Hi, In today’s live session we looked at forex, stock’s gold, mining stocks and currencies as potential hedges for your investments. What is going on now and the likelihood of a full blown recession happening this year.
Has it already started, or could there be one last rally before the inevitable crash?
Ashley also joined me to look at Earth & Sky set ups for this week. Of course if markets are tanking we can still make money from Forex.
How to Hedge & Invest in a Recession
I have cautioned for many months that a recession is probably coming our way later in the year.
The war in Ukraine has exacerbated the problem.
Food, fertiliser, wheat, commodities and fuel inflation is being exported around the world and is not going to be resolved in the short term.
Even Goldman Sachs senior chairman now warns that there is “a very, very , very high risk of recession in the USA this year.” Check out his comments in this article:
As we have seen the major stock markets around the world have seen substantial drops. After 2 years of $trillions of government handouts throwing fuel on the fire, the value of companies was way over rated. This was not just tech stocks. The average P/E ratio for the S&P was 24 and the tech heavy Nasdaq 24, something had to give. Traditionally “good value” is around 10
Housing is in a bubble in many countries and increasing mortgage rates on top of inflation are going to hit homeowners as well as the poor. In the USA rates have almost doubled since August of last year and are likely to move higher still.
Then recent days saw the crypto markets continue to drop & more worryingly a stable coin associated with LUNA crashed 99% of its value from $120 to less than a penny. It raised a lot of questions regarding the concerns on stable coins and their financial backing.
LUNA CRASHES 99%
On the back of that news USDC, backed by the Circle group say that their stable coin is backed entirely by Cash and Short-Dated US Treasuries.
How to Hedge & Invest in a Recession
Despite all the doom and gloom banks, hedge funds, insurance companies and probably pension companies are still looking to get involved in crypto and especially (to start with), Bitcoin & Ethereum. The technology of blockchains is revolutionising so many businesses that I do not see the move ending. Yes things could get much worse in the short term but I remain confident crypto is here to stay.
We are even seeing the likes of HSBC joining JP Morgan in buying “digital land” as it looks to invest in the metaverse: HSBC joins JP Morgan in Metaverse investments
This has been the hot topic in the news lately and there is a lot of pressure now on the central banks as to how they will control this. First they were in denial and as recently as 2020 when I was forecasting major inflation problems the Fed was forecasting a fight to get it to their target of 2%
Well they won that battle! 🙂 The official rate being over 8% right now and under the old calculations over 18%.
As recently as August last year, Fed chair Powell was claiming inflation was “transitory” and “would be falling by Christmas”…. He is doing such a great job* that he was just confirmed as continuing in his role!! You can’t make this stuff up!
* presuming his job is to run the Fed properly. Cynics might feel his true role is to convince the public that the Fed and politicians know what they are doing!
A month after the Fed forecast I hosted a webinar explaining why I had invested quite heavily in cryptocurrencies and how inflation was probably going to be a big problem. I also spoke about the dangers of hyperinflation. The current $ strength and interest rate rises are exporting inflation to poorer countries, especially South America & parts of Africa.
The recording of that webinar can be found in our crypto mini course, here (unit 1)(Only members have access) https://www.forexmentorpro.com/members-area/cryptocurrency-course/
Latin America has again been hard hit by inflation , Venezuela already being in the hyperinflation list and more could follow if the central banks fail to conquer it. Which is why we could see in the coming future crypto to be adopted in these countries just like El Salvador which has adopted bitcoin as a means of payment.
Latin America hit with inflation badly
In fact today there is a meeting in El Salvador at which over 40 nations will be represented, to discuss adopting Bitcoin! What folks who don’t follow crypto fail to realise is the altruistic goals of the crypto universe:
“President Nayib Bukele has announced that El Salvador will be hosting 44 countries “….32 central banks and 12 financial authorities (44 countries) will meet in El Salvador to discuss financial inclusion, digital economy, banking the unbanked, the Bitcoin rollout and its benefits in our country,” Bukele tweeted again on Monday.
Those expected to attend include the Central Bank of Paraguay, Bank of Uganda, National Bank of Angola, Bank of the Republic of Haiti, Central Bank of Madagascar, Central Bank of the Republic of Guinea, Central Bank of Eswatini and its Ministry of Finance among others.
Bukele also stated that the Sacco Societies Regulatory Authority (SASRA) of Kenya, the National Bank of Rwanda, General Superintendency of Financial Entities of Costa