Ron Schenone

Aftershock – Is Another Financial Meltdown Heading Our Way? Review Part 1

Posted by on Feb 17, 2010 | 16 Comments

It was about 3 weeks ago that my wife suggested picking up a copy of the book ‘Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown’. At first I balked since I normally do not believe in all of the smoke and mirror predictions that some so called experts make. But just out of curiosity I decided to take a look at the book and see what others were saying about it. After reading the reviews I ordered myself a copy.

The authors of this book, Aftershock… ‘ had previously written the book, ‘America’s Bubble Economy: Profit When It Pops’ back in 2006. I had not read the original book the authors wrote, but apparently these people were right on the money. They subscribe to the theory of a ‘Bubble Economy’, which they claim has six separate parts. The bubble parts are housing, stock-market, foreigner supported dollar, consumer debt, U.S. debt and consumer discretionary spending.

In housing, the theory was that housing would never stop increasing in price. With this in mind loans were given to people who should of not been loaned money. We have all heared of the so called sub-prime loans and the effect it had on the housing market. But some of what we didn’t know is explained in ‘Aftershock…..’ What I found interesting was the way that some borrows were provided three options each month on how they wished to repay their loan. They could pay both principal + interest, or interest only, or just a portion of the interest. This last option would add the unpaid interest back onto the original loan up to a maximum of 125% of the original amount borrowed. That is creative financing at its best! LOL

The authors claim they  “are not bulls or bears or gold bugs, stock boosters or detractors, currency pushers, or doom-and-gloom crusaders,” and “have no particular political ideology to endorse, and no dogmatic future to promote.”  The authors present how they predicted the housing bubble crash and how in turn it caused the stock market, consumer debt and consumer discretionary spending bubbles to burst as well.

So what’s left?  The two bubbles foreigner supported dollar and U.S. Debt. The authors are now predicting that these bubbles are the next to fail over the next few years. They justify their opinion in a way that makes complete sense. The U.S. is borrowing so much money that it will become apparent that we will be unable to pay off the debt. When this happens foreign support of the dollar will wane.

There was a word of caution which I especially liked. The authors state that there will not be a depression like the 20′s and 30′s, but instead will force the U.S. to only spend what it takes in without borrowing. The countries that will be in trouble are the countries that reply on exports. The authors also state that we in the U.S. will not be left out in the streets, since we are to wealthy of a nation for this to happen.

I finished last evening reading the chapter about buying gold. Before reading the chapter I thought gold would be the recommendation to protect our personal wealth. The authors believe that gold will rise, possibly up to $2,500 or more per ounce, but that bubble will pop as well. So what’s left? I don’t know, but I am looking forward to reading the second half of the book to see what strategy the authors may suggest.

Comments welcome.

Stay tuned for part#2.

Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown only $16.34

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  • Bravehart

    The answer is YES. It looks to me that very few understand
    how the world economy works! Basically it is Peter paying the
    piper. That is the short way . The US of A. has a lot of resources, but you do not own them anymore, they are put up for collateral! The country has a depht of 68 Trillion USD.
    This is what the country has to payback to other countries!
    And the other counties own depht to jet an other country, do
    you see how virtual money really is? It really does not have any value anymore! The problem is that very few have all the
    money and they will not easely depart with theire welth, they
    worked (or cheated/ Madhoff) hard for theire money.
    Aquire assets, material, the stuff that you need everyday, buy
    a farm to grow food and most important, payoff your personal
    depth! The mallaise which will come by the end of this year
    will not be fixed with more depth nowone has the kind of money to fix this one, unless we are prepared to close the gap
    between Rich and Poor? In sort Carl Marks! (Comminism)

  • KG

    I’m almost positive there is going to be.

    For a time I day-traded in the stock market. Among other things I used technical charting as a prediction tool. If you look at a 30 year chart on the Dow, you can see a definite head and shoulders, and if this plays out, we are around the peak of the right shoulder. That would mean another massive drop in a year or two…maybe more, maybe less.

    If you look at a 10 year chart, you will see a head and shoulders roughly from Nov 2001 through June 2002, which preceded a fairly precipitous drop. That was the last of the Tech Stock bubble bursting.

    Then you have the most recent one from roughly May 2007 to May 2008. While the right shoulder was poorly formed, we all know this led to the big stock market crash of 2008/2009.

