The Aftershock Investor E-Book

David Wiedemer

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2013

Seitenzahl: 664

Beschreibung

From the authors who accurately predicted the domino fall of theconjoined real estate, stock, and private debt bubbles that led tothe financial crisis of 2008, comes the definitive guide toprotection and profit in 2013 and beyond. Based on the authors'unmatched track record of accurate predictions in their threelandmark books, America's Bubble Economy, Aftershock,and Aftershock Second Edition, this new book offers whatreaders have been clamouring for: a detailed guide to how tosurvive and thrive in the next global money meltdown. Entirely updated with three new chapters, plus more actionableinsights and detailed advice, The Aftershock Investor secondedition spells out clearly and concisely exactly what smartinvestors need to know right now, before the worldwide Aftershockhits. Specifically, readers will discover that... * This so-called economic "recovery" is 100% fake (see newChapter 1) * And is working to temporarily support our multibubble economy(Chapter 2) * Based on massive money printing that will only make our problemeven worse later (Chapter 3) * When mounting future inflation and climbing interest rates willinevitably push us over the Market Cliff (new Chapter 4) * Going over the Market Cliff will surprise most conventionalinvestors (Chapter 5), * Crash the stock market (Chapter 6) * Diminish bonds (Chapter 7) * Depress real estate (Chapter 8) * Threaten insurance and annuities (Chapter 9) * And make gold and other precious metals soar (Chapter 10) * If you can keep your job or business before and during theAftershock (Chapter 11) * And be smart about spending, savings, and debt (new Chapter12) * You can learn now how to best protect your retirement (Chapter13) * And most importantly, how to defend yourself and your assetswith an innovative, actively managed Aftershock investmentportfolio (Chapter 14)... Before it's too late.

Leseprobe

Contents

Acknowledgments

Introduction

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 Sure This Recovery Is 100 Percent Fake?

Don’t Believe the Stimulus Has to Eventually End? There Is a Limit to What the Government Can Do

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

Please Prepare Now

Part I: Aftershock

Chapter 2: Bubblequake and Aftershock—A Quick Review of How We Got Here and What’s Next

Not Asleep with the Sheep

Bubblequake! First, a Rising Bubble Economy; Now, a Falling Bubble Economy

Future Inflation Will Cause Rising Interest Rates

Why Don’t Most Conventional Investors See This Coming?

What’s a Savvy Aftershock Investor to Do?

Chapter 3: 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 4: 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?

1. “Lag Factors” Delay the Onset of Inflation

2. Government Statistics Underreport Inflation

3. Strong Motivation to Maintain the Bubble Economy Will Delay Most Inflation Until after the Market Cliff

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)

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

The Inflation Deniers Are Liars!

Chapter 5: Why Conventional Wisdom Won’t Work This Time

The Key to Conventional Wisdom: The Future Will Be Just Like the Past

Warren Buffett: Master of Conventional Wisdom

The Key to Aftershock Wisdom Investing: The Future Is Not the Past!

Why Don’t More People See This?

Part II: Aftershock Investing

Chapter 6: Taking Stock of Stocks

Stocks: A Love Story

How Stocks Became the Heart of Most Investment Portfolios

In Theory, When You Buy Stocks You Are Buying Future Earnings

Conventional Wisdom on Stocks

Why Conventional Wisdom Is Wrong Now

What’s a Savvy Aftershock Investor to Do?

Chapter 7: Bye-Bye Bonds

How Do Bonds Make Money? “Total Return” Is the Key

Conventional Wisdom on Bonds: The Safety of the Recent Past Means We Can Count on More Safety Ahead

Why Conventional Wisdom on Bonds Is Wrong Now

Bonds Will Fall in Four Stages

What’s a Savvy Aftershock Investor to Do?

The Bottom Line for Bonds

Chapter 8: Getting Real about Real Estate

Real Estate Is Still a Bubble

What Really Drives Real Estate Prices?

