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Portfolio > ETFs > Broad Market

Depressed Yet?

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Just as many financial experts are telling us that economic conditions have hit bottom and won’t deteriorate further, Martin Weiss, editor of Safe Money Report, offers a far gloomier outlook. Indeed, his new book, The Ultimate Depression Guide, is based on his premise that we’re headed into America’s “Second Great Depression.” In addition, Weiss considers this depression as inevitable and a “consequence of a great housing bust, a massive mortgage meltdown, and the biggest credit debt crisis in history.”

Weiss blasts the advice most financial professionals provide to clients. He tells readers that if they have an investment portfolio, they don’t have the luxury of sticking around to see if the economy will tank further.

“Yet, that’s what most Wall Street experts are telling you what to do. Three years after the first obvious signs of a housing collapse and many months after the first major financial collapses, most people who give advice about investing are in denial…. Wall Street cheerleaders refused to admit that an obviously massive collapse in the nation’s largest industry would inevitably lead to an equally massive collapse in the nation’s economy.”

He writes that financial advisors have wrongly persuaded investors to stay the course, to keep their money in stocks or even buy more. He describes the buy-and-hold approach as “dead,” and if one holds on until the “bitter end, it could take a generation or more to recoup from stock market losses.”

The author writes that as long as we have a financial crisis, recession or depression, the risk of loss is greater than the opportunity for profit. “If there was ever a time when stock market investing is too risky, this is it,” he asserts.

He thinks investors should “get their money out of danger before it’s too late!” He advises readers to consider market conditions when deciding when and how much to sell. For instance, if the stock market advances due to a temporary government-inspired rally, Weiss tells readers to sell. If the stock market is already down, he suggests selling half of the holdings. And if a market is in a panicked frenzy, wait for the panic to subside and sell half.

Weiss even provides a warning to readers: Don’t let your broker talk you out of doing what’s right for you. He notes that it’s necessary to move money away from risk “and that mostly means out of stocks even in the best of times.” Financial advisors, in his view, are trained to keep clients in the stock market, for example by arguing that we’re currently near bottom. “Brokers don’t have the faintest idea where the bottom is,” he grouses.

Besides selling stocks and mutual funds, Weiss advises readers to get out of real estate they don’t live in and to make sure their banks and insurance providers are in good standing. For investors looking to grow wealth actively, he suggests spreading risk among diverse securities in exchange-traded funds (ETFs), for instance limiting exposure by pairing technology investments with an ETF tied inversely to the Dow Jones U.S. Technology Index. His rule is that when using inverse ETFs in a bear market, buy the fund on a stock market bounce and sell it after major market declines. Weiss offers other investing ideas, including investing in world currencies and bonds.

Weiss’ book lacks the kind of third-party input that might strengthen the credibility of his argument. However, he has a wide reading audience and will undoubtedly cause many clients to further question their financial advisors’ advice.

Mary Scott is the co-author of Companies with a Conscience and can be reached at [email protected].


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