The Aftershock: Where Does the Next Investment Opportunity Lie?

Upon publishing the book “America's Bubble Economy-Profit When it Pops” in 2006, David Wiedemer, Robert Wiedemer, Cindy Spitzer and Eric Janszen became the first group of economists to have accurately predicted the collapse of the housing and stock market bubbles. The book was highlighted as one of the 30 best business books in 2007 by Kiplinger’s. For those who followed the strategies in the book, the recent financial shock was less painful than for the general population, and could have turned out to be a blessing in disguise. Their latest book, “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown”, will be out on November 12, 2009.

In the late spring of 2007, a couple of months before the Dow reached an all time high of 14,198, Robert A. Wiedemer and Eric Janszen predicted a collapse and irrational panic in the market, during their interviews with Monex. In the first interview of the series titled Is a “Bubble Crisis” Developing in America and How Could it Unfold?, Bob Wiedemer envisioned a rather bleak but accurate description of how the future would unfold in the asset markets. Since stocks, housing and the dollar are interconnected, the collapse in one market will impact the others. He described the path as a 2-3-year pressure buildup in Phase 1, with a sudden drop and irrational panic in Phase 2.

During later interviews in the series, Bob saw that Japan and China would work to reduce their exposure in dollars. He predicted that in Phase 2, which is discussed in "Aftershock", this lower demand would cause a precipitous drop in the dollar. Ultimately, the interest rates would have to spike in reaction to the falling dollar. Furthermore, as the largest issuer of short-term, effectively adjustable-rate debt, the Federal government would become overburdened by servicing the increasing interest expense. In response, the government would resort to borrowing and printing money, which consequently would push up the inflation rate and the price of gold.

Eric Janszen saw a repeat of the cycles as happened over the last 10-20 years and a lot of risk build-ups in the financial system. He views the repeated federal bailouts in the past, such as during the crisis in the 80s and the housing decline in the 90s, as the direct and largest cause of the high level of risk premium in the current financial system. The need to reflate the economy after the 2001 stock market collapses caused excess growth in debt markets and excess availability of credit, and pushed up the price of gold up. Bob and Eric recommended gold and the euro as a hedge, and that investors maintain a large cash position ahead of the chaos.

During his interview with CNBC on February 20, 2008, Bob was cautious on oil when it approached the $100 level. He reasoned that in a weakening economy demand for energy would be reduced. Bob continued his recommendation on gold and suggested shorting home building and consumer stocks. Bob put gold into a separate category from commodities in general, due to its pure speculative nature and limited industrial usage.

In his speech to the National Press Club on June 23, 2009, and the conference of “Asset Allocation Forum in Alternative 2009” by Catalyst Financial Partners on October 5, 2009, Bob raised the question on whether there was a credit limit for the federal government. If there is, how much? If so, can our government print its way out of the crisis? He acknowledged that the financial turmoil could have been worse without the government bailout and stimulus plans. However, he viewed the federal government’s actions as simply kicking the can down the road without solving the fundamental problems. Since the future risks were “sowed in the policy responses to the bursting of the prior bubbles”, the current economic reality of a $1.5 trillion federal deficit and a $12 trillion national debt would cause an inevitable freefall in the dollar. He further speculated on what the New Normal might look like; a falling dollar, double-digit unemployment, double-digit inflation and double-digit interest rates in the 2011 - 2014 time frame. Bob viewed gold as the top choice to hedge the currency risk. However, it doesn’t mean that the future investment opportunity is necessarily paved in gold. Bob pointed out that speculative fever and its inelasticity of supply would be a source of an extremely large bubble itself in the future. But for now, gold, as well as the other commodities, provided a good hedge against future inflation and dollar depreciation.

