The Only Ones Who Warned Ahead of Time …
Martin D. Weiss, Ph.D. and Mike Larson
The Only Ones Who Warned Ahead of Time
by Amber Dakar
Based on my research, Martin D. Weiss and co-editor Mike Larson are the only analysts that have specifically named nearly all of the major institutions that have suffered a financial failure in this crisis, whether in the form of a forced buyout, a government bailout or outright bankruptcy. Moreover, the failure warnings were issued with no ambiguity and with months of advance lead time, giving the public ample time to escape the dangers.
At the same time, Weiss has provided constructive solutions, guiding hundreds of thousands of investors and savers to the nation’s strongest institutions and safest investments. (For the current lists of weakest and strongest institutions, click here. For information on the safest investments, click here.)
Below are the major institutions that have failed and Weiss’ specific advance warnings.
Bear Stearns failure: On March 14, 2008, the Federal Reserve Bank of New York provided a 28-day $29 billion emergency loan and Bear Stearns signed a merger agreement with JPMorgan Chase in a stock swap worth $2 per share, or less than 10 percent of Bear Stearns’ most current market value. The sale price represented a staggering decline from a peak of $172 per share as late as January 2007 and $93 per share just two months earlier.
Weiss warning: 102 days before the failure, Martin Weiss 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.”
Source: “Dangerously Close to a Money Panic,” Money and Markets, December 3, 2007.
Lehman Brothers failure: 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 warning: 182 days before its failure, Weiss warned that Lehman was vulnerable to the same disaster that struck Bear Stearns. That was not his first warning. In the prior year, he 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.
Fannie Mae failure: Fannie Mae and its sister company, Freddie Mac, were placed under conservatorship of the U.S. government on Sunday, September 7, 2008, with the U.S. Treasury committing to bailout funds of $100 billion for each, the largest bailout for any company in history at that time. Common and preferred shareholders were wiped out.
Weiss warning: Four years earlier, Weiss 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.” And 41 months before the failure, Weiss listed Fannie Mae as a stock not to touch with a “ten-foot pole.”
Citigroup failure: On November 24, 2008, the U.S. government announced a substantial bailout of Citigroup, devised to rescue the company from bankruptcy.
Weiss warning: On August 6, 2008, 110 days before the failure, Martin Weiss and co-editor Mike Larson broadcast a live webcast naming Citigroup as the number one candidate for bankruptcy. More than 100,000 individuals viewed the broadcast or the recording, and the transcript was distributed to more than 400,000. The following are the banks Weiss listed as candidates for failure on August 6.
And three days before the failure, in Business Week online, Weiss warned, “We’re getting to the critical doomsday question: What happens when a megabank like Citi fails? [Citi] is on the razor’s edge.”
Sources: For the video recording, go to http://www.moneyandmarkets.com/x-list-webinar. For the transcript, go to www.moneyandmarkets.com/x-list-transcript-1 and www.moneyandmarkets.com/x-list-transcript-2. See also November 20, 2008 Business Week article.
Washington Mutual failure: On September 26, 2008, Washington Mutual Inc. 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 warning: On August 6, 2008, 51 days before the failure, Martin Weiss and co-editor Mike Larson broadcast a live webcast also naming Washington Mutual as a candidate for bankruptcy: “Most people think that “big” means “safe.” So the first shock to most people reviewing this list is going to be the simple fact that some of the nation’s very largest banks and thrifts could be vulnerable to financial difficulties: Citibank, Wachovia, Washington Mutual, HSBC.”
In the March 2007 edition of Safe Money Report, Weiss and Larson told readers to avoid Washington Mutual “like the plague.”
In the June 2008 edition of Safe Money Report Weiss and Larson wrote, “If you hold stocks like … Washington Mutual (WM), sell and don’t look back.”
Wachovia buyout: In the third quarter of 2008, Wachovia faced a banking crisis. On September 29, 2008, the FDIC announced that Citigroup would acquire Wachovia Corporation’s banking operations. However, on October 3, 2008, Wells Fargo and Wachovia announced they had agreed to merge in an all-stock transaction, apparently reversing the Citigroup deal. On October 12, the U.S. Federal Reserve approved Wells Fargo’s takeover of the bank, thus forming the largest bank branch arrangement in the United States. The acquisition deal was completed on January 2, 2009.
