Citigroup Failure Imminent

Subject: Citigroup Failure Imminent

Citigroup Failure Imminent by Martin D. Weiss, Ph.D.
Dear Subscriber,
Citigroup, the nation’s second largest banking conglomerate, is on the brink of failure.
Its stock price collapse is the canary in the coal mine, wiping out over nine-tenths of the company’s market cap since its 2007 peak, decimating two-thirds of its value just last week alone.
At the same time, the collapse in its market cap is also the bank’s nail in the coffin, making it virtually impossible for it to raise the capital it desperately needs to save itself.
If it fails, it will be, by far, the largest banking disaster in history, involving $2 trillion in assets. That makes it approximately six times larger than Washington Mutual and three times bigger than Wachovia.
Moreover, the prospect of a failure by Citigroup poses far greater challenges to regulators than a typical large bank. Due to its massive derivatives holdings — side bets on interest rates, currencies, and the probability of defaults by other large corporations — it could be extremely difficult to save Citigroup without serious disruptions, raising serious questions about the global banking system and the world economy.
At mid-year, June 30, 2008, the Office of the Comptroller of the Currency (OCC) reported that Citi’s primary banking unit, Citibank NA, held $37.1 trillion in total notional value derivatives, including $3.6 trillion in credit default swaps, which, in recent months, have proven to be the most dangerous category.
In contrast, Wachovia bank, bought out by JP Morgan Chase in a deal brokered by the regulators, had only $4.4 trillion in derivatives, among which $404 billion were in credit default swaps, or only one-ninth the size of Citigroup’s.
Thus, whereas it was possible for the authorities to arrange buy-outs for banks like Wachovia and Washington Mutual, there is no buyer big enough in the United States to absorb Citigroup. Nor is it likely that an international consortium of banks would want to squander the precious capital they have left on a sinking titanic the size of Citigroup.
What will happen next? No one can say with certainty. However, it’s likely that:
The Treasury Secretary, the Fed Chairman, as well as FDIC and Citigroup officials are currently holding tense and intense discussions in a desperate attempt to somehow stem the megabank’s demise.
They will soon announce a massive federal bailout that could make the $150 billion AIG rescue seem small by comparison.
And, ultimately, these kinds of bailout efforts will fail.
It is preposterous to assume that any government, no matter how powerful it may seem, can save the entire world. It is naive to believe that a few government bureaucrats, with a grab-bag of gimmicks and tricks, are a match for billions of consumers in revolt, millions of investors desperate to sell, and thousands of banks pulling in their horns.
The government cannot repeal the law of gravity and stop markets from falling. Nor can it turn back the clock to reverse our financial blunders.
My recommendations are unchanged:
Recommendation #1. Keep up to 90% of your money in the highest rated, most liquid safe haven in the world — short-term U.S. Treasury bills, bought through Treasury Direct or a money market fund that invests exclusively in Treasury securities.
Recommendation #2. If you have substantial assets or securities held in any other venue — a brokerage account, insurance company, or bank — pull away a reasonable portion of those funds for safekeeping in Treasuries as well.
COET: Recommendation #3. For urgent self defense, go on the offense. Click here to read Mike Larson’s latest report on how to convert this crisis into a steady stream of high-profit results.
Recommendation #4. Above all, stay out of the stock market. Do not be lured back in by so-called “bargains” or temporary rallies like Friday’s. Our next target for the Dow is 5500, and it could get there very quickly.
Good luck and God bless!
Martin
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Michelle Johncke, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
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Supersize Your Dividends at McDonald’s

