The Current Financial Crisis
The world economy is at risk of another financial crash. Global debt levels are at an all-time high of $182tn (£139tn), a 60% increase over the last decade, which is well above the last 2008 crash. Paul Tudor Jones, the billionaire investor, recently posted that we are likely in a “global debt bubble,” and Jim Rogers, the influential fund manager and commentator, has forewarned of a crash that will be “the biggest in my lifetime”.
The 3 top imminent signs for a potential crisis:
- Student debt
Student debt has summed up to nearly $1.5 trillion. There is a low probability that with the rise of unemployment, that the young generation will ever be able to pay off a hundred grand in tuition loans in an economy where even hedge funders are finding it tough.
Over the past decade, China invested largely to build airports, factories and cities — now known as “ghost” cities, since they are populated by largely empty skyscrapers and apartment towers. The result is a country with a supersized population (1.4 billion people) and supersized debt.
- Easy money
In the name of quantitative easing, the federal reserve has printed billions of dollars which has made money further lose its value. With lower interest rates, this has facilitated a rise in credit line and increase in indulgences of fancy watches, jet boats and real estate. Debt continues to rise further and what would happen when there is a further hike in interest rates?
Understanding this, how do we get prepared? Here are 3 steps that I would take:
1) Choice of asset classes
– I would look into the following asset classes: Stocks, Commodities,
Indexes, Real Estate and Crypto
2) Asset allocation
– I would plan out my risk allocation for each of the asset classes. I
would do this based on my risk appetite for each asset class.
3) Get liquid and invest
3 ways to get liquid:
– Shorting the market through trading
– Selling my current assets
– Fund raising through my network of investors
Everyone usually asks me, when do you think the market would crash? If I were to tell you a specific timeline, I would be lying. Timing the markets is one of the toughest things to do. However, I would definitely track the market technical levels. As of this writing, the Dow has just gone through its last weekly resistance level at 26962. I would look closely to see if its reaction to the 27000 level.
In terms of the most endangered asset class and of the biggest potential volatiliy, I would say the S&P 500 and DJ30. In terms of the best asset class for the next crisis, my top picks will be crypto and gold.
Generally, on an average, the market corrects itself every 8 years. The last crash was in 2008. We are well overdue of another one. Let’s plan now and secure the financial future of our families.
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