Three years after “America’s Bubble Economy” was published, their predictions proved highly accurate as the biggest credit crisis since the Great Depression unfolded. Irrational panic sent the stock market in a tailspin. The S&P 500 dropped as low as 666 before it rebounded. Various government bailouts and stimulus plans pulled us back from the financial abysses. However, these actions also pushed the federal deficit to all time highs. The U.S. Dollar is now on the verge of losing its world reserve currency status. Gold is above $1000. Efforts by the federal government to reflate the economy have ignited the current bull runs in the stock and commodity markets. The risk appetite is back as a result of the government bailouts. More than ever, the long-term economic outlook is increasingly murky despite the leading indicators pointing to a recovery in the near term.

Their new book, Aftershock, will focus on the dollar crisis. Continuing their forward-looking approach, they identify future investment opportunities rising out of the coming dollar crisis. The book seeks to address such questions as: what happens if the current steady drop of dollar turns into another panic? How will the game change if the Chinese have to reduce their dollar purchases? Their top-down approach on macroeconomic fundamentals will be a valuable and timely addition to anyone reviewing their portfolio strategy. Investments are like politics, never waste a good crisis!

I ‘d like to thank Mr. Carl Berg of Catalyst Financial Parnters for inviting me to the conference of “Asset Allocation Forum in Alternative 2009” and Mr. Michael Holan of Seekingalpha for arranging this invitation.

Comments

[Adonis:]

Good article, looking forward to reading this book. Just not sure if this is saying to buy gold, or not. If inflation happens, and interest rates go way up, gold would be good. But if a bubble is in the process, when will it pop??

Oct 30 09:02 AM

[Ergo:]

Yes. Good article. I will certainly enjoy looking up information on the author, and I'll most likely read that book too.

On substance, the overall thesis is sound. We are going to see this play out. So many people don't believe it. And afterwards, a lot of people will want to know why the talking heads didn't see it coming - or will blame it on an event. But it is perfectly obvious if you think objectively. The real question is timing and positioning (and preparation).

Oct 30 09:40 AM

[User 353732:]

I suggest that it is more than a bubble economy but a bubble culture or bubble social pathology. In my view, its organizing principle was and, for most, still is: “I am special. I am entitled to the undeserved instant gratification of appetites. I can take without merit, work or means. I transcend moral, economic and natural laws precisely because I am so special”. From this come all manner of sequential and parallel bubbles, inflating on fantastic vapors of vanity and greed.

Of course, we know that there are laws that cannot be transcended or defied. If we ignore or break them, it is we not the law that will break. This is true for a person, a polity and a global power. The fake dollar and the fake US regime will, I think, both break but no one knows when. The dollar will be exposed for the fraud it is and be treated as frauds are and the Regime reformed or purged and maybe exiled. It may not be years away, however, so, thinking about the post collapse investment world is not a completely academic exercise.

The investment thesis may be constructed by answering the omnibus question: “Post collapse, what will Americans do to reclaim prosperity, security, honor and high national purpose?” Different people will have different answers, naturally assuming they do not dismiss the notion of a dollar and regime collapse as a point of departure.

One response is that “Americans will have to make real things and provide real services for real people all over the world and create real value in a big, competitive and sustained way”.

These big things (and therefore investment areas or sectors) for Americans include:

1. Food, especially, protein. As the Global South rises above deep poverty, its demand for concentrated and appealing calories will rise faster than both population and income growth.
2. Energy. America has the greatest and most diversified endowment of energy resources in the world. America can and may well have to become one of the world’s major exporters of energy. If done, this will, literally create millions of jobs and transform both the economy and the structure of American trade, capital, talent and technology flows. Energy will be another great global growth industry and it offers a remarkable opportunity for American renewal
3. Life Sciences. As the Global South rises above subsistence and as the world ages, the demands for health preservation and life extension will soar. Goods and services based on advanced life sciences will increase dramatically.
4. Globally deployable, on scale, technologies based on bio-info-matics, robotics, and nano-engineering , improving and even transforming dozens of industries and adding value to millions of companies.
5. National security, anti-terrorism and anti piracy goods and services. As America retreats it may be decades, even generations, before a replacement hyperpower
emerges. The world is likely to be dangerous and fragmented. America can have a very large market share in providing defensive, reactive and preemptive goods and services.
6. Aerospace and space. The global demand for mobility, remote monitoring, analysis and intervention from a distance and rapid deployment of goods, people and force will also increase as the world is not only richer but more dangerous.
7. Practical education. Once again Americans will need to learn and keep perfecting practical skills in making real things. There will be a tremendous need for formal and quasi formal classroom (physical and virtual) as well as work based education, training and testing that is directly relevant. The current system of high school and college education is largely a failure in providing these skills and creating the right habits and attitudes for doing real work that the world values or will value. The legacy model of high school and college education will either collapse as the dollar and Regime collapse or will be greatly transformed ---or hugely replaced---- to make it much more responsive in terms of content, process, and cost to the new needs of a new America.