Supersize Your Dividends at McDonald’s by Nilus Mattive

I’m not a fan of fast food. And since my wife is a strict vegetarian, I don’t eat very many hamburgers, even of the slow-cooked variety.
So you’d think McDonald’s would be way off my radar, right?
Wrong. My mouth starts watering whenever I pass those golden arches. Here’s why …
McDonald’s Serves Up Big, Fat, Juicy DividendsAnd Will Gladly Supersize Your Income
In last week’s column, I told you that more and more companies are cutting dividends. And I pointed out that despite the bleak landscape, there are still some places to find rising payments.
McDonald’s is a perfect example of a company boosting its dividend in the face of economic weakness.
In 2007, it decided to boost its annual payment by a whopping 50%. Then, just last month, it decided to increase its dividend another 33%!
As I constantly point out, that means investors holding these shares keep getting higher and higher effective yields on their original purchase price.
In this case, I have a real world example:
I first recommended McDonald’s as a total return play to my Dividend Superstars subscribers on November 26, 2007. At the time, the shares were yielding about 2.6%.
Today, less than a year later, those same shares are already producing an effective yield of 3.5%.
In other words, that single 33% dividend hike has already added another percentage point to the stock’s effective annual yield!
Plus, since my initial recommendation through yesterday’s close, MCD shares had posted a small capital gain, while the S&P 500 lost more than 31%!
Now you can see why I say dividend stocks can not only give you better income but also better protection than other so-called safe investments!
That’s what investors are saying about McDonald’s recent 33% dividend hike!
And just to bring the point home, let’s go back a little further into McDonald’s history, before the latest two dividend hikes, to see what kind of results a long-time investor would have gotten:
Pretend it’s March 26, 1990. You just finished polishing off a Big Mac at the local McDonald’s. Across the restaurant’s floor, you see a long line of customers in front of the register, wallets and purses in hand.
You go home and call your broker. “Buy me 100 shares of McDonald’s,” you say. That day, the stock closes at about $29 a share. Its indicated dividend is $0.31, making the stock’s yield slightly more than 1%.
The move is certainly no great leap of faith. By 1990, McDonald’s restaurants are everywhere — it’s the fast food company by which all others are judged. Its stock is considered “boring.”
Now fast forward 16 years to March 27, 2006. McDonald’s stock closes at $34.55 a share. Its indicated dividend is $0.67 a share, giving the stock an annual yield of 1.9%. Hey, that’s twice as much as when you bought it, right?
Nope.
During your 16 years of ownership, McDonald’s stock split 2-for-1 on two occasions. Adjusting for these splits, your purchase price is equal to $6.20 a share.
Dividing the current indicated dividend of $0.67 a share by your $6.20 cost basis gives you a yield on cost of 10.8%. Plus, you’re also sitting on paper gains of 457%. That’s an average annual return of 28.6%. And, in addition, you got regular cash payments the whole time!
Will McDonald’s Dividend Drive-Through Stay Open?
As I mentioned, I have already recommended McDonald’s to my Dividend Superstars subscribers. And so far, they have been doing rather well with that position in spite of an absolutely horrible stock market.
The question is whether the good times will continue for McDonald’s. In my mind, the answer is “yes.”
All along, my pro-McDonald’s argument has been twofold:
First, while it’s technically a consumer discretionary company, MCD is really a consumer staple food stock these days.
After all, where else can financially squeezed people find complete meals for a few bucks? In many cases, eating at McDonald’s is far cheaper than buying similar ingredients and making a home-cooked meal.
I snapped this shot of Ronald McDonald in a Bangkok mall. He’s doing the traditional Thai wai.
In the kind of recessionary environment we have now, that argues for stronger sales. People will flock to the lowest-cost sources of food, especially when they save time in the process.
Second, the company’s huge — and expanding — overseas presence will further insulate it from weakness in one region and provide plenty of future growth.
In the last two months, I’ve spent time on four different continents. And you know what I saw every place I visited? Lots and lots of Ronald McDonalds!
Just take a look at the company’s latest earnings results, which came out on October 23:
McDonald’s said profits rose to $1.05 a share from $0.89 a year earlier. That was better than analysts expected — the consensus estimate was $0.98 a share.
Meanwhile, the company’s revenues gained 6%, with global same-store sales gaining 7.1%.
I think those kind of results will continue to support the company’s generous dividend payments, and potentially produce mouth-watering returns for savvy investors.
Does that mean you should run out and buy the shares today? Only you can decide whether they belong in your portfolio.
And please note that I have given my Dividend Superstars subscribers an exit price at which to sell the shares to lock-in profits.
However, at the very least, I think McDonald’s is proof positive that there are solid brand-name stocks that are not only holding up very well in these tough economic times, but also handing their investors richer and richer payments.
Best wishes,
Nilus
P.S. McDonald’s is just one of many solid dividend-payers I’ve recommended to my subscribers. If you want to get an entire portfolio packed with steady income stocks, plus my sell-target for MCD, subscribe to Dividend Superstars now. You’ll get 12 issues for just $39. Plus, I’ll rush you a series of special reports that tell you all about my favorite income stocks. Click here for the details.
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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Fed rate cut a DUD! Fed rescues go WILD!

Fed rate cut a DUD! Fed rescues go WILD! by Martin D. Weiss, Ph.D.

While all eyes were focused today on the Fed’s rate cut, the big news was the Fed’s latest cockamamie effort to save world.
Indeed, just when you thought the insanity couldn’t get crazier, the Fed announced it’s now going to funnel a massive $120 billion of U.S. funds into Brazil, South Korea, Singapore, and Mexico.
And that’s on top of the IMF bailouts already committed to the Ukraine ($16.5 billion), Iceland ($2.1 billion), and Hungary ($25.5 billion)!
In response, some folks are cheering with glee, blindly believing that Mr. Bernanke can play Santa Claus, the Pied Piper and the Fairy Godmother all in one act.
But anyone with any experience with the real world is quickly coming to the realization that Mr. Bernanke is
Desperate — resorting to the most radical measures of all time.
Playing his last cards — realizing that if these last-ditch rescues don’t work, it’s game over.
Taking huge risks — that his rescue-the-whole-world schemes will backfire in the form of falling confidence in the U.S. government as a whole!
Meanwhile, the much ballyhooed Fed rate cut was a dud!
After all the hope and prayer implied in yesterday’s stock-market surge, today, the market literally saw a ghost: Just in the final 12 minutes of trading — from today’s post-rate-cut high to the closing bell — the Dow nosedived by an alarming 372 points!
Not exactly a polite “thank you” note to Mr. Bernanke for his half-point rate cut!
Bottom line: Some investors can be fooled some of the time. But the investors that move the market are painfully aware of one simple fact:
Mr. Bernanke cannot drop interest rates below zero!
He cannot force banks to lend money!
He can’t compel consumers to borrow, or make people spend.
Nor can he turn back the clock to undo decades of financial sins … or repeal the law of gravity and stop investors from selling.
Indeed, all of this week’s wild events merely underscore the wisdom of Mike Larson’s strategy:
To watch the bulls drive up the price of stocks until he can see the white’s of their eyes … and then to fire with all guns with his recommendations that help you profit massively when stocks plunge. All strictly with inverse ETFs!
Good luck and God bless!
Martin
P.S. For a quick heads up on what kind of investment Mike intends to recommend and when, click here.
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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The Chinese Perspective: What Global Recession?

