Martin Weiss: A Depression Is Unavoidable 34 comments
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Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello everybody, and welcome to HardAssetsInvestor.com’s interview series. I’m Mike Norman, your host. Well, are we headed for a depression, and if so, what can you do about it? My guest today is here to tell us. He is Martin Weiss, author of the “The Ultimate Depression Survival Guide,” and economist. Martin, thanks for joining me on the show.
Martin Weiss, author, “The Ultimate Depression Survival Guide,” (Weiss): Thank you for having me.
Norman: Well, the book just came out recently and it shot up to the No. 1 position on the Wall Street Journal Book Review and also on Amazon.
Weiss: It’s No. 1 on Amazon and it's on the Wall Street Journal best-seller list. It’s not No. 1 on the Wall Street Journal yet, but it should be soon.
Norman: Hopefully after this program, it will be. So the book is titled “The Ultimate Depression Survival Guide.” We discussed it a little bit. You’re obviously worried about things that might happen … the situation’s looking pretty scary for lots of people right now. What you’re saying ... look, if we go into a bad period, there are things you can do, there are things to protect yourself. That’s what you talk about in the book. Let’s get a little bit of an overview.
Weiss: Well, first of all, whenever you see a government-inspired intervention, a government-inspired rally in the stock market or a recovery in the economy, to me that’s an opportunity to get out.
Norman: Really?
Weiss: That’s an opportunity to do what you wish you had done in 2008 before the stock market tanked. It’s what you wished you had done with your real estate properties before the real estate market collapsed.
Norman: But what if you had done that, though? Let’s look back in history. It seems from that statement that you just made, you are averse or you view government intervention as a backstop, as a countervailing force in an economic downturn – you see that as bad. But what if you would have gone against that in the 1940s? You would have lost a lot of money.
Weiss: Oh of course. It depends on time. I’m saying in this era, in the beginning of the 21st century, we are in a decline, fundamental decline that’s going to continue, but it’s not a straight-down move, just like any market. Therefore, when you have a countermove, that’s your opportunity to sell; that’s your opportunity to reduce your risk and build cash. Now we have, because the government has done so much, and I know you’re in favor of that ...
Norman: I am.
Weiss: ... but precisely because the government is doing so much, you may have a bit of an uptick, but I don’t see it as a change in trend. I think that a depression, a deep depression is essentially inevitable and unavoidable. Let me explain what I mean by a depression. A depression is a multiyear decline in the economy, bring massive unemployment and delivering widespread financial losses to the majority of the population.
Norman: All right, but by that definition, we’re already in it.
Weiss: Exactly my point. You guessed what I was about to say, and it’s that we’re already in it, but there’s no sign that’s it over yet. There’s a lot of hope that it would end prematurely, but I don’t think it will, and I’ll explain why.
Norman: Now, things are bad; I’m going to let you explain why. But just from the standpoint of observation, things are bad; there’s no question. Twelve million people have lost their jobs in the last year, the stock market has experienced one of the worst declines in history, not just here but around the world. We have a massive credit crunch and problems in the banking system. Yet when you walk around here in New York and other places around the United States, you don’t see soup lines, you don’t see the sort of visuals that we at least read about from the Great Depression.
Weiss: We’re not there yet.
Norman: Things are bad relative to where they were. But are you saying they’re going to get that dire?
Weiss: It’s going to get much worse, but it’s not the end of the world. There’s one thing I agree with on about what you said. You walk around, buildings aren’t destroyed, the lights are still on, the Internet is still up, and we still have the fundamental strength of our country’s infrastructure. So we’re talking about a financial economic crisis, not the destruction of our society or our country. Based on that fact, there’s still hope; this is not the end of the world.
A depression, even a severe depression like we had in the 1930s, was not the end of the world. So that then is an opportunity for you as an individual to protect your assets now, build up a nice nest egg of cash, put it in a truly safe place, and then wait for the opportunity to buy what I call the big bottom. This is not it yet.
Norman: OK. So that answers the question I was about to pose to you. It’s not too late for those who have been watching this horrific decline and the problems in the economy, and saying, it’s too late, I’ve missed my opportunity to protect what I have. You’re saying it’s not too late?
