‘Aftershock’ Investor: Book Review


BOOK REVIEW
AFTERSHOCK INVESTOR –RELEASED SEP 2012 –AUTHORS:
DAVID WIEDEMER, ROBERT WIEDEMER, CINDY SPITZER

This is another Wiedemer (W) masterpiece – 3rd of 3 Aftershock books, each with an updated and exhaustive analysis of the US and world economic scenario along with forecasts of what to expect over the next several years.  Yes – a lot of gloom and doom is expected; however, the US will rise rise to the challenge (a Wiedemer  (W) prediction).  This will be a radical restructuring our economic and political structure following a severe economic collapse;  the US will once again lead the world in economic prosperity.  Reference the powerful , optimistic 2 page Epilog.

 

This 3rd Aftershock book concentrates on more practical investment decisions one should consider in light of pending Aftershock bubble pop economic collapse, during the collapse, and as we come out of the collapse.

 

Click on the AfterShock Economy Tab in  https://economics501.wordpress.com/category/aftershock-economy/ to catch up on the core economic analyses from the 1st 2 books.

Details

This is a must read for all.  The Wiedemers (W), renowned financial advisors, in 2005, precisely predicted the 2008 economic debacle; then in 2009 precisely again predicted fiscal and monetary policies which have placed us in a more precarious environment now, than 2008.  W debunk a new ‘Monetarist’ economic theory that increasing our money supply is the answer to our slow economy.  This Monetarist theory is an extension of Keynesian economics gone astray. W argues and proves that the only way an economy truly grows is via productivity increases and not artificial stimulus (our government fiscal and Fed dollar bubbles). In the US productivity is flat or down.  Why?  Median incomes will rise with productivity increases.  They have significantly fallen in the past 4 years especially for the middle class.

These 2 bubbles (government and dollar) will eventually lead to  (1) significant 10% inflation and much higher) and (2) with our creditors abandoning our dollar (already occurring on an increasing scale).. Note the Fed purchased 77% of the Treasury’s debt in 2011.  W notes also that since 2009, monetary stimulus has increased 3.9 Trillion counting the Fed, ECB, Banks of England and Japan.  W also details a Chinese ‘construction’ bubble where a planned economy has pumped in money in projects that have little to do with increasing productivity.  W main point here is that we are in a major world debt bubble and economic slowdown.

In W 2nd book (Summer 2011) W predicted an economic collapse the 2013-2015 time frame, with only a sliver of a window to ease (and only ease) the pain the world will experience.  A major point of that book was that inflation would significantly escalate to 10% and over with an 18 -24 month lag post major $ expansion.  QE 2 ended Summer 2011 tripling the Fed balance sheet hence that would project to significant inflation in 2013.  In this 3rd book W predict this significant inflation to occur in approx 2 year time frame but possibly even 2013.  W does not explain the forecast revision.  However in all fairness to W we are in uncharted territory.  So many factors are in play right now impacting investment decisions including the European debt crisis which may be a factor in keeping T bill rates still low as a safe haven.  Nevertheless note the increasing inflation in food and energy.  Realize also the US gov faulty CPI calculations.  All  and especially the poor and middle class are most impacted by the food and energy inflation. These commodities are presently feeling the most impact of more dollars chasing same supply.  The price of oil has doubled in the last 4 years primarily due to monetary expansion.  And why is the Fed increasing the money supply?  A prime reason is due to fact that our $6 Trillion total debt growth in last 4 years can not be financed by private creditors; hence the Fed steps in to avert a severe recession if not depression.  If only the US Gov would take action to slow down debt and increase productivity!  However as W points out again our politicians lack the will and our electorate expects entitlements. W still feels strongly we are at point of no return – economy will collapse; we will experience severe pain few years or more, but then we will drastically restructure our economy, jettison non productive aspects, and lead the world to a new age of economic prosperity.

But right now …

So with productivity and profits down, inflation on way up, the dollar down, most bond and stock investments are not wise long term (more than 1-3 years and maybe a lot shorter).  W then again provides an exhaustive analysis yielding an Aftershock Investment portfolio.  This includes:

  • Gold
  • Short Term Treasuries
  • TIPS (Inflation adjusted Treasuries)
  • Hi dividend yield stocks
  • Select commodities
  • Foreign exchange for hedging
  • Shorting stocks and bonds especially via short ETF’s

 

Per W …

For the latter (shorting ETF’s) one should be careful in timing these investments as the stock and bond markets may have some volatile life in them up until Summer 2013.  Portfolio diversification is recommended in the short term along with decrease in stock and bond exposure.  Most ETFs are EZ to invest in and liquid for now.

