America Fast Approaching Debt and Economic Crisis Day of Reckoning
Economics / Great Depression II Apr 13, 2009 - 07:08 AM GMT
Martin Weiss writes: We are fast approaching the ultimate day of reckoning for everyone — Washington, me, you, your family, and the entire country.
The great dilemma: The government’s TARP funds to bail out the nation’s banks are nearly exhausted. But, at the same time, bank losses from this debt crisis have doubled from $2 trillion to $4 trillion, according to the IMF.
Now, either the government will print trillions of dollars in paper money to bail out bankrupt banks, broken brokers, and insolvent insurers … or it will be forced to back off from the bailouts and follow a sounder path.
Either we will sit idly by as Washington destroys our money and marches us like lemmings off the cliff of monetary insanity … or we will stand up, fight, and protect all the things we’ve worked so hard for — our retirement, our home, our income, and the future of our children.
I have chosen to fight, and today, I’m inviting you to join me.
Your first priority, of course, is to batten down the hatches and build wealth for yourself. That’s why, in this double-length gala issue, I lay out six key steps that can help speed up that process for you. At the same time …
Today Marks the Official Public Launch Of My National Campaign to Help Pull Us from the Brink
I have been preparing for this day for a long time.
I have created a community of nearly a half million investors like you with a keen awareness of the dangers we face.
I am working with two national grassroots organizations, reaching a combined audience of 14 million Americans with a proven desire to take action.
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And to covey our message unambiguously, I have just written a new book, The Ultimate Depression Survival Guide, with 100 percent of my royalties donated to charity.
The book is already the nation’s #1 Business & Investing bestseller on Amazon.com. And thanks to the book’s instant success, Barnes & Noble is already loading up with copies in each of its 778 stores in 50 states.
Here’s What I’d Like You To Do Starting Right Now …
First, buy multiple copies of the book for your family, your community, and your representatives in Congress. If you click here, it will take you to our web page that gives you a choice of four online booksellers for immediate purchase, plus a 100 percent Weiss Research credit for each and every copy you buy.
Second, use the book to protect your savings, boost your income, and grow wealthy even in the worst of times, while helping others do the same.
Third, join me in my national grassroots campaign. Stand by for the specific instructions I’ll be sending you THIS week — on exactly how and where.
Fourth, give yourself an immediate head start with …
Your Own Personal Bailout with Martin. D. Weiss, Ph.D., and
former CNN anchor David Goodnow
To view the 1-hour video, click here.
For the abridged transcript, read on …
David Goodnow: There comes a life-changing moment in the march of history when you and I have no choice but to step outside of our ordinary lives and do the extraordinary things required to ensure financial security for our families.
Now, with the greatest crisis of our lifetime entering a new, more dangerous phase, that time has come for all of us.
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My name is David Goodnow, former CNN news anchor, and I am here to interview Dr. Martin D. Weiss, founder and chairman of Weiss Research.
Today, Dr. Weiss is stepping up to the plate to help each of us as individuals prepare for the coming storm — and, at the same time, to launch a remarkable national campaign to help ensure that it does as little damage to America’s economic future as possible.
Dr. Weiss is one of the only ones who specifically named almost every major company to fail in recent years. He is one of the very few who saw this great economic catastrophe coming years ahead of time, warned of it repeatedly in the most public ways possible, and who has helped hundreds of thousands of individuals weather the storm.
In this one-hour briefing, Dr. Weiss will equip you to get your family through this crisis in safety … make your voice heard in Washington in a uniquely powerful and effective way … and get urgently needed help to the most innocent victims of this crisis. And before we part today, he will give you indispensable recommendations to help you …
- Erase your debt so you’ll have the money to see your family through the crisis and beyond.
- Secure your income at your current job and discover the truth about how secure your personal paycheck is now.
- Insulate your investment portfolio and your retirement nest egg.
- Protect every dollar you have in cash by making sure it’s in the truly safest place.
- Keep your home if you want to, or get a decent price for it if you don’t want to.