The Chinese Perspective: What Global Recession? by Tony Sagami
You’ve probably never heard of the Canton Fair, but it is the largest trade fair in the world, where thousands of manufacturers, businessmen, and merchants gather to conduct business.
The Canton Fair is co-hosted by the Ministry of Commerce of the People’s Republic of China and the People’s Government of Guangdong Province, and organized by the China Foreign Trade Centre.
Also known as the China Import & Export Fair, the Canton Fair has been held in the spring and fall since 1957 and has the largest assortment of products, the highest attendance, and the largest number of business deals made at any trade show on the planet.
22,000 exhibitors and 200,000 buyers from more than 200 countries gather in Guangzhou (formerly known as Canton) to find everything from industrial products, textiles and garments, medicines and health products, gifts, and consumer goods.
At the most recent fair, a total of $38.2 billion worth of goods were ordered, accounting for a whopping 25% of China’s entire annual export total. The Canton Fair is simply the single most important business event of the year.
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Hey! Somebody needs to tell the businessmen at the Canton Fair that the world is falling into a deep global recession because the businessmen in attendance are too busy making money to listen to what the “experts” from Wall Street and CNBC keep telling us.
Exports Fuel China’s Unstoppable Economy
Get this: The number of exhibitors at the Canton Fair hit 53,000, 10% more than just six months ago.
The reason is simple — the export business is still booming. According to the Ministry of Commerce, China’s exports rose 22.3% to $1.07 trillion during the first three quarters of this year. In September alone, exports rose by 21.5% a year earlier and China boasted a trade surplus of $29.3 billion.
At the most recent Canton Fair, $38.2 billion worth of goods were ordered — a whopping 25% of China’s entire annual export total!
“Export figures do not seem to be very discouraging now,” confirms Zhang Yansheng, director of the International Economic Research Institute of the National Development and Reform Commission.
“China’s economic fundamentals are still strong, so are exports,” Yao Shenhong, a Ministry of Commerce spokesman concurs.
Example: Haier Group, the largest appliance manufacturer in China, reported a 10% increase in foreign sales in the first nine months of the year.
Of course, the good fortune isn’t universal. What is happening is that Chinese exports to the U.S. and Europe are rapidly slowing, but exports to its Asian neighbors, Russia, Latin American, Africa, and the Middle East are skyrocketing.
It may sound ironic, but exports to developed countries are plummeting but exports to emerging markets are soaring.
The reason for the dichotomy is simple: Developed countries are sitting on billions of quasi-worthless mortgage bonds, while emerging market countries never had enough money to invest in the toxic bonds our Wall Street alchemists created, packed, and peddled.
China, for example, has a closed financial system that severely limited how many Chinese companies, banks, and governmental agencies are allowed to invest in foreign securities. China simply doesn’t own a meaningful amount of our crappy mortgage bonds.
Even Chinese consumers are in solid shape. The total household debt as a percentage of GDP in the U.S. is more than 100%, but is only a meager 13% in China.
The result is that for the first time that I can remember in my 30-year investment career, the risk of investing in the developed countries is higher than investing in emerging markets.
Don’t Just Sit There, Get Busy
China’s good fortune in the midst of economic crisis in the U.S. may not make market conditions in the West more palpable, but it does offer a ray of hope. Here’s what you should do:
Step 1: Use rallies to reduce your U.S. holdings. The market has been very volatile, but volatility can be your friend if you use big dips as buying opportunities and big rallies as selling opportunities. That is exactly what I did last Monday when the Dow Jones soared by 936 points and I trimmed my U.S. holdings.
Make the most of market volatility by buying on big dips and selling on big rallies.
Step 2: Dump the station wagon for a Ferrari. Given the choice of hitching your investment wagon to a slow jalopy headed for the junk yard or a 200-mph high-performance sports car … I’ll take the faster ride every time. I suggest the same for your portfolio and recommend that you overweigh your portfolio with stocks, funds, and/or ETFs from Asia, Latin America, and the Middle East.
Step 3: Buy yourself some “haywire” insurance. I’ve been saying this for a long time, but I’ll say it again: I expect the U.S. economy and the U.S. stock market to get ugly. If things do get ugly, the best haywire insurance you can buy is gold, gold stocks, or gold funds.
Lastly, the one thing that you should NOT do is do nothing. Don’t let the volatility turn you into a deer-in-the-headlights investor who is too frightened to do anything. Doing nothing has been a very costly strategy in the last month and I expect the cost of inaction to go even higher.
Best wishes,
Tony
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Another Reason to Like Gold