 

My favorite W portfolio selection (for myself): physical Gold – secure and physically hold.   W explains why Gov confiscation is unlikely.  Why?  Gold is not as important as in early 20th Century.  To maintain the economy the Fed has other assets to inflate that would be more effective than confiscating gold.

 

W notes that The US bond market is 30 times greater than all gold the US has at present.  Nevertheless on a global scale gold will increase as a safe haven especially during and after dollar depreciation and collapse.

 

W is not keen on Whole Life Insurance as the core investments are mainly stocks and bonds which will depreciate.  Also give the relative spike in real estate 2000 – 2006 and 2009-12 Fed artificial $ expansion real estate values will continue to decrease over next 1-2 years at the minimum.  Therefore if you are looking to sell real estate W recommends you do it now.  You may be able to buy it back much cheaper in 2-3 years.

 

 

** I am not making any recommendation for any investors as I can not in this web site.  These are just my views.  I have 29 years experience in essentially Wall Street IT.

 

In addition to financial investments W also elaborates on how one can hedge the likely economic debacle via personal job skills investment.  Core necessities such as health care, education, utilities, transportation, and government jobs will be among the better job prospects during the Aftershock post bubble pop economy.  W stresses a very important point: if you choose to upgrade your job skills do it in a shirt time period (target 1-3 years) as there is not much time left.

Per Oct 15, 2012 interview with Investors Business Daily (IBD) — http://news.investors.com/investing-etfs/101512-629333-aftershock-investor-author-wiedemer-sees-gold-soaring.htm

W does not completely dismiss the possibility of averting a severe economic collapse (worse case – 50% unemployment, $ loosing 90% or more if its value).  Or perhaps he addresses a scenario where the economy is drastically on its way down, falls into a severe recession but with some quicker than expected much needed fiscal/monetary actions that may avert the worse case scenario.  IBD asked what would be positive signs.  W replied

if the federal deficit declines by 50% and economic growth is going up significantly, that is also a sign you are getting real economic growth and not just growth due to printing and borrowing.

*** Please read the book and blog to my site – Economics501.wordpress.com and also advice Congress that we are not economic illiterate and demand courageous action on their part.

 

*** Time permitting I respond to civil comments.

Twitter @Economics501

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About economics501

1 - free market Capitalist; 2 - Fitness Entrepreneur; 56 years old, VP at an Investment Bank in NYC, ex Venture Capitalist, happily married with 2 girls. Education: Rutgers and NYU. I allow Ted Hruzd, my friend to blog at will here. He has many posts here. I have known Ted since we were both students at NYU. Ted also works for an Investment Bank as a VP in Equity Global Markets. ------------------------- I was very very Socialist leaning as a 22 year old. I then strongly believed in Gov role in helping the poor. However, as a USDA Child Nutrition Programs, I personally accounted for millions of fraud, abuse, and waste of tax payer money. I came to believe that the poor would be best served with less Gov programs and more with direct aid via tax system. Then after 5 years I became a free market capitalist, was a venture capitalist in 2007 and helped start 2 high tech companies. I dedicate this site to champion free market capitalism as the best road to Prosperity. Please join in. If you disagree, fine, but please post with dignity and class and be civil. Argue with facts always.
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12 Responses to ‘Aftershock’ Investor: Book Review

  1. Perry says:

    I wish he would address retirement a bit more…how can we protect our investment the best we can during this time? My husband and I are both in our forties. We are quite worried about our 401K.
    Do you have any suggestions?

  2. economics501 says:

    As I work for an investment bank I cannot advise over this site. I will comment though how I view my 2013 investment opportunities. My wife and I are in 50s with 14 yr old daughter. Post fiscal cliff ‘compromise’ I expect debt to GDP to accelerate – unless we hold the line on debt ceiling increase (I say limit to $600 billion for 12 months so we will be forced to prioritize spending better). Personal possession of precious metals is a priority for me for 2013 as hedge against dollar loosing value due to debt and Fed $ printing. Also very very important – maintainable and enhance your job market skills. When the aftershock economy surfaces this will be critical. Competition for jobs will be intense.

    All the best – happy new year to all. I will continue to follow and blog on economics here and on Twitter @economics501.

    Jan 3, 2013

  3. If some one wants expert view about blogging afterward i advise him/her to visit this blog, Keep up the fastidious job.

  4. Geofffrey Strawser says:

    I am a believer in the macroeconomic view and I have a question.

    As I see the market go up, I don’t see my ETF’s, GLD and PHYS go up, but rather down. Also, if the market goes down, I don’t see those aforementioned ETF’s go up either.

