Customer Reviews

Contagion: The Financial Epidemic That is Sweeping the Global Economy... and How to Protect Yourself from It

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In 2003, I read my first John Talbott's book, The Coming Crash in the Housing Market. He was simply ahead of his time with his prediction of the housing market, Fannie Mae, Freddic Mac, etc. In 2006, I read Sell Now, and this was right before THE PEAK, and this time he was simply spot on. Of course, he wrote Obamanomics, when everybody thought Hillary was going to win. This is how good this author is.

Naturally, I devourved his latest book, Contagion. This book has no charts, no tables, but the message is clear: this time the recession is gonna be deep and long, and no countries can escape it, and there are only a few things you can do: cash, TIPS, gold, and if you must, only one other country to invest in. He has another message, that our country has been hijacked, and this mess is not an accident, and we need reforms.

Regarding his prediction about this recession, I just hope that he is wrong just this one time. But given the case he laid out, I think that's just wishful thinking.

This book goes beyond the simple "Sub-Prime Mortgage," expose' to explain the root causes of the recent financial meltdown in an interesting and understandable way. While sub-prime lending may have been the first shoe to drop, the fundamental problem was one of greed and complicity among all of the bad actors from appraisers and mortgage brokers to investment bankers and members of Congress who took their money and turned a blind eye to what was about to happen.
Sadly, the means of protecting yourself from this catastrophe are limited since the vast majority of "investments," are still heading down, but the author does point out that cash, TIPS and gold might hold value in the long run, along with judicious investments in China. In the final analysis, we need to cut our national leaders off their lobbyist habits and allow the marketplace and bankruptcy courts to clean up the garbage that has been created.
I found this book to be extremely engaging and enlightening. While I usually read 4 or 5 books at the same time, I couldn't put this one down and finished it in just a day or so. Although the elements of this financial disaster change on a daily basis, the general course of the author's predictions remains true and his observations continue to have merit, even though Treasury's TARP program as described by the author has morphed into a no strings attached Wall Street Giveaway.

The current market crisis could not have been accomplished without significant deregulation. This occurred through lobbying - a study concluded that business lobbying provides a 400:1 payback in just tax benefits, with more benefits from blocking competition, aid with union-busting, etc. Senator Shumer's top 10 contributors are the biggest financial institutions he's supposed to regulate on the Senate Banking Committee.

Hedge funds, some of the biggest lobbyists, have no reporting requirements and no supervision; meanwhile, they grew the CDS market from $140 billion ten years ago to $65 trillion today.

Losses due to current market crash are in the trillions ($8 trillion in residential real estate, $2 trillion in commercial real estate, and $6 trillion in the stock market - not easily absorbed or ignored in a $14 trillion economy and when the federal government already is in debt $55 trillion, with an additional $1 trillion/year trade deficit as well.

Bear Stearns had $190 billion of external debt, and there was close to $2 trillion of CDS to guarantee it. Talbott uses this to substantiate his conclusion that massive gambling is going on - most likely via hedge funds writing lots of bogus swap insurance.

Talbott becomes confused when covering property tax yields - unless there's a limit on tax rates, declining assessed values do not limit tax revenues as the rates simply increase proportionately. Also his point that GDP is not an adequate measure of economic activity misses the point that it counts $1 of "Made in China" the same as "Made in the U.S.A."

Talbott sees Paulson's plan as creating greater moral hazard for the future (What else has the Federal Reserve and the Treasury been doing for the last 50 years besides bailing out the market?), and not helping balance sheets. Citibank was leveraged at 29:1, 60:1 if off-balance sheet entities are included.

Talbott's recommendations include reducing housing volatility by requiring 20% down payment (the real culprit was Greenspan's low rates), reducing allowable bank leverage to 10:1 and banning off-sheet liabilities, regulating CDS, limiting their total volume, and setting up a clearing house to ensure they are in balance (aka a Las Vegas sports book).

I have read all of John's books more than once and continue to be amazed at the accuracy with which he can discern the economic consequences from a history of social behaviors.

I experienced my first, so called, real estate bubble during the sixties and was buying duplexes in the San Francisco Bay area for $13,000 each in its aftermath. I have also studied every bubble since, and agree that the magnitude of the forces driving the current Financial melt down has created the mother of all perfect storms which will likely lead to world altering consequences.