- And then use this as an opportunity to actually build your wealth during — and after — this crisis.
This is a watershed event for another crucial reason: It is the unveiling of what may well be the single most important masterwork on the economy, on investments, and on personal finance in a generation.
The title: The Ultimate Depression Survival Guide: Protect Your Savings, Boost Your Income and Grow Your Wealth.
The publisher, John Wiley & Sons, has just printed an unusually large number of copies on its very first print run. Big shipments have already been delivered to Amazon, Barnes & Noble, Borders, and Books-A-Million.
With this unprecedented volume, Dr. Weiss has given all of us a practical, actionable, step-by-step strategy for surviving this crisis. But this is no ordinary book. Because of this great financial crisis — and because of the government’s massive efforts to combat the crisis — your personal finances, our country, the entire world are coming to an epic fork in the road.
One of those paths — the path Washington is taking now — can only lead to decades of poverty, want, and despair. The other path leads to a real recovery, prosperity, and financial security for all of us.
And so, this briefing is also the first volley in Dr. Weiss’ national campaign to compel our leaders to reverse course, to withdraw our nation from the brink before it’s too late. To help launch this movement, we have invited the press to attend this conference along with us, and I will be asking Dr. Weiss some of their questions I’ve received, along with yours.
Dr. Weiss, what originally motivated you to launch this campaign and why do you think it’s really possible?
Martin D. Weiss: It’s what my father, J. Irving Weiss, was able to achieve one-half century ago. In 1959, he founded the Sound Dollar Committee and led a similar campaign with a similar philosophy. He enlisted the support of former President Herbert Hoover and presidential advisor Bernard Baruch. And he appealed to Americans to support President Eisenhower’s proposal to balance the budget, which had been bitterly opposed by Congress.
Eleven million Americans responded with letters, telegrams, and phone calls to Congress, and they won that battle. But in the years that followed, they lost the war. And now we are paying the price. Today, we have an even bigger financial war in the making which we must not lose. The consequences would be far too horrific.
Goodnow:But what about the positive signs we’re seeing on Wall Street right now? What about the rally we’ve seen recently in stocks?
Weiss: It’s a trap. Even after the 1929 Crash, we had rally after rally just like this one — up 30 percent the first time, 48 percent the second time, 23 percent the third time, and more. Each time, my father used those rallies as selling opportunities. And sure enough, after each temporary bounce, the market plunged far further.
Right now, unemployment is getting worse far more rapidly than at the end of a recession. Bankruptcies are still soaring. Credit is still scarce.
And never forget: Three major world organizations — the International Monetary Fund, the World Bank, and the Organization of Economic Development — are unanimously predicting the first global decline since the Great Depression. Plus, they’re predicting even sharper declines precisely in the same area that made the 1930s experience so severe: world trade. Look at this chart!
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Goodnow:World trade is falling off a cliff.
Weiss: Yes, it is. The key point is this: No matter how often or sharply the stock market rallies … no matter how much the G-20 countries stimulate their economies … regardless of any near-term bounce in this or that sector of our economy … this decline is the big picture context of the entire globe.
Goodnow:I think most people agree it’s going to take a heck of a lot of stimulus to turn that monster of a decline around.
Weiss: More than anything that any government could possibly afford! So let’s not mince words or sugarcoat this: Right now, the global economy is already sliding into the first Great Depression of the twenty-first century.
That depression is already bringing big cutbacks in industrial production, severe declines in corporate revenues, massive unemployment and bankruptcies. It has already unleashed the most powerful vicious cycle of all time.
Goodnow:Which is …
Weiss: The collapse in credit, which kills revenues … and a collapse in revenues, which kills the credit of millions of borrowers.
Goodnow:Caused by the housing boom and bust in America.
Weiss: Yes, but the roots of this crisis go far deeper than the housing boom or the mortgage bubble. They go all the way back to the 1960s, when my father’s Sound Dollar Committee was finally overwhelmed by events … when Eisenhower’s balanced budget was abandoned … when we began a nonstop climb up a mountain of debt, punctuated, of course, by temporary pauses and recessions.