Another Reason to Like Gold by Larry Edelson

The credit collapse is not entirely over. Nor is its impact on Main Street.
And as we saw yesterday, there will be more sell-offs, sharp ones that scare the dickens out of nearly everyone.
That’s why I suggest sticking mainly with natural resource-based companies that operate businesses which deal in assets that have intrinsic value — and that will be the main recipients of the next wave of what I call the “Great Re-inflation.”
At the top of that list is my all-time favorite: Gold.
You know I’m a gold bug. And given everything that’s happening in the world today, I’m more of a gold bug than ever before.
How can you NOT be in gold?
There are dozens of reasons I believe everyone must own some gold. But lately, there’s another one that’s rising to the surface …
China Is Soon Going to Make Some Big Buys In the Gold Market
Just yesterday, China’s central bank announced that its foreign-exchange reserves rose to a record $1.905 trillion.
If China were to lay this nearly $2 trillion in surplus reserves end-to-end using dollar bills, the trail would stretch for 193,813,130 miles. That’s enough to wrap around the widest part of the earth 7,752 times!
Clearly, Beijing’s piggy bank is overflowing with money. In fact, at nearly $2 trillion, China has the largest foreign reserves of any country in the history of the planet.
Compare it to Washington, which now has nearly $11.4 trillion in debts, not counting the contingent liabilities of the real estate crisis, Social Security or Medicare.
Whose paper currency do you think should have more purchasing power? Naturally, the yuan. Yet that’s not the case — the dollar remains stronger.
But not for long.
I warned of this a couple of years ago, but now the signs are even clearer: Over the next few years China is essentially going to corner the world’s gold market.
It’s one of the chief reasons I am now even more bullish on gold, expecting the price of the precious yellow metal to eventually exceed $2,000 an ounce.
Mind you, Beijing won’t intentionally set out to corner the gold market. But, in effect, that will be the end result.
Take it from me. I’ve met with central bankers, regulators, and gold traders in China and Asia. I know Beijing’s views on the yuan and gold.
You see, Beijing knows that the dollar’s status as a reserve currency is soon going to be history. Just like the pound sterling lost its status as the world’s reserve currency in the early 20th century.
And authorities in Beijing also believe that as China rapidly progresses toward superpower economic status, the yuan should be a world-class, stable medium of exchange.
They envision the yuan as a major international currency some day, with as much (or more) status than the U.S. dollar. That’s why they’re going to back the yuan with gold … loads of it.
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Plus, there’s another reason for Beijing to buy more gold as part of China’s piggy bank. China has an estimated $1.3 trillion invested in dollar-denominated investments. They can’t get out of the dollar quickly. It would destroy the U.S. economy which would have a direct negative impact on China.
So the smart thing to do: Hedge and diversify existing dollar holdings with gold.
Consider this: Right now, China has a mere 0.9% of its reserves in gold (600 tons). That’s the lowest of any industrialized economy! To put it into perspective …
The U.S. has 77.3% of its foreign reserves in gold.
The European Union has 23% of its reserves in gold.
Lithuania, Mozambique, and even tiny Nepal all have more of their reserves in gold than China.
Just to up its reserves to 5% in gold, Beijing would have to purchase $93 billion worth of bullion. That could easily send the yellow metal skyrocketing to more than $2,000 an ounce.
And if China were to match roughly half of the gold reserves held by the United States, it would have to buy another $636 billion worth. That kind of buying would send gold to well more than $2,000 an ounce. Probably to $3,000, or even higher.
My view: China has already started purchasing small amounts of gold. It’s one of the reasons gold is now holding support at its 1980 high in the mid-$800 level, well above important support levels on the charts from $600 up to $735 an ounce.
This is yet another reason I recommended you substantially increase your gold holdings back in mid-September.
I believe gold is still one of the best bets out there, loaded with huge profit opportunities. No matter what aspect of the market I examine, I see much, much higher prices to come for the precious yellow metal.
Best,
Larry
P.S. Make sure you’re on board with all my gold recommendations, which can be found in my Real Wealth Report. The October issue is going to press tomorrow. You can get that issue, and become a Real Wealth Report member for a mere $99.
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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Currencies and Cotton Candy Rate Cuts