He, rightly, does not blame capitalism for the current financial problems, but has much to say about corrupt politicians, lobbysts and greedy corporate leaders who line their pockets at the expense of stock holders and working citizens while creating losses and a costly clean up for them.

He very astutely points out that this recession is different from all the others, noting that the residential real estate market is leading this one down for the first time in our history. He notes that recessions usually begin with a business decline followed by high unemployment and then falling housing prices. He suggests that the consequences of the unprecedented activities that produced this housing led crisis will be severe and wide spread, with global affects.

I was pleased to learn that he believes capitalism, operating in a well regulated republic is the strongest economic model in existence. He offers that capitalism works so well that it has the ability, unless properly regulated, to over-heat and meltdown from time to time.

He makes a strong case for eliminating lobbyist, who corrupt and interfere with regulations, from government altogether. I hope, as he, that we survive this experience and will make changes to prevent it from happening in the future.

Hopefully, our grand children will look back on this as the world's last great finnancial crash, meanwhile everyone interested in surviving it today would do well to read Contagion.

John writes, street wise, with Hemmingway-like simplicity and clarity with good documentation. I have suggested it as a must read for my business associates.

Now, I hope he can be coaxed into writing an in-depth, sequel about the on-going selling of the favors of our beloved America the beautiful. We need to rescue her from these self-serving lobbyst and corrupt politicians who are behaving like pimps rather than responsible public representitives as they prostitute her for their own personal gains. Since arriving on these shores in 1630 many of my ancestor have served her in just about every capacity, often fighting and dying for her honour. Now others, after swearing to protect and serve her have insulted and violated her in the most vile manner. It is past time to put a stop to this corrupt humiliation, wipe the tears of disgrace from her eyes and reinstate her to the place of high honor that she rightly deserves.

Congratulations on another great book John.
Bill G. Avery

I am not quite finished reading Contagion. I've learned so much from this book. Everything makes sense, and the author thoroughly supports his predictions. I've never been political or financial, but the book is written in a way that all readers can understand it. I can't wait to share the book with friends and family. I never realized the level of corruption that we face today. I highly recommend this book!

A must read for any one that is involved in the current economic downturn - and that means practically everyone.

John Talbott lays out a very concise and coherent history about how we got here and what are some of our options going forward. The book is an easy read - you don't need an MBA or PhD in Economics to get through it. To not read it, is to not have an understanding of economic forces that are engulfing us.

I'm convinced that when the definitive economic history of this era is written John Talbott will be seen as a sort of prophet (as opposed to profit) for our time.

Talbott is the type of author who lets you know what's exactly has gone wrong and what can be done to escape the brunt of it. He doesn't have a "get rich quick" scheme or a feel-good message, just a outline of what's ahead and why we're there. He is dead on that this could not have happened without significant deregulation, but in reforming the system, we need to realize that the rules were wrong to begin with. The regulatory commissions are there to protect the industry, not the investors. Until that fundamental flaw is corrected, then any reforms will be ineffective. This is a must-read book for those who think a "stimulus" package is going to fix everything.

I had never read any of John Talbott's books before but was more than interested as he was dead on with his previous books, "The Coming Crash" in 2003 and "Sell Now: The End of the Housing Bubble" in 2006. He finished this book in the fall of 2008 but everything he has written about has happened so far in the last three months of 2008 and the first two months of 2009.
His accuracy is frightening because he paints such a gloomy picture of the next few years in America. He blames lobbyists and the government for much of the disaster but he also puts blame on every other Usual Suspect that has helped bring down the United States and global economies. This is a must-read book that is scary but necessary to read. I would hope that our congressmen, President, and every other person in America has a chance to read this. But I doubt if he will be taken as seriously as needed because of his book, "Obamanomics."
I hope he isn't completely accurate but I believe that he will be. And if he is, the next few years will be titled, "Contagion of Chaos."

Mr Talbott analyzes the current economic situation with stomach churning logic. Incredibly enough, our elected officials and corporate leaders have led us down a path that has devastated our country. Mr Talbott covers every aspect of how each segment of our economic and political system has focused on short term greed as their focus. He offers solutions that potentially can change things around but will take the participation of every citizen to make a difference.

I will only say that this is another excellent analysis with predictions by the man who called the housing bubble long before it had anyone else's attention. It's flawed only by the publisher's failure to catch a number of errors in grammar that sometimes make the text confusing. That's not the author's fault.