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The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy, 2nd Edition



The old ways of investing are over. Completely over. Not only are we facing a falling multibubble economy due to decades of declining U.S. productivity growth, we now have a falling world bubble economy, too. The conventional wisdom investing that worked so well in the past is becoming increasingly ineffective. Worse, clinging to the old ways will send your hard-earn assets to "money heaven" faster than in the global financial crisis of 2008—only this time we won't have a quick rebound.

From the authors who accurately predicted the domino fall of the conjoined real estate, stock, and private debt bubbles that led to the financial crisis of 2008, comes the definitive guide to protection and profit in 2014 and beyond in the next global money meltdown.

Based on the proven predictions of the New York Times bestseller Aftershock, every chapter of this fully revised second edition of The Aftershock Investor has been extensively updated with even more actionable insights and detailed advice about what smart investors need to know right now, before the worldwide Aftershock hits. Here you can:

  • Discover why this "recovery" is 100 percent fake
  • Protect your investment portfolio and other assets in the coming multibubble pop
  • Make wise real estate decisions that fit your particular situation
  • Limit your exposure to the coming market cliff, especially in retirement
  • Learn how to buy gold, even with limited finances
  • Take full advantage of new investment opportunities in the aftershock ahead

Now is the time to discover this entirely new approach to investing—before it's too late.

DAVID WIEDEMER, PhD, is a world leader in macroevolutionary economic analysis. His work in information dynamics, technological evolution, and economic history forms the basis for the predictions in the Aftershock series of books. Dr. Wiedemer is the Chief Economist for Absolute Investment Management. He is also a Portfolio Manager for the Aftershock Strategies Mutual Fund (SHKNX). Dr. Wiedemer holds a doctorate in economics from the University of Wisconsin-Madison.

ROBERT A. WIEDEMER is a Managing Director of Absolute Investment Management, a macro-focused money management firm that is in alignment with the macroeconomic analysis and perspective of Aftershock. He is also a Portfolio Manager for the Aftershock Strategies Mutual Fund (SHKNX). Mr. Wiedemer holds an MBA from the University of Wisconsin-Madison.

CINDY S. SPITZER is an award-winning author who has collaborated on more than two dozen books, including Chicken Soup for the Soul, Buy and Hold is Dead (Again), and America's Bubble Economy. Ms. Spitzer is President of Aftershock Consultants, a consulting firm that provides support and insights to hundreds of individuals, families, and businesses worldwide, based on the macroeconomic ideas in Aftershock.

Acknowledgments xi

Introduction xiii

Chapter 1 This "Recovery" Is 100 Percent Fake 1

Isn't a Fake Recovery Better than No Recovery at All? 2

If the Aftershock Has Not Been Canceled, Why Hasn't It Happened Yet? 5

Still Not Sure This Recovery Is 100 Percent Fake? 14

Don't Believe the Stimulus Has to Eventually End? There Is a Limit to What the Government Can Do 20

Wondering Why the Aftershock Hasn't Happened Already? "Animal Spirits" Are Keeping Us Going 21

Please Prepare Now 23

Part I: Aftershock

Chapter 2 Bubblequake and Aftershock--A Quick Review of How We Got Here and What's Next 29

Not Asleep with the Sheep 30

Bubblequake! First, a Rising Bubble Economy; Now, a Falling Bubble Economy 32

Future Inflation Will Cause Rising Interest Rates 43

From Boom to Bust: The Virtuous Upward Spiral Becomes a Vicious Downward Spiral 46

Why Don't Most Conventional Investors See This Coming? 52

What's a Savvy Aftershock Investor to Do? 53

Chapter 3 Aftershock Update: They Read Our Playbook--The World Is Printing Money 54

Central Banks Gone Wild 54

Economists Continue to Ignore the Risks of Money Printing 57

Why Isn't Inflation Higher Now? 60

Even Before We Get High Inflation, Other Potential Triggers Could Accelerate a Downtrend in the U.S. Economy 64

Chapter 4 The Market Cliff 73

The Market Cliff Won't Be Just a "Down Cycle" 73

Hitting the Market Cliff 77

The Last Resort: A Stock Market Holiday 81

When Is the Best Time to Get Out of the Stock Market? 84

Chapter 5 Conventional Wisdom Won't Work This Time 87

The Key to Conventional Wisdom: The Future Will Be Just Like the Past 89

The Myth of a Natural Growth Rate 91

Real Productivity Growth Is Slowing Down, Here and Around the World 93

Warren Buffett: Master of Conventional Wisdom 95

The Key to Aftershock Wisdom Investing: The Future Is Not the Past! 99

This Debate Is Really Not about Inflation or Deflation, It's All about Protecting the Status Quo with Denial 106

