hill. It's been great to have such support. I want to thank early supporters Stan Goldstein, Tim Selby, Sam Stovall, Mike Larsen, Steve Schnipper, and Phil Gross. I am most grateful to Weldon Rackley, who helped my father to become an author and who did the same for me.

Of course, my gratitude goes to Dave Wiedemer and Cindy Spitzer for being, quite clearly, the best collaborators you could ever have. It was truly a great team effort. Most of all, I thank my wife and two beautiful children for their support of me and this book.

Cindy Spitzer

Thank you, David and Bob Wiedemer, once again for the honor of collaborating with you on our seventh book. I look forward to many more. For their endless patience and support, my deep appreciation and love go to my husband, Philip Terbush; our children, Chelsea, Anya, and Zachary; and my dear friend Cindi Callanan. I am also filled with a lifetime of gratitude for two wonderful teachers: Christine Gronkowski (SUNY Purchase College) and two-time Pulitzer Prize winner Jon Franklin (UMCP College of Journalism), who each in their own way helped move me along an amazing path. My appreciation also goes to Christie Chroniger and Beth Goldstein for their ongoing help with all things great and small.