Currencies and Cotton Candy Rate Cuts by Jack Crooks

I understand that the lending system is in bad shape. Or more specifically, that it’s barely functioning at all. We’re well past the point when central banks and governments around the globe inexplicitly declared it their duty to save their economies. But they really unleashed their helping hands this week.
That’s especially true of the coordinated rate cuts from many of the world’s Central Banks — everyone from the U.S. and Europe to China.
These moves have serious implications for all financial markets, but especially the currency markets. And today I want to tell you what I think is coming next.
Governments Make Bold Moves; Markets Shrug …
Stocks started the week with a horrendous Monday that basically stated, “Bailout package? So what?”
Monday was followed by an equally bad Tuesday.
So the Federal Reserve, and every other central bank you may have ever heard of, did what many had been hoping they would do. They cut their benchmark interest rates.
Ben Bernanke and the Fed cut rates this past week, along with just about every other Central Bank under the sun.
But the markets continued falling. In short, Wednesday simply deflated any hopes of recovery to which a very small minority might have still been clinging.
Throughout recent weeks, Chairman Bernanke has guided billions of dollars of credit into money markets, supported the Treasury’s $700-billion bailout plan, and taken steps to make accessing loans easier.
But until Wednesday, the Fed hadn’t caved in to the newest pressures rocking the markets with official interest rate cuts. And surely to their disappointment, it’s done little to better the current investment environment.
I Didn’t Think the Federal Reserve Needed to Cut; Here’s Why …
Even though the Fed Funds target had been stable at around 2%, the market-determined rate was already far lower.
Plus, as I mentioned, the Fed had already created and used so many other methods of pumping liquidity into the system.
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But the Fed did what it did, knocking another 50 basis points off an already measly 2% Fed Funds rate. But the Fed was only one guest at a rather big party that took place in the middle of the week:
The European Central Bank finally budged and knocked 50 basis points off its benchmark rate.
The Bank of England followed suit with 50 basis points.
The Swedish Riksbank cut by 50 basis points.
The Bank of Canada cut by 50 basis points.
The Swiss National Bank got in on the action by 50 basis points as well.
The Bank of China knocked rates down by 27 basis points.
The Bank of Japan offered their support, but made no change to rates.
Also note that a day before all these actions, the Reserve Bank of Australia sliced off 100 basis points. And a day after the rate cut party, central banks in Taiwan, South Korea and Hong Kong also joined in with rate cuts of their own.
When I say party, I mean it. Only investors never got the invitation to come share in the finger foods and free booze.
But at least the central banks were kind enough to toss some more easy money their way. After all …
When Everyone’s Already Heavily Indebted, What’s Left to Do but Make Debt Cheaper for Them?
Here’s the argument that central bankers and government officials make during crises like this:
Individuals, companies and banks are having trouble accessing credit.
This inability to secure credit is wreaking havoc on the growth of the economy.
By cutting interest rates, credit is made cheaper and encourages borrowing that will in turn stabilize growth.
Well, in reality, it’s not quite that easy or obvious. The government’s solution is a lot like a marathon runner fueling his body with cotton candy …
The runner may get quite a burst of energy from the cotton candy at first, but, sooner or later, his sugar high is going to peak and subsequently collapse.
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And in an effort to keep from losing his sugar high completely, the runner just takes in more and more cotton candy. The problem is the cotton candy intake becomes increasingly less effective … to the point of becoming unhealthy.
A sugar high can only last so long before it becomes a massive crash!
How could allowing cheaper access to credit, at a time when it’s “completely necessary” for the economy to function, become unhealthy for the economy?
My answer is that it’s not completely necessary.
The problem, as many have already mentioned, is a lack of confidence in the lending system. To a much smaller extent is the problem actually due to a lack of credit.
Easy access to credit — unnecessarily low interest rates and a “loans-for-everyone” mentality among banks — is what created the bursting bubble we’re dealing with right now.
Cheap money and easy access to loans have bred projects of low value and low profitability. If money was more difficult and costly to secure, these investments would have never happened in the first place.
Artificially low rates attract any ol’ Joe Schmoe who’s got a business idea — no matter if it’s building birdhouses out of popsicle sticks or selling cell phones to scuba divers.
Market determined interest rates, however, naturally weed out the birth of wasteful and absurd projects. This kind of growth is far healthier and more sustainable.
Surprisingly (and fortunately!) quite a few parties are learning lessons from excessive intake of credit. They’re not feeling so good anymore. And so they’re not willing to swallow any more cotton candy credit, no matter how cheap and how easily accessible it becomes.
What needs to happen is a period of cleansing and consolidation. Particularly with the banks.
Everyone needs to know which banks are solvent and which ones are being held together with paper clips and chewing gum.
The collapsing banks will need to liquidate. The solvent banks will be able to buy up assets on the cheap and solidify their own business. The result is a healthier entity that’s ready to run again.
The cotton candy credit being dished out is going to keep everything running a little while longer, sure. But that’s only going to delay the inevitable collapse of troubled institutions. And it will fail to restore confidence that some banks, who will actually escape this mess, will be willing to lend and borrow between one another at healthy, responsible rates.
In the end, of course, central banks make these decisions, not me. So …
What Do the Rate Cuts Mean for Currency Investors?
Like the $700-billion dollar bailout, these rate cuts aren’t going to have an immediate effect on the lending system or on confidence in the market. Let’s just keep our fingers crossed that they have a positive effect at all … ever.
To the specific point I’ve mentioned plenty of times in the last couple months … the Federal Reserve is ahead of the curve on interest rates. It seems likely to me that they have less distance to travel on the downside with policy rates.
Major central banks around the world, on the other hand, have quite a bit of room to play with. The potential for rates to drop a lot further in European and Antipodean countries will sustain the exchange-rate rebalance that’s currently working to the advantage of the greenback.
The ECB just got started on this rate cut business …
The BOE just resumed a much needed easing trend …
The RBA has gotten the rate cut momentum moving quickly …
And the RBNZ has set a comfortable pace for cutting rates that is far from coming to an end.
So if you’re seeing Fed rate cuts and automatically thinking the U.S. dollar will fall, you might want to get your brain off cruise control!
There are too many other factors that are going to keep the rates vs. currency trend in the U.S. turned upside down.
Am I saying that the U.S. dollar is officially out of its bear market? No. But things have turned up for the buck, even though it’s counterintuitive.
As I see it, now’s the time for the rest of the major currencies to feel the pain. And it’s time for the buck to lead the way out of this mess that’s engulfed the world’s financial system.
Best wishes,
Jack
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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Optimists: House prices expected to fall until 2009 (articles.moneycentral.msn.com)Paulson Credit Push Earns Jeers From Free-Marketers (bloomberg.com)Disaster capitalism, the new Manifest Destiny (eyeonmiami.blogspot.com)SIV Bailout Plan: Don’t Ask, Don’t Sell (seekingalpha.com)Text of Paulson’s Remarks on Housing (blogs.wsj.com)As Defaults Rise, Washington Worries (nytimes.com)Mortgage Securities Bailout Fund: A Bribe? (seekingalpha.com)Banks May Pool Billions to Avert Securities Sell-Off (nytimes.com)Boom Boom Tuesday (market-ticker.denninger.net)Wells Fargo, Regions Financial, KeyCorp Profits Miss (bloomberg.com)Wells Fargo Hit by Mortgage Woes (thestreet.com)Foreigners Sold Record $69.3 Billion in U.S. Assets (bloomberg.com)German bank hit by subprime crisis slashes results, directors leave (afp.google.com)Builder D.R. Horton Orders Fall (cnbc.com)D.R. Horton Orders Fall to Lowest in Almost Six Years (bloomberg.com)Housebuilder Outlook Falls to Record Low (biz.yahoo.com)8 Areas in the U.S. Most Unaffordable in World (efinancedirectory.com)Blame the Downturn on Homebuilders and Banks (doctorhousingbubble.com)Southern California house sales plunge 30 pct in Sept (reuters.com)2005 San Diegeo Sales (sandicor.com)2007 San Diego Sales (sandicor.com)
Bloomberg.com
market-ticker.denninger.net
eyeonmiami.blogspot.com
conotary.com

