Kitco News’ recent YouTube interview with InvestorsHub’s Clem Chambers has readers asking if I think another market crash is imminent—and if we should go to cash to avoid it.
My answers are: maybe, and no.
The Crash
As for the crash, let me start by saying that I agree with most of what Chambers said.
Many popular stocks are way overpriced. The real economy doesn’t support these ridiculous valuations. US equities are showing classic signs of being in a bubble. I agree that it could pop at any moment—and that could happen with or without help from the impending US election or the next wave of COVID-19 shutdowns.
Where I part with Chambers is on the very high odds he places on a market crash before the election.
To be clear, he’s not saying the election will pop the bubble. Any tiny grain of trading sand could start the avalanche that takes Wall Street down to Main Street’s level. “By the election” is just his time frame.
I think it’s possible he’s right.
I also think it’s possible that signs of more easy money coming from Washington could propel stock to even more ridiculously overbought levels. Tesla could shift Wall Street into Ludicrous Mode. And given the trillions of dollars we’re talking about, who knows how high or how long that might go?
I sure don’t.
But do I think one of these scenarios is more probable than the other?
No.
I’m not saying the odds are 50-50. I’m saying I have no idea what they are. I see no valid way of putting numbers on them.
But I will say that the higher and longer Ludicrous Mode goes, the more certain—and the more violent—I think the Wall Street crash will be.
In short, I don’t disagree with Chambers that Judgment Day is coming. I just don’t share his strong conviction that it’s almost certain to happen within about a month.
Going to Cash
Chambers is so sure the crash is imminent, he’s sold almost all his stocks and other assets—even gold. He’s gone almost entirely to cash.
I’ve been telling readers for some time that I’m working on raising as much cash as I can before that possible meltdown can happen.
Having just bought a bunch of stocks on my Shopping List during last week’s sharp decline in gold and silver prices—and taken some profits—building my cash position is now my top priority.
But…
I’ve not closed any of my positions in junior mining stocks, which are mostly in gold and silver exploration and development plays.
That’s not because I expect gold and silver to be exempt from a general market meltdown. I agree with Chambers that during the worst of a crash, all assets other than cash will take a hit, even gold. That won’t be because there’s anything wrong with gold, but because it’s doing its job as a source of wealth of last resort.
But since I don’t agree that it’s certain that the next crash is imminent—and I do think there’s a chance of the opposite happening—I don’t want to sell anything right now.
Am I taking a big chance holding on to stocks that could fall off a cliff with little notice?
I don’t think so.
In the first place, I have Upside Maximizer stops on my big wins. That means I’ll lock in my gains, even if possibly at lower levels than today, if there’s a market meltdown.
Won’t that be too late? Not if I follow my Upside Maximizer strategy with discipline. What looks like high waterfalls when we look back in future years are events that take weeks or months to play out. Even last March’s record decline took a couple weeks. Time enough to sell—as long as I don’t chicken out.
And remember the other risk: selling now could mean missing a huge leap upward.
This is a particularly painful outcome for most of us. We’ve been trained by harsh experience not to chase stocks. That means that if we sell and then prices rise dramatically rather than fall, most of us wouldn’t buy back in. We’d risk being left completely behind.
That’s not a risk I’m willing to take.
One more thing. Even Chambers says that he might hold on if he were a hardcore “buy and hold” sort of guy, willing to stay long through whatever volatility may come. I am that sort of guy.
I’d be delighted to average down on every gold and silver stock I own if I could buy more at 50% off with no company-specific bad news.
I’m that confident that they’ll deliver plenty of value going forward. I’d expect their prices to recover and head much higher when gold and silver rebound. That’s just what they did after the March meltdown—rising even faster and higher than mainstream stocks.
Of course, it’d be different if I owned Wall Street market darlings or similar risk assets. I’d probably be selling, just like Chambers.
It’s because my stocks are primarily leveraged to monetary metals—and uranium, which I see as different from other industrial commodities—that I’m willing to stay long.
Especially with my Upside Maximizer strategy in place, I’m ready to ride whatever volatility the next few weeks bring.
That’s my take,
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