The least useful investment books are those that describe
either extremely bright or very dark outcomes for the markets.
The quality of predictions in both types tends to be so awful
that they generally provide reliable contrarian indicators. If
the author says buy, you should sell, and vice versa.
Michael Panzners Financial Armageddon, which was
published in early 2007, is an exception to this rule. The
books deeply gloomy predictions have proved so accurate
that, if the text were changed from the future to the past
tense, it would read like a financial history of the past year
and a half. Theres more bad news to come, says Panzner.
Given his extraordinary track record, investors are bound to
One seldom profits from following the advice of a
doom-monger. In September 1981, The Coming Currency Collapse by
Jerome Smith was published. Over the next year the dollar
appreciated by roughly one third against the yen. Richard
Zambells Hyperinflation or Depression appeared in 1984.
This book ushered in more than two decades of stable consumer
prices. James Dale Davidsons The Plague of the Black
Debt: How to Survive the Coming Depression went to press in
1993, just as the U.S. economy was about to embark on a decade
and a half of credit-fueled expansion. The optimists
havent much to crow about, either. Far from tripling in
value, as the authors of Dow 36,000 predicted back in the
summer of 1999, U.S. stocks are currently worth one third less
than a decade ago.
The style of Panzners Financial Armageddon is typical
of the genre. The forecasts are grim, they are presented with
deep conviction, and the crisis deepens melodramatically with
each successive chapter. What distinguishes Panzner is that his
predictions have come true.
More than two years ago, Panzner warned that the collapse in
the housing market would drag the United States
and ultimately, the rest of the world into a deep and
dark abyss, the likes of which we havent seen for
decades. He anticipated that the hardest-hit countries
would be those emerging markets that depended most on the
bloated American consumer and that had accumulated
massive reserves of dollars and holdings of U.S. assets in an
expensive yet ultimately failed strategy to maintain an export
market for their rapidly expanding output.