Why Financial Collapses Are Unavoidable

Why Financial Collapses Are UnavoidableAnd Government Actions May Be Backfiring
Open Letter to Dominique Strauss-Kahn, Managing Director of The International Monetary Fund (IMF)
From Martin D. Weiss, Ph.D., Chairman, Sound Dollar Committee
Dear IMF Managing Director Strauss-Kahn: This past Saturday, October 11, at a joint press conference by world economic leaders, you said:
“Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.”
Further, in an attempt to prevent that potentially traumatic outcome, some of the world’s largest nations have proposed a series of new steps, including massive direct injections of taxpayer capital into private-sector banks.
This brings us to a crossroads that can determine the fate of six billion people for decades to come, a dire reality that motivates me to write you today.
I am president of Weiss Research, Inc., an independent research corporation, and Chairman of the Sound Dollar Committee, a nonprofit, nonpartisan organization founded by my father in 1959.
The Sound Dollar Committee was instrumental in helping President Dwight D. Eisenhower achieve one of the only truly balanced budgets of the past half century. And in keeping with that tradition, we continue to promote fiscal responsibility, sound business practices, and prudent investing.
Over the years, we have learned how elusive these goals can be. And by the same token, I recognize the unusual difficulty of the current challenges you face.
However, it is undeniable that the new rescue proposals being made today go beyond the already-extreme efforts announced or undertaken previously, such as the $700 billion bailout package signed into law by President Bush ten days ago, the unprecedented $1 trillion in central bank liquidity injections during the prior week, and additional extreme measures by the U.K., Germany and other leading nations.
It is also undeniable that those efforts have not yet been effective, leading us to wonder if new efforts will be any different. Before implementing them, therefore, I believe it behooves us to consider some ominous trends:
1. Government interventions are backfiring.
Since the credit crisis burst onto the global scene approximately 14 months ago, each new government countermeasure seems to have backfired.
Rather than encouraging investors to make the rational choice of shifting assets to stronger hands, governments have inadvertently done precisely the opposite. They have promoted irrational complacency. They have encouraged imprudent inaction. They may have also prompted investors to shift some assets back to weaker hands.
Repeatedly, the authorities pursued a policy that made individual and institutional investors more confident than the circumstances warranted. This policy, in turn, prompted investors to buy more common shares in insolvent banks, more junk bonds in over-rated corporations, and more derivatives contracts based on unrealistic models — all despite abundant evidence that the banks’ balance sheets were continuing to deteriorate.
Earlier, various government measures seeking to reduce the panic — such as coordinated central bank intervention — did buy some time by temporarily reducing investor fears. And during those quieter interludes, policymakers were able to artificially drive down the premiums charged by lenders for higher risk loans.
But this was accomplished despite the deterioration in balance sheets.
In other words, each time governments intervened, the cost charged for risk came down, but the level of risk continued to rise. Instead of bringing stability to the marketplace, the authorities created a dangerous discrepancy between the two — between price and reality.
Result: As soon as the immediate effects of the interventions dissipated, and as soon as symptoms of the true risk levels resurfaced, there were sudden, explosive market adjustments.
Investors seeking to avoid devastating losses dumped their high-risk assets. Other investors, who otherwise might have not been unduly impacted by the turmoil, suffered parallel losses. And the general public, previously less cognizant of the financial turmoil, suffered surging anxiety.
The authorities may have exacerbated the very panic they were seeking to avoid. And now, as the public begins to connect the dots between government actions and market reactions, the quiet time bought with each new intervention has diminished or even vanished.
2. Government actions are too little, too late to stem the debt crisis.
Kindly refer to our white paper submitted to the U.S. Congress on September 25, 2008, titled “Proposed $700 Billion Bailout Is Too Little, Too Late to End the Debt Crisis; Too Much, Too Soon for the U.S. Bond Market.”
In it, we detail why the U.S. debt crisis alone was far larger than previously believed. As of the first quarter, it encompassed or affected
1,479 banks and 158 thrifts at risk of failure with $3.2 trillion in assets, or 41 times the bank assets estimated at risk by the FDIC.
$14.8 trillion in residential and commercial mortgages, $20.4 trillion in consumer and corporate debt, plus $2.7 trillion in municipal debts outstanding.
$180.3 trillion in notional value derivatives, of which one single institution — JPMorgan Chase — held $90 trillion, or 49.9% of the total U.S. market share.
$465 billion in credit exposure to derivatives, up 159% from one year earlier.
Today, less than three weeks later, it appears that many of these debts and bets are falling like a house of cards. Moreover, in retrospect, it appears that many of the efforts to support or sustain them may have been futile, wasteful, or both.
3. Government actions are too much, too soon for the debt markets.
In its Fiscal Year 2009 Mid-Session Review, Budget of the U.S. Government, the Office of Management and Budget (OMB) projected the 2009 U.S. federal deficit will rise to $482 billion, a major burden on U.S. debt markets. However, that OMB projection was made before the recent bailout commitments were known or even imagined.
Since then, the expenditures and liabilities announced or proposed by the U.S. government have easily exceeded $1 trillion.
However, for the world’s debt markets — the primary source of federal government deficit financing — the expectation of exploding federal deficits is damaging confidence. It may even be one of the factors responsible for the global paralysis of short-term credit markets. And it may also be one of the reasons why, this past Friday, October 10, we witnessed the worst-ever collapse of high-yield corporate bonds.
4. Government bailouts could endanger government credit and credibility.
The credit market contagion has spread in phases:
In the mortgage sector, it was initially confined to subprime mortgages. Then it reached the mid-level Alt-A mortgages. And now it has affected prime mortgages.
In short-term credit markets, it was first restricted to commercial paper issued by weak financial institutions. Next, it spread to the short-term paper of stronger financial institutions. And now it has hurt nonfinancial paper as well.