Oct 30 09:56 AM

[Mad Hedge F...:]

zri Those of you who heeded my GLOBAL RISK ALERT on October 13(click here for report at www.madhedgefundtrader...) missed the top of the market by six trading days and 10 S&P points. I’m sorry; I’ll ring the bell more precisely next time, with a more accurate date and time. Since then, technical sell recommendations have been breaking out like acne at a junior year prom dance. You are all now out of your positions or love them so much that you are willing to carry them through another crash. At the risk of hubris, even PIMCO’s Bill Gross has jumped on the bandwagon, although I doubt he needs my help ascertaining the direction of stocks and bonds. The way everything turned tail and ran at exactly the same time was a complete vindication of my theory that a tsunami of liquidity was raising all boats, completely unjustified by the underlying fundamentals. Long time readers of this letter know the only short I have advocated this year was in long dated Treasury bonds through the TBT. But the better than expected Q3 GDP of 3.5%, obviously fueled by temporary government programs like “cash for clunkers” and the first time homebuyers tax credit, may be presenting one of those pristine, “sell on the news” moments. Will this data finally give us our long awaited double top? Fading rallies in stocks is looking more enticing by the day.

Oct 30 01:30 PM

[Deepv:]

mad hedge is an arrogant little shortermist rambler isn't he?

Oct 30 01:56 PM

[anarchist:]

No one can predict what is going on because we are not privy to the information that drives the market untill it's too late. Is this just a techinical fight over the 50 day MA or a fall off yesterdays top and the beginning of the end? Mabe GS insiders have the answer.

Oct 30 02:45 PM

[Diogenes of...:]

>>He further speculated on what the New Normal might look like; a falling dollar, double-digit unemployment, double-digit inflation and double-digit interest rates in the 2011 - 2014 time frame. Bob viewed gold as the top choice to hedge the currency risk.<<

It

Oct 30 04:30 PM

[mbkelly75:]

Thank you for a well written article. I enjoyed the first book and look forward to the next one. Some good comments also are here. However, "anarchist" - you do not need to know what is going on or predict it. Peter Lynch said it many years ago in his 20 Golden Rules:
"Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what is actually happening in the companies in which you've invested."
"There is always something to worry about. Avoid weekend thinking and ignore the latest dire predictions of newscasters. Sell a stock because the company's fundamentals deteriorate, not because the sky is falling."
"If you invest $1000 in a stock, all you can lose is $1000, but you stand to gain $10,000 or even $50,000 over time if you are patient. You need to find only a few good stocks to make a lifetime of investing worthwhile."

Oct 30 05:21 PM

[Catch22:]

Hold the calls, please. We have a winner! Excellent post. Unfortunately, we'll have to abide by Churchill's observation about the USA. "You can always count on the Americans to do the right thing...after they've tried everything else first."


