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2012: Myths, Truths and Grave Dangers!


By Martin D. Weiss, Ph. D.



The Foundation for the Study of Cycles says that, based on 5,000 years of cyclical data, 2012 will deliver “The Perfect Storm.”

The History Channel proclaims that the year 2012 could be the single most pivotal year in 10,000 years of human history.

Others cite Mayan calendar calculations that the world will end on December 21, 2012 ... or Nostradamus predictions that the planet Earth will be struck by a comet, also in 2012.

Among those kinds of predictions, I won’t tell you which to believe or which to discard.

But in a moment, I will tell you about our own vision for 2012.

Just bear in mind that it is fundamentally impossible to predict the future with precision. In the real world, every decision you make today sets off a chain reaction of events that can change the course of history. Indeed, the mere act of making a prediction can — in and of itself — alter the ultimate outcome.

This is why, at Weiss Research, my team and I do not rely on ancient predictions. Nor do we presume to forecast exact dates and precise target levels for future events.

Rather, our approach is to review our proprietary database of 40,000 Weiss Ratings and millions of data points ... to draw from the vast databases we access on a daily basis via Bloomberg, LexisNexis and many more around the world ... and then, armed with this hard, tangible information, to use our hundreds of years of collective experience to form an opinion about the most likely future events.

Sometimes that opinion will be wrong — either in timing or in direction. But more often than not, we have predicted events that most others — especially Wall Street pundits and the world’s leading rating agencies — have sorely missed.

Here are just a few of the most salient examples ...

Bear Stearns failure: The company failed on March 14, 2008, and signed a forced merger agreement with JPMorgan Chase in a stock swap worth $2 per share, or less than 10 percent of Bear Stearns’ market value of just days earlier.

Weiss forecast: 102 days before the failure, we wrote: Bear Stearns has “sunk its balance sheet even deeper into the hole, with $20.2 billion in dead assets, or 155 percent of its equity; and is threatened with insolvency.” (See “Dangerously Close to a Money Panic,” Money and Markets, December 3, 2007.)

Lehman Brothers failure: The company filed for Chapter 11 bankruptcy on September 15, 2008, a landmark event that froze credit markets globally and began a new era of financial instability.

Weiss forecast: 182 days before its failure, we warned that Lehman was vulnerable to the same disaster that struck Bear Stearns. Plus, in the prior year, we wrote that Lehman was in a “similar predicament as Bear Stearns” because of an even larger, $34.7 billion pile-up of dead assets, or 160 percent of its equity. (See “Closer to a Financial Meltdown,” Money and Markets, March 17, 2008.)

Fannie Mae failure: Fannie Mae and its sister company, Freddie Mac, were placed under conservatorship of the U.S. government on September 7, 2008. Common and preferred shareholders were wiped out.

Weiss forecast: Four years earlier, we wrote “Fannie Mae is already drowning in a sea of debt. It has $34 of debt for every $1 of shareholder equity. That’s big leverage and of the wrong kind. Plus, the company has only one one-hundredths of a penny in cash on hand for every $1 of current bills. Think Fannie Mae can’t go under? Think again.” (See“My Chat With FDR,” Money and Markets, September 24, 2004.) 
Citigroup failure: On November 24, 2008, the U.S. government announced a substantial bailout of Citigroup, devised to rescue the company from bankruptcy.

Weiss forecast: On August 6, 2008, 110 days before the failure, Mike Larson and I hosted a live webcast, “X List,” naming Citigroup as the number one candidate for bankruptcy. (For the transcripts, go to See also Weiss forecast of Citigroup failure in November 20, 2008 Business Week.)

Washington Mutual failure: On September 26, 2008, Washington Mutual filed for Chapter 11 bankruptcy protection from its creditors. In the voluntary petition the company listed assets of $32.9 billion, and debts of $8.2 billion, placing it in the top 10 largest U.S. bankruptcy cases in history.

Weiss forecast: On August 6, 2008, 51 days before the failure, we also named Washington Mutual in our “X List” webcast. And earlier, in our March 2007 edition ofSafe Money Report, we told readers to avoid Washington Mutual “like the plague.”

Similarly, we warned about the failures of Wachovia, General Motors and dozens of others. (See “GM Headed for Bankruptcy” Money and Markets, October 11, 2005).

Indeed, since 1990, we have issued grades on a total of 1,533 banks that subsequently failed.

On 90% of those banks, we issued a clear warning to consumers at least one full year ahead of time. And on nearly all of the rest, we issued a warning or a caution flag at least a few months before the failure.

Now, the problems in the global banking industry have gotten a lot worse. Just in the United States alone, 49 relatively big banks and thrifts (with assets of $1 billion or more) have failed in the last two years. We issued an advance warning on every single one.

Plus, earlier ...

The U.S. Government Accountability Office (GAO) concluded that Weiss Research far outperformed all of the nation’s major rating agencies, including Standard and Poor’s, Moody’s and A.M. Best, in warning of future insurance company failures. (SeeU.S. Government Accountability Office (GAO) — Insurance Ratings: Comparison of Private Agency Ratings for Life/Health Insurers.)