In bonds, it began with the most speculative junk bonds, then reached middle-tier bonds, and now has impacted most corporate bonds of all stripes.
Each time, frightened investors sought the safety of government paper. And each time, this fear factor drove up government bond prices while driving down their interest rates.
This may be giving U.S. Treasury officials the false impression that they enjoy strong investor demand for government securities and easy access to funds for more handouts to near-bankrupt corporations. But this influx of money may also be obscuring a frightening prospect:
Governments could be the next victims.
To the degree that the authorities pursue the purchase of bad bank assets, or to the extent that they go forward with the injection of government capital into a collapsing banking system, they may become subject to the same contagion of mistrust.
I implore you: Please do everything in your power to help prevent that from happening. If the governments’ heretofore stellar credit is sucked into this crisis, it could
make it much more expensive for governments to roll over their maturing debts;
make it difficult to raise the cash needed to maintain government operations; and
ironically, deprive authorities of the last weapon they have to help bring about a subsequent recovery: The credit and credibility of the world’s leading governments.
5. Government actions could aggravate, or even cause, the systemic meltdown they are seeking to prevent.
Reason should dictate that governments should do everything possible to liquidate insolvent institutions, quarantine the weakest institutions, fortify the strongest, and insulate the government’s own credit from the scourge. Instead, it seems that U.S. and European authorities are doing precisely the opposite. They are engineering
shotgun mergers that sweep bad assets under the carpet of otherwise stronger institutions;
bailouts that create zombie banks and corporations, weakening the system as a whole; and
new, bigger and unaffordable FDIC-type guarantees of bank deposits that further obscure the difference between worthy and unworthy banks.
The long-term, fundamental affect of these actions is widely known: They are corrosive. They cause far more losses and pain in the end.
What’s not so widely recognized is that the short-term consequences could be equally catastrophic: By
combining bad assets with good assets,
merging weak banks with strong banks, and
confusing risk with safety,
the authorities are merely making it more difficult for millions of savers and investors to discriminate between each of the above.
The result: Instead of shifting from riskier banks to safer banks, many people are exiting the banking system entirely.
Inadvertently, the authorities could be transforming what should have been a shift within the system to a run on the system.
Instead of a harsh, but ultimately manageable, collapse of the weakest institutions, they could be leading us toward the systemic meltdown you warned about this weekend.
6. Governments are squandering scarce capital that will be needed for a true recovery after any collapse.
No one wants a collapse.
We all abhor the tremendous hardship it will inevitably cause — not just for the few who have the most to lose, but also for the many who have lost hope of anything to gain.
But a financial collapse, no matter how dramatic, is not the end of the world. We have endured many such collapses before and we survived. We can survive this one as well.
Today, it seems the relevant debate is no longer whether or not a financial collapse is preventable. The collapse is already here.
Rather, the main topics worthy of discussion are how big the collapse will be, how long it will last, and what we can do today to maximize the chances of a healthy recovery in the future. Below, I provide my view on each of these topics separately:
The size of the collapse is not within our power to control. We cannot repeal the law of gravity; we cannot stop investors from selling. Nor can we turn back the clock to reverse the financial sins already committed. One way or another, the bad debts have to be expunged. And the events of recent weeks are telling us that a deflationary debt collapse may be the mechanism.
The duration of the decline depends on its speed. To the degree that we let the debt liquidation process happen naturally and manage it wisely, it should be short, fast and behind us soon; to the degree that we stop it from happening and sweep the debts under the rug, it could be long, slow and more tortuous.
It’s in the nature of the subsequent recovery that I feel you can have the greatest influence today. If you protect the credit of the financially sound institutions, they can be powerful resources to help bring about a recovery. However, if you prematurely squander our precious resources now, then any subsequent recovery is bound to be weakened and delayed.
I have four recommendations, as follows:
First, cut back the bailout and rescue efforts.
Second, protect the credit and credibility of sovereign government debts.
Third, preserve public resources for (a) emergency assistance to those that are rendered ill or destitute during a secular economic decline, and (b) carefully planned economic stimulus after a secular decline.
Fourth, foster an environment of public trust by guiding consumers to research that can help them better distinguish between low- and high-risk banks, insurance companies, and other financial institutions.
I know it will be very difficult. I realize millions of people must make great sacrifices. But with the right guidance and leadership, I am sure we’ll be ready to step up to the challenge.
Sincerely,
Martin D. Weiss, Ph.D.
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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Optimists: House prices expected to fall until 2009 (articles.moneycentral.msn.com)Paulson Credit Push Earns Jeers From Free-Marketers (bloomberg.com)Disaster capitalism, the new Manifest Destiny (eyeonmiami.blogspot.com)SIV Bailout Plan: Don’t Ask, Don’t Sell (seekingalpha.com)Text of Paulson’s Remarks on Housing (blogs.wsj.com)As Defaults Rise, Washington Worries (nytimes.com)Mortgage Securities Bailout Fund: A Bribe? (seekingalpha.com)Banks May Pool Billions to Avert Securities Sell-Off (nytimes.com)Boom Boom Tuesday (market-ticker.denninger.net)Wells Fargo, Regions Financial, KeyCorp Profits Miss (bloomberg.com)Wells Fargo Hit by Mortgage Woes (thestreet.com)Foreigners Sold Record $69.3 Billion in U.S. Assets (bloomberg.com)German bank hit by subprime crisis slashes results, directors leave (afp.google.com)Builder D.R. Horton Orders Fall (cnbc.com)D.R. Horton Orders Fall to Lowest in Almost Six Years (bloomberg.com)Housebuilder Outlook Falls to Record Low (biz.yahoo.com)8 Areas in the U.S. Most Unaffordable in World (efinancedirectory.com)Blame the Downturn on Homebuilders and Banks (doctorhousingbubble.com)Southern California house sales plunge 30 pct in Sept (reuters.com)2005 San Diegeo Sales (sandicor.com)2007 San Diego Sales (sandicor.com)
Bloomberg.com
market-ticker.denninger.net
eyeonmiami.blogspot.com
conotary.com