On Oct 30 09:56 AM User 353732 wrote:

>
> I suggest that it is more than a bubble economy but a bubble culture
> or bubble social pathology. In my view, its organizing principle
> was and, for most, still is: “I am special. I am entitled to the
> undeserved instant gratification of appetites. I can take without
> merit, work or means. I transcend moral, economic and natural laws
> precisely because I am so special”. From this come all manner of
> sequential and parallel bubbles, inflating on fantastic vapors of
> vanity and greed.
>
> Of course, we know that there are laws that cannot be transcended
> or defied. If we ignore or break them, it is we not the law that
> will break. This is true for a person, a polity and a global power.
> The fake dollar and the fake US regime will, I think, both break
> but no one knows when. The dollar will be exposed for the fraud it
> is and be treated as frauds are and the Regime reformed or purged
> and maybe exiled. It may not be years away, however, so, thinking
> about the post collapse investment world is not a completely academic
> exercise.
>
> The investment thesis may be constructed by answering the omnibus
> question: “Post collapse, what will Americans do to reclaim prosperity,
> security, honor and high national purpose?” Different people will
> have different answers, naturally assuming they do not dismiss the
> notion of a dollar and regime collapse as a point of departure.<br/>
>
> One response is that “Americans will have to make real things and
> provide real services for real people all over the world and create
> real value in a big, competitive and sustained way”.
>
> These big things (and therefore investment areas or sectors) for
> Americans include:
>
> 1. Food, especially, protein. As the Global South rises above deep
> poverty, its demand for concentrated and appealing calories will
> rise faster than both population and income growth.
> 2. Energy. America has the greatest and most diversified endowment
> of energy resources in the world. America can and may well have to
> become one of the world’s major exporters of energy. If done, this
> will, literally create millions of jobs and transform both the economy
> and the structure of American trade, capital, talent and technology
> flows. Energy will be another great global growth industry and it
> offers a remarkable opportunity for American renewal
> 3. Life Sciences. As the Global South rises above subsistence and
> as the world ages, the demands for health preservation and life extension
> will soar. Goods and services based on advanced life sciences will
> increase dramatically.
> 4. Globally deployable, on scale, technologies based on bio-info-matics,
> robotics, and nano-engineering , improving and even transforming
> dozens of industries and adding value to millions of companies.<br/>5.
> National security, anti-terrorism and anti piracy goods and services.
> As America retreats it may be decades, even generations, before a
> replacement hyperpower
> emerges. The world is likely to be dangerous and fragmented. America
> can have a very large market share in providing defensive, reactive
> and preemptive goods and services.
> 6. Aerospace and space. The global demand for mobility, remote monitoring,
> analysis and intervention from a distance and rapid deployment of
> goods, people and force will also increase as the world is not only
> richer but more dangerous.
> 7. Practical education. Once again Americans will need to learn and
> keep perfecting practical skills in making real things. There will
> be a tremendous need for formal and quasi formal classroom (physical
> and virtual) as well as work based education, training and testing
> that is directly relevant. The current system of high school and
> college education is largely a failure in providing these skills
> and creating the right habits and attitudes for doing real work that
> the world values or will value. The legacy model of high school and
> college education will either collapse as the dollar and Regime collapse
> or will be greatly transformed ---or hugely replaced---- to make
> it much more responsive in terms of content, process, and cost to
> the new needs of a new America.

Oct 30 07:32 PM

[Tom B:]

Good post. Education is TRYING to move in the direction you say, but it's been the football of stupid, ideologically drive programs, like No Child Left Behind.


On Oct 30 09:56 AM User 353732 wrote:

