All markets, even gold, are about to crash says investor in all cash

our next guest is preparing for a big crash coming up in the markets and he is fully allocated into defensive assets here's why says clem chambers of investors hub clan welcome back to the show it's a pleasure to speak with you today great to be back well um i got a warning from the market about 10 days ago and and i went ah we're going to crash so i've cleared the decks because i think it's highly likely not absolutely certain but too likely to be in the markets that we're going to be in for a crash i think a lot of people have had a pretty rough ride over the last few days and you know normally before a crash i experience what i call a market malfunction when my portfolio just doesn't behave as it should or has it has as it has been behaved having and i thought well was something wrong here and i looked at things i thought well you know it just i couldn't forgive myself if i was in the in market and it crashed right now because all the american charts are saying trouble ahead so i just cleared the decks because i think coming up to the election we're going to get a crash and you know i would say 65 to 70 percent sure of that and a crash is just not something you want to be in the market for unless you are really a died in the wall by and hold sort of person so i'm out i mean i i can't bear the way the market is at the moment okay you know i've i've got three positions left out or say maybe 30 or 40. and until this crashes out of the way onto the market convinces me that it's not gonna crash i'm i'm out i'm gonna have to just sit on my money and and stare at the action and and stand to one side and you're not i'm not always right but i've caught all the crashes since like oh i can't remember now since 2007. uh and it's always good not to be around when they happen and you can always buy afterwards and see what happens when you're talking about a crash how big of a magnitude are we talking about well the time's so extreme it's very difficult to judge but i mean i call a crash 25 percent and you know if it's a massive crash it'll be 40. but somewhere between 25 and 40 are nine times out of ten the crashes that occur and you know even if you look at the wall street crash it crashed but it recovered a long way and then it basically slid off and you could take that whole 82 percent fall as the crash but really the crash is the first part of things and i think we're going to get a severe down draft that will be 20 to 30 percent um somewhere between now and the election and maybe even a little bit after the election if it doesn't happen to that because you know the way that the market is set up it the drop is so steep i mean so many companies have a mind-boggling valuations are just mind-blowing valuations and we know why they're so high because of all the money printing and that money's got call in the banking and financial system and it's been pushed into lots of stocks and the glory stocks that we all know well you know that is incredibly fragile and now we're going to go through a fragile period up to the election where pretty much anything could happen and none of it particularly good so you know i see that as i mean most of my positions are not in the us but if the u.s goes and i can't see it not going sometime in the next few months then it's going to smash everything else and you know talk about liquidity trap when it happens there'll be so many margin calls that pretty much all assets are going to get smashed just as they did in the crash early on in the year gold got smacked crypto got smacked they all got smacked because when the market crashes it's the people getting margin calls that causes the knock-on vicious circle clem two weeks ago you wrote a report for seeking alpha and you had written that you would recommend an allocation of 33 stocks 33 crypto and gold and 33 cash obviously things have changed for you because you're no longer advocating for the allocation what exactly triggered you to sell everything off well you know i i would say if you didn't think it was going to be a crash that's where you how you should allocate your money and the investing is always a personal choice you might say crap it's not going to be a crash um i want to be in the markets and i think that's a very sensible allocation right now because at some point maybe not very soon but at some point all this money that's in the system is going to come out in prices and that's the way to navigate between a situation which could be deflation in the one hand and could be inflation in the other and you can go between those assets very cheaply very quickly and pivot between an inflationary or deflationary outlook depending on how this crisis pans out i personally if i wasn't out of the market and sitting on my cash waiting for this crash to roll by i would be a lot more in uh equities and in gold and crypto than i would be in cash but you can't be in assets if you're going to get a crash and a crash is normally a very short-term thing so it's basically a blip it's like a piano falling out the window you just don't want to be under it and you know if it crashes i will buy the bottom of that crash or attempt to buy the bottom of that crash and then revert back to normality when the market does and in normality i would definitely be navigating between inflation and the potentials of deflation by moving between those three poles but i personally believe over the next three years you'll see 100 inflation so you'll see your money being devalued cut in half but i don't want my equities cut in half in the next 90 days so you know i'm in in cash because i don't think there'd be an amazing explosion of inflation in the up to christmas i think you know you won't see much in the way of inflation coming in the very short term but over the medium and long term you'll be seeing it in spades so i will be one when this crashes out the way navigating towards that end then we're going to talk about inflation in just a moment but going back to this crash usually when we see a large panic in the market a fire cell if you will you're going to see a correlation of one across asset classes meaning everything falls together can we see that happen today or at this time i i'm i'm almost certain of it because there's a lot of things that i love that i've got out of because there's no point in you know being tied up in something that goes down by 30 and then i have to wait six months for it to recover so yes i think that is absolutely what will happen if it crashes you know gold will get hit and crypto will get hit everything will get hit because where are you going to go for safety then if everything is going to get hit cash cash is the only place to be in a crash okay so let's talk about your inflation outlook because assuming that we are going to see inflation wouldn't you just lose value to inflation then if you're holding cash yeah but crash