Goodnow:And now?
Weiss: Now, we’re sliding down the other side of that mountain — and, of course, the decline is also punctuated by temporary pauses like the one you’re seeing in the economy and the stock market … which, by the way, is a godsend for all those who missed the chance to get to safety in 2008.
Goodnow:And that’s why this is the perfect time for people to follow the recommendations in your book. I know you’re going to give us some of those today and you’re also going to release some very useful lists. So I want to make absolutely sure we cover those in a moment. But the book is not really your bigger goal, is it? It’s merely an instrument in your national campaign. Can you explain that?
Weiss: We are at the most important crossroads in our lifetime. This choice is not about us. It’s about our children and their children. If we choose the right path, we can pave the way for better times for them. Or we can just continue down the primrose path of papering over the bad times and dooming our children to far harder times for generations to come.
One path leads to an economic depression with deflation — falling prices — much like the Depression of the 1930s.
That’s no picnic. It comes with a chain reaction of corporate failures — not only companies like General Motors and Chrysler, which are now on their way to a government-managed bankruptcy … but also megabanks like Citigroup and giant insurers like AIG, which, sooner or later, could be headed for a similar fate.
It brings record unemployment — as many as 25 percent out of work. Already, including discouraged and part-time workers, unemployment in 2009 is 15.6 percent of the nation’s workforce.
It comes with massive cutbacks in industrial production, down to as little as half of the peak production levels. And already, industrial production is sinking swiftly — not only in the U.S., but all over the world.
Sadly, it also brings massive homelessness, and already, we have seen tent cities popping up all over the country, with one out of 50 American children homeless.
But this scenario also delivers a series of all-important benefits.
Yes, we’d see a sudden, massive washout of bad corporate and personal debt. But that’s part of the solution. And yes, we’d have to prepare for financial Katrinas everywhere. But that’s the basic emergency preparedness which is needed no matter what.
Goodnow:How will people retire in dignity? Even now, with the market in a rally, that’s a goal that’s suddenly out of reach for most people.
Weiss: Not necessarily. Your financial advisor may have told you that you’re going to need, say, $500,000 or $1 million to carry you through a comfortable retirement. But that was assuming never-ending inflation. In a deflation, that estimate could be way off. You may only need half that much for a decent retirement, provided you don’t lose any more from this point forward.
In a deflation, homes become more affordable; college education, more achievable; a tank of gas, easier to fill. People are more willing, even anxious, to work more for less, so that America can enhance its ability to compete globally. The U.S. dollar stays strong. Our democratic form of government holds up firmly. The U.S. Treasury retains its power to borrow the money it needs to help run the government’s essential operations.
Goodnow:With 25 percent of the work force out of work?
Weiss: Yes, and 75 percent of the work force still on the job! Very glad to get paid in a currency that buys more with each passing month! Those are the benefits of deflation.
Goodnow:But most people in this country, including most policymakers in Washington, don’t see it that way. For them, deflation is a four-letter word. Inflation doesn’t have the same negative connotations.
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Weiss: Perhaps not. But wait till they see the dark inflation scenario. The dark scenario is not just ordinary inflation. It’s runaway inflation with most of the same, inevitable consequences of the depression we just talked about.
In theory and in its most extreme form, it would ultimately lead to a scenario similar to what Germany suffered in the 1920s, when the government printed money without restraint, when money was cheaper than wall paper.
Goodnow: Historians connect the dots from that financial crisis to the rise of Hitler … to World War II … and to the Holocaust. The real question is: Is something this extreme really possible in the United States?
Weiss: We don’t want it to happen and I don’t think it will happen. But what we want and think is not always what we get … unless we stand up and fight for it.
Goodnow:I’ve heard some serious, well-respected people predicting social chaos. Do you think they’re crazy?
Weiss: No, I just think that they’re going to be proven wrong. This is not the end of the world. We still have a solid physical infrastructure and tremendous capacity to produce goods.
Goodnow:A lot of people think they actually benefit from inflation. What do you say to them?