>
> I suggest that it is more than a bubble economy but a bubble culture
> or bubble social pathology. In my view, its organizing principle
> was and, for most, still is: “I am special. I am entitled to the
> undeserved instant gratification of appetites. I can take without
> merit, work or means. I transcend moral, economic and natural laws
> precisely because I am so special”. From this come all manner of
> sequential and parallel bubbles, inflating on fantastic vapors of
> vanity and greed.
>
> Of course, we know that there are laws that cannot be transcended
> or defied. If we ignore or break them, it is we not the law that
> will break. This is true for a person, a polity and a global power.
> The fake dollar and the fake US regime will, I think, both break
> but no one knows when. The dollar will be exposed for the fraud it
> is and be treated as frauds are and the Regime reformed or purged
> and maybe exiled. It may not be years away, however, so, thinking
> about the post collapse investment world is not a completely academic
> exercise.
>
> The investment thesis may be constructed by answering the omnibus
> question: “Post collapse, what will Americans do to reclaim prosperity,
> security, honor and high national purpose?” Different people will
> have different answers, naturally assuming they do not dismiss the
> notion of a dollar and regime collapse as a point of departure.<br/>
>
> One response is that “Americans will have to make real things and
> provide real services for real people all over the world and create
> real value in a big, competitive and sustained way”.
>
> These big things (and therefore investment areas or sectors) for
> Americans include:
>
> 1. Food, especially, protein. As the Global South rises above deep
> poverty, its demand for concentrated and appealing calories will
> rise faster than both population and income growth.
> 2. Energy. America has the greatest and most diversified endowment
> of energy resources in the world. America can and may well have to
> become one of the world’s major exporters of energy. If done, this
> will, literally create millions of jobs and transform both the economy
> and the structure of American trade, capital, talent and technology
> flows. Energy will be another great global growth industry and it
> offers a remarkable opportunity for American renewal
> 3. Life Sciences. As the Global South rises above subsistence and
> as the world ages, the demands for health preservation and life extension
> will soar. Goods and services based on advanced life sciences will
> increase dramatically.
> 4. Globally deployable, on scale, technologies based on bio-info-matics,
> robotics, and nano-engineering , improving and even transforming
> dozens of industries and adding value to millions of companies.<br/>5.
> National security, anti-terrorism and anti piracy goods and services.
> As America retreats it may be decades, even generations, before a
> replacement hyperpower
> emerges. The world is likely to be dangerous and fragmented. America
> can have a very large market share in providing defensive, reactive
> and preemptive goods and services.
> 6. Aerospace and space. The global demand for mobility, remote monitoring,
> analysis and intervention from a distance and rapid deployment of
> goods, people and force will also increase as the world is not only
> richer but more dangerous.
> 7. Practical education. Once again Americans will need to learn and
> keep perfecting practical skills in making real things. There will
> be a tremendous need for formal and quasi formal classroom (physical
> and virtual) as well as work based education, training and testing
> that is directly relevant. The current system of high school and
> college education is largely a failure in providing these skills
> and creating the right habits and attitudes for doing real work that
> the world values or will value. The legacy model of high school and
> college education will either collapse as the dollar and Regime collapse
> or will be greatly transformed ---or hugely replaced---- to make
> it much more responsive in terms of content, process, and cost to
> the new needs of a new America.

Oct 31 09:19 AM

[p church:]

thats terrible advice and Peter Lynch was living in the unprecedented era of the bull market 1982 to 2000


On Oct 30 05:21 PM mbkelly75 wrote:

> Thank you for a well written article. I enjoyed the first book and
> look forward to the next one. Some good comments also are here. However,
> "anarchist" - you do not need to know what is going on or predict
> it. Peter Lynch said it many years ago in his 20 Golden Rules:<br/>"Nobody
> can predict interest rates, the future direction of the economy,
> or the stock market. Dismiss all such forecasts and concentrate on
> what is actually happening in the companies in which you've invested."
>
> "There is always something to worry about. Avoid weekend thinking
> and ignore the latest dire predictions of newscasters. Sell a stock
> because the company's fundamentals deteriorate, not because the sky
> is falling."
> "If you invest $1000 in a stock, all you can lose is $1000, but you
> stand to gain $10,000 or even $50,000 over time if you are patient.
> You need to find only a few good stocks to make a lifetime of investing
> worthwhile."

Oct 31 11:26 AM

[Tetrapod:]

User,

I like your analysis and especially the list of likely important industries -- very insightful.

I have to have to disagree with the tone of your first paragraph, though. It almost kept me from reading further. You seem to imply that there is something sick or wrong with the American people, while I see what's happening as normal human reaction to excess liquidity. Combine that with shrinking real incomes, and borrowing against your home becomes the only way to remain in the middle class. There's nothing even slightly aberrant or surprising about it. It's not as if there was an announcement: "People, you're all going to be poorer in the future, so you should just all move down an economic level. Low-end home owners -- become renters. Comfortably wealthy -- move to a starter home. McMansions -- break them up into multi-unit rentals." -- or maybe I just missed the announcement?

