Global Debt Crisis Red Alert, Sell Your Stocks and Bonds

The Market Oracle ^ | 2-16-2010 | Martin D Weiss

[blam]

Global Debt Crisis Red Alert, Sell Your Stocks and Bonds

Stock-Markets / Global Debt Crisis
Feb 16, 2010 - 02:09 AM
By: Martin D Weiss

One year and five months ago — armed with a 92-page white paper and 59,000 petitions — we warned Congress about the grave danger of government bailouts.

And to understand how this is likely to impact your investments this year, please listen carefully to what I have to say now about the NEXT major debt crisis — this time hitting sovereign governments …

The Spreading Rot

In a debt crisis, Washington, Wall Street and European governments still seem to think that the only way to “restore investor confidence” is to pump in massive amounts of rescue capital, bail out the sinking ships, and plug the biggest leaks in the system.

But they accomplish little more than spreading the bad debts from one place to another. And recent history has proven, ad nauseam, that the relief they provide is pitifully short-lived … while the toxic material they spread is inevitably lethal.

So many examples come instantly to mind, we need not even blink to remember:

* Bankrupt subprime lenders were rescued by mortgage giant Countrywide Financial in 2007 … Countrywide was rescued by Bank of America in 2008 … and BofA itself needed an emergency bailout by Uncle Sam in 2009.
* Similar sequences of big-fish-eat-small-fish contamination abound with the likes of Washington Mutual, Merrill Lynch, Citigroup, JPMorgan Chase, and many others.
* And still today, we see Fannie Mae, Freddie Mac, and the FHA taking over 90 percent of the entire U.S. market for mortgages … while, at the same time, we see the Federal Reserve and U.S. Treasury providing 90 percent of the financing.
* Ditto for companies and governments all over the world — not just in weaker economies like Greece, Italy, Portugal, Ireland, and the UK … but also in supposedly stronger ones like France, Germany, and even Switzerland.

Yet, despite everything, few have recognized the historical patterns that have emerged:

Pattern #1 The stampede to risk is a herd phenomenon.

[snip]

[unkus]

ping

[rface]

hmmmmm..... I have sold all stock except symbol OIL and I have shorted the S&P500 with symbol SH. For the last week these 2 ETFs have pretty much canceled each other out because of the quantity I have of each. OIL seems to be doing pretty good and trouble in the mid-east bodes well for OIL and bad for the markets in general - not even bringing the EURO into the equation. I’ll see what my strategy brings..... What do you think?

[dawn53]

If you want to know what’s likely to happen next in each major market — and transform that knowledge into a series of profit opportunities — be sure to attend our gala 2010 event this Thursday

"Life is pain, and anybody who tells you otherwise is trying to sell you something."...The Princess Bride.

Not that this guy isn't saying life isn't pain, but he knows the way out. Truth is, if government bonds collapse, and the country defaults, we're all in a world of hurt, no matter what financial strategy chosen. "And anyone who tells you otherwise is trying to sell you something."

[longtermmemmory]

I wonder about these types of articles. While everyone was panicing in March of 2009, the big boys were buying.

[kingpins10]

There is absolutely no way of knowing how many equities the corrupt Fed has bought in the last 10 months. They did the same thing in the 1920’s before the crash of 1929.

If one hasn’t sold yet, they’d better. The market has spiked too high too fast with not enough earnings to back it up.

[skimbell]

"...Life is pain, and anybody who tells you otherwise is trying to sell you something...The Princess Bride"

Exactly! The article's last line says it all.

"...be sure to attend our gala 2010 event this Thursday..."

[CitizenUSA]

There’s a relatively simple way to build wealth. Save and invest. Diversify. Do not put all of your eggs in any basket, whether that be stocks, gold, or bonds. Do not look for the quick score. Those kinds of investments mean you’re a gambler, not an investor. Invest over time in regular, affordable amounts, and you’ll average out market extremes.

[gitmogrunt]

With articles like this, please post an 800 number, where we can order the Books,CD's and T-shirts, or maybe I can Just attend the 2010 gala event.

What was that famous quote by P.T. Barnum... "A sucker is born every minute"??

[tongass kid]

Your statement is one of Modern Portfolio Theory and is not now Modern, does not factor in Black Swans we have seen lately and is in conflict with the growing concept of the New Normal. MPT net after taxes and fees essentially did not return a profit for the last decade of investing. An investment in cd had a better return then MPT.

[agere_contra]

I agree. The market is going to snap back to its March lows.

[ctdonath2]

The difficulty is that for most people that model means they don't actually have anything. Everything is invested in the trust of those managing the investment; if the market self-destructs as many predict, as in really implodes, there won't be anyone to get "your" investments back from.

[Tunehead54]

I'm just watch the genaral trend ... last time there was plenty of time to get out but I listened to my money guy ... ;-(

I think two or three -250+ days will be a good hint that its time to bail ...

[CitizenUSA]

I never wrote that CDs are a bad investment. It’s wise to diversify. That includes having cash on hand, some CDs, and maybe even a couple sacks of silver and/or gold coins (depending on what you can afford). It might not hurt to purchase some guns and ammo, too.

My point is that the best way to lose money is to look for the quick score. That usually means betting everything on a single investment in order to maximize your potential gain. That’s a good way to lose massive amounts of money.

[Tunehead54]

Oops - meant to add - with the Euro situation “iffy” some think a flight to quality - despite our problems - will boost US markets for at least a while ... if China bails though all bets are off ... I do sometimes wonder to what extent the gloom and doom articles are placed by “experts” shorting the market who will benefit from declines they help create ...

[RobRoy]

I used to tell my friends, back in high school (I graduated in 1972) that if we ever reached a point where I had to worry if the government would make good on my US Savings Bonds, that would be the least of my worries. ;)