I’m not ready to sound the alarm and tell everyone that it’s time to head for the fallout shelters—but the bogeys on the radars of the broader equities markets are multiplying. I’ve removed the cover from the alarm button.
I’ve already offered some guidance on what to do if we do get another major market crash like 2008, 1987, or 1929. Rather than repeat myself (basic strategic considerations have not changed), I suggest reading any of the articles you missed:
- Last June, I said a market crash didn’t look imminent, but I laid out a plan for what to do when it does seem imminent.
- I followed up with my ideas on what to do when Doomsday does come.
- Just recently, I wrote that things were starting to look ugly and could get very ugly.
What’s New
I’ve been watching market action since mainstream investors started to realize last October that the party on Wall Street may not go on forever. The speed and strength of the flip-flopping between irrational exuberance and sheer panic has been epic, as my children say.
This tells me that I’m right in thinking that the real meltdown won’t be just a waterfall event; it will be a nuclear-chain-reaction type event. The powers that be may be able to contain it—I don’t see how, but I didn’t see how in 2008 either, and they did. But if not, the effects would be devastating. It could “break” the current world economic order. A long nuclear financial winter would follow. My friend Doug Casey’s prediction of The Greater Depression could finally come to pass.
I’m not trying to hype up the danger.
There is a flip side. The market’s massive positive reaction last Monday to the new temporary ceasefire in the US-China trade war was also spectacular. That tells me that real progress on that front could reignite commodities and equities alike. If that happens, the financial nuclear meltdown could be put off for years, to the benefit of all my current speculations.
Which way will it go?
I honestly don’t know. But I do think the consequences of the many crazy things governments have done since the crash of 2008 will be dire—at some point. And it’s possible that an otherwise healthy market correction now could be the trigger that starts the nuclear chain reaction. What seemed possible but not imminent last June now seems, at the very least, less remote.
I can’t put odds on the possible outcomes before us. It would be a BS number if I tried. But in my view, the risk of a major downturn is clearly elevated.
What I’m Doing Now
With this in mind, what am I doing now?
I’ll tell you:
- Cash remains king. I’m liquidating what I can to raise cash. I’m even calling in loans. In the near term, inflation is not a concern, and holding cash is cheap, easy, and possibly interest-bearing. I may miss out on some opportunities, but cash has the least downside of all the options before me today. And I can always deploy it tomorrow, if things change.
- Any other asset—all other assets—could face much lower prices in a real market meltdown. That’s even true of gold, temporarily. Anything I’m not absolutely sure I want to own gets the heave-ho.
- Gold remains the world’s best and longest-serving financial safe haven. Precious metals in my direct possession have zero counter-party risk. And if the truly worst scenario came to pass, my savings of last resort in bullion could be the one thing that saves me and my family from disaster. So I’m not selling any physical gold or silver. I’d be delighted to buy more if a major crash gives me a chance to do so at stupid cheap prices.
- I’m not buying any more industrial metals plays until the coast is clear. This includes new energy minerals and uranium.
- I’m waiting to buy stocks on my watch list later this month if market volatility and Tax Loss Season put them on sale at prices too good to resist.
I can’t tell you what to do. I’m not licensed for that, and I can’t know everyone’s individual circumstances well enough to advise you all. But I sincerely hope you’ll think about what I’ve said and adapt it to your own needs, based on your own outlook.