Weiss: Yes, at first, some people in some sectors of society and at some initial stages of this scenario feel like they get some benefits. But it doesn’t work. Most people soon discover that the inflation is just a placebo and the prosperity is just a fleeting fantasy. Most important, this scenario brings nearly all of the SAME negative consequences as deflation.
We still get a chain reaction of corporate failures. Companies like GM and Chrysler, which were initially bailed out by the government, are ultimately pushed into bankruptcy anyhow. Giant financial firms like Citigroup and AIG, initially the largest recipients of government aid, are ultimately reduced to a shell of their former self anyhow. In the end, one way or the other, they effectively exit the business no matter what.
Ultimately, we still get massive cutbacks in industrial production, we still get record unemployment, and we still see massive losses for most investors.
Goodnow:So why do you see this inflation scenario as the greater of the evils?
Weiss: Because on top of all these consequences, it would deliver a series of additional, potentially fatal blows — to our country and to our money. It drags out the crisis over a far longer period of time. It drains the nation’s precious resources, funneling them to the weakest and least worthy companies. It destroys the value of our money and kills the incentive to make collective sacrifices.
People say: “What good is it to work so much harder, if the money we get for our labor is worth so much less?”
The economy freezes. Retailers and other businesses cannot stock their shelves because the price of merchandise is too volatile.
We still wind up with the one out of four unemployed. But to make matters far worse, even the people who are employed get squeezed by higher prices, are far less productive, and far more prone to a negative work ethic.
Goodnow:So ultimately, in this scenario, we suffer the same pain but we reap none of the benefits!
Weiss: No, worse. We inflict additional pain on those who might have been spared. In this dark scenario — the inflationary depression — instead of a strong dollar, we get a sinking dollar. Instead of becoming more competitive globally, we become even less competitive. Homes are again beyond the reach of most citizens. A college education becomes a pipedream. A tank of gas becomes almost impossible to afford.
Because there’s no strong currency to bind us, instead of shared sacrifice, we get more social unrest, mass protests, riots. Instead of a stable democratic government that can afford to help the most helpless victims, we wind up with a shaky democracy that punishes the victims. And because it lasts for many long years, even those who do survive the early depression years are ultimately devastated.
Goodnow:So those are the two choices: Either a depression with deflation or a depression with runaway inflation.
Weiss: Yes. The questions are: Will the decline be short … or will the government’s massive money printing ensure that it’s far longer? Will it be followed by a robust recovery … or will the monetary madness ensure that it’s followed by years of economic decline?
That is the monumental choice we must make. And all of us today, all of us living on the edge of this 21st century depression, have been chosen by history to make that choice now.
This is the time — and we are the ones — that our future descendants will look back upon, either honoring us for our prudent foresight or cursing us for our blind imprudence.
Goodnow:And right now, governments are making …
Weiss: The most foolish, selfish, high-risk choices in the history of civilization. In their zeal to prevent the unpreventable — a natural, cyclical depression — the U.S., the U.K., and other G-20 nations are taking us down the path of destruction. The Federal Reserve has abandoned its traditional role of controlling inflation and is actually doing its dead-level best to create inflation. The Treasury has abandoned any semblance of fiscal restraint and is now out of control, exploding the deficit to four times our worst deficit in history!
Goodnow:How does that make you feel?
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Weiss: I’m rarely angry. But this makes me madder than hell. Just in the last 18 months, Washington has invested, loaned, or guaranteed $14 trillion — more than the nation’s entire gross domestic product, more than the national debt we’ve built up over more than two centuries — money we do not have, money they could not possibly borrow, paper money that they’re already starting to print.
Fourteen trillion dollars and counting! And now, the Fed has used up all its reserves. Now, for the first time in history, the Fed is running the printing presses for corporate bailouts! This has never worked in other countries and will never work today. We must stop it before it’s too late.
Goodnow:Is it already too late?
Weiss: No. But think of how much damage all that money printing can do! Then think of how much good just a tiny fraction of that money could do for the helpless victims of this crisis!
