Hello Apes,
I have seen a lot of posts regarding a potential crash and subsequent questions by concerned apes asking how they can protect their assets and capital. I too had the same question and began researching safe assets and have decided to share my research here.
I am by no means a financial advisor and so this should not be considered financial advice. However and I am open to editing this posts following suggestions that are backed up by sufficient references.
The "Everything" Bubble
Following multiple DD's on this subreddit and that which will not be named it has become clear that are multiple underlying systemic issues in the market which are likely to implode. Furthermore, warnings from many renowned analysts suggest that the bubble is about to pop sending the U.S. and other global economies into a recession the likes of which has not been seen in decades.
Among those who have suggested a market collapse is:
Harry Dent - Author of "Great Depression".
Michael Burry - Known by many on this sub as a result of his prediction of the 2008 housing bubble.
The list of renowned investors warning of a bubble does not stop there. However, I will mention that many of them have mixed reputations and are especially critiqued for constantly stating there will be a collapse. It is important to consider this issue but also consider this quote "I may have been early, but I am not wrong".
Cyclically Adjusted P/E Ratio
I won't delve into indicators for an economic crash in this post too much as it is off-topic. However, the one indicator I will discuss is that mentioned above. This indicator was created by Robert Shiller, a Nobel laureate and professor of economics at Yale University in order to track future returns of equities. A higher than average value, in this case, suggests a lower than average annual return. It can be used to identify stocks that are undervalued although. Although it was not originally intended to predict market crashes high CAPE has been a great indicator of subsequent crashes.
It is clear that for every time CAPE has advanced over 30 there has been a resulting crash. I will add a disclaimer that many will take unkindly to using this as an indicator for the economic crash. However, I do believe that its historical record warrants such use.
Gold
In this first instance, we will take a look at gold price action which as many of you will be aware recently hit an all-time high in August with a price of $2,061.50. This can be attributed to the economic uncertainty of Covid-19 [1]. The price of what is considered one of the safest stores of value has since declined to $1,730 as of writing.
Research has also found that gold prices performed consistently, thus, rising during the majority of major economic collapses [2].
Overall, it should come as absolutely no surprise that gold is one of, if not the safest form of hedging for the event of a market collapse. Therefore, holding physical gold should be an obvious move for those looking to protect their wealth. The same article I previously mentioned also gives important reasons as to stay away from silver if you are intending to hedge your bets on the market collapsing as it has consistently performed poorly in such events.
Real Estate / "Housing Bubble"
The real estate bubble is well documented and it should come as no surprise to people that the market seems massively disconnected from reality. As a result of the pandemic evictions for those who are unable to pay rent have subsequently been halted leaving many landlords in a precarious situation where may be unable to afford mortgage repayments. However, the inventory of real estate has decreased dramatically with the average time of sale from listing dropping to just 17 days.
Note: Graph Demonstrating Housing Inventory Source: https://fred.stlouisfed.org/series/MSACSR
This is arguably the result of historically low-interest rates leading to more borrowers and hence, buyers. As a result, housing inventory drops. Although this in and of itself can not be considered an indicator for a housing market crash the reason you are reading this is that you believe the stock market will crash and with its earnings as well as savings. It, therefore, goes without saying that there will be a reversal of these historic low inventories as buyers using credit begin to default on mortgages leading to a shift in the buy and demand fundamentals and a decrease in property values as foreclosures increase.
Overall, it can be suggested that in the event of any recession it will be important for the individual to have a home that they can afford to fully pay off. Furthermore, it is suggestible that any property investments should be delayed or the effects of a crash considered on the value of the property prior to purchase.
CryptoCurrency
Although I won't give out any specifics of which cryptocurrency to choose or invest in it is advisable that you choose one that has a low carbon footprint and is sustainable. Although, that is not to say Bitcoin and other cryptocurrencies have had their day yet.
With the short history of mainstream crypto, it is extremely hard to gather any valuable data on these assets and their potential uses during a crash. However, their disconnect to any centralised financial system makes them a good bet as they are limited in supply and this will not change.
Perhaps the biggest concern for crypto is whether it is firstly, in a bubble in and of its own right and secondly, whether in the event of any economic collapse it will be recognised to hold a similar value. Furthermore, JPMorgan has announced its interest in crypto markets suggesting it could act as a good hedge.
Cash
In the event of a collapse of big banks and a systemic failure that does not result in extreme hyperinflation, it is likely that having a reserve of physical cash will be a great advantage as millions disappear from the economy and maybe individuals are unable to withdraw money from their accounts. This is extremely relevant today as the use of bank cards has almost irradicated the use of physical money circulating in the system.
Conclusion
It appears that the best way to hedge against any risk of systemic failure, recession or even depression is a diverse portfolio including while including much physical gold. Don't forget to stock up to also stock up on lead.
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