Weiss: The cup is still half full, and if you only have half of your portfolio left, it’s still half full. And one more point: If I’m right that real estate prices and stock prices and other prices are going to continue going down, that means that your half-full portfolio will be worth a lot more in the future, provided you can preserve what you have today.
Norman: We’re going to talk about some of the strategies, but I want to touch on one point, because it seems to me that you feel what will instigate this or cause it to become very severe - you mentioned it before, you alluded to it - is the government. In what way though? Are you talking about an inflation?
Weiss: Higher interest rates - not inflation, but higher real interest rates. Let me explain why. The government’s deficit this year is going to exceed $2 trillion even with the best of economic assumptions. If I’m right about the scenario, you’re going to see that deficit perpetuate itself and get larger. There’s only one conclusion: Interest rates must go up.
Norman: But Martin, that flies in the face of facts. I mean look, in 2000 we had a surplus of 250 billion, we’re about to have a deficit of 1.8 trillion and interest rates went from 6.5% to zero; they didn’t go up. So why are they going to go up this time?
Weiss: The deficit is coming now, that’s what driving the interest rates, and interest rates are driven by a combination of factors. One is sinking demand for Treasury securities, the other one is rising supply of Treasury securities, and a third one is a revival of inflation. You put it all into the soup, and short term, the Fed can keep short-term interest rates down, but it can’t control long-term interest rates.
Norman: I say interest rates are a parameter set by the central bank, period. In the book, you talk about and you mention that there are things that people can do now to protect their assets, to protect their wealth. Long term, you do see this, sort of … it can be an opportunity if you approach it right. How so; what do you do?
Weiss: "Step one is get rid of all your stocks that are vulnerable to a decline, and that’s probably almost all of them, with few exceptions.
Norman: So all stocks?
Weiss: Almost all. There are a few exceptions. Take advantage of the fact that there is a rally in the market, and whenever you see a future rally, do the same. Step No. 2: Get rid of real estate properties, investment properties, before it’s too late. Step three: Take that cash and put it in a safe place. The safest place right now is short-term Treasury securities, even though there’s no interest to earn, and maybe some gold, small allocations of gold.
Norman: Small allocations of gold … what percent, 10%, something like that?
Weiss: Up to 5, 10%. No. 4: There are going to be some assets that you can’t sell, for whatever reason, that you’re stuck with. To protect yourself against declines, and those assets, hedge, using inverse ETFs. In my book, I list over 50 inverse ETFs that you can choose from as well as a very structured, well-planned-out, prudent hedging strategy for the investments that you cannot sell. The more the market goes down, the more those inverse ETFs are going to be worth.
Step No. 5: If you want to take some additional risk, you can use those same inverse ETFs to go for pure profits. Step No. 6: And this is the bigger opportunity - which is for most people, you don’t have to be a speculator - and that is, to wait for the big bottom.
Norman: How do you know - and this is why I’m asking you - because it looked like back in December, or when we hit 6,500 in a panic sell-off on the Dow, that looked like the big bottom. How do you know?
Weiss: In my book, I devote three chapters to the signs and the typical circumstances that surround the big bottom, and that’s the best way to know. You can’t pick a number. If you were to go by 1929, 1932, it would be 1,500 on the Dow. We don’t know; and even if it goes only half that far, you’re still looking at another 40% decline. So you don’t want to base it on a single number, but there are a lot of conditions or signs to look for.
Norman: Like we spoke about earlier... as bad as things are, they don’t seem that bad when you walk around on the street: You see businesses functioning, there are people in restaurants, stores still have customers. Do we need to see a level of failure in the general economy; is that something to look for?
Weiss: You need to see failure and you need to see extreme pessimism, not only on Wall Street but on Main Street, in people you talk to, your real estate broker. When everyone else is telling you what I’m telling today, that will probably be very close to a big bottom.
Norman: Like brokers jumping out of windows here on Wall and Broad.
Weiss: I hope not. So that’s one of the signs, but there are many others that I describe in my book. That’s your opportunity to start step-by-step to get back into investing for the long term and for the long-term future of the economy, because it won’t be the end of the world. There will still be a strong potential for a very healthy recovery. The first thing you want to invest in at that time is going to be the safer, more prudent investments, like long-term corporate bonds.