After the Fundamental Drivers of Real Estate Began to Slow, the Bubble Started to Rise

Why Conventional Wisdom about Real Estate Is Wrong

What’s a Savvy Aftershock Investor to Do?

Timing Your Exits Out of Real Estate

The High Cost of Doing Nothing

Chapter 9: Future Threats to the Safety Nets

All Insurance and Annuities Are Essentially Investments in Bonds

Conventional Wisdom on Whole Life Insurance and Annuities: Perfectly Safe and Worth Every Penny!

Why Conventional Wisdom Is Wrong: Facing the Real 800-Pound Gorilla in the Room

What’s a Savvy Aftershock Investor to Do?

Chapter 10: Gold

Gold Was Golden for Centuries

Current Conventional Wisdom on Gold as an Investment: Stay Away!

Why Current Conventional Wisdom on Gold Is Wrong

What’s a Savvy Aftershock Investor to Do?

How to Buy Gold

Owning Gold as Part of a Well-Diversified Actively Managed Aftershock Portfolio

How High Will Gold Go?

Part III: Your Aftershock Game Plan

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 Investor 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: Aftershock Money Smarts

Don’t Let Spending Become the Achilles Heel of Your Aftershock Preparations

Savings: How Much Is Enough?

Borrowing Money before, during, and after the Aftershock

Saving and Borrowing for College

Summing It Up

Chapter 13: Aftershock Retirement and Estate Planning

Why Conventional Wisdom on Retirement Is Wrong

What’s a Savvy Aftershock Investor to Do?

Should I Use a Retirement Calculator to See if I am on the Right Track?

Should I Take Social Security Early?

Estate Planning: Making the Most of Your Assets for Yourself and Your Heirs

A Good Retirement

Chapter 14: Your Actively Managed Aftershock Portfolio

This Economy Is Evolving—Your Investments Should Evolve, Too

The Three Goals of an Actively Managed Aftershock Investment Portfolio

Creating Your Actively Managed Aftershock Portfolio

Active Portfolio Management: Timing Is Everything

Warning: Active Management of Short Term Investments is Riddled with Potential Danger

Better to Move Too Early than Too Late

Government Intervention Makes Active Portfolio Management More Difficult

Do It Yourself or Bring In Help?

The Bottom Line

Appendix A: Additional Background on Stocks and Bonds

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

Epilogue

Bibliography

Index

End User License Agreement

List of Illustrations

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 2.1 Income Growth versus Housing Price Growth, 2001–2006

Figure 2.2 Price of Homes Adjusted for Inflation since 1890

Figure 2.3 GDP Up 260 Percent, Dow Up More than 1,000 Percent, 1980–2000

Figure 2.4 Rise of the Financial Assets Bubble: Financial Assets as a Percentage of GDP

Figure 2.5 Growth of the U.S. Monetary Base

Figure 2.6 Growth of Foreign-Held U.S. Assets

Figure 2.7 Growth of the U.S. Government’s Debt

Figure 4.1 Around the World, Central Banks Are Printing Money

Figure 4.2 The Rise of M1

Figure 4.3 Increase in the Monetary Base 1984–2013

Figure 4.4 Decrease in Home Values When Mortgage Rates Increase

Figure 4.5 Slowing Productivity Growth (Using Total Factor Productivity)

Figure 4.6 Real Median Family Income, 1965–2012

Figure 5.1 Stocks versus Three-Month T-Bills and Gold, 1965–2013

Figure 5.2 Stocks versus Three-Month T-Bills and Gold, from 2000 to July 1, 2013

Figure 5.3 Outflows from Domestic Stock Mutual Funds since 2008 Crash

Figure 6.1 S&P 500 Rises with the Fed’s Money Printing, mid-2009 to mid-2013

Figure 6.2 Historical Price-to-Earnings Ratios (Based on Cyclically Adjusted P/E Ratio)

