Introduction
On September 11, a handful of fanatic terrorists broke America's heart.
Now, even as we continue to grieve for our fallen countrymen and women, the second devastating impact of that contemptible deed is about to be felt — on our economy.
The unsettling new environment guarantees that we are about to experience more than an economic slowdown ... more than a mere recession. We are about to witness the deepest stock market crash and depression since the 1930s.
Please don't misunderstand: Stocks will not fall straight down from here. After all, the most powerful institutions and central banks in the world are doing everything in their power to prop up their economies and stimulate temporary stock market rallies.
But their efforts are a drop in the bucket compared to the trillions that has been lost in US stocks in the last two years alone. They can't begin to solve the economic problems that got us into this financial mess long before this terrible catastrophe ...
Even before the Twin Towers fell on September 11, the economic world was already staggering like a punch-drunk prize fighter.
When explosions rocked New York and Washington D.C. on September 11 ...- The Dow 30 was already teetering precariously at 9605 — precisely where it had been in April 1999, more than 29 months earlier.
- The S&P 500 — made up of America's 500 richest companies — had already been hammered back to where it was November 1998, erasing a whopping 33 months of gains ...
- And the Nasdaq had been slammed 66% — back to the levels of October 1998, canceling nearly THREE FULL YEARS of gains and wiping out $5 trillion in invested wealth — equivalent to nearly HALF of America's total gross domestic product.
And as you know, the most aggressive interest-rate cuts in history had done nothing — absolutely nothing — to reignite the economy.
Things were even worse overseas: Japan's stock market was down 75% ... Hong Kong's had collapsed through the critical support level of 10,000 ... Singapore had fallen into the worst recession in 15 years ...
The German Neuer Markt, the equivalent to our Nasdaq, had lost roughly NINE TENTHS of its value ... the German DAX was down about 45% ... and London's FTSE 100 had fallen below the 5000 level for the first time in nearly three years.
The US economy was hanging
by one slender thread.
And at 8:48 am on September 11, that thread was irreversibly cut!
In a poll taken mere days after the attacks, CNN asked consumers how their future buying plans would be affected by the events.
For every person who said they would continue buying, FOUR said they would hold off on major purchases!
Now that terrorism has come to US shores, consumers have been reminded that this country is NOT bulletproof. Neither is their financial security. And you can almost hear the sound of millions of American consumers slamming their wallets SHUT.
We Americans will unite behind the President and rally for our country. But will we buy a new gas-guzzling SUV every year? Take luxury fly-away vacations every summer? Willingly go deeper and deeper into- debt? No, those days are gone.
Mark my words: It's going to be many, many long years before we see another wave of consumer spending like the one that had energized this economy for the past few years.
- Airlines have already been slammed: Even before the terrorist attacks of September 11, air carriers were expecting a huge $2.5 billion loss for the year.
But within 24 hours of the attack, Midway Airlines declared bankruptcy and Continental Airlines cut flights 20%, announcing plans to lay off 12,000 workers.
Now, the airlines estimate their losses will be ten times larger than the $2.5 billion they were expecting. Congress will bail them out. But for howlong?
- Insurance stocks are next: They will be slammed not only with the damage claims, life insurance claims, and loss-of-business claims from the September 11 crisis, but also with the inevitable losses that always strike insurers during any economic decline: More policy cancellations, more fraudulent claims, and large losses in their investment portfolios.
- Technology companies are getting clobbered — AGAIN! These companies invariably get most of their sales in the last month of each quarter. And in this third quarter of the year, that meant SEPTEMBER — precisely when much of the economy shut down. Put simply, this disaster will wipe out not just one month, but almost an entire quarter of sales.
They were already losing money hand over fist before the attacks. In fact, the TOTAL result of the 4,000-plus companies listed on the Nasdaq stock exchange was a LOSS of $160 billion in the last 12 months, more than the total profits for six years previous. Now, those losses are going to be even deeper.
- Brokerage firms are taking big hits: When the terrorists struck the World Trade Center, brokers were already being slowly strangled by declining commissions and a dearth of IPOs. Plus, they were being hammered by record numbers of investor complaints, lawsuits, and arbitration claims arising out of losses investors suffered in the tech wreck.
Then, the stock exchanges were closed for nearly a full week — and those same brokerage firms lost an estimated $400 billion in business.
- US banks are facing their worst threat in a decade: As always happens, banks made too many risky loans in boom times. And now, with the economy going down, non-performing loans are at the highest level in six years.
And that's only the tip of the iceberg. Some major US banks are overloaded with "derivatives" — high-risk investments that are especially vulnerable to unpredictable events just like these.
- The auto industry is in for a major shock: Ford and General Motors were already taking big hits before the terrorist attacks. Domestic auto and truck sales had gone sour. Now, Ford has suspended production at some plants and has warned that its earnings will fall far short of expectations.