Most people had to borrow against their home, just to maintain their existing life-style, and never suspected that maintaining their previous or even reduced lifestyles, without a quantum jump down would lead them to the verge of bankruptcy. Many are still hanging on, thinking things will get back to normal. How quickly will the next minor shock shake-off the millions of Americans that are trying to hold on?


On Oct 30 09:56 AM User 353732 wrote:

>
> I suggest that it is more than a bubble economy but a bubble culture
> or bubble social pathology. In my view, its organizing principle
> was and, for most, still is: “I am special. I am entitled to the
> undeserved instant gratification of appetites. I can take without
> merit, work or means. I transcend moral, economic and natural laws
> precisely because I am so special”. From this come all manner of
> sequential and parallel bubbles, inflating on fantastic vapors of
> vanity and greed.
>
> Of course, we know that there are laws that cannot be transcended
> or defied. If we ignore or break them, it is we not the law that
> will break. This is true for a person, a polity and a global power.
> The fake dollar and the fake US regime will, I think, both break
> but no one knows when. The dollar will be exposed for the fraud it
> is and be treated as frauds are and the Regime reformed or purged
> and maybe exiled. It may not be years away, however, so, thinking
> about the post collapse investment world is not a completely academic
> exercise.
>
> The investment thesis may be constructed by answering the omnibus
> question: “Post collapse, what will Americans do to reclaim prosperity,
> security, honor and high national purpose?” Different people will
> have different answers, naturally assuming they do not dismiss the
> notion of a dollar and regime collapse as a point of departure.<br/>
>
> One response is that “Americans will have to make real things and
> provide real services for real people all over the world and create
> real value in a big, competitive and sustained way”.
>
> These big things (and therefore investment areas or sectors) for
> Americans include:
>
> 1. Food, especially, protein. As the Global South rises above deep
> poverty, its demand for concentrated and appealing calories will
> rise faster than both population and income growth.
> 2. Energy. America has the greatest and most diversified endowment
> of energy resources in the world. America can and may well have to
> become one of the world’s major exporters of energy. If done, this
> will, literally create millions of jobs and transform both the economy
> and the structure of American trade, capital, talent and technology
> flows. Energy will be another great global growth industry and it
> offers a remarkable opportunity for American renewal
> 3. Life Sciences. As the Global South rises above subsistence and
> as the world ages, the demands for health preservation and life extension
> will soar. Goods and services based on advanced life sciences will
> increase dramatically.
> 4. Globally deployable, on scale, technologies based on bio-info-matics,
> robotics, and nano-engineering , improving and even transforming
> dozens of industries and adding value to millions of companies.<br/>5.
> National security, anti-terrorism and anti piracy goods and services.
> As America retreats it may be decades, even generations, before a
> replacement hyperpower
> emerges. The world is likely to be dangerous and fragmented. America
> can have a very large market share in providing defensive, reactive
> and preemptive goods and services.
> 6. Aerospace and space. The global demand for mobility, remote monitoring,
> analysis and intervention from a distance and rapid deployment of
> goods, people and force will also increase as the world is not only
> richer but more dangerous.
> 7. Practical education. Once again Americans will need to learn and
> keep perfecting practical skills in making real things. There will
> be a tremendous need for formal and quasi formal classroom (physical
> and virtual) as well as work based education, training and testing
> that is directly relevant. The current system of high school and
> college education is largely a failure in providing these skills
> and creating the right habits and attitudes for doing real work that
> the world values or will value. The legacy model of high school and
> college education will either collapse as the dollar and Regime collapse
> or will be greatly transformed ---or hugely replaced---- to make
> it much more responsive in terms of content, process, and cost to
> the new needs of a new America.