i don't think this particular crash is going to be one spread over the next six months it'll be it'll probably take a week ten days to roll out you'll just see as you normally see in crashes you know the floor just opens and everything gets swallowed it won't be a long term thing i mean it depends what happens after that of course but i think it will just be a vertical and you know if you're not there in equities when it happens you you get to keep your money but if you're there if you're in equities and it happens well you will take a serious haircut and it's a short-term thing it's almost a trade i'm an investor i don't like to do this but you know when you see and when you you know highly sure that you're going to get a crash you have to go to cash and then wait for the moment where either happens or you believe that that storm has passed and what would be the trigger what would trigger this crash well there's all sorts of potential triggers on there and i mean you don't actually need a trigger you just need something small to happen and that causes a cascade and then of course everyone will pull a reason out of their ear and say oh is this oh it was that oh is that it can be purely technical you know a bank decides to shift its allocation and that just triggers everything because sometimes crashes like avalanches it takes the smallest amount of of a jog to set the whole thing coming down the mountain and i think that's exactly where we are now i think the pricing of so many of these stocks is so out of whack and sometimes so surreal i mean there's places in the uk there's an airline whose share price is higher than it was last november how can you have that situation in the current climate it means the markets in many places are broken well that's a very very fragile place to be particularly up to an incredibly contentious american election particularly up with stimuluses and going all over the place in many countries okay let me posit a counter argument to your inflation thesis i know you think inflation's coming but consider this we've seen similar situations in 2008 particularly in the eurozone where we had very low interest rates very low consumption f following the financial crisis following very low investment from the general public and just very low aggregate demand in general and so under this circumstance isn't that just a definition of a liquidity trap or we're going to see no inflation at all clem well the money's in the system and to an extent is trapped okay in qe it got trapped in real estate and inequities but this time the stimulus has been at every single level so there's been handouts to companies handouts to individuals people's and getting job support um really some unemployment benefit under another name and basically the money has been handed out in all directions and the money supply has grown way more than it did under qe in addition to that it's not over yet you know the the the problem of the um covid uh crisis and what that's done to the world economy that's still ongoing they're still digging a bigger hole it's it's not repaired and then we're going back into growth the only thing we're going back into is a return to where it was before and that's a long way off and where it was before was a place where lots of countries had huge deficits anyway so now we've got a massive deficit situation with governments that can't afford their budgets an absolutely textbook example of what creates hyperinflation let alone inflation is when governments can't cover their budgets they just print money and we're seeing the beginnings of that not the end okay but then right so let's suppose that you're right and that we haven't really seen the full extent of the economic repercussions from covet yet we're going to see more bankruptcies more closures of small businesses wouldn't that have deflationary pressures instead then well what happens is the government won't say oh we're not funding the military anymore oh we're not funding health care in europe anymore oh we're going to fire all our employees and cut back our budgets and try to get them back into balance no they just print the money and that money will go out not into like qe did into the banking system to support it from going bust to fill up their their whole their their shortage of of assets and then it won't get trapped in real estate because they only lend it to people who want to buy buy houses and it won't get trapped in inequities because they were only lended to people with collateral no it will go straight into the economy it'll go into the hands of people that not only need to spend money but want to spend money not a load of um wealthy people they'll just now hold it so it's a different direction it's a different mechanism and that mechanism of filling your budget deficit by printing bonds that get monetized which they will have to do because their budget deficits are just so gigantic all around the world they will print money and they will pay it out to normal people and that's exactly what causes inflation in places like africa and south america and there's no magic to creating inflation if venezuela can do it and zimbabwe can do it they could do it here and they're going to have to do it so if you think that these repercussions from covet would only play out fully in the medium term why wouldn't you be defensive then why would you fully allocate to cash now before we see the full extent of covet's economic fallout well i'm only in cash now because i believe it's going to crash in a matter of days or weeks up to christmas at the latest maybe february the latest if it hasn't happened by then well you know it's not going to happen right and then i would get back into inflation hedges the only reason to go to cash is if you think the market's going to crash and that's where your money is tied up if you didn't think it was going to crash you'd leave it there i mean after all you know there's been a stock market miracle i just think that that miracle is too good to last and i i just think that the disruption that's going to be up in america up to the election is going to be so bad or so you know so disruption ish that it's going to break the the dream and and we're going to get a bit of a calm weapons because i'm sorry i i me a lot of people that are kind of stunned in shock in a kind of weird state of mind and the markets are the same way around you can't look at the economy you can't look at the fundamentals of the world and say it isn't a very very very scary picture and it's just not reflected in the stock market and the only way that prices can be so high is if people are trying to hedge themselves from inflation well i don't think that's a bad thing to do but in the very short term i think we're getting a very big stock market correction and being in equities is a very dangerous place in the short term clem there must be another crash later on then right if you're expecting bankruptcy