Americans are saying "no" to the very cars that give automakers their largest profit margins — luxury cars, sports cars, and SUVs.
- Luxury goods and services of ALL kinds will fall: Americans were already cutting back due to the big dent in their tech stock portfolios. Now, they are losing their appetite for almost ANY luxury spending whatsoever. That's a big blow to luxury jewelers, retailers, hotels, restaurants, and any industry that benefited from the free-wheeling spending of millions of consumers.
Your financial security has never been in greater danger than it is at this very moment.
In this book, I will prepare you for ALL the impacts of this crisis — not just on your investments, but on your home and family, your job, business or retirement, your insurance, and your savings accounts. That's my life's work: Helping to keep my clients safely and profitably invested in tough times.Here's what I suggest you do right now:
First, get most of your money to safety as soon as possible. Don't accept second best. Go for the "Cadillac of safety" in the investment world — US Treasury bills, 100% guaranteed, with no limit, by the full faith and credit of the US government.
Investing in US Treasury bills is not only the best thing for you and your family; it's best for the country as well, helping to finance ALL the government's efforts to make America more secure.
You can buy Treasury bills directly from the US Treasury Department with their "Treasury Direct" program (800-722-2678; www.publicdebt.treas.gov/sec/secomtd.htm).
Or you can buy them through a Treasury-only money market fund such as American Century Capital Preservation Fund (800-345-2021), Dreyfus 100% U.S. Treasury Fund (800-645-6561), Fidelity Spartan U.S. Treasury Fund (800-544-8888), or U.S. Global Treasury Security Cash Fund (800-873-8637). Also, consider our own Weiss Treasury Only Money Fund (800-289-8100). (See Chapter 21 for more details.)
Second, for a small portion of your money, you can add a great profit kicker with some little-known investments that can produce very unusual results in times like these, with strictly limited risk.
Using these investments, in the first week of April 2001, subscribers to my premium service took 411% profits ... 103% profits ... 128% profits ... and 124% profits on four different investments.
Those profits came in as little as two weeks, with put options on stocks and on the Nasdaq-100, investments that surge in value as the Nasdaq falls.
Earlier, DURING the great Nasdaq crash of 2000-2001, my subscribers picked up an incredible 929% profit — this time with put options on a technology index. Every $10,000 you'd have sunk into those options would have grown into as much as $102,900.
The point is simple: You don't have to accept big risks to bank big rewards — IF you understand the investment vehicles that are tailor-made to grow your wealth in times like these.
And the more you can grow your wealth NOW, the more buying power you will have in the future to pick up bargains in great companies at the right time. That will give you still more large profit opportunities, PLUS it will give support to our country precisely when it's needed the most. (See Chapters 22 and 23.)
The Nasdaq will plunge to 800. The Dow, to 5000!
After being crushed by 66%, you'd think the Nasdaq would finally be back down to a reasonable level. Not so!The Nasdaq companies are LOSING money. So there is no way to value the stocks with earnings. Until they start making money again, they are grossly overpriced.
Think blue chips will weather the storm better? Think again! In the past 100 years, the average valuation for blue chips has been around 14 times earnings. To get back there, the Dow will have to fall 31%, and the S&P; 500 will have to plummet 44%.
And that assumes no further declines in earnings. If earnings plunge in half, as I suspect they will, the decline in the Dow could be 62%, and in the S&P 500, close to 88%!
Even the strongest companies in America — stocks you thought could NEVER get trashed — will have to fall dramatically before any semblance of normalcy can be restored ...
- Your GE stock will have to drop at least 40 percent ...
- Your CISCO stock will have to tank at least another 30 percent ...
- Your EXXON MOBIL stock will have to dive at least 40 percent ...
- Your PFIZER stock will have to slide at least 30 percent ...
- Your MICROSOFT stock will have to lose at least another 50 percent of its current value, and ...
- Every equity fund you own will have to crash by anywhere from 30% (conservatively managed funds) to 80% or more (if they're still loaded with "emerging growth" stocks or tech stocks).
The Federal Reserve will be powerless to stop the stock market collapse. Just to make up for the money that has already been vaporized in the Nasdaq, it would have to dump trillions of dollars into the economy. Instead, the most it can pump in is a few hundred billion — a drop in the bucket compared to the amount of wealth that has been destroyed.
But no future historian will ever be able to assert that terrorists caused the Great Stock Market Panic!
Months before the attacks on the World Trade Center, the stocks leading the technology revolution were crushed by more than half.
In March 2000, the total value of all stocks listed on the Nasdaq exchange was close to $7.5 trillion. Just over a year later, in early April 2001, those same stocks were worth only $2.5 trillion. The difference — $5 trillion in wealth — was obliterated, wiped off the fact of the earth; and a fleeting spring rally barely made a dent in those losses.Millions of American investors were hammered as their stocks fell 70%, 80%, even 99%. But months before the crash began, I warned this was coming.