Oct 31 11:49 AM

[masf:]

The comments about education sound great, but in reality education is being slashed right and left. My daughter's elementary school has lost its music program and only still has science thanks to a volunteer parent who works for EPA. Community colleges like the one that made my re-entry into the job market possible can't serve all of the students anymore. I also heard on NPR today that thousands more education jobs will be cut next year. So where is all of this essential learning going to take place?

On Oct 31 09:19 AM Tom B wrote:

> Good post. Education is TRYING to move in the direction you say,
> but it's been the football of stupid, ideologically drive programs,
> like No Child Left Behind.

Oct 31 02:30 PM

[ebworthen:]

EXACTLY!

Well said.

You have pointed to the real bubble - the result of which is usually civil strife/war or world war.

On Oct 30 09:56 AM User 353732 wrote:

>
> I suggest that it is more than a bubble economy but a bubble culture
> or bubble social pathology.

Oct 31 04:10 PM

[BPYHO:]

No, as a subscriber to his services I can say that he is not... Although him posting the same thing 10x a day on all the different articles is ANNOYING(to say the least), his newsletter is chalk full of good info and very entertaining... Id highly recommend it, even if his posts are VERY annoying...


On Oct 30 01:56 PM Deepv wrote:

> mad hedge is an arrogant little shortermist rambler isn't he?

Oct 31 06:16 PM

[pigdog67:]

The real issue is the offshoring of production and the offshoring of services to India and China. This is destroying the ability of most Americans to increase or maintain incomes. Education will not solve this. Neither will entrepreneurship. As soon as something new is developed the multinationals will buy it or copy it and offshore development outside of the USA. Is it better to be educated and unemployed or just unemployed. This is the dirty undercurrent that the media and the politicians will not address. Basically the ability to generate wealth in the USA is being transferred to other countries. However the elite in America is doing fine by taking there cut from this. Eventually the offshore elite will cut the American elite out of the deal.

Oct 31 07:23 PM

[Nik Kondrat...:]

Thanks for your great review of this book. It looks like an insightful analysis. I think Eric Janszen is one of the people who gets what's happening. His itulip.com is a great resource, and his article in the May 2008 Harpers pretty clearly laid out the current financial crisis.

Yes, we're in an acute financial crisis that has major geo-political implications with China and what will emerge as the world's reserve currency in the 21st century. But just as important, especially here in the US, is that we've eviscerated the Middle Class and the crisis is now a crisis for the survival of Middle Class life.

Oct 31 09:35 PM

[mbkelly75:]

You are entitled to your opinion, but Sir John Templeton came out of the Great Depression a millionaire with basically the same techniques. Many people have become very wealthy in EVERY type of market with the same basic ideas and different viewpoints of how to take advantage of and make use of them. I just like how Peter Lynch said it - clear and understandable in just a few words. He also said - once again in his 20 Golden Rules:
"Often, there is no correlation between the success of a company and the success of it's stock over a few months or even a few years. In the long term, there is a 100% correlation between the success of a company and the success of its stock. This disparity is the key to making money; it pays to be patient, and to own successful companies."
"If you study 10 companies, you will find 1 where the story is better than expected. If you study 50, you will find 5. There are always pleasant surprises to be found in the stock market - companies whose achievements are being overlooked on Wall Street."
"Time is on your side when you own shares of superior companies. You can afford to be patient - even if you missed Walmart in the first 5 years, it was a great stock during the next 5 years. Time is against you when you own options."
"In the long run, a portfolio of well chosen stocks will outperform a portfolio of bonds, or a money market account. In the long run - a portfolio of poorly chosen stocks will not outperform the money left under the mattress."
You do not have to agree with every single word to find value in the basic ideas. Peter did not like options - I have friends who do quite well with them as their only investments - but he was right about the time factor. He was a long term investor, rather than a short term trader, but he did not simply buy and hold. He studied and bought and continued studying them. There were stocks that he only held for a short term and stocks he held onto for many years. When the reason for buying them changed or the fundamentals changed - he sold them. There is a LOT to learn and benefit from in his (and in other similar so-called Guru Investors) writings. You do not have to make use of all of it to benefit, but the benefits are there for you.