The Wall Street Journal reported that Weiss’ stock ratings outperformed those issued by all brokers and independent research firms they covered, including JPMorgan Chase, Merrill Lynch, Goldman Sachs, Piper Jaffray, Credit Suisse First Boston, Smith Barney, S&P Equity Research, Morgan Stanley, and 14 others. See Wall Street Journal, “Stock Research Gets More Reliable,” June 7, 2005.)

Newsmax wrote “Martin Weiss’s prediction of the current economic crisis is uncanny.”
The New York Times wrote Weiss was “the first to see the dangers and say so unambiguously.” And ...

Barron’s wrote Weiss is “the leader in identifying vulnerable companies.”

Now, with this track record more clearly defined, let me set forth our big-picture vision for 2012.

A Convergence of Unprecedented Crises

Right now, our Weiss Ratings are telling us that the sovereign debt crisis is far worse than virtually anyone has recognized:

Weiss Ratings scale: A = excellent, B = good, C = fair, D = weak, 
E = very weak. C- = lowest investment grade, D+ = junk.

Scale of others: BBB- = lowest investment grade, BB+ = junk.

Some prime examples:

Ireland is already bankrupt! Had it not been for a European bailout, it would probably have defaulted on its debts. Yet, even with the bailout, the country’s economy is still in shambles. Its GDP is shrinking; inflation is stubborn; unemployment, sky high; tax revenues, sinking. Despite all this, the other rating agencies still say its bonds are “investment grade,” three notches above junk. We give Ireland a D-, two notchesbelow our highest junk level.

Italy is so overloaded with debts it has become the largest victim of the contagion so far. We rate Italy just one notch above junk.

Belgium still has no government, which some say is a blessing in disguise. But its gross debt per capita is very high and one of the country’s largest banks has just failed, with more possibly on the way. We also give it a C-, one notch above junk.

France still gets a triple-A from all three of the rating agencies. Without that perfect rating, the entire European bailout fund would fall apart, because France, a major contributor to the fund, would be disqualified. So for now, the rating agencies, very reluctant to rock that boat, are sticking with their triple-A. We don’t base our decisions on what others will do or think. We go strictly by the facts, which tell us that France merits a C, two notches above junk.

Germany is in the same boat as France — just to a lesser degree. We give it a C+, three notches above junk. That’s a far cry from the triple-A, which the three other agencies still consider untouchable. But remember: That’s also what S&P used to say about the United States.

United States debt is anything but the image of perfection (or near perfection) that the ratings of Moody’s, Fitch, and S&P imply. We have downgraded U.S. debt to C- (one notch above junk), which is why Forbes reported that we beat Standard & Poor’s in taking this historic action.

At the same time, our Weiss Ratings are telling us that the vulnerabilities of major global banks are ALSO far worse than most others believe.

Highly vulnerable institutions include ...

  • Bank of America (U.S.)
  • Bank of Ireland (Ireland)
  • Barclays (U.K.)
  • Commerzbank (Germany)
  • Crédit Agricole (France)
  • JPMorgan Chase (U.S.)
  • Lloyds Banking (U.K.)
  • Mitsubishi Bank (Japan)
  • Royal Bank of Scotland (U.K.)
  • Société Générale (France)
  • Unicredit (Italy)
  • And many others

Now, these two giant likely debt disasters — 
sovereign defaults and bank failures — 
are converging.

They are feeding on each other — sovereign debt dragging down the banks, and the banks dragging down the sovereign debts.

They are spreading — not only from Greece to Portugal and Ireland ... but also Spain and Italy ... not only from the weaker PIIGS countries, but also to Europe’s two strongest countries — France and Germany.

They are escalating — despite last week’s “global rescue by central banks” and despite countless grand pronouncements over the past two years. And ...

They are converging in ...

The same year: 2012, plus

The same place: Europe and the United States.

Do NOT be tempted to believe that this crisis can be contained in Europe. That simply is not the case. You’ve seen it impact us here in America yourself — as U.S. stocks skyrocket after every rumor that a solution has been reached ... and as they crater after each of those rumors is proven false.

But daily fluctuations in U.S. stocks — no matter how breathtaking — are only the tip of the iceberg.

Far more important is:

  1. The sudden surge of borrowing costs among sovereign governments, reaching the point at which they are virtually frozen out of credit markets, regardless of the interest rate they pay. 
  2. The sudden withdrawal of funds from endangered banks — the same final nail in the coffin that doomed big U.S. banks in 2008 and 2009.
  3. The sudden freeze in the credit markets in Europe and the U.S., chocking off loans to even the most worthy corporations and individuals.

All this is already beginning to happen!

All this is precisely why central bankers, in an act of desperation, announced emergency measures last week!

All this is what can drive gold and other inflation hedges through the roof.

All this is why 2012 is likely to be the most pivotal year of our lifetime, bringing not only major failures, but also unprecedented government responses, and a whole new round of “unintended consequences.”

Plus, this is also why I have decided to make you a revolutionary offer:

To help make sure you’re totally prepared for 2012 — and beyond — I want to change our relationship in a very fundamental way.

And to make that possible, I will "pay" you $486 to immediately cancel any and all of your current Weiss Research subscriptions.

I know it sounds crazy. But there’s method in my madness. Click this link for the full story.

Good luck and God bless!


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