    As we go further right on the chart, you will see that around March of 2009 the market started to rise again. At December 2009 we see that the market peaked and started to fall a bit.

    Whether this is just a consolidation or an indication of a left shoulder in the shorter term is yet to be seen. But as I said above, the 30 year chart looks as if the right shoulder is forming on a massive head and shoulders. I’ve been told that the longer time period on a chart, the more predictable it is.

    We may still have a couple or three years; maybe shorter, maybe longer, but if technical charting is to be believed, we might be looking at another crash. Only time will tell.

    • http://wp3.lockergnome.com/nexus/blade/ Ron Schenone

      Hi KG,
      Thanks for the info.

  • http://wp3.lockergnome.com/nexus/theoracle/ the oracle

    I haven’t read the book, but was just watching this week’s Frontline on PBS. The show is called The Warning, and shows that a person in the Clinton administration gave call to arms about this problem and was completely marginalized by the good ol’ boy network that was running the financial dealings of the nation. (as you might know, a couple of them are now on the Obama team)

    Very clearly the signs were there, this woman was not talking through an incorrect orifice, she knew completely of what she was talking.

    The sad part is, unless something changes very quickly, the same thing will happen in a few years, because of the tendency of the nation to lapse into what is comfortable, and not push for needed change.

    I vored for Barack Obama, but I wish when he came into office, he would have extended a hand to Ron Paul, and though there would be no reconciling their two philosophies, a synthesis could possibly put us in a much better place.

    One of the things I see as a problem with the Tea Baggers is that they seem to believe the problem is the Democratic Party. They should open their collective eyes and realize that the only solution to what they complain about is to keep a vigilant eye on the Congress, and vote out the ones that don’t follow the constituents wishes, and keep doing so until the legislators get the picture. They are not bright, but they aren’t brain-dead, they will pick up on it if the vigil is kept up.

    • http://wp3.lockergnome.com/nexus/blade/ Ron Schenone

      Hello Marc,
      Well my friend, we are both on the same page and I agree with you 100%.
      As I continue reading the second half of Aftershock, it becomes clear that this is going to be a political hot potato.
      The authors believe we will blame one political party, and then blame the other, once the problem can not be fixed.
      We will wander in the wilderness of a financial mess, brought on by own arrogance, and we will be forced get back to basics.

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  • Philip

    I just finished Aftershock. The part about the bubble economy is interesting and probably valid. The predictions about the next two bubbles are felt by a lot people, in the media and privately. They are not exclusive to the book. The book falls apart at the end. One example is oil will fall to $10-20 a barrel but in the US it will cost a hundred. If it cost $10 it costs $10, I know what their saying but they said it poorly. Another example is that there will be massive cuts in spending (entitlements probably) and massive tax increases and the Federal government will not be able to borrow money. At the same time there is high unemployment. Then they predict people will be on welfare and getting
    medicaid. If there is high unemployment income tax revenues will fall, if there is no borrowing how is this paid for, with what? It doesn’t make sense to me.
    Another thing is that all the place they ask you to go on the internet to read more on each chapter are blank each on saying The Foresight Newsletter is coming in February. It’s now March. There is no news after January in the news section.
    The basic advice is good though, gold in one’s portfolio never hurts.

  • SusanNation

    Oracle, bless your heart, but you don’t even know the history of your party. After WW2, FDR/Truman initiated the Marshall Plan accentuating the recovery of Europe and Japan. Noble concessions to absolute surrender. Withn ten years, the economies of both wartime arenas recovered. However, in 1960, one of JFK’s political planks was to extend the Marshall Plan to 2nd and 3rd world nations (Peace Corps, USAID) via the UN. Truman argued with the Kennedys that this was the wrong way to go. Harry wanted an end to entitlements to other nations, fearing that the US would become an enabler to all forms of dependence. Truman also argued that NATO should be equal in disbursement, which Eisenhower failed to follow up – thereby initiating the practice that the US is the primary funder of NATO (as well as the World Bank). In 1968, Ted Kennedy failed in his hopes of a Presidential run, however, he became more and more insistent on a global assistance program – his joy was his world trips and the influence he exerted on governments, especially Europe. Harvard took up his mantel (and endowments) and began the creation of public policy/social welfare state, or in other words the contuiance of the Marshall Plan now defined as social economics, or utopic socialism. In 1972, Kennedy championed the creation of the Congressional Black Caucus, who shared with Kennedy the concept of the social welfare state (read W.E.B du Bois) and established the DuBois School within Harvard (of which Gates administers).