On Oct 31 11:26 AM p church wrote:

> thats terrible advice and Peter Lynch was living in the unprecedented
> era of the bull market 1982 to 2000

Nov 01 11:42 AM

[CLH:]

Education will never get better as long as it is run by the govt.. We need school choice and competition. Students are still taught the same as they were 300 years ago. Can you think of any industry that hasn't progressed during this time?

Nov 01 12:15 PM

[Graham and ...:]

Investments in food, energy (and tobacco) were the mainstays of the 1930s market. The first two, as you described below, the last, because of the resulting stress.


On Oct 30 09:56 AM User 353732 wrote:

>
> I suggest that it is more than a bubble economy but a bubble culture
> or bubble social pathology. In my view, its organizing principle
> was and, for most, still is: “I am special. I am entitled to the
> undeserved instant gratification of appetites. I can take without
> merit, work or means. I transcend moral, economic and natural laws
> precisely because I am so special”. From this come all manner of
> sequential and parallel bubbles, inflating on fantastic vapors of
> vanity and greed.
>
> Of course, we know that there are laws that cannot be transcended
> or defied. If we ignore or break them, it is we not the law that
> will break. This is true for a person, a polity and a global power.
> The fake dollar and the fake US regime will, I think, both break
> but no one knows when. The dollar will be exposed for the fraud it
> is and be treated as frauds are and the Regime reformed or purged
> and maybe exiled. It may not be years away, however, so, thinking
> about the post collapse investment world is not a completely academic
> exercise.
>
> The investment thesis may be constructed by answering the omnibus
> question: “Post collapse, what will Americans do to reclaim prosperity,
> security, honor and high national purpose?” Different people will
> have different answers, naturally assuming they do not dismiss the
> notion of a dollar and regime collapse as a point of departure.<br/>
>
> One response is that “Americans will have to make real things and
> provide real services for real people all over the world and create
> real value in a big, competitive and sustained way”.
>
> These big things (and therefore investment areas or sectors) for
> Americans include:
>
> 1. Food, especially, protein. As the Global South rises above deep
> poverty, its demand for concentrated and appealing calories will
> rise faster than both population and income growth.
> 2. Energy. America has the greatest and most diversified endowment
> of energy resources in the world. America can and may well have to
> become one of the world’s major exporters of energy. If done, this
> will, literally create millions of jobs and transform both the economy
> and the structure of American trade, capital, talent and technology
> flows. Energy will be another great global growth industry and it
> offers a remarkable opportunity for American renewal
> 3. Life Sciences. As the Global South rises above subsistence and
> as the world ages, the demands for health preservation and life extension
> will soar. Goods and services based on advanced life sciences will
> increase dramatically.
> 4. Globally deployable, on scale, technologies based on bio-info-matics,
> robotics, and nano-engineering , improving and even transforming
> dozens of industries and adding value to millions of companies.<br/>5.
> National security, anti-terrorism and anti piracy goods and services.
> As America retreats it may be decades, even generations, before a
> replacement hyperpower
> emerges. The world is likely to be dangerous and fragmented. America
> can have a very large market share in providing defensive, reactive
> and preemptive goods and services.
> 6. Aerospace and space. The global demand for mobility, remote monitoring,
> analysis and intervention from a distance and rapid deployment of
> goods, people and force will also increase as the world is not only
> richer but more dangerous.
> 7. Practical education. Once again Americans will need to learn and
> keep perfecting practical skills in making real things. There will
> be a tremendous need for formal and quasi formal classroom (physical
> and virtual) as well as work based education, training and testing
> that is directly relevant. The current system of high school and
> college education is largely a failure in providing these skills
> and creating the right habits and attitudes for doing real work that
> the world values or will value. The legacy model of high school and
> college education will either collapse as the dollar and Regime collapse
> or will be greatly transformed ---or hugely replaced---- to make
> it much more responsive in terms of content, process, and cost to
> the new needs of a new America.

Nov 01 03:48 PM