Figure 6.3 Stock Analysts’ Buy/Sell Recommendations, November 2011

Figure 6.4 Growth of the Dow, 1928–1999

Figure 7.1 Falling Interest Rates Pumped Up Bond Prices from 1980 through 2012

Figure 7.2 Growth in the Size of the U.S. Bond Market Since 1980

figure 8.1 Home Values Decrease as Mortgage Interest Rates Rise

figure 8.2 Farmland Prices Up Dramatically Since 1990

Figure 9.1 Bonds Make Up the Lion’s Share of Most Insurance Companies’ Investments

Figure 10.1 Gold Has Increased about 300 Percent Since 2001

Figure 10.2 Paper Gold (Gold Futures) Down, Physical Gold Up

Figure 10.3 Gold versus Stocks since 2000

Figure 10.4 Gold Mining Output Since 2005

Figure 10.5 Gold-Mining Stocks versus Gold since 2000

Figure 10.6 Silver More Volatile than Gold

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

Figure 12.1 The Majority of Americans Live Paycheck to Paycheck

Figure 12.2 – Student Loans Top $1 Trillion

Figure 13.1 Most Americans Don’t Have Enough for Retirement

Figure 14.1 Ideal Aftershock Portfolio Performance in a Moderately Increasing, Volatile Stock Market

Figure 14.2 GLD, a Gold ETF, from mid-2008 to mid-2013

Figure 14.3 PPH, a Pharmaceuticals ETF, from late 2012 to mid-2013

Figure 14.4 STPZ, a Short-Term TIPS ETF, from mid-2011 to mid-2013

Figure 14.5 FXC, a Canadian Currency ETF, from mid-2011 to mid-2013

Figure 14.6 DBA, an Agriculture ETF, from mid-2011 to mid-2013

Figure 14.7 SH, an Inverse S&P 500 ETF, from mid-2011 to mid-2013

Figure 14.8 TBF, an Inverse Long-Term Treasury ETF, from mid-2011 to mid-2013

List of Tables

Table 4.1 Correlation Coefficients for Money Supply Growth and Inflation

Table 4.2 Many Studies Confirm the High Correlation between Money Growth and Inflation

Table 7.1 Interest Rates Up, Bond Values Down

Table 9.1 A. M. Best Rating Scale for Overall Financial Strength

Table 9.2 Interest Rates Up, Bond Values Down

Table 14.1 Our View of the Relative Risk of Various Bonds before the Market Cliff (Stage 4)

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Guide

Cover

Table of Contents

Begin Reading

The Aftershock Investor,Second Edition

A CRASH COURSE IN STAYING AFLOAT IN A SINKING ECONOMY

David Wiedemer, PhD

Robert A. Wiedemer

Cindy Spitzer

Copyright © 2014 by David Wiedemer, Robert A. Wiedemer, and Cindy Spitzer. All rights reserved.

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

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 http://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 also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Cartoons used with permission of Cartoon Stock, www.CartoonStock.com, and Cartoon Bank.

ISBN 978-1-118-73336-3 (Hardcover)

ISBN 978-1-118-73343-1 (ePDF)

ISBN 978-1-118-73345-5 (ePub)

Acknowledgments

The authors thank John Silbersack of Trident Media Group and David Pugh, 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 Fazone, Jay Harrison, and Nancy McSally for their work on the graphics; Michael Lebowitz for his help on the data; and Beth Gansner for her help in proofreading. We also want to acknowledge Christine Peglar’s and Jennifer Schoenefeldt’s help in keeping us organized.

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 died late last year. She 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. We also want to thank 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. It’s been great to have such support. I also want to thank early supporters Stan Goldstein, Tim Selby, Sam Stovall, and Phil Gross. I also want to thank Dan Cohen and Michael Calkin for their support of this book. I am most grateful to Weldon Rackley, who helped my father to become an author and who did the same for me. A very heartfelt thanks goes to John R. Douglas for his very special role in making our books a reality.

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, Sera, and children, Seline and John.

Cindy Spitzer

Thank you, David and Bob Wiedemer, once again for the honor of collaborating with you on our fifth book. It is always an exciting experience, and 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 ways helped move me along a path exceptional.

My appreciation also goes to Beth Goldstein and Christie Chroniger for their ongoing help with all things great and small.