The second thing you may want to invest in is nice dividend-paying stocks, the surviving dividend-paying stocks. You’ll know by then which ones will survive and which ones won’t, because most of the damage will have been done. So you can do the triage then; trying to do it today is premature. Then finally, get more aggressive and start investing in blue chips and major companies, which you should be able to pick up for a small fraction of what they’re selling today.
Norman: Let’s talk a little bit about the global situation. You’ve discussed the U.S. economy, the situation here, but will there be opportunity globally? Is that included in basically what you just told me?
Weiss: Yes. The last chapter in my book is about global opportunities, but let me say one thing before we run out of time. I wrote this book primarily to help you and everyone protect their wealth and grow it in these difficult times, but I also wrote it for another reason, and that is to try to help the country.
For example, No. 1: Every penny that I earn in royalties is being donated to a national charity; it’s the campaign to end child homelessness, which I think is going to be an even bigger problem as we move into this depression. No. 2: In the book, I provide a prescription not only for you as an individual but for us as a nation to come out of this, and I’m very optimistic that this is not the end of the world. No matter how bad things may appear, there is still a light at the end of the tunnel, and out of bad comes good.
Norman: Out of bad comes good. Well, Martin Weiss, thank you very much. The book is titled “The Ultimate Depression Survival Guide.” Thanks for coming by, folks. Bookmark this site; there are going to be a lot more great interviews like the one you just saw. That’s it for now. I’m Mike Norman; take care.
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> "I wrote this book primarily to help you and everyone protect their
> wealth and grow it in these difficult times, but I also wrote it
> for another reason, and that is to try to help the country."
>
> Why sure you did Mr Weiss.
> Mr Weiss, you're just like the fox in the hen house.
> Get um while they're running boys and skin um good.
> You and your publisher will be laughing all the way to the bank.
Actually, no ...
The charity that's on the receiving end of 100% OF THE PROFITS from his book, The Campaign to End Child Homelessness, is laughing all the way to the bank.
> Even his website distracts from his credibility. As a hard asset
> proponent he benefits financially from a failing stock market &
> economy, which may impair his ability to see things objectively.
Incorrect.
100% of his profits go to the Campaign to End Child Homelessness.
* Disclaimer: no, I'm not Martin Weiss and am not associated with him in any way.
On May 06 07:52 PM Steven Vincent wrote:
> Really these perma bears are almost SOCIALISTS in their thinking.
> They think that somehow the American people will cease to be industrious
> and profit seeking and agressive consumers. They think the population
> will somehow cease all activity and stop looking for opportunity
> and will just curl up in a ball with their hands stretched out waiting
> for a government bail out and a free ride. Forget it. People will
> continue to work, invest, hustle, bustle, create, spend, innovate
> and LIVE. The myth of the Coming Great Depression was a psychological
> warfare operation carried out against the American people to bring
> about a big move towards SOCIALISM and Big Brother. If you bought
> into it you were PLAYED by the system.
But you find him at about Number 41.
www.amazon.com/gp/best...
> That charity may come in handy for those following his advice...
Seems pretty unlikely, Cetin, given that his recommended investment strategy involves a lot of diversification and is geared toward making sure investors do well regardless of whether the market goes up or down.
... Or were you just so desperate for a smartass comment that you had to go for that one?
Hmmm, yeah, I think that's probably it ...
On May 06 06:20 PM Cetin Hakimoglu wrote:
> Ironically the fact that his book did so well on Amazon.com may be
> a contrary indicator. People still have money to spend on (worthless)
> books. There will be no recession because the bailouts & stimulus
> are working to negate the toxic attest and restore investor &
> business confidence.
>
> Even his website distracts from his credibility. As a hard asset
> proponent he benefits financially from a failing stock market &
> economy, which may impair his ability to see things objectively.
>
>
> -------------------------
> Norman: Well, the book just came out recently and it shot up to the
> No. 1 position on the Wall Street Journal Book Review and also on
> Amazon.
>
> Weiss: It’s No. 1 on Amazon and it's on the Wall Street Journal best-seller
> list. It’s not No. 1 on the Wall Street Journal yet, but it should
> be soon.
