Last fall, Gene Epstein of Barron’s interviewed me. In the resultant article, he wrote that I “…subscribe to the hoary fallacy that boom-and-bust cycles are mainly driven by consumer spending.”
And that was arguably the nicest thing he wrote about me that day.
That’s OK. I’m no stranger to criticism. Frankly, I don’t care what mainstream economists, market pundits or journalists say about me… So far, the evidence is stacked in my favor…
In 1988, when I first predicted the downfall of the Japanese economic machine, economists around the world were busy forecasting the exact day that Japanese GDP would overtake U.S. GDP (the Japanese, who were 2nd in GDP for many years, are now 3rd).
In 1992 I wrote The Great Boom Ahead, outlining how the U.S. would experience the greatest economic growth and stock market expansion in history over the following two decades. At the same time, other writers were on the speaking circuit touting their books with names like Bankruptcy 1995, The Coming Collapse of America and How to Stop It.
In 2003 I wrote a special report, “Demographic Trends in Real Estate,” in which I outlined how residential housing would peak around 2005 and then decline, wiping out wealth and crushing homeowners. At the same time, the Federal Reserve was congratulating itself on shepherding the economy through a magnificent expansion with little risk.
And every step of the way – 1988, 1992, 2003, and all points in between – I wrote about the greatest downturn of them all, which would happen somewhere between 2007 and 2009. This point needs no explanation.
My Research is Clear and Straightforward
If an economy is developed and wealth is in the hands of the population, then consumers will drive growth. This growth is fueled not just by spending one’s income, but also by borrowing to spend.
If the trend turns to contraction, with income being saved, debts being paid down and credit shrinking, then the economy contracts. And it hurts.
Welcome to 2012.
We are in the midst of the greatest economic contraction since the Great Depression. We call this the economic Winter Season.
And I saw it coming. I warned about it.
Now I’m telling people that this season is not over yet. Don’t believe the hype. Don’t listen to the hue and cry from market pundits, housing associations, or TV economists that talk about our wonderful prospects.
I agree that America will grow again, and will be very prosperous. But not today. We have to get through this wringing-out period where we flush out the excess debt and leverage in our economy. It is happening right now. It isn’t fun, but it’s necessary so that we can get back on track.
In the meantime, we are all living from one government intervention plan to the next.
Earnings or corporate activity is not driving markets today. Instead, markets around the world are clearly focused on what governments and central banks are doing.
Will the European Central Bank (ECB) fire another Bazooka? Will the Fed rescue the U.S. with more QE? Will Greece leave the euro? Is the bailout in Spain big enough?
It seems like every weekend there is a new program announced, a new initiative to stave off some financial calamity. And there’s a reason it is this way. Everyone knows that without continued government life-support, the markets would fall into comas. Arguably, this is where they should be, until the drugs of excess credit and stimulus have been worked out of their systems.
I’ve spent my working life forecasting boldly. While I have at times been wrong about the levels a market would reach, there is no doubt the direction of my forecasting has been spot on. I expect this market to suffer and go lower. Don’t take a chance with your wealth. Protect yourself before you wake up to an ugly Monday morning surprise.
P.S. To help you survive and prosper in the coming years, my team and I tirelessly research and analyze the demographic trends, predictable consumer spending patterns and technical indicators unfolding around us… then Adam O’Dell, the Boom & Bust portfolio manager scours the markets to find the investment opportunity best positioned to help investors profit from what we see ahead. And right now, I expect the Dow to roll over in the next few months and plummet to 3,300 within the next few years. Here’s what you need to know.
Ahead of the Curve with Adam O’Dell
A Triple Double for Boom & Bust Subscribers
I’ve added six positions to the Boom and Bust portfolios so far this year. Already, three of them have handed us double-digit percentage gains.