Will the Economic Crisis Come in 2022? If That Happens, What Should We Ordinary People Do Before the Crisis? Can We Still Invest? Invest in Stocks, Foreign Exchange, or Futures?
By Josh Lin, Christian | Deep Value Investor
Knowing that the men in pointy shoes (central bankers) have control over the floodgates of liquidity, regardless of whether there is an economic crisis in 2022, keeping an eye on what central bankers are saying and doing will give you the biggest chance of success.
Here is an exhibit of what happens when the Federal Reserve (the central bank of the U.S.) opens the floodgates of liquidity…
Now, check this out from legendary investor Stanley Druckenmiller…
“Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets…
Contrary to what a lot of the financial press has stated, looking at the great bull markets of this century, the best environment for stocks is a very dull, slow economy that the Federal Reserve is trying to get going.
Once an economy reaches a certain level of acceleration… the Fed is no longer with you…”
If you don’t know Stan Druckenmiller, this is a guy with the following track record…
- Averaged over 30% in annual returns over the last 3 decades.
- While his track record is astonishing, what’s even more impressive is the lack of volatility in his portfolio, meaning… he rarely loses.
- Never had a single negative year and only had 5 losing quarters (out of 120 altogether).
- Achieved all of the above IN SIZE.
I’m sure we’re both thinking the same thing…
Now, let’s assume that there is a economic crisis in 2022…
What we’d do is incline our ears to what the Fed says and track their actions, as the stock market basically derives its value from the bond market, which the Fed has full control over.
And so, if an economic crisis does happen in 2022, how do you think the Fed will react—will they just let it slide and let the whole stock market crash? Probably not, given that most of these central bankers are also heavily invested in the stock market. The more probable outcome is that they will fall back to their old ways and print a whole lot more money (like they did when the Covid pandemic struck).
What will happen if the Fed keeps on printing more money? Well, more money printing basically means more currency de-basement, which means you want to be buying assets that are scare in supply (and preferably with increasing demand)—commodities and commodities-related stocks.
There you have it. I hope my answer is helpful!
If you’d like to learn about how to position your portfolio with “when-not-if” investment ideas targeting 5x-10x+ returns, I’d check out Chris MacIntosh’s weekly newsletter.
Chris retired in his late-20s, having turned pennies into pounds in “when-not-if” investments like…
- The New Zealand real estate (64x return)
- The last commodities bull market (10x)
- Bitcoin (35x)
- Shipping (17x)
Chris manages a deep value hedge fund called Glenorchy Capital and is sharing his research and investment ideas with retail investors, so you can invest alongside him.