Dr. Quigley was Professor of History at Georgetown University, where he was President Bill Clinton’s mentor. He was also an insider, groomed by the powerful clique he called “the international bankers.” His credibility is heightened by the fact that he actually espoused their goals. He wrote:
“[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
The key to their success, said Quigley, was that the international bankers would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The statement echoed one made in the eighteenth century by the patriarch of what would become the most powerful banking dynasty in the world. Mayer Amschel Bauer Rothschild famously said in 1791:
“Allow me to issue and control a nation’s currency, and I care not who makes its laws.”
Huh?
"Where have you seen prices going down in a government driven economy?"
You mean, like JAPAN?
On May 06 07:52 PM Steven Vincent wrote:
> Really these perma bears are almost SOCIALISTS in their thinking.
> They think that somehow the American people will cease to be industrious
> and profit seeking and agressive consumers. They think the population
> will somehow cease all activity and stop looking for opportunity
> and will just curl up in a ball with their hands stretched out waiting
> for a government bail out and a free ride. Forget it. People will
> continue to work, invest, hustle, bustle, create, spend, innovate
> and LIVE. The myth of the Coming Great Depression was a psychological
> warfare operation carried out against the American people to bring
> about a big move towards SOCIALISM and Big Brother. If you bought
> into it you were PLAYED by the system.
But Weiss is fixated on his approach, never changes or learns and never admits any mistakes that easily confront a near perma-bear. Perma-bulls are no better.
The more prudent way is to take opportunities in the intermediate term and be long as well as short as time dictates, anticipating upcoming trends and getting out in time with nimbleness. Buy-and-hold fools as well as perma-bears are a recipe for underperformance.
Be a prudent opportunist and don't let your politics taint you market posture and performance. Errors in judgment always happen. Market humiliates the majority consistently.
There are more than one ways to make money in market. Find yours but for your own sake, get out of the so-called "disciplined" way to lock yourself into an erroneous strategy. Change strategies as necessary. The goal is not to prove yourself but to win financial freedom, whatever strategies it takes over time.
Good luck, in any case.
A lot us began deleveraging in 2006.
On May 06 09:00 PM PastTense wrote:
> Here's the list of bestselling books at Amazon. You don't see this
> book at Number 1. Nor at Number 2. Nor at Number 3.
>
> But you find him at about Number 41.
> www.amazon.com/gp/best...;pf_rd_s=right-3&a...
Big Ben and crew have gone to great lengths to do the exact opposite in this crisis. Add to that the sophistication of information transfer and economic modeling, and it is very plauible that the Great Depression 2 is truly off the table.
As for Weiss, he has some good insights, but he is way to gloomy, almost as if he hopes things continue to deteriorate just so he can be right. I subscribed in 2004 when he was spewing the same doom scenario and missed a huge market run up.
On May 06 08:57 PM Chrisvnerd wrote:
> Garbage. You say the Coming Great Depression is a myth, but there
> was an Actual Great Depression, and it's not like the only reason
> that came about was because suddenly people stopped having a hustlin',
> bustlin' attitude, as you imply is the what would cause a downturn
> now.
I beg your pardon! There's lots of people that have already made money in gold in 2009, me included. In fact, this past week I had 4 individual sales of Yamana and Silver Wheaton shares and I made good money ON EVERY ONE!! Want to learn how?? Check out:
www.321gold.com/editor... Note here: I'M STAN!! (honest)
But back to Martin Weiss.....People who spew this garbage about the perils of gold and hard, real money remind me of the types that slam Art Bell, George Noory or Rush Limbaugh or MARTIN WEISS here or any of the other major talking heads on either TV or radio that they happen to DIS-agree with, without even bothering to listen, before their own rush to judgment. Same thing here with Martin Weiss, who happens to be an honorable man that HAS THE BALLS TO SPEAK UP & OFFER SOLUTIONS, whether YOU happen to agree with them or not. As a subscriber to his Safe Money Report, I credit him to opening my eyes about the inverse ETF's and the value they provide, especially in a financial environment we find ourselves in. And while I don't follow anyone's advice ALL THE TIME, he nonetheless has helped thousands of people who continue to pay to read his books and hear his advice. It's hard to argue with the longevity and a track record like Martin Weiss has.....