Introduction

We wrote our first book, America’s Bubble Economy, back in 2004 and finished it in 2005, long before the housing bubble was visible to many people. We asked our publisher, John Wiley & Sons, to hold the book as long as they could because we were concerned that nobody would buy it. Few people believed there was a housing bubble at that time, much less a whole bubble economy. They wouldn’t hold it any longer than fall 2006, and so it was published.

With that first book and Aftershock (Wiley, 2009 and 2011), we have built up a good track record of predicting much of what has happened since then, certainly better than most analysts. Almost no economists or analysts wrote an entire book about such issues at the time, although many have written books since. But many of those books are more historical than predictive. It’s still scary to predict the future. It’s much easier to review the past.

We have been criticized by some as being one-trick ponies—that we made one good prediction and that’s it. Certainly, there have been cases of this in the past, such as Elaine Garzarelli, the market analyst who famously predicted the 1987 stock market crash. But we’re not trying to predict a crash. What we are trying to do is predict a far larger change in the entire economy. Yes, an earlier real estate crash and stock market crash was part of that, but there is much more to what’s going on in the U.S. economy and world economy. Anyone who reads our books will see that.

Some people may say we were right about one prediction, but in fact, it was a range of related predictions, many of which we predicted will not occur for years more. We’ll have to wait to see if those come true. But even if we got only one prediction right, that’s better than many people who get far more attention for their predictions than we do, such as Ben Bernanke. He predicted, after the Bear Stearns collapse in June 2008 and just four months before the biggest financial crisis in our history, that all was fine with our financial system. Well, it’s better to be right once than never. At least it should give us more credibility.

But our forecasts are not meant to cheerlead or paint a rosy picture, and we know that leads many people to giving us less credibility, for obvious reasons. They would rather listen to a more bullish outlook, such as Mr. Bernanke’s, especially on the stock market. As one of our good friends on Wall Street said, “Nobody likes a bear, especially when they’re right!”

We’re not trying to be a bear or a bull, we’re just trying to help people better understand the economy. As another friend on Wall Street said, “What you’re really doing is teaching people.” And that’s exactly what we want to do. Some people have said we are arrogant, but we try not to be arrogant. Of course, maybe in the act of teaching something very new that others aren’t teaching, there is a certain inherent arrogance.

The best teachers have a passion for what they teach. And when you have a passion, you try to make strong points of great substance that will stick with the people you are teaching. If we have overreached in some of our chapters and appeared arrogant, we apologize. We try to keep the book as nonarrogant and easy to read and enjoyable as possible, while still getting our message across. In fact, we think that is critical to good writing and good teaching.

We don’t try to attack anyone personally. If we do make a reference to someone personally, it is to make a larger point about the economy or the way people look at the economy, not to personally put anyone down.

We try to be as fair as possible because we need to be as believable as possible. That is absolutely critical to teaching anything new.

In this book we hope to expand on what we have taught in the past, and we hope more people will benefit. The greatest joy of writing a book is that someone benefits from it—whether that’s because they are entertained, or live a more financially secure life, or simply have a better understanding of the way our society works. It’s all about feeling that you are somehow better off after reading the book than before.

We wrote this latest book, The Aftershock Investor, Second Edition, in response to our readers’ demands for more details about how to put the ideas in Aftershock into action. The old ways of investing based on conventional wisdom are becoming increasingly ineffective and even dangerous. For those lucky enough to see what is coming, we need a new investing approach. Rather than passively waiting for things to get better, we need to actively manage our investment portfolios, based on the correct macroeconomic view of the current and future economy. For that, we now offer you The Aftershock Investor, Second Edition.

Chapter 1This Recovery Is 100 Percent FakeWHY THE AFTERSHOCK HAS NOT BEEN CANCELED

With the U.S. stock markets hitting new highs, home prices rising, and so much “happy talk” in the media, it’s easy to think that all is well or will be soon. The economy, they tell us, is in recovery, and the coming Aftershock, our critics say, has been canceled.