SOS Revenge of the Fallen

It will be back! With a vengence.

SOS Survival Guide

Martin Weiss, http://www.moneyandmarkets.com/, on 30 July 2009, said the full impact of deflationary depression is postponed due to the stimulus plan, but he insist his call on deflationary depression did not change an iota. It may be delay to the next fall or early 2010, the second tsunami.

Have we forgotten the size of the bubble!

1. consumption bubble - USD9.8 trillion


2. mortgate bubble - USD20 trillion


3. derivatives bubble - USD200 trillion (credit default swap USD60 trillion, MGS, CDO, CLO etc)


4. bailout bubble - USD24.7 trillion


5. social and medicare commitment bubble - USD58 trillion

The only different between US and Japan is, the size of bailout is bigger, the gearing is bigger, and the derivatives is definitely a lot bigger and the consumption bubble is also bigger.

MyView

US and EU is doomed, doubt there is a way out other than bite the bullet. The bailouts and stimulus manage to win back the confidence or buy time, so to speak, but, the fundametal did not change i.e. bubble problems is not solved, the second tsunami will be back with a vengence. It would be far bigger than the first one.

SOS Inverse ETFs

For those who believe in deflationary depression is yet to come, perhaps Inverse ETFs will help you prosper. Inverse ETF is like a ETF that short the market/assets.

Some of the Inverse ETFs are:-

DOG - short Dow 30

CMD - short commodity

SKF - short financials

SRS - short real estates

REW - short technology

EEV - short emerging market

Analysts that believe US & Europe is going to go through deflationary depression, where, most assets class investments will fall:-

Robert Prechter

Martin Weiss

Gary Shilling

Harry Dent

MyView

I personally believe the experts above said is true, based on facts, and figures and social mood as well. There are money to be made in a depression. Well, allocate a sum of money you can afford to lose, because this is a chance of a lifetime, in occur every 76 years. Well, if you got it wrong, meaning the market is not going into deflationary depression, there are higher chances that you still keep your job, so, that's not too bad. Once the deflation plays out (could be 2010 to 2014), the hyper inflation will sets in, the you move your investments into Commodities.

Well, if you read it wrongly, i.e. inflationary depression comes first, then you lose. So please do your homework, get prepare. Either case, you can have about 20% hedge over your call, either inflation or deflation. Refer to my article on Portfolio Allocation.

SOS Martin Weiss

The U.S. and most of Europe are buried in mountains of debts which, even in the best of circumstances, could take many years to unwind. Brazil, India, China, and others (such as Indonesia, Malaysia, and South Korea) are not.

According to the Fed’s Flow of Funds Accounts of the United States, at the end of the first quarter, the U.S. had $6.8 trillion in Treasury debt, $8.2 trillion in government agency debt, $2.7 trillion in municipal debt, $11.6 trillion of corporate debt, $14.6 trillion in mortgage debt, $2.5 trillion in consumer debt, plus $6.5 trillion in other debts.
Grand total: $52.9 trillion, the highest in history. (To see exactly where I get these numbers, click here.)

Moreover, the U.S. government has future obligations to Social Security, Medicare, and pensions that exceed $60 trillion … while U.S. banks now hold derivatives obligations exceeding $202 trillion, according to the latest tally by the OCC.

This is a huge, unprecedented burden to every single segment of our economy:
U.S. families are buried in their mortgages and credit cards, getting forced out of their homes by the millions.

U.S. cities and states are jettisoning essential services, abandoning decades-long commitments to their citizens.

U.S. corporations are defaulting on their debts in record numbers, with worse to come.

MyView

Some people said he is a pessimist, but, if you read his view, all based on hard facts and figures, he is merely explaining the figures and his expectations based on fact and figures. I will say he is objective and realistic, he just called a spade, spade. His father Irwing Weiss, personally encounter the same situation in 1929-1932, his view is based on experience (with the father's experience), it is highly believable.

Just compare if you ask the question in early March and now in July 2009, you will realise that most of the investor outlook change 360 degree, in a short span of 5 months.

Well, it is worth awhile to check out his book on The Ultimate Depression Survival Guide. I think, it is wise to listen to people like him, who is able to see the Bigger Picture. Of course, he was mainly refering to US and Europe, while he believe Asia should do fairly.

SOS Balance Your Portfolio

INFLATION

DEFLATION

GOLDILOCKS

Portfolio for Inflation, Deflation and Goldilocks


MyView

Note, this is meant for the American only, those who lives in Asia, you may like to reweigh it differently, but overall, the asset class seems OK. Btw, this is from Charles Schwab, not me. Investment must be independent, like what Jim Rogers said, however, one must conduct his or her own research, so as to know what went wrong or right, failing which, one may not win big. I believe, lots of reading and researching helps, however, don't forget what you did not learn in school, common sense and logic.

So, start doing your homework, there are still time. Anyway, it is both art and science, but knowing what went right or wrong is also important, or we will end up like a dog, chasing our own tail.

SOS the bounce is aging, but the depression is young

The Partial Recovery is Already Maturing Late February-early March was a great time to step aside from our bearish opinion. The outlook for a rally that would be “sharp and scary for anyone who is short” has pretty well come to pass. Our “All the Same Market” theme has ruled the entire time. In just three months, the S&P has leaped over 40 percent, the dollar has plunged 13 percent, gold, silver, oil and the CRB index of commodities have all rallied, real estate deals have picked up, and the economy is showing signs of recovery. Our prediction for a temporary turn toward optimism meant a rise in the availability of credit, which has fueled all these trends and events.

These outcomes are just as one would expect from a turn toward optimism in a deflationary environment where the ebb and flow of liquidity is the financial tail on the social-mood dog. It has been breathtaking to watch the swift return to all the old false beliefs: the bull market is back; inflation is the main threat; we are running out of oil; real estate is a bargain; and the economy is setting up to boom. We explicitly forecast that investors and economists would return to optimistic views, and it has happened. This is the power of a Primary degree second wave.

It shows up in the rally in our All-the-Same-Markets Index (ASMI), as shown above.

MyTake

Well the US Government has thrown about USD12.7 trillion into the market, and in their report on TARP will expect the total bill to be USD23.5 trillion. Wow! where are they getting the money from? I tend to listen to the elderly, especially people like Robert Prechter, Gary Shilling, Harry Dent, Martin Weiss and not forgetting Jim Rogers and Marc Faber. We don't have to share the same opinion, but i can tell, there are definitely wise. Didn't your parents tell you to listen to the wise guy, here they are LISTEN UP!

SOS The worst is over!

Not according to Martin Weiss, page 35 of this book called the Ultiamate Depression Survival Guide.

Phase 1 : bust in sub prime mortgage market, by 2008 this had already taken place

Phase 2 : A severe US recession, by 2008, this phase was beggining

Phase 3 : Depression and deflation. Still ahead!

The direct causes:

1. large inventories of unsold properties (is it around 2.0 million unsold)


2. abandon projects will cause neighborhood properties to decline (side effect)


3. 6 million adjustable rate mortgages that could reset at higher rates, forcing millions of additional foreclosure (it ain't over yet pal)


4. falling rents cause people to abandon their homes (more to come)


5. soaring unemployment (how to make payments)

Mytake

Martin manage to speak to his father, Irwin Weiss, before he passed away, who personally went through the 1929 to 1932, so, he speaks from experience. Instead of debating on the issue that the worst is over! might as well do some research on what Martin and Irwin said.

Total debt of US is about USD60 trillion or 4 times the GDP
Total medicare and social care is estimated also about USD60 trillion (in coming years, where to get the money?)
Total US derivatives bet is about USD200 trillions, well only about about 46 times of GDP

I do not believe it would take a genius to figure out the implosion of this debt, no amount of government can stop it, slowing it perhaps, but not stopping it.

Sell your stocks - before it's too late, according to Martin in Chapter 3.