Goodnow:They say all that government money is for a good cause. It saves the banks and the financial markets. Is that false?
Weiss: Absolutely false, and they know it! They know they cannot turn back the clock and reverse the excesses of debt and speculation that have caused this great financial crisis. They know they cannot repeal the law of gravity and ask investors to stop selling or prevent stock and real estate prices from falling. Yet they try to do it anyhow.
Goodnow:Where does it lead us?
Weiss: It leads to what I call the threshold of the absurd. The barrier of the impossible! That’s the point in time when the obvious cost of the bailouts — trillions and trillions of dollars — becomes greater than the elusive benefits of the bailouts.
Goodnow:When the cure is worse than the disease.
Weiss: When the cure causes the disease. Look. The disease is our addiction to debt. We all know that. So now they’re telling us the feel-good solution is another giant fix, another injection of even more debts … this time, mostly government debts.
Goodnow:I understand that in theory, but what does it mean in practice?
Weiss: It means that the next shoe to fall in the debt crisis is the biggest and most important one of all: government bonds!
From the very beginning of this crisis in 2006, instead of liquidating the bad debts — the toxic assets — the authorities have shuffled them up the food chain, like DDT. First, the DDT was mostly in the failed mortgage lenders. Then it was moved to the big banks. And now, it’s being shifted to the federal government itself.
At each step of the way, institutions holding the toxic assets have been severely punished — even slaughtered — by the marketplace: Countrywide Financial, which was loaded with toxic assets, saw its shares plunge from $45 to $4.25 between 2007 and 2008. Fannie Mae, the next to feel the market’s wrath, fell from $70 to a mere 30 cents by November 2008. Bank of America, which bought Countrywide, crashed from $39 to $2.53 within just a few months.
Now, it is the U.S. government’s turn. Explicitly or implicitly, the U.S. government has assumed responsibility for trillions in toxic assets. So it should come as no surprise that the government’s most volatile securities — bonds — will be the next victim of the market’s revenge.
Goodnow:I know what that means for the average person. It means higher interest rates. The government bailouts, the toxic assets, the big deficits, the money printing! It all means higher interest rates. If there’s another alternative, tell me what that is. I just can’t see it.
Weiss: I can’t either.
Goodnow:So what happens next, in your opinion?
Weiss: Just as you said: higher interest rates. All the bailouts — all the sandbags the government has placed here and there — are wiped away by the new flood waters of rising interest rates.
Your neighbor gets a cut-rate mortgage, thanks to the government’s mortgage refinance programs. A few businesses here and there finally get some financing from your local banks, thanks to the Treasury’s new private-public partnership.
Then, suddenly the tidal wave of rising interest rates sweeps into town and washes it all away, impacting nearly everyone — the homeowners struggling to keep up with adjustable-rate mortgages, the companies trying to cope with the recession, the city governments trying to borrow their way out of a huge budget deficit in order to pay the police, to keep the fire stations open.
Goodnow:I think the larger point here is that soaring interest rates would be the coup de gras for the entire economy.
Weiss: Pure poison! When Treasury Secretary Geithner unloads an avalanche of Treasuries onto the market to fund these bailouts, he’s posing as the “savior” of the economy. But in reality, he’s like Dr. Jack Kevorkian, administering the poison that kills the patient.
Goodnow:I’m a homeowner, a consumer, an investor; and I’m asking you: What do I do? I know that, in your book, you recommend many urgent steps to take immediately to protect and even grow wealth as this crisis intensifies. Please give us some of those steps now.
Weiss: Step 1 is to secure your income.
Goodnow:Everyone, all the way up to the CEO level, is worried that their job could be the next to vanish — and for good reason. Look at the unemployment data that just came out! It’s a massacre. So far in 2009, about a half-million more wage-earners are getting pink slips every week. That’s a hundred thousand lost paychecks every day, two million pink slips every month! What do I do?
Weiss: I have a list of the largest, publicly traded companies that, based on our analysis, are at risk of failure. If your employer is on it, the steps I recommend in my book are doubly urgent.
