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100+ Banks to Fail; Wisdom from Buffett; I LUV Danielle Park and So Can You! & Actionable Advice

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August 23, 2008 – Comments (9) | RELATED TICKERS: WAMUQ.DL , WU , C

That which is ridiculous cannot go on forever.

Chris Whalen manages Institutional Risk Analytics. He analyzes banks. This is his forecast: 100 failed banks, mostly small, but a few biggies. Total assets at risk: $850 billion. This is reported by John Mauldin. 

It is More then Just Fannie and Freddie 

(Gary North provided the link and much of the wisdom here)

Of note if you think the US market is going to make you rich read Warren Buffet here:

Mr. Buffett on the Stock Market The most celebrated of investors says stocks can't possibly meet the public's expectations. As for the Internet? He notes how few people got rich from two other transforming industries, auto and aviation.
By Warren Buffett; Carol Loomis

http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm 

Buffett began with an observation: the Dow Jones Industrial Average's 17-year move from December 31, 1964 to December 31, 1981:

12/31/64: 874.12 TO 12/31/81: 875

 

Warren Buffett commented: "Now, I'm known as a long-term investor and a patient guy, but that is not my idea of a big move."

In the same period, Buffett pointed out, the Gross Domestic Product rose 370%. The underlying productivity of the nation was heading up, yet the stock market had gone nowhere, as of late 1981. Why not? One answer, he says, was rising interest rates.

The US will have to raise rates in order to save the dollar, the US stock market will likely follow the same pattern, IMO. 

The Big Picture has an outstanding post from another female truth teller.

Danielle Park: "Decoupling is a Buncha Bunk"

I could not be more aligned with this woman. Look at her amazing quotes here:

"Sell Strength"

"Canada sells rocks and trees"

"Secular Bear in stocks started in 2000, Cyclical Bull began 2002 - 07, Cyclical Bear began in 2007."

"Its a fundamentally different climate than '82-99"

"You cant buy always you cant hold always"

"Ignore day-to-day gyrations, focus on weekly and monthly trends"

Who is this lady? Why don't we have more strategist like this in the US? She's terrific!

Related:
Danielle Park's Juggling Dyamite
http://www.jugglingdynamite.com/

I watched BNN for part of the day. It appears to be a good sources of news.

Watch Canadian Daniel Park here:

http://watch.bnn.ca/the-street/august-2008/the-street-august-21-2008/#clip84829 

How much can real estate fall? Read and Heed:

The real cost of a Full Bailout.

http://mises.org/story/3062 

 

As a pilot, there are times when you must focus and maintain accute situation awareness, called the critical phases of flight. Two critical phases of flight are take-offs and landings, on TO and Landings you are in a transition and you may have very little time to react if there is a problem. So you have to focus....

I think we are approaching a Critical phase in the US Markets and you should focus on your investments, career and protecting your wealth.

I believe we have reached a point of Peak Credit. We are running out of fools (consumers) to borrow and buy. We are running out of fools (mostly Asians) who are willing to save and lend it to the US. There are also limits to which the FED and govenment can print "money out of thin air" and expect it to maintain its' purchasing power.  

I think the US stock and real estate market have plenty of room to fall.

1. Credit is drying up. Banks are affraid to lend, people and business are affraid to borrow. 

2. Earnings are going to fall with the credit contraction. Stocks are bought in expectation of earnings or appreciation. Decreasing earnings and decreasing credit = decreasing stock values.

3 . Real estate has a lot of room to fall. No wealth effect + no home equity = reduced consumption

Reduced consumption = reduced earnings + increase unemployment 

4. Commodities will fall (near term). Reduced consumption = reduced prioduction = reduced commodity prices.

5.  As home prices fall so will the US stock market. I expect both to fall another 20-40% of the next couple of years. 

6. The US has some very systemic problems, that will take years to work out, it took years to get here. It will not be fixed for a some time.  

The time to prepare is NOW.

1. Job security is your main concern. You need to ensure during a slow down you are not the one, who is laid off. Update the resume, show up early and leave late, do what it takes to stay employeed and marketable etc....

2. Save money, live below your means. Asains save on average 50% of their income. THERE IS YOUR NEW TARGET SAVINGS RATES. Asia will go into recession and their stock markets will fall further, after the further fall accumulate Asian equities (my guess is we are a couple years away from the bottom in Asia). Political instability is possible from the severity of the recession.

3.  Stay out of debt. Avoid any new debts.

4. I recommend shorting the US market (at least 10-20% of your portfolio)

5. Long term accumulate foreign currencies (10-20% of your portfolio). I like Yen, Swiss frank.  Low population or productive people or low population and resource rich. NEAR TERM US DOLLAR MAY / WILL rise. My WAG long term the US dollar will decline or disappear or be replaced. Everbank (FDIC insured allows you to redenominate in other currencies)  

6. If you want to be wealthy, you must start your own business. Warren Buffet did not make his money in the stock market he made his money by starting and running his own company. If you are under 30 and you want to be wealthy, you must focus on starting your own business.  

7. Accumulate gold coins or move money outside of US banking. You can use Goldmoney or Perth Mint

8. Obama will want to redistribute wealth thru taxes and McCain appears to not understand economics, AT ALL. 

If you are an active investor there will be a huge opportunity to capitialize as these banks fail and real estate falls to near free. 

Some Onion News


Diebold Accidentally Leaks Results Of 2008 Election Early 

9 Comments – Post Your Own

#1) On August 23, 2008 at 4:01 PM, abitare (33.88) wrote:

The other Female Truth teller is Meredith Whitney here:

The Future of Financials 

http://www.cnbc.com/id/15840232?video=808357964 

lquadland10 found this great video here, it is worth your time.

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#2) On August 23, 2008 at 4:19 PM, abitare (33.88) wrote:

Warren Buffett on Financials

 

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#3) On August 23, 2008 at 4:28 PM, abitare (33.88) wrote:

Buffett on Debt

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#4) On August 23, 2008 at 4:29 PM, abitare (33.88) wrote:

Buffett on Debt

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#5) On August 23, 2008 at 4:44 PM, kdakota630 (29.53) wrote:

Argh!  I hate these 60 minute youtube clips.  I'm sure it's informative, but typically I only access the internet from my work computer, and I can't spend an hour at work watching youtube.

The Merideth Whitney clip was good, although a little dry, and I loved the clip from The Onion, although I'd already seen it before.

Also, I liked your list of things to do to prepare.  I'm not sure how many people can follow number 6 though.  What's the statistic everyone quotes?  Something like 90% of all businesses fail in the first 2 years?  You can, however, count me among the successful ones.  I'm not sure I'd call myself particularly "successful" but I've had my own business for over 6 1/2 years now.

(Yay me!)

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#6) On August 23, 2008 at 5:03 PM, abitare (33.88) wrote:

Buffett on Energy

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#7) On August 23, 2008 at 5:07 PM, abitare (33.88) wrote:

Warren Buffett on Energy

 

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#8) On August 23, 2008 at 5:14 PM, abitare (33.88) wrote:

Oil Price Manipulation

 

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#9) On August 23, 2008 at 8:16 PM, dwot (45.35) wrote:

Well said...

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