    Fast forward to the creation of the EU, which to most intelligent thought is the permanance of the former Marshall Plan. However, by giving socialists control over the American dollar via the World Bank/IMF (of which we donate the most $$), America has been underwriting the EU for decades (via the leadership of the Democratic Party).

    Here’s the catch in the last 20 years. The EU takes in our $$ willingly, and if they need more, and the US balks at contributing more $$, the EU reduces trade with the US. The current “intellectual property rights war” is a prime example. Thus in order to trade/exchange within the EU, US companies are forced to expose their technologies and science to EU competitors. Needless to say, if MS exposes its trade/scientific secrets to the French conglomerate, what does that do to the comparative advantage of MS? The answer is obvious. Former communists, now EU socialists, learned from the Cold War the above lesson about failure within to develop technology, thus the EU not only takes our $$ and our science/technology.

    Currently, the goal of the Obama administration is to end American Exceptionalism, and move the US to become a participant of the EU; its largest and wealthiest state. Meanwhile, anyone reading the history of Europe, its tenacious determination of secret treaties, its disregard of zero sum, its wars (even today), its political unreast with its neighbors, their dramatic mistakes that lead to totalaterian regimes, their first and foremost goal is financial entitlements via the US taxpayer’s wallet.

    We will see the Obama adminstration (as did the Carter Adminstration) begin to pass more and more money to the EU in the coming years via the IMF, World Bank, UN, and the EU itself – thus making the US the newest addisiton to the EU. Meanwhile, the EU leadership (mostly governed by socialists) have an ax to grind with the US (the cold war) – and will drain the wealth of the US in order to establish propserity within the EU, leaving the socio/economic/political ability of the US exhausted with their demands.

    Republicans saw this coming and moved toward a more balanced agreement with the Brits/British Commonwealth. Democrats move toward the EU accepting all of their problems and failures with good ol’ American tax-dollars (just like the Marshall Plan).

  • charlene

    Men have sought world domination ad nauseam. Unfortunately none have lived long enough to achieve their goals. I think at this stage no matter how the present mortals try to play god ,hopefully the real one will step in and do something new! I personally think mankind is suffering from acute boredom.

    • http://wp3.lockergnome.com/nexus/blade/ Ron Schenone

      Hi charlene,
      I agree. I hope the real God steps in as well.

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  • Sovereignty and Self Reliance

    The United States needs to pull out of the corrupt United Nations, stop borrowing money (from Communist China) that we don’t have and giving it to social and redistribution of wealth organizations such as the World Bank and the International Monetary Fund! Our government continues to give hundreds of billions of dollars to them every year. These organizations are going to bleed us and push the U.S. into an economic collapse. What the hell is wrong with our Congress and government? Our government continues to recklessly spend and run up huge amounts of debt. We don’t have money to give away and yet they continue to do it anyway. Now that the debt commission has formed, guess who is going to pay for our irresponsible government? It won’t just be the “so called rich”. Get ready middle class America, Uncle Sam is going to need you to step up also and pay “your fair share” because there won’t be enough of the “rich” to take from to pay for their spending sprees. I like how the debt commission is now stating that “America has a problem” like the taxpayers of this country caused this mess in the first place. It is not the responsibility of the United States to take care of the rest of the world and promote social justice programs. THIS THOUGHT PROCESS IS SOCIALIST UTOPIA NONSENSE THAT WILL NOT WORK! Self reliance, sovereignty and captialism is what built this great country. If we move away from these principles it will just be a matter of time before our demise just like the other great empires that came and fell before us. Read about the history of the Roman empire and why it failed. We are on the same path. It amazes me that the self proclaimed liberal and progressive thinkers believe that a social utopia or even a one world government is viable. How could anyone think that moving away from what made us the most powerful nation in the world be the right thing to do?

  • http://meltdown.host-ed.net/ Dave James

    Well i still think we are on course for a full meltdown so that the USA can dump its debt to china and introduce a single world currency.

    if the euro one size fits all din’t work in europe then how the hell is a single currency across the world suposed to work!

    Keep your money out of the banks