Part II: Aftershock Investing

Chapter 6 Taking Stock of Stocks 117

Stocks: A Love Story 118

How Stocks Became the Heart of Most Investment Portfolios 122

In Theory, When You Buy Stocks You Are Buying Future Earnings 123

Conventional Wisdom on Stocks 130

Why Conventional Wisdom Is Wrong Now 134

What's a Savvy Aftershock Investor to Do? 138

Chapter 7 Bye-Bye Bonds 141

How Do Bonds Make Money? "Total Return" Is the Key 142

Conventional Wisdom on Bonds: The Safety of the Recent Past Means We Can Count on More Safety Ahead 148

Why Conventional Wisdom on Bonds Is Wrong Now 151

Bonds Will Fall in Four Stages 156

What's a Savvy Aftershock Investor to Do? 160

The Bottom Line for Bonds 163

Chapter 8 Getting Real about Real Estate 165

Real Estate Is Still a Bubble 166

What Really Drives Real Estate Prices? 167

After the Fundamental Drivers of Real Estate Began to Slow, the Bubble Started to Rise 169

Why Conventional Wisdom about Real Estate Is Wrong 171

What’s a Savvy Aftershock Investor to Do? 176

Timing Your Exits Out of Real Estate 189

The High Cost of Doing Nothing 192

Chapter 9 Future Threats to the Safety Nets 193

All Insurance and Annuities Are Essentially Investments in Bonds 194

Conventional Wisdom on Whole Life Insurance and Annuities: Perfectly Safe and Worth Every Penny! 195

Why Conventional Wisdom Is Wrong: Facing the Real 800-Pound Gorilla in the Room 201

What's a Savvy Aftershock Investor to Do? 205

Chapter 10 Gold 211

Gold Was Golden for Centuries 215

Current Conventional Wisdom on Gold as an Investment: Stay Away! 216

Why Current Conventional Wisdom on Gold Is Wrong 219

What's a Savvy Aftershock Investor to Do? 222

How to Buy Gold 225

Owning Gold as Part of a Well-Diversified Actively Managed Aftershock Portfolio 231

How High Will Gold Go? 232

Part III: Your Aftershock Game Plan

Chapter 11 Aftershock Jobs and Businesses 239

The Rising Bubble Economy Created Huge Job Growth; Now the Falling Bubble Economy Means Fewer Jobs 240

Conventional Wisdom about Future Jobs Is Based on Faith that the Future Will Be Like the Past 241

Why Conventional Wisdom on Jobs Is Wrong 243

What's a Savvy Aftershock Investor to Do? 244

The Falling Bubbles Will Have Varying Impacts on Three Broad Economic Sectors 247

Should I Go to College? 257

Opportunities after the Bubbles Pop: Cashing In on Distressed Assets 257

Chapter 12 Aftershock Money Smarts 260

Don't Let Spending Become the Achilles Heel of Your Aftershock Preparations 260

Savings: How Much Is Enough? 264

Borrowing Money before, during, and after the Aftershock 269

Saving and Borrowing for College 274

Summing It Up 278

Chapter 13 Aftershock Retirement and Estate Planning 280

Why Conventional Wisdom on Retirement Is Wrong 282

What's a Savvy Aftershock Investor to Do? 285

Should I Use a Retirement Calculator to See if I am on the Right Track? 291

Should I Take Social Security Early? 292

Estate Planning: Making the Most of Your Assets for Yourself and Your Heirs 292

A Good Retirement 295

Chapter 14 Your Actively Managed Aftershock Portfolio 297

This Economy Is Evolving--Your Investments Should Evolve, Too 298

The Three Goals of an Actively Managed Aftershock Investment Portfolio 299

Creating Your Actively Managed Aftershock Portfolio 302

Active Portfolio Management: Timing Is Everything 311

Warning: Active Management of Short Term Investments is Riddled with Potential Danger 318

Better to Move Too Early than Too Late 319

Government Intervention Makes Active Portfolio Management More Diffi cult 320

Do It Yourself or Bring In Help? 322

The Bottom Line 323

Appendix A Additional Background on Stocks and Bonds 327

Stocks 327

Bonds 334

Inflation, Interest Rates, and the Aftershock 343

Profiting from a Moving Market 345

Profiting from Market Moving 346

Shorting in the Aftershock 349

Appendix B Are the Stock and Gold Markets Manipulated? 353

Statistical Manipulation 360

Gold Manipulation 362

Market Manipulation Summary 365

Investment Impact 365

Epilogue 367

Index 369