

It's Time To Prepare For The Crisis Ahead - chailatte
http://www.forbes.com/sites/investor/2011/09/06/its-time-to-prepare-for-the-crisis-ahead/

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justin_vanw
> "junk bonds yields are soaring" no they aren't.
> [http://ycharts.com/indicators/moodys_seasoned_baa_corporate_...](http://ycharts.com/indicators/moodys_seasoned_baa_corporate_bond_yield#startDate=&endDate=&zoom=5)

> "there will be massive dumping when the support levels are broken" Really?
> Technical analysis? I wonder if he consulted his tea leaves as well.
> [http://en.wikipedia.org/wiki/Technical_analysis#Empirical_ev...](http://en.wikipedia.org/wiki/Technical_analysis#Empirical_evidence)

> "In my Wellington Letter, I have been looking for a serious crisis to start
> in early September." So he believes he can predict major market movements
> months in advance? Why doesn't he use that data to make a billion dollars
> (as he easily could if he has this remarkable power). Rather, than, say,
> selling that same 'information' for $500 per year?
> <http://www.dohmencapital.com/wellington.htm>

> "Money managers realized during the July-August plunge that they were way
> overinvested." Wow, that's a huge claim. All of them did? What about the
> incompetent ones, they somehow tuned into this realization somehow? Or does
> he mean that just in general a lot of them 'realized' this? Of course, when
> he says 'realized' he actually means 'guessed', since you can't realize that
> you were wrong about a future event that you have no evidence to predict one
> way or the other. Phrasing it this way is just an attempt to use the
> unscientifically derived (in this case, assumed) opinion of anonymous or
> nonexistent experts as evidence. This is the sort of hand waving 'logic' he
> uses in the entire article.

> "In the mean­time, the Pied Pipers will be out in force telling you to buy,
> so that they have someone to sell to." If Forbes isn't part of the Pied
> Pipers, who the fuck is? This is like Fox News talking shit about the
> 'mainstream media' while being #1 in the ratings.

> "Warren Buffett’s $5 billion investment in Bank of America (BAC) shows that
> a crisis will not be confined to Europe. I consider this a signal that
> things are much worse than they are saying." It is entirely evidence that
> Warren Buffet thinks the fundamental value of BAC is higher than what he had
> to pay for it. Generally betting against Warren Buffet won't be profitable.
> Wait a second! Isn't Warren Buffet a 'Money Manager'??? I thought they were
> all overinvested and trying to unload. Warren Buffet is by far the largest
> 'Money Manager' in the world, and yet he's diving in with both feet. For
> fucks sake!

> "Now that everyone knows there is a crisis in Europe, the one in China will
> soon be making headlines." So... They won't sell us stuff anymore? They
> barely import anything from the west, so if they go into some kind of crisis
> they still won't, but their exports will get cheaper and demand for oil and
> natural resources will go down worldwide.

> "For more strategic recommendations, read September 5′s issue of the
> Wellington Letter." LOL, this entire article is just an advert.

This author is just full of shit on every point.

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gaustin
How much of this doom and gloom is it reasonable to worry about? How much of
it is marketing for the kinds of books this guy writes, which seem of the same
theme?

~~~
rnemo
It's always reasonable to be cautious, even wary. Doubly so these days.
Throwing caution to the wind is what got the US economy into this mess. Never
stop being cautious when dealing with any sort of market.

That said ever since the end of 2008 you can find a Forbes or WSJ opinion
piece not less than once a month about how within the next six months the
entire planet is going to fall straight to bits and theres nothing you can
really do about it, but heres a few things to do to make you feel better. And
those things always happen to conveniently be things that make the problem
even worse, basically putting your money into a mattress. Another common theme
is that the fact the government is spending a dime at all on anything is whats
causing the problem, despite the fact that the US governments deficit problems
only play a small part in the overall economy (consumer confidence, lack of
hiring, and etc are all more important woes).

This particular article is bad enough that I really wish I could downvote it.
It's a scare article marketed as journalism and I think it's pretty insulting.

~~~
TomOfTTB
I'm sorry but you're wrong on just about everything here.

1\. While I don't know the articles you speak of you can't blame commentators
for being off on predictions if the Government is doing everything it can to
goose the economy. You say the national debt is a small amount of total debt
and that's true. But the governments of the world have also been taking other
steps like printing money and artificially keeping interest rates down (at 0
in fact). These are things that could help the economy recover but they are
also things that would put off a crisis if it was coming.

2\. No one would suggest putting money in your mattress because money loses
value. Take a look at the dollar index: <http://bit.ly/qO0F7X> So the dollar
has lost about 35% of its value since 2001

~~~
rnemo
1\. I can and will continue to blame the commentators and the respected
publications in the financial world who give them voice for consistently
publishing pieces that not only turn out to be wrong but aren't doing anything
to help the problem. I really don't care what the government is or isn't
doing, it's at best irresponsible to keep on publishing articles that doomsay
to no result when investor confidence, employer confidence, and consumer
confidence are such important parts of economic recovery.

2\. I was using metaphor when talking about stuffing money into mattresses,
the point being that most of the time the recommended actions for saving the
individuals money do nothing good for the overall economy, instead the actions
just provide a potential safety blanket. In terms of talking about economic
ups and downs and how to prevent them, these actions have not much more effect
than shoving money into a mattress

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joshcrews
I would take this seriously. The causes of crisis of 2008 were never resolved
just addressed with more debt and more money-creation. A financial system
collapse like 2008 but without a rescue could happen this fall.

Steps to prepare: think of the power outages of a hurricane, with the rioters
of London, with the austerity of the 30's depression. What would you want in
advance to prepare for some combination of either or all of those happening in
the near future?

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outside1234
it does feel like we are at the frontend of a disaster - its clear the US
can't keep spending like this but yet we propose more stimulus.

its the same in Europe. nobody believes that Greece is getting out of this
without defaulting. yet they keep sending money. it's crazy.

i suspect its going to end badly - either a major currency devaluation or a
major recession as we are forced to balance our budget (and hence pull a lot
of government spending out).

~~~
rvkennedy
It's clear actually, that the US must increase spending, increase taxes. You
spend to get out of recession, or you cut and make it worse, as has been
demonstrated in every recession since records began. The failure to spend has
brought us to a double-dip. For some grounding in economics, try the
following: [http://www.amazon.com/Macroeconomics-N-Gregory-
Mankiw/dp/071...](http://www.amazon.com/Macroeconomics-N-Gregory-
Mankiw/dp/0716752379).

Update: For a more specific analysis of an analogous situation - the Japanese
"lost decade", try: [http://www.amazon.com/Holy-Grail-Macroeconomics-Revised-
Rece...](http://www.amazon.com/Holy-Grail-Macroeconomics-Revised-
Recession/dp/0470824948/ref=sr_1_16?s=books&ie=UTF8&qid=1315770747&sr=1-16)

~~~
_delirium
It is a pretty strange situation, where a bunch of people are somehow fixated
on "hyperinflation" and deficits for political reasons, but economists on
_both_ sides of the political spectrum are surprisingly in agreement that
that's crap. Perhaps they're wrong, but I'm more confident in the predictions
of a moderate conservative with solid macroeconomic understanding, like Greg
Mankiw, than I am in the predictions of people like Lew Rockwell, who have
been consistently wrong for 25 years now with the same, self-serving
predictions (<http://hyperinflatingyet.com/shame.html>).

Maybe _this_ time they're right, even though they were wrong in 1985, 1988,
1993, 1998, 2003, ...; but I doubt it.

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simpsond
I am no economist... so this is me trying to understand the situation. Doesn't
news of imminent economic failure impact the economy negatively? If enough
people are afraid to spend, because they are worried about money, then they
slowing the economy. Once the forward economic momentum slows and wallets get
thinner, the economic situation degrades further. Am I way off base here? It
seems a self-fulfilling prophecy.

~~~
rnemo
Investor confidence and consumer confidence are both very important factors in
how well the market does over any given period of time. So yes, these doom and
gloom articles tend to be somewhat self-fulfilling a lot of the time.

