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Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.
In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.
The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.
In the interview for his latest blockbuster Aftershock, Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” and the host quickly challenged this claim.
Wiedemer calmly laid out a clear explanation of why a large drop of some sort is a virtual certainty.
It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.
“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge,” said Wiedemer.
“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”
And this is where Wiedemer explains why Buffett, Paulson, and Soros could be dumping U.S. stocks:
“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”
No investors, let alone billionaires, will want to own stocks with falling profit margins and shrinking dividends. So if that’s why Buffett, Paulson, and Soros are dumping stocks, they have decided to cash out early and leave Main Street investors holding the bag.
Investors like Buffett and Soros are always selling or trimming positions in stocks. And buying or adding to other positions. That is what smart investors do. Companies always managed just fine with interest rates at higher levels and will do so again. Bonds will decrease in value as interest rates rise, that is a given. It is the way bonds work. Companies are sitting on large amounts of cash and average P/Es are at historic norms. I don't have any special insight, but anyone paying attention could see the real estate bubble long before it reached critical mass. I did, does that mean I am a forecasting genius? Or do I have to write a book detailing the obvious first?
As long as Barnanke is at the helm we do not have to worry about the stopping of printing money or a rise in the interest rate. He is committed because he knows he is propping up a zombie economy. Looking at GDP with out the extra trillion plus dollars in gvt spending the U S would be at the same place it was in 2009 or worse.
His term ends after this year and if they follow the playbook we will be getting a Volker and interest rates will rise. I think it will be Richard Fisher from the Dallas fed due to everything Barnanke does he is against.
One point I keep reading mostly in the politics forum and sometimes here from our friends on the left is interest rates are low and it is a great time for the gvt to borrow. But in the vid Wiedemer points out that 30 plus percent of gvt debt is in very short term bonds. So what happens when Uncle Benny is gone in 2014? 2015?
He also points that the stock market has followed the money printing and of course it has gone up. And when the spigot is slowed? I am glad I am poor and have very little to invest, it would drive me crazy trying to fight against FR policy and inflation to get a return. I choose the easy route if I can not hold it in my hand or put my feet on it I do not want it.
But be in good cheer he is right about there is always ways to make money in a up or down market. We all know he is right about that, good luck.
It's funny that people have to go back 5 months to find a story to fit their narrative, because the current story on Warren Buffet doesn't work for their narrative.
Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.
In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.
The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.
In the interview for his latest blockbuster Aftershock, Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” and the host quickly challenged this claim.
Wiedemer calmly laid out a clear explanation of why a large drop of some sort is a virtual certainty.
It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.
“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge,” said Wiedemer.
“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”
And this is where Wiedemer explains why Buffett, Paulson, and Soros could be dumping U.S. stocks:
“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”
No investors, let alone billionaires, will want to own stocks with falling profit margins and shrinking dividends. So if that’s why Buffett, Paulson, and Soros are dumping stocks, they have decided to cash out early and leave Main Street investors holding the bag.
[quote]Warren Buffett appeared on Bloomberg this week personally guarantee the safety of U.S. banks. Though Buffett doubtless has a thorough method for valuing banks, he mentioned three signs in particular of their growing strength coming out of the financial crisis. "The banks will not get this country in trouble, I guarantee it," he said. "The capital ratios are huge, the excesses on the asset side have been largely cleared out... we own bank shares and I personally own stock in banks... I do not see problems in these things."
Buffett also praised the banks for their large deposit bases, saying that that is fundamentally where their earnings are going to be driven from.
While Buffett has not revealed Berkshire Hathaway ( BRK.A )( BRK.B )'s fourth quarter portfolio yet, his third quarter holdings show just three banks worthy of inclusion in the portfolio: Wells Fargo ( WFC ), M&T Bank Corp ( MTB ) and U.S. Bancorp ( USB ). Together, they have a 22.8% weighting in it.
Wells Fargo ( WFC )
Of his three bank holdings, Buffett has been purchasing Wells Fargo the most aggressively by far. Between the first quarter of 2009 and the third quarter of 2012, he has amassed 12,230,677 Wells Fargo shares at prices ranging from about $16 to $34. In total he has 422,549,545 shares, or 8.03% of the company.[/QUOTE]
The question presented by the OP is similar to the daily discussion about the price of Gold. Will this be another year where the price trades sideways? Will it ever see $1,900 again much less the often claimed $2,000 by the end of 2011. Or as some others speculate will it break its current trading floor and actually go down to the $1,500 level again. What impact will Germany moving gold from the NY Fed back home have on future prices? What is their intent? What if they sell it? Does it reflect a lack of confidence in the international banking system? Either one could have a different price consequence for Gold. Germany Wants Its Gold Back—Should You Worry?
So with Gold prices down at this current minute is anyone really acting worried other than folks holding Gold for profit or that they purchased at a higher price? How do Gold supporters prop up the price of Gold so that they don't have their own mini After Shock? So many moving prices and most seasoned investors have long since learned that investing on fear is a path to something not so good.
I am not being a wise guy but was wondering how did Buffet do in the 2008 crash? Did he bail before the crash? or did he take a beating? This is a serious question that I do not know what the answer is?
I am not being a wise guy but was wondering how did Buffet do in the 2008 crash? Did he bail before the crash? or did he take a beating? This is a serious question that I do not know what the answer is?
Buffett is a long term investor so like other long term investors they stayed the course like any other market correction.
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