and what not to happen it's a strong possibility it's a very very strong possibility and if they keep stimulating and if they have if they decide that it's better to print money than to cut back on social budgets and programs and projects well the only outcome potentially is inflation they can't just print money out of nowhere without the money coming from taxation it's just unless they've reinvented economics in the last few months if you print money and you don't have production and you don't have businesses to give you the supply for the demand you're going to get inflation and yeah you know the potential long-term economic disruption and downdraft from this is almost incarcerable and i'm you know i'm reserving my judgment for that we could have a terrible economic situation and high inflation just like i had in hungary in the 50s just like they had in germany and 20s just like they've got in africa in places now just as they've got in argentina and venezuela and you know that is certainly a possibility but you'll be a brave man to say that your crystal balls are so shiny that you can see more than a few months out in this situation yeah but there's a high likelihood of of a crash up to christmas and there's a very strong likelihood of inflation over the next three or four years and you have to be able to navigate between those polls cheaply quickly and and and be able to you know get out before everyone else runs for the exits and glenn don't you think we could possibly see a scenario similar to that of japan in the 90s when we have a lot of accommodative monetary policy large money supply but people are holding off their big big ticket purchases because they expect prices to go down the following year savings rate become high as a result and that becomes a self-fulfilling prophecy right that that pushes prices down could that happen in north america and europe um yes it's possible but you know the american government doesn't lend money to just to americans like the japanese do so the japanese can have this vast um national debt which is basically owed to its own people america is not not in such a great situation it's got its and borrowings internationally and if they don't actually monetize them or they don't sell the debt abroad it has to you know there's no one else to sell it to they have to turn into dollar bills and if the production's not there and if the demand's not there but there's all this money spilling out everywhere well it's going to cause inflation that that's how inflation is caused is caused by more money than supply and this is a different mechanism than qe because qe was filling up a hole in the banking system for of assets and was going into real estate and you did get inflation really if you want to think of it that way inflation was in property i mean the the prices of of property is rocketed and rents et cetera et cetera everyone can see how much those prices have moved in real terms and that's because that's where the money went well this time it's not going to go there it's going to go into the general population it's going to go into the general economy it's not going to get locked up in the banking system and therefore it's going to go on all the other things that people need and you know that is the reality of having a supply of money without supply goods i mean people if the economy is not producing if you increase the amount of money it's going to push up prices if you look at japan which is interesting their um exports are down 10 percent their imports are down 10 percent their overall level of activity is down 10 percent and if that is representative of the world well if you increase the money supply by x percent and you decrease activity by y percent you are going to get increases of prices okay well let's say i don't want to be in all cash let's say i do want to be invested somewhere there must be a few stocks that you like that you think can weather the storm would there be it's a very very very tricky game to be long in a bear and it's an even tougher game to be long in a crash and you know no this is the sort answer okay okay what about crypto and gold what role do they play well i mean if you look at the last crash the crash in march or whenever it was krypton gold slumped but bounced really fast and you know that that is you know i i've actually held on to quite a lot of my crypto in fact the bulk of it because i think potentially it will crash but it would bounce really hard so you know i don't really want to be able to time that gold would probably do something similar it would crash because people were having to liquidate to make up margin the calls but then again it would bounce pretty quick and probably be pretty strong thereafter but you know the equities will definitely drop really fast and i think crypto is quite interesting because i think there's potentially trouble brewing in china and you know crypto will be the signal for trouble in china and so therefore i want to have a a good bet on on on crypto because i think there's a possibility that um there might be um some uh pressure in in the uh government in china and that will go straight into the value of crypto but you know that's that's a long shot kind of thing one of the things that i think about is that i don't think anybody in power when covered struck will be in power the next time they go up for election and you know so there's going to be a huge political upheaval and crypto and gold also would be pretty good for that but in the short term you know this potential crash will take everything down with it because that's what crashes do no bonds right you're not holding on to bonds i'm not a bond person i i'm so not a bond person i don't feel even qualified to talk about bonds i i when i was a young person reading about and finance and investing it seemed to be a litany of of governments renegade on their bonds since the beginning of time so i thought you know if king george the third will do it and charles ii did it and charles the first did it and edward iii did it maybe maybe now won't be so different all right fair enough clem chambers thank you so much for coming on the show today with your thoughts i appreciate it thank you and thank you for watching kitko news stay tuned we'll have much more for you you

Channel: Kitco NEWS

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Keywords: gold, silver, finance, news, investing, investing news, finance news, financial news, economy, precious metals, gold price, silver price, gold price today, pandemic, recession, stock market crash, stock market correction, stock market recovery, economic recovery, sp500, nasdaq, dow jones, stock market news, gold hedge inflation, gold price prediction 2020, federal reserve, monetary policy, inflation, hyperinflation, jerome powell, interest rates, clem chambers, investment, david lin

Id: Q1RpVnWhcls

Length: 20min 18sec (1218 seconds)

Published: Tue Sep 29 2020