I don’t know when, and I am not the only person predicting this.
I am not concerned by inflation, or sharemarket valuations being too high, although they could be minor factors. These are my key concerns (some are US-centric, but if the US crashes, the world will follow).
- Corporations hoarding money – particularly Big Tech – instead of spending it. This is bad for capitalism in general. Never been worse than today.
- Share buy-backs. This is corporations enriching shareholders and executives while leaving the business financially vulnerable and not investing in the future either. Never been worse than today.
- Collateralised Loan Obligations. This is the one nobody is talking about. Banks bundle dodgy business loans together, the same as they did with mortgages pre-GFC. It is the exact same problem, and undoubtedly when pandemic help runs out, many business will go under, with a lot of debt defaults. Never been worse than today.
- Idiot investors. The Bitcoin rollercoaster is due to leveraged gambles. When the price dips, stop-loss mechanisms kick in, sending the price lower again. The same gamblers are betting on stocks stupidly (GameStop) and useless cryptos (DogeCoin). RobinHood enables these idiots, and it will only get worse.
- China. China lies. We can’t trust any financial news from there, and don’t be surprised if western experts discover a major underlying problem that affects market everywhere.
- Small business failure and mortgage defaults. As we emerge from the pandemic, which is uncharted territory, it won’t take much, another black swan event, to be the final nail for many businesses. Changing habits (WFH, empty downtowns, packed freeways, Uber Eats) are all disruptive.
- Protests. We have become a much more politicised, complaining people, in all countries. Inequality has never been worse in modern times. Expect protests to continue on various topics, including inequality, the lack of wage growth, surveillance and evil Big Tech.
- East/West. There is much talk of a fracture in global trade. I think this is so likely I have a blog about it. East West Split.
It only takes some of the above to go sideways at the same time to cause a major financial crash. There will be corporations that have lied about their true state of affairs. I recommend keeping most of your cash in cash. Don’t invest in bank stocks or high-flyers like Big Tech. Put a little bit in gold and crypto, both should rise in a crash.
If we make it to 2023 without a crash, ignore the above, I was wrong.