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Do you feel that many investors, despite the economic warning signs, fail to see the growing risk to their portfolios?

David & Bob Wiedemer
July 6, 2016
Video Transcript

Announcer: Do you feel that many investors, despite the economic warning signs, fail to see the growing risk to their portfolios?

David Wiedemer: I think, the best way to understand it is looking back on previous "bubbles" in our country, recent previous "bubbles", we've had a lot of "bubbles," but our "Internet bubble," people were very happy as it was going up. People were thrilled. Now, there were few people that say, including ourselves would say, "Hey, you don't have the underpinnings for this huge stock price and that's bad, because if you don't have the revenues and the earnings that can support it long run, it will eventually go back down with catastrophic consequences," which it did. Once you have those, no one was worried about that. In the "Internet bubble," everyone was pretty pleased while it was going up and the same thing was true of the "housing and the mortgage bubble." We had to argue with people, "No, there are some problems here." There were very few people who felt that housing could ever go down, housing prices could ever stop going up, or go down temporarily, because they would say, "Look, there's only a certain amount of land being created, no more land is being created, it's always got to go up." Well, that's what's happening now on a much more massive scale is the danger signs are very clear and very present, but if you choose to ignore them as people did in those previous two "bubbles" you can get hurt.

Robert Wiedemer: There's a lot of anger out there and I think the elections are showing just anger all over the place, sometimes that's better than an unemployment statistic or an inflation statistic, that really tells you what's going on. I think anybody will say that something is different. I think most people will agree that something is different. On the Democrats side, on the Republicans side, you're seeing a lot of anger. Some people coming in from outside the mainstream institutions of those parties that are very upset and I think this is one of those early warning signs, kind of like negative interest rates, basically telling you that all is not as good as it may appear on the stock market. I might add, let's be very honest about the stock market, once money printing was stopped, in October 2014, it hasn't gone up. It's had two big drops. It's recovered, but that's what of course is the good side. The reality is it hasn't been very good and you add to that the fact that I think after years and years of people's incomes not growing they're angry and they're angry for a reason. I don't think they're angry just because they're crazy. I think they're angry for a reason. Things are not working out as well as the market or statistics would say and I think it's an early warning sign that mentality, which is so important to keeping that faith in the Fed up, I think mentality is starting to change too. That's what pops all "bubbles," whether it be Internet or housing, somewhere the mentality changes before you actually see it show up in the numbers.

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