Goodnow:Can we see that list?
Weiss: It’s in my free report we’ve just posted to the Web — a sneak preview of my book.
Goodnow:OK. But name some names right now.
Weiss: I’ll skip the obvious ones.
Goodnow:No. Give me those as well.
Weiss: OK. Ford, General Motors, Citigroup. And the not-so-obvious ones: JPMorgan Chase, Sears, Dynergy, Micron Technologies, Eastman Kodak, Advanced Micro Devices, Sandisk, Tenet Health Care, Interpublic Group, Massey Energy, Ciena Corp., E*Trade Financial.
I also have a list of companies that are among the strongest financially, with the most capital and the best prospects for weathering any storm. Of course, this alone is no guarantee that they won’t announce layoffs. But if your company is on this list, the chances of losing your income are greatly reduced. For example, Johnson & Johnson, Pfizer, Exxon Mobil, Wal-Mart, Microsoft.
Goodnow:Suppose my company is not on any of your lists?
Weiss: In my free report, I also give you some specific instructions on that too.
Step 2 is real estate!
Goodnow:OK. Then let me ask you what a lot of people are asking: They see property values plunging faster and faster. When is this thing going to hit bottom? What should they do with their real estate now?
Weiss: There’sno way to know how much deeper the real estate market is going to fall. But I can tell you one thing with relative certainty: When interest rates go up, it could set off a whole new round of price collapses. Even if you can afford it, you don’t want to be trapped in sinking real estate. You could use that money to buy tremendous bargains in almost anything your heart desires.
Goodnow:So I should just sell?
Weiss: If you have investment property, absolutely! Take advantage of any temporary market recovery stimulated by the government. Then price your property correctly, market it correctly, and sell it right. I give you more instructions in my free report, and then, the complete guide is in the book itself, of course.
Goodnow:What about our family home?
Weiss: I can’t tell you what to decide. But if your mortgage payments are high and rents for equal or better homes are lower, take advantage of any temporary pick-up in the market to sell before prices plunge anew. Just be sure to choose a realtor with a recent track record of selling many properties in the same general category as yours.
Goodnow:Suppose I want to stay in my home.
Weiss: Then there are a lot of practical steps you can take to reduce your costs. Chapter 2 in my book has all of those.
Goodnow:OK. I’ve taken care of my real estate. What’s the next step?
Weiss: Step 3 is to protect your savings.
Goodnow:Last summer, you held a live online video conference about that. You predicted that we’d see another massive banking crisis. And that’s what happened. You also named Washington Mutual, Wachovia, and Citigroup as banks that would fail or need a federal bailout. And that happened, too. But now, with everything the Bush administration and the Obama administration have done for the banks, there’s talk that, finally, the worst is behind us. I presume you don’t agree.
Weiss: No. You’re going to see the same pattern all over again. You’re going to see bank CEOs on TV declaring their banks are solid. And then, with more commercial real estate going bad, with more consumers defaulting on their loans, with more derivatives blowing up, they’re going to go under in even bigger numbers.
Goodnow:Whether you’re right or not, I’ve got to take protective action. What should that be?
Weiss: First, make sure your bank is among the safest in America, starting with my list of the largest banks in my free report. Unfortunately, most of the biggest banks are not on the list. Many are community or regional banks. So to find those elusive safe banks in your area, be sure to go to follow the instructions in the book.
Second, whatever bank you choose, make sure your deposits remain comfortably under the old FDIC insurance coverage limits of $100,000. The new $250,000 per account limit is temporary, not something you can rely on long term.
Third, even the safest bank in America won’t be able to guarantee seamless access to your money if the U.S. government declares a banking holiday. But everyone who has been following me knows that you don’t even need a bank or S&L for most of your banking needs. The complete guide is in the book.
Goodnow:What’s the next step?
Weiss: Step 4 is a portfolio housecleaning. That’s where this stock market rally comes in very handy. Sell into this rally like you’ve never sold before.
