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Worst Case Scenario?

November 12, 2012

After a tough few years, some cautious green shoots of recovery are starting to poke through the frozen ground of a dormant economy. The long, cold recessionary winter is over, and we can all look forward to better times ahead, right? Well, don’t put away the parkas and break out the suntan lotion just yet. Believe it or not, even though we feel as if we’ve just escaped the last one, it might be time to start planning ahead for the next recession.

Economist Robert Wiedemer certainly seems to think so. Wiedemer, who correctly forecast the market crash and corresponding recession back in 2006 (which, you may recall, was hardly a time for grim predictions), has a sobering—and possibly frightening—new prediction: another crash. And this time, instead of the 50% he accurately forecast back then, Wiedemer predicts that we are going to drop as much as 90% in the stock market! The primary reason for this? Wiedemer sees the serial episodes of quantitative easing that the government has engaged in as essentially lighting the fuse on a stack of fiscal dynamite.

He believes that the government’s willingness to essentially print enormous amounts of extra money and infuse it into the economy will have dire consequences once those funds work their way through the system and hit the marketplace. Now, just because he was right once doesn’t mean he has a crystal ball, but we would be foolish not to at least pay close attention to what he is saying. Think about it: if Wiedemer is even half right, we could potentially be in for another costly roller coaster ride on a skidding stock market. The bottom line? Don’t let the early signs of a recovery fool you into letting your guard down: invest with caution, especially if you are nearing retirement.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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