Weiss warning: Also in their August 6, 2008, webcast, Larson stated that Wachovia “…made the fatal mistake of buying the nation’s largest and most aggressive mortgage lender — Great Western Financial — at the worst possible time. And it’s also got some serious exposure to derivatives.”
Also, the headline for the September 2008 Safe Money Report clearly stated Weiss and Larson’s warning: “Failure possible at Wachovia …”
General Motors bailout:
On December 19, 2008, General Motors along with Chrysler were approved to receive $13.4 billion from TARP funds with an additional $4 billion to be made available later. However, despite these enormous efforts, as of mid-February 2009, General Motors began contemplating Chapter 11 bankruptcy.
Weiss warning: On October 11, 2005, Weiss wrote: “GM Headed for Bankruptcy.”
Five months earlier he warned:
… that General Motors is “likely to collapse,” that “the consequences for investors will be enormously far-reaching” and that “millions who depend on the company’s value and retirement income will suffer shattering losses.”
Then, on August 31, he issued a second warning in Money and Markets:
“Delphi, GM’s former parts subsidiary, has already threatened to file for Chapter 11 bankruptcy by October 17 if its union does not provide relief. Don’t be surprised if one day, in the not-too-distant future, General Motors does the same.”
Weiss warnings on other companies: Weiss warned that, due to massive losses and financial failures, investors should not to touch the following companies with a “ten-foot pole”:
Accredited Home Lenders
Beazer Homes USA
Fidelity National Financial
Golden West Financial
New Century Financial
Wells Fargo & Company
By yearend 2008, 11 of the 25 companies had filed for bankruptcy, been bailed out, or bought out. Virtually all had suffered severe stock declines, with average losses of 81.3 percent. Source: Safe Money Report of April 2005.
Weiss warnings of 1990s insurance company failures:
A 1994 study by 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 life and health insurance company failures, including the failures of Executive Life of California, Executive Life of New York, Fidelity Bankers Life, First Capital Life, Mutual Benefit Life of New Jersey, and others. Source: U.S. Government Accountability Office (GAO) — Insurance Ratings: Comparison of Private Agency Ratings for Life/Health Insurers.
Weiss stock research track record:
The Wall Street Journal reported that Weiss’ company’s stock ratings outperformed those issued by all brokers and independent research firms they covered, including J. P. Morgan Chase, Merrill Lynch, Goldman Sachs, Piper Jaffray, Credit Suisse First Boston, Smith Barney, S&P Equity Research, Morgan Stanley, and 14 others. Source: Wall Street Journal, “Stock Research Gets More Reliable,” June 7, 2005.
The Media Praises Weiss’ Foresight
Newsmax: “Martin Weiss’s prediction of the current economic crisis is uncanny.”
The New York Times: Martin Weiss was “the first to see the dangers and say so unambiguously.”
Barron’s: Weiss is “the leader in identifying vulnerable companies.”
Louis Rukeyser: Weiss provides “a tougher service.”
The Los Angeles Times: “Of the 62 publicly traded companies to file
for bankruptcy protection in the first quarter, Weiss said it rated 36 of
them at least three months before their Chapter 11 or Chapter 7 filing, and 34 of those got ‘weak’ or ‘very weak’ investment ratings of D-plus to E-minus … the lowest-rated shares, including US Airways Group Inc., JDS Uniphase Corp. and Xerox Corp., have lost an average of 33.1%, while the highest-rated stocks are up an average of 14.9%.”
Fortune: Weiss delivers “The most comprehensive source of
Esquire: Weiss’ company is “the one company [that] … provides financial grades free of any conflicts of interest.”
Worth: “Weiss’ record … is so good compared with that of his competitors, nervous buyers need look no further.”
Today’s Librarian: Weiss was “the only [one] to warn the public in advance about the massive insurance company and bank failures that eventually impacted nearly 6 million Americans.”