Goodnow:In recent months, quite a few people on Wall Street have been starting to talk about something they’d all like to forget: The great bear market of 1929. What would a similar bear market look like in this day and age?
Weiss: I want to repeat a very important fact: From its peak in 1929, the Dow Jones Industrials Average fell nearly 90 percent. So if you start from the Dow’s peak in 2007 and you take off 90 percent, that would be tantamount to a plunge of more than 12,600 in the Dow — down to a low of approximately 1500.
Goodnow:Do you think that, if we’re going into another depression, the Dow decline will be equally severe or less severe?
Weiss: You left out one of the possible choices.
Goodnow:What do you mean?
Weiss: There are three possibilities: a similar decline, a lesser decline, or a greater decline. Even if the decline from this point forward is just half as bad, it would take us down about 40 percent from current levels. Why should you sit back and let that kind of devastation ravage your assets without lifting a finger to stop it?
Goodnow:So what do I do now?
Weiss: Let me offer you the same advice I’ve been giving my readers since before this crisis began: “If the stock market is enjoying a temporary, government-inspired rally, sell everything.
Goodnow:No exceptions?
Weiss: Very few exceptions.
Goodnow:What about my 401(k)? Some people think they need to take their money out of their 401(k) and pay the penalties. But that’s not the case, is it?
Weiss: No, it isn’t. Don’t break up your 401(k)! Make the move within the 401(k). Get the list of choices. Then, switch from stock mutual funds into the safest alternatives you can find, listed in my free report.
The first choice would be a Treasury-only money market fund, but unfortunately 401(k)s don’t give you that choice. The second choice is a government-only money market fund. Your third choice is a standard money market fund. They’re safe right now, and if I think that’s going to change, we’ll let you know.
Goodnow:A lot of people have rushed into long-term bonds. Do you think that’s the right approach?
Weiss: Absolutely not! Why lock in what could wind up being practically the lowest yields of the century? It makes no sense, whatsoever! BUT if you wait for the surge in interest rates we talked about before, then that’s a different story.
Goodnow:Next?
Weiss: Step 5: For all the investments you cannot sell, offset the risk with investments that protect your portfolio.
Goodnow:Let’s suppose, for example, I have real estate that’s falling in value. Or suppose I have stocks in a pension fund that I have no control over.
Weiss: Simple: You create your own, personal hedging strategy — like an insurance policy that pays you when your stocks or real estate decline in value.
Goodnow:That sounds complicated.
Weiss: Not at all. You just use plain-vanilla exchange-traded funds (ETFs) that rise in value when stocks fall.
Goodnow:Despite falling stocks?
Weiss: Because of falling stocks! These ETFs are as easy to buy and sell as any stock or mutual fund, and you can do it in the brokerage account you have now. And you can start with $100 or even less.
Goodnow:For example?
Weiss: If you have a lot of technology stocks, you could protect yourself with the ETF tied inversely to the Dow Jones U.S. Technology Index.
Goodnow:What’s the symbol for that one?
Weiss: REW. Plus, if you have a lot of small caps, you could protect yourself with the ETF tied inversely to the S&P SmallCap 600 Index, symbol SBB. Or if you’re exposed to emerging markets, you could use EUM or EEV.
Goodnow:And to hedge my real estate?
Weiss: SRS.
Goodnow:How much of this insurance, as you call it, should I buy?
Weiss: Don’t just run out and buy these ETFs willy-nilly. I have a full-fledged hedging strategy in the book. Then, once you’ve battened down the hatches and have the reserves, you can venture out and take some calculated risks to go for potentially life-changing profits.
Goodnow:That’s step 5.
Weiss: Yes. Step 6 is to go for life-changing profits. Right now, those same inverse ETFs that you used for protection can also be used to go for profits. When my father did something similar in the early 1930s, he told me he used 10 percent margin and turned $500 into $100,000. He confessed that he had to take huge risks to make that happen and that he had big losses as well. But fortunately, with inverse ETFs, the risk is a lot less and you don’t use margin accounts. You just buy them like any other stock or ETF.
But the biggest pay-off will come when markets hit a true bottom. If you can just preserve what you have today — your assets and your income — the bottom will give you the best opportunity to reap the benefits of your prudence today. That’s when you need to be ready and able to pick up the stock market bargains of the century — great companies for pennies on the dollar, stocks set to explode in value.
I dedicate several chapters in my book to that, including how to recognize a true bottom in government bonds, corporate bonds, dividend stocks, real estate, and more.
Goodnow:Some people would say that using a crisis to grow richer is perverse in some way. What you’re trying to do is very different. You’re trying to help everyone grow richer or at least keep what they’ve got.
But I have one nagging question: You seem to advocate cutting back or ending the bailouts for banks and big corporations. Won’t that just create the very scenarios you’re concerned about? Won’t that throw small business into bankruptcy, workers out of work, people on the street?
Weiss: But look around you! That’s happening anyhow. But the theory in Washington is that this economy is unsinkable … or that the government has the power to keep it afloat. If that’s the case, they figure, why have lifeboats for every passenger? That’s why every penny of my royalties from the sale of this book is going to homeless children. And that’s another reason I’ve launched this campaign.
Goodnow:Martin, I’ve seen a lot in my lifetime. I was an anchor and editor at CNN Headline News for almost 20 years, and you won’t believe some of the things that came across my desk. But I must confess, I’ve never seen anything like this crisis, and I’ve also never seen anyone doing what you’re doing. Congratulations, Martin.
Weiss: I have no illusions. I know this is just one small step. But I’m hopeful we can accomplish something.
Goodnow:That’s very modest. I think you can accomplish quite a bit more. I personally think your book is an essential gift for any family member or friend that you do not want to move in with you as this crisis worsens.
On a more serious note, it is a call to action that can help ensure that this crisis ends quickly and is not extended by our leaders’ misguided efforts to fight it.
Weiss: The point of my book is that Washington’s $14 trillion welfare program for banks, brokers, insurers, and automakers has us headed down the path to a decade or more deprivation and lost opportunities … and for the most vulnerable members of our society, abject poverty and homelessness.
Goodnow:We’re all on a bus, driven by our leaders, and it’s speeding towards the edge of a cliff. We, the people, need to hijack that bus! We must convince our leaders to turn it around while there’s still time.
Weiss: All of us have the power to do that.
Goodnow:The image I have is of thousands of books landing on every desk in Congress; many more stacked up in the oval office. Semi-trailers packed with petitions demanding that Washington stop making matters worse — stop forcing us to pay other people’s mortgages, compelling us to bail out guilty CEOS with million-dollar bonuses, dooming us to a decade or more of an inflationary depression.
Weiss: There’s still time to save ourselves from that nightmare scenario, but not much. What we — you, I, and everyone — do now will determine how each of us will fare in the months and years ahead. Our future is in our own hands.
Goodnow:Suppose I want to buy a hundred copies of your book or even a thousand copies. Suppose I want to send it to every member of Congress. How would I go about doing that?
Weiss: That would be great. But don’t worry. The two grassroots organizations we’re working with have all that set up. Just call us at 800-814-3029 and we’ll walk you through it. The main thing is that I welcome your support, no matter how little or how much, with open arms. I can’t do this alone.
Goodnow:You’re investing a lot of your own money in this, aren’t you? Your costs. All your royalties.
Weiss: This is not a for-profit book.
Goodnow:Plus, you’re giving a 100 percent Weiss Research credit to all buyers.
Weiss: That’s not an out-of-pocket cost; just lost revenue.
Goodnow:But it gives your readers a chance to try some of your investment products and services for free, or to save some money, and to get the specific investment recommendations and support they need to get through this crisis and beyond. Thank you, Martin.
Editor’s note: To purchase Martin Weiss’ new book, The Ultimate Depression Survival Guide, and receive a 100 percent Weiss Research credit for your purchase, click here.
And if you scroll up from there, you’ll see that the free report Martin mentioned is also available on the same page.
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