    Question: If or when the market crashes, will my ETF in GLD and PHYS act like a stock, and go down with the market, or will my holdings in these ETf’s stand alone and go up as I hope?

    • economics501 says:

      Please read my reply to both of your posts in the 2nd post you sent. Thanks much for your feedback and relevant questions. I will soon post an analysis of M2 velocity.

      • Geoffrey Strawser says:

        The question I asked regarding my GLD & PHYS ETF’s and the answer given back, was ambitious to me and I seek clairification.
        I will use today as an example. (June 11th) The stock market lost over 100 points. However, gold did not go up, but my GLD and PHYS ETF’s went way down! This makes me believe that my GLD and PHYS ETF’s are acting like stocks and not the “stand-a-lone” gold that I wanted and expected those ETF’s to respond like.
        What am I missing here? And more importantly, what can I expect in the way of performance in an up or down stock market?

        Please don’t be afraid to answer my question.. I can take the truth any way it falls… I just need to know what you think!

        Geoff

      • economics501 says:

        Geof: I feel that the further an asset is from its core the greater the odds of price fluctuation (fund vs physical possession). Personally I may sell my precious metals fund soon (this month) and use proceeds to purchase gold and silver coins. for me and my situation (56 yrs old, married with 2 teen age girls), this would be a move to safety. Hope this helps. Please keep in touch.

        see below – Gold may have dropped in part due to China (have been horders of gold) out on holiday.

        http://online.wsj.com/article/SB10001424127887324634304578539630311765220.html?mod=WSJ_Commodities_LEFTTopNews

        most actively traded gold contract, for August delivery, fell $9, or 0.7%, to settle at $1,377 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement since May 22. Silver for July delivery settled down 1.3% at $21.64, the lowest level since late-September 2010.

  5. Geofffrey Strawser says:

    I would like to follow up on my previous theme.

    The macroeconomic view calls for staying out of stocks and, at the same time the macroeconomic view calls for investing in “high yield dividend stocks”…Which is it?

    • economics501 says:

      As an Investment Bank VP (IT management responsibilities), I cannot advise over Web blogs so do not interpret this as advice. Instead I will broadly comment about how I view the current economy and how it may broadly impact investments.

      Regarding stocks and high yield bonds ..
      As long as the Fed continues buying debt thus expanding the money supply at rate of $85 billion per month and inflation does not appreciably heat up, probability of stock gains continuing may be fair. However, as of today June 11, we have witnessed strong selloff. One factor may be that creditors may have become more negative with regard to Treasury bill purchases. note that the 10 year rate almost reached 2.3% yesterday after spending most of the past year well under 2%. Stocks typically do not perform well with increasing Debt interest rates. we must closely analyze this phenomenon of t bill rate increases and pressure on stocks. Re stocks — Quality is extremely important and some companies involved in new energy production may be wise. But how long will this go on? long term with an expansive public sector increasing debt much faster than GDP is a risky environment for stocks and also high yield bonds. For the later, inflation can devastate these bonds. It is hard to say when or if inflation will kick in. Key your eye on the velocity of the $. It reached a 49 year low this year. M2 velocity of M2 ratio to GDP dropped to under 1.6. From 1950 on M2 velocity or M2V peaked at 2.15 during the 1997 economic boom but now has set a new 49 year low this year descending below 1964’s 1.6. There is a clear positive correlation with M2 velocity increases with inflation. I think that once the Fed sees velocity increase with continued increase for few weeks they may cut back on their debt purchases. Stocks can then plunge and then precious metals may start increasing in value again.

      regarding precious metal ETFs and precious metals in the aggregate… They have been decreasing in my view in large part due to persistent low inflation. What will happen if we reach an AfterShock scenario with increasing inflation plus severe unemployment – in essence a weaker economy than we had in the 2008-09 Recession? If the $ collapses, as Robert Wiedemer predicts in an Aftershock economy, then will precious metals rise significantly? What if one has precious metals in an ETF or managed fund? I have the latter. Will one be able to sell it? If the broker or investment firm managing the precious metal fund is extensively internally involved in equity funds, will it be in business? If not then how can one retrieve the fund? These are risks and I have plans now to physically purchase gold coins and keep them long term. They may be needed if the $ collapses.

      We largely live in economic uncharted waters. Hence it is difficult to predict the economy and investments based on prior empirical data. The uncharted waters include massive unprecedented Fed monetary expansion and a government hostile to the private sector, the main economic growth engine historically. In this blog I have argued with specific solutions to try to prevent or at least lessen the impact of an Aftershock economy. We need therefore to daily and intimately monitor and interpret all economic and political activities. That will then provide us with best odds of thriving during what may be difficult economic times ahead.

      Twitter @Economics501

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