I mailed nearly a million letters to investors telling them to get the heck out of the stock market, and to run — literally RUN — out of tech stocks. I told them to expect the worst tech wreck of all time. Now it has happened, just as I warned. So I have decided to write this book with a new and more urgent warning:
When the stock market plunges, the economy always follows.
The tech stock crash — and now the attacks on America — are already hitting the economy. Unless you take action immediately, your mutual funds, your IRA, your Keogh, or your 401(k) are going to get crushed, just like the Nasdaq has already been crushed. Don't wait. Get out now.If the Fed can stimulate a rally, all the better. Consider the rally a gift — a great selling opportunity.
If Wall Street is feeding you its newest story about the "recession-proof, terror-proof, crash-proof sectors to invest in," fine. To the degree that investors fall for it, it will temporarily support the price of your shares, giving you another great selling opportunity.
But don't believe Wall Street's myths. As the crash has spread, each myth has fallen by the wayside.
The first myth you heard was back in 2000. They wanted you to believe that the crash was strictly a "dot-com phenomenon." Major, established technology leaders — like Intel, Cisco, and Microsoft — would be just fine, they said.
Wrong! The tech giants were the next to fall. And a new myth emerged: "The crash is limited to technology," said Wall Street confidently. "Mainstream, non-tech sectors like brokerage, banking, airlines, manufacturing, etc. will be just fine."
Wrong again! By mid-2000, profits were already plunging rapidly in all of these sectors.
The newest myth: "To help support the war against terrorism, the authorities will push the market higher."
I would like to believe this is possible. But it isn't. The best the Fed can do is stimulate short-term rallies. The fact is, you can not erase more than $5 trillion of invested wealth ... make mincemeat of the nest eggs of millions of Americans ... and demolish the great "wealth effect" that has driven this economy for over a decade ... without doing extreme, irreparable damage to the economy, whether there is a war effort or not.
Millions of Americans had their entire life savings in tech stocks when the crash began in March 2000. On average, they are now already less than half as rich as they were. That — plus fear of what could happen next — is why millions will slam shut their pocketbooks ... why they will buy fewer cars and homes ... why they'll cancel vacation plans ... and why the stock market will fall still further.
It's a vicious cycle that no one can stop — not President Bush, not the Federal Reserve, not even a war!
I want you to be one of the tiny handfuls of investors who will make a fortune in the coming economic hurricane.
In this book, I will help prepare you for nearly all the impacts of this crisis — not just on your investments, but on your home and family, your job, business or retirement, and your savings accounts.Plus, I want to help you use this crisis to actually pile up more money in the next two years than you did in the last 10.
I'll tell you all about the amazing investments that make this possible in Chapter 22. But for now, just remember this: You don't have to lose 30%, 50%, or even 90% of your money on the turkeys Wall Street recommends. Wall Street is wrong, wrong, wrong! And as soon as you realize that, you can harness the great power of the bear market in your favor to grow your wealth by up to 1,000%.
Another example: Back in the crash of '87, one of my subscribers multiplied his money by over 45-fold. He put an extremely modest $650 in the investments we recommended to him ... and three days later when he sold them out, again on our recommendation, he had $30,500.
He spoke with us personally about his profits, and he kicked himself for not investing more. If he had started with $5,000, he'd have made about a quarter of a million dollars. And that was in just three short days back in 1987. This time, I think you're going to have months — maybe even years — of opportunities to roll up the profits.
Let's face it. For most investors, the Great Stock Panic will be an absolute disaster. But with the investments I teach you about in this book, you can turn the disaster into a potential bonanza.
In it, I give you the full picture — the documented, scrupulously researched truth that: 1) proves you're now in for the most chilling ride of your investment lifetime, and 2) shows you precisely how to protect yourself while you pile up once-in-a-lifetime profits.
Always remember: I have no crystal ball. As time goes by, and you compare the real events with those predicted in this book, you will inevitably find some that match well and others that do not. No one can predict the future with precision — let alone events like terrorist attacks on America or the outcome of our war on terrorism.
You will also discover, however, that my forecast of a major financial crisis is based on extensive analysis, giving you the knowledge you will need to protect yourself and your family from the impending disaster.
But beware: Wall Street is going to give you exactly the opposite advice I am giving you here. If the market is enjoying a rally, they will tell you "the worst is over and we've turned the corner." If the market is tumbling, they will tell you "not to panic" and to "hold on for the long term."
They will tell you all these things. But what's more important are all the things they won't tell you — the subject of my first chapter ...
Martin D. Weiss, Ph.D.
Palm Beach Gardens
September 24, 2001
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