Hurricane warning:
Huge new stock plunge
on the horizon NOW!
BREAKING NEWS:
• Home foreclosures exploding to a new all-time high — enormous new bank losses ahead!
• Retail sales plunging much faster than Wall Street had dreamed possible — huge new losses ahead at retailers!
• Massive NEW layoffs at GM and Chrysler; hundreds of thousands more jobs vanishing at dealerships and suppliers!
Dear Investor,
Just when they told us the worst was over …
Just as gullible investors pushed stocks higher on news that would have been viewed as catastrophic in less insane times …
Major new fault lines are now opening in the foundations of the U.S. economy, setting the stage for the next, even more devastating phase of this great crisis.
Just in the last few hours, we learned that …
• Consumer spending is plunging: The Commerce Department announced that consumers — a whopping 70% of the economy — unexpectedly slashed spending for a second straight month.
Conclusion: Get ready for even more disastrous corporate losses and stock declines ahead!
• Home foreclosures are soaring: RealtyTrac reported that home foreclosure filings skyrocketed 32 percent to a new all-time record high in April, making the March-April period the worst two-month surge in foreclosures ever with a record 682,000 homeowners receiving notices.
And as if that news isn’t disturbing enough, they’re also warning that the greatest surge in foreclosures of this crisis is still ahead.
Conclusion: The housing bust that lit the fuse on this economic crisis is nowhere near ending.
• A new explosion in loan losses is about to crush banks. With Washington’s bank stress tests already being seen as a sham by most, this new surge in mortgage defaults is already beginning to sour billions MORE dollars of bank assets.
Conclusion: The credit crisis that nearly triggered a global economic Armageddon last year — a world-wide, systematic shutdown — may well strike again in the months ahead!
• New employment implosion taking shape NOW. Yesterday, Chrysler dealers warned that the automaker is about to close 800 dealerships with thousands of employees. General Motors is following suit.
Plus, with Chrysler bankrupt and GM less than three weeks away from its June 1 deadline, hundreds of thousands of workers at these two companies … plus thousands of dealerships and suppliers … are now only days away from losing their paychecks.
Conclusion: With U.S. unemployment already more than 8 percent, these new job losses can only cause MORE mortgage defaults … credit card defaults … auto loan defaults … and make consumers MORE reluctant to spend in the weeks and months ahead!
• The Social Security and Medicare day of reckoning is here, NOW. Old news? Absolutely not! A new government report says that, with 70 million baby boomers officially beginning to retire this year, the crashing economy has left the two programs with more than $53 TRILLION in unfunded liabilities.
Conclusion: Washington simply cannot afford to save every “too-big-to-fail” company AND ALSO preserve Social Security and Medicare benefits for 70 million Americans. Something’s got to give, and it’s going to be the government’s power to bail out the U.S. economy.
BOTTOM LINE: All of these new revelations — the probability of which was glibly ignored by the government’s stress tests — can only kill the “green shoots” Wall Street stock hucksters have hyped in recent weeks … crush bank stocks … and trigger a new debt crisis that makes last year’s pale by comparison.
{ 16 comments… read them below or add one }
News Clip that makes me feel angry:
“On Wednesday, Treasury Secretary Timothy Geithner specifically said some of the recycled bailout cash will go to community banks. But it’s not clear how many banks even want TARP money.
Some have canceled plans to take bailout funds or are considering doing so. They worry the money could give the government too much control over their operations.”
After reading this news clip, I am angrier than angry! This rings of a government takeover attempt of banks, including my hometown community bank. Over the years, I have developed a trust in our community bank, but I am no longer so comfortable.
We will never get to the bottom of our economic crisis unless we precisely define what economy really is.
First, there is no special group as “Consumers” because each and every one of us have to consume in order to survive. Second, we can consume only what we produce ourselves – or obtain from others by exchanging our surplus products with theirs (trade). This act of production and consumption lumped together is called the economy – it is as simple as that.
Then why do the bunch of politicians, economists and lawyers – who think they run our economy – only talk about consumption (and spending) and seldom of production (and earning)? The answer is simple – they themselves never produce anything useful in their entire lives. Hence they always come up with nonsense like “consumption-oriented economy” (similar to a head-oriented coin) and such and our adoption of an oxymoron called Keynesian Economics has only served to further complicate matters.
When the U.S. dollar was a receipt for 1/35 oz. of gold, when we purchased other nation’s products with dollars, that closed the deal because it was an exchange of real products with intrinsic values. Now that we use fiat (counterfeit) dollars, the trade can be completed only when those nations can use them to buy our products that they want. As long as we keep thinking of economy only as endless consumption without equivalent production, we only dig ourselves into a deeper hole.
FWIW.
My 401K still lost $20,000 when I compromised between your advice and that of my financial adviser. I should have put everything in money market or federal treasuries when you warned to. I pulled out of stocks just in time to miss the upsurge, but have still gained some in bonds and have stopped the bleeding. My wife, who didn’t heed your advice at all, lost $50,000. We are small timers. We don’t have money to speculate with because we don’t have money we can afford to lose. I have the option of rolling over my 401 to a vehicle where I would be able to buy gold and ETFs, but would pay higher commissions. Also, I don’t feel I have the expertise, and I can’t afford to experiment. What should I do? My wife is putting 15% in her 401 even though the company only matches 6%. Is there another way she should invest the other 9%? We are both over 50, and with Social Security and Medicare in trouble, there may be little other money for retirement.
Mr. Weiss,
Thank you for your courage, your honesty and your generosity during these tumultuous times.
My family and myself are very grateful to know you.
Keep on sharing your brilliants thoughts.
Eventually it will be understood by enough people and something constructive will come out of this. This will be a change from the actual corruption going on in Washington and on Wall Street.
The whole country will honour and owe you.
Thank you.
In this report Dr Weiss reports that 70 million new baby boomers will retire this year, I don’t believe that figure is correct. How could 1 in 5 retire this year? The USA only has a population of roughly 320 million.
David, he says the 70 million “Baby Boomers” are beginning to retire this year. I perceive that the benefits will have to be reduced or the Dollar will have to be revalued similar to what happened to the Ruble in Russia, where many who thought they had pensions sufficient to retire had to be subsdized by the government. Savings to purchase an auto would hardly be enough to purchase a bicycle. I prefer a reduction in benefits.
DR. WEiss:
I believe in you explicitly. But when, OH when will the stock market sink so my reverse stocks will score?
This market seems oblivious to bad news. One would think that GM trashing 1100 dealers would be enough alone to send thew dow tumbling. But not yet. WHEN!!! Thanks
Are treasury-only money-market funds still safe? Thank you.
I agree with what you are saying. However, my biggest worry is that ETF’s especially double or triple shorts do not mirror the underlying index. My own experience with SRS show it can be disastrous. I am not a day trader. Is there any work on how these ETF’s really perform??
Thanks for your help.
ER
Martin,
I live in Australia so how do I follow your recommendations..do I have to engage a broker? or can I somehow circumnavigate and not incur broker fees?..
What should I be invested in right now (stocks & sectors) or should I be on the side lines with cash or treasury bills/notes? I don’t want to lose what I have now. Can you help me?
Thank You
Joe
Dr. Weiss
I have been reading these inteesting blogs on regular basis. It seems like everyone of us is in confusion mode and looking for guidance. I understand market has mind of its own, a totally unpredicatble nature. I believe with your expertise and experience you may be able to provide much needed guidance in a timely manner. keep up the good work .
What is your take on farmland? Everybody is saying Gold but is it a safe investment?
Speaking of retiring, if the baby boomers will be retiring steadily for the next 20 or so years, can the stock market ever really go up?….people will be selling to live/eat for the forseeable future
We have read and studied hard since ‘97. M.Weiss, you are ‘the man’, and we thank you for your leadership through the dark and dangerous land of finance. We participate in the Contrarian Portfolio, not because of a million, but because of the sound advice, instruction, and guidance. Taking one direction and staying with it has served us well, and will keep us safe. Retired, looking for work, or working….all of us have the responsibility to do our best with what we have…and M. Weiss is the help we need.
Thank you. Thank you.
Dr Weiss. Thank you profoundly for being a voice of relative reason in a crazy world. I have one worry though, I am new to short term trading and worry about decay (especially leveraged decay) in ETFs and especially Inverse (Short) ETFs like FAZ which I hold. I was advised they would be a longer hold than Put Options but when things are volatile what will the FAZ come back to when the finacial go down again. I bought at average $11 (100 @ $22 in early April and 170 @$5 on 29 May) With present volatility
this article gave me cause for concern: http://blog.quantumfading.com/2009/06/01/leveraged-decay/