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This is one time I wish our timing hadn’t been so spot on …
Back in mid-September, as we were preparing for our Bear Market Defense Forum online video event, I was worrying that perhaps our market outlook was too pessimistic — that, after so much relentless selling this year, perhaps stocks were getting close to a bottom?
After all, the market was already down over 20% from its highs. Many well-respected experts were saying at the time that stocks were “oversold” and a rally was “overdue.”
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But we didn’t see it that way. The “real time” data we monitor carefully at Weiss Capital Management, told us something very different. It told us that this bear market had much further to go.
I wish today, some 10 weeks or so later, that I could say we were too bearish. But facts are facts and our conclusions were inescapable: We warned viewers, back then to expect more turmoil ahead, saying the current bear market may be only HALF over.
As it turns out, we were right. Since the Bear Market Defense Forum first aired on September 24th, stocks plunged much further. The S&P 500 Index declined 53% from its high — a steep loss that is twice as deep as it was in mid-September.i
I sincerely hope our warnings didn’t fall on deaf ears. Hopefully, viewers took these warnings seriously, and took steps to help defend their wealth from the clutches of this punishing bear market. If so, then we were successful. If not, then it’s still not too late for you to defend your savings, and potentially grow your wealth, even in the midst of this brutal bear market.
But you have to act to participate. We urge you to take defensive steps now, because the sheer magnitude of financial loss, credit stress, and economic strain we have seen so far is almost unprecedented.
In fact, since the Bear Market Defense Forum first aired …
» Banks Continue to Crumble: Credit LOSSES and write-offs at financial firms around the world are nearing the $1 TRILLION markii but the carnage for equity investors is much worse …
» Stocks Continue to Tumble: The Dow Jones Industrial Average stumbled another 2,355 points — on pace for it’s worst yearly decline since 1907 — 101 years ago! Stock markets worldwide have lost ANOTHER $14 TRILLION in market value in just the past two-months!iii
» Throwing Good Money After Bad: The Federal Reserve Bank’s balance sheet ballooned to a massive $2 TRILLION in reserve bank credit extended to FAILING banks and financial firms.iv
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» A Year Later and Deeper in Debt: Just over one-year since the credit crunch began, American taxpayers are now on the hook for an estimated $8 TRILLION in total spending and “commitments” by the government in its desperate attempt to prevent a total meltdown of the financial system — yet stocks continue to tumble, banks refuse to lend, and the economy keeps sinking!v
In response, the U.S. Treasury and Federal Reserve are writing blank checks and issuing IOUs that could leave you and me … our children and grandchildren … and perhaps even our grandchildren’s children, holding the bag on massive deficits as far as the eye can see.
Now, more businesses and industries are lining up in the halls of Congress; their hands held out for even more government bail-out money … where will it END?
How Much Worse Will This Bear Get?
This treacherous bear market in stocks continues to hit new lows. In fact, take another look back at the first chart above — you can see that every red cent of profit earned in the S&P 500 since 2002 has vanished into thin air.
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Five full year’s worth of wealth creation — completely wiped-out in just over 12 months. It’s as if someone pushed the reset button on the last bull market … perhaps all the wealth we saw during the bull was all just an illusion to begin with?
Regardless, it’s clear that we’re in the grips of a secular bear market today that is similar to the see-saw decline experienced in U.S. stocks from 1966 to 1982, or perhaps even worse. We may be in store for an even more punishing bear market and deflationary spiral similar to what Japan has been struggling with for the past 20 years.
Looking back, our primary goal for the Bear Market Defense Forum was to brief investors on our outlook for the economy and stock market. Both were already under severe stress in September — a situation we had been anticipating and preparing for since last year.
The “real time” indicators we follow told us we were already in a recession, and pointed to an economic contraction much worse than average. We can see this clearly in soaring credit spreads — the interest rate difference between ultra-safe Treasury bonds and other assets.
What else? Unemployment insurance claims were also soaring to their highest levels in years …
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Junk bond spreads were going through the roof, and credit default swap prices on America’s biggest banks soared, telling us that the credit crunch was getting WORSE not better …
Commercial paper rates for top rated triple-A borrowers surged to panic levels …
Even short term interest rates — the rates that big banks charge each other to lend money overnight (Libor rates) — soared to unprecedented high levels!
These indicators and more shouted loud and clear — and months ahead of time — to expect more trouble ahead in the stock market. In September, we said that most investors were only just beginning to realize that the U.S. economy was headed for a severe recession.
Even after a wicked decline in 2008, here’s why we see more potential trouble ahead in 2009…
Better Late than Never: U.S. Economy Now
“Officially” in Recession
Dateline December 1, 2008: National Bureau of Economic Research says economy in recession … and it began in December 2007!vi
At Weiss Capital Management, our research told us early on that we were already in a recession, which we detailed in our Bear Market Defense Forum. Only now, one-year later, has this recession “officially” been declared; far too late to protect yourself after-the-fact.
Even with the official declaration, there are still many unanswered questions: How long could this recession last and how deep will the economy contract? How much further can home prices fall? How far down will the stock market go?
Our view: By and large, the stock market selloff that we have witnessed so far has been mainly due to investor concerns over housing and the Wall Street financial crisis — but NOT the result of any recognition that Main Street America could be in store for a DEEP and PAINFUL recession. If anything, recent data tells us that our current economic slump is only accelerating.
This is a critically important point to understand, because we believe the GREATEST RISK for investors going forward is MORE disappointment. Over the next year, and perhaps beyond, we can expect: mounting bankruptcies, more job losses, further wealth destruction. In fact, we may witness the worst recession in American history since the Great Depression.
We’re likely to see steeper earnings disappointments, deeper worries about home foreclosures, and debt defaults, across the entire American economy — as other sectors are hit — retail, autos, and technology — for example.
It’s true that stocks have already declined significantly, and powerful short-term rallies could come at any time. However, once investors recognize the full magnitude of the trouble we’re facing — a deep recession with no quick or easy way out — then we’re likely to see even more market losses ahead.
In other words: there could be MANY false-starts and dashed hopes in 2009 before this bear finally goes back into hibernation— and you should be prepared!
Your Bear Market Defense Plan
Weiss Capital Management can play a vital role right now in helping you defend your wealth. We have navigated challenging markets before, and have strategies that are specifically designed for these difficult market conditions.
Here are the steps we believe you should take RIGHT NOW to help safeguard your wealth in this treacherous investment climate:
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- STEP #1: If you missed our exclusive online Bear Market Defense Forum video DON’T WORRY, you haven’t completely missed the boat. The video is off-line, but you can still read an edited transcript of the presentation:
- STEP #2: If you’re looking for a way to help DEFEND your wealth from the clutches of a SEVERE bear-market— and perhaps potentially earn gains as stocks and bonds decline— then we urge you to consider the Weiss Bear Strategy. For more information:
GO HERE
Weiss Bear Strategy
Bottom Line: Your hard-earned wealth is STILL VULNERABLE to major risk of loss in a continuing bear market decline, but you CAN take steps now to help defend yourself and help preserve your investment portfolio.
Before the markets break any more records…on the downside… you should consider the Weiss Bear Strategy for a portion of your portfolio.
To get started right away click here now… or for faster service, call a Weiss Capital Management Financial Advisor today at: 800-814-3045.
Best wishes,
Mike Burnick
Director of Research and Client Communications
Weiss Capital Management, Inc.
Sources:
i Bloomberg data, 12/2/08
ii Bloomberg: “U.S. Stocks Advance, Rebounding From Worst Drop Since October,” 12/2/08
iii Bespoke Investment Group: “DJIA: Ten Worst Years Up Until Nov. 13,” 11/13/08 Bloomberg data, 11/17/08
iv Federal Reserve Statistical Release; Bloomberg data, 11/13/03
v Bloomberg: “U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit,” 11/24/08
vi Bloomberg: “U.S. May Be in for ‘Great Recession,’ Longest Postwar,” 12/2/08
*Weiss Bear Strategy Complete Performance:
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Weiss Bear Strategy — Returns Thru 9/30/2008
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| 3rd Qtr Total Return | YTD Total Return | 1-Year Total Return | 3-Year Annualized Return | 5-Year Annualized Return | Since Inception Annualized Return (12/31/00) | Since Inception Cumulative Return (12/31/00) | |
| Weiss Bear Strategy Net Returns | 5.30% | 11.69% | 12.47% | 6.34% | 0.60% | 4.21% | 37.60% |
| S&P 500 Index | -8.37% | -19.29% | -21.98% | 0.22% | 5.17% | 0.17% | 1.31% |
Net returns are based on a composite of actual client accounts and include actual management fees, commissions and other similar fees charged on transactions, and reinvestment of dividends, income and capital gains.
S&P 500 Index: The S&P 500 assumes the reinvestment of dividends and capital gains, and excludes management fees, transaction costs and expenses. It is not possible to invest in an index.
Past performance is not indicative of future returns and, as with any managed program, it is possible to lose money by investing in this strategy. For more information, read the WCM Form ADV Part II and program materials before investing.
About Money and Markets
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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.
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