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Authors: David Wiedemer,Robert A. Wiedemer,Cindy S. Spitzer

The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy

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Contents

Acknowledgments

Introduction

Part I: Aftershock

Chapter 1: Bubblequake and Aftershock—A Quick Review of How We Got Here and What’s Next

You Are Not Asleep with the Sheep

Bubblequake! First a Rising Bubble Economy, Now a Falling Bubble Economy

From Boom to Bust: The Virtuous Upward Spiral Becomes a Vicious Downward Spiral

Why Don’t Most Conventional Investors See This Coming?

What’s a Savvy Aftershock Investor to Do?

Chapter 2: Since We Last Spoke . . .

Ignoring the Massive Money Printing (the Dollar Bubble) Is a Key Goal of the Cheerleaders

Potential Triggers That Could Accelerate a Downtrend in the U.S. Economy

A Closer Look at the Current U.S. “Recovery”

Bottom Line: “Recovery” Is Still Driven by Massive Borrowing and Massive Money Printing

Our Investment Outlook

The 2012 Presidential Election

In Conclusion

Chapter 3: Conventional Wisdom Won’t Work This Time

The Key to Conventional Wisdom: The Future Will Be Just Like the Past

The Myth of a Natural Growth Rate

Real Productivity Growth Is Slowing Down, Here and Around the World

Warren Buffett: Master of Conventional Wisdom

The Key to Aftershock Wisdom Investing: The Future Is Not the Past!

This Debate Is Really Not About Inflation or Deflation, It’s About Protecting the Status Quo with Denial

How to Invest in a Falling Bubble Economy

What’s a Savvy Aftershock Investor to Do?

Part II: Aftershock Investing

Chapter 4: Taking Stock of Stocks

Love Story: How Stocks Became the Heart of Most Investment Portfolios

How Are Stocks Valued? It’s All about Earnings

Conventional Wisdom on Stocks

Why Conventional Wisdom Is Wrong

What’s a Savvy Aftershock Investor to Do?

Our Current Recommendations

Chapter 5: Bye-Bye Bonds

What Are Bonds?

Conventional Wisdom on Bonds: The Safety of the Recent Past Means We Can Count on More Safety Ahead

Why Conventional Wisdom on Bonds Is Wrong

The Final Two Bubbles in America’s Multibubble Economy Will Pop

Bonds Will Fail in Three Stages

What’s a Savvy Aftershock Investor to Do?

Chapter 6: Getting Real about Real Estate

What Really Drives Real Estate Prices?

The Real Estate Bubble Rises

Conventional Wisdom about Real Estate: Continued Low Interest Rates for as Far as the Eye Can See

Why Conventional Wisdom about Real Estate Is Wrong

What’s a Savvy Aftershock Investor to Do?

Timing Your Exits Out of Real Estate

The High Cost of Doing Nothing

Chapter 7: Threats to the Safety Nets

All Insurance and Annuities Are Essentially Investments in Bonds, Stocks, Even Real Estate

Conventional Wisdom on Whole Life Insurance and Annuities: Perfectly Safe and Worth Every Penny!

Why Conventional Wisdom Is Wrong: Facing the Real 800-Pound Gorilla in the Room

What’s a Savvy Aftershock Investor to Do?

Chapter 8: Gold

Gold Was Golden for Centuries

Current Conventional Wisdom on Gold as an Investment: Warren Buffett Says Stay Away!

Why Conventional Wisdom on Gold Is Wrong

What’s a Savvy Aftershock Investor to Do?

How to Buy Gold

Owning Gold as Part of a Well-Diversified Actively Managed Aftershock Portfolio

How High Will Gold Go?

Part III: Your Aftershock Game Plan

Chapter 9: Aftershock Jobs and Businesses

The Rising Bubble Economy Created Huge Job Growth; Now the Falling Bubble Economy Means Fewer Jobs

Conventional Wisdom about Future Jobs Is Based on Faith that the Future Will Be Like the Past

Why Conventional Wisdom on Jobs Is Wrong

What’s a Savvy Aftershock Investor to Do?

The Falling Bubbles Will Have Varying Impacts on Three Broad Economic Sectors

Opportunities after the Bubbles Pop: Cashing In on Distressed Assets

Should I Go to College?

Chapter 10: Aftershock Retirement and Estate Planning

Types of Retirement Plans

The Conventional Wisdom on Retirement Plans

Why the Conventional Wisdom on Retirement Is Wrong

What’s a Savvy Aftershock Investor to Do?

Retirement Q&A

Estate Planning: Making the Most of Your Assets for Yourself and Your Heirs

Chapter 11: Your Aftershock Investment Portfolio

Aftershock Portfolio Strategy

Key Components

Do It Yourself or Bring in Help?

Timing—Better to Move Too Early than Too Late

The Last Resort: The Stock Market Holiday (the Ultimate Reason Why You Need to Move Early Rather than Later)

The Moral

Epilogue

Appendix: Additional Background on Stocks and Bonds

Index

Copyright © 2012 by David Wiedemer, Robert A. Wiedemer, and Cindy S. Spitzer. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at
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www.wiley.com/go/permissions
.

Important Disclaimers: This book reflects the personal opinions, viewpoints, and analyses of the authors. Nothing in this book constitutes specific investment advice or any specific recommendation for any specific individual with respect to a particular country, sector, industry, security, or portfolio of securities. All information is impersonal and not tailored to the circumstances or investment needs of any specific person.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Cartoons used with permission of Cartoon Stock,
www.CartoonStock.com
and Cartoon Bank.

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978-1-118-07354-4 (cloth); 978-1-118-22248-5 (ebk); 978-1-118-26109-5 (ebk); 978-1-118-23338-2 (ebk)

Acknowledgments

The authors thank John Silbersack of Trident Media Group and David Pugh, Laura Walsh, and Joan O’Neil from John Wiley & Sons for their relentless support of this book. We would also like to thank Stephen Mack and Jeff Garigliano for their help in writing this book. We thank Jim Fazone, Jay Harrison, and Nancy McSally for their work on the graphics, Michael Lebowitz for his help on the data, and Beth Gansner for her help in proofreading. We also want to acknowledge Christine Peglar’s and Jennifer Schoenefeldt’s help in keeping us organized.

David Wiedemer

I thank my co-authors, Bob and Cindy, for being indispensable in the writing of this book. Without them this book would not have been published and, even if written, would have been inaccessible for most audiences. I also thank Dr. Rod Stevenson for his long-term support of the foundational work that is the basis for this book. Dr. Jeff Williamson and Dr. Lee Hansen also provided me with important support in my academic career. And I am especially grateful to my wife, Betsy, and son, Benson, for their ongoing support in what has been an often arduous and trying process.

Robert Wiedemer

I, along with my brother, want to dedicate this book to our mother, who died late last year. She inspired us to think creatively and see the joy in learning and teaching. We also dedicate this to our father, the original author in the family. We also want to thank our brother, Jim, for his lifelong support of the ideas behind this book. Chris Ruddy and Aaron De Hoog have been enormous supporters of
Aftershock
. It’s been great to have such support. I also want to thank early supporters Stan Goldstein, Tim Selby, Sam Stovall, and Phil Gross. I also want to thank Dan Cohen and Michael Calkin for their support of this book. I am most grateful to Weldon Rackley, who helped my father to become an author and who did the same for me. A very heartfelt thanks goes to John R. Douglas for his very special role in making our books a reality.

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