Black October Getting Blacker

Black October Getting Blacker by Martin D. Weiss, Ph.D.

Three weeks ago, on September 25, I sent you an email with the subject “Black October Dead Ahead.”
In it, Mike Larson wrote: “October is the month that brought us the Crash of ‘29 and the Crash of ‘87 — single-day declines in the Dow that would be the equivalent to 1,400 and 2,500 points in today’s market. And next Wednesday, a new killer Black October begins.”
Then, just in case you missed that e-mail, we sent you a similar warning three times in Money and Markets and posted it prominently to our Website.
We implored you to get out of the market, and we recommended inverse investments that naturally explode in value when stocks crash.
Now, just twelve days into the month of October …
We’ve seen the single worst week in the history of the Dow.
We have seen two of the three greatest one-day crashes in stock market history.
More than $8 trillion of stock market wealth has evaporated (since January).
And there’s no end in sight.
With credit markets frozen and the global economy coming unglued, it’s now very obvious that this is a secular bear market. And, according to Friday’s Wall Street Journal,
“Secular bear markets can last for 14 years or longer, like the one from 1968 to 1982. Typically, such bear markets are accompanied by repeated economic disappointments, as excesses that developed during long periods of growth are unwound. That was true during the 1970s, and it seems to be the case now, although the underlying economic issues are different.”
We hope they’re wrong. We’d actually prefer to see the bear market strike more swiftly and end more swiftly. But in either scenario, unless you’re absolutely fully prepared for what’s to come, you need start taking immediate protective action — ideally as soon as Monday morning!
For urgent instructions, see the 1-hour video recording of the emergency Q&A Conference we just held Friday. It’s available for immediate viewing right now. Just turn up your computer speakers and click here.
Good luck and God bless!
Martin
About Money and Markets
For more information and archived issues, visit http://www.gliq.com/cgi-bin/click?weiss_mam+111401-2+SUM1114SPLIT1+rob@contempowest.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.gliq.com/cgi-bin/click?weiss_mam+111401-2+SUM1114SPLIT1+rob@contempowest.com

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Optimists: House prices expected to fall until 2009 (articles.moneycentral.msn.com)Paulson Credit Push Earns Jeers From Free-Marketers (bloomberg.com)Disaster capitalism, the new Manifest Destiny (eyeonmiami.blogspot.com)SIV Bailout Plan: Don’t Ask, Don’t Sell (seekingalpha.com)Text of Paulson’s Remarks on Housing (blogs.wsj.com)As Defaults Rise, Washington Worries (nytimes.com)Mortgage Securities Bailout Fund: A Bribe? (seekingalpha.com)Banks May Pool Billions to Avert Securities Sell-Off (nytimes.com)Boom Boom Tuesday (market-ticker.denninger.net)Wells Fargo, Regions Financial, KeyCorp Profits Miss (bloomberg.com)Wells Fargo Hit by Mortgage Woes (thestreet.com)Foreigners Sold Record $69.3 Billion in U.S. Assets (bloomberg.com)German bank hit by subprime crisis slashes results, directors leave (afp.google.com)Builder D.R. Horton Orders Fall (cnbc.com)D.R. Horton Orders Fall to Lowest in Almost Six Years (bloomberg.com)Housebuilder Outlook Falls to Record Low (biz.yahoo.com)8 Areas in the U.S. Most Unaffordable in World (efinancedirectory.com)Blame the Downturn on Homebuilders and Banks (doctorhousingbubble.com)Southern California house sales plunge 30 pct in Sept (reuters.com)2005 San Diegeo Sales (sandicor.com)2007 San Diego Sales (sandicor.com)
Bloomberg.com
market-ticker.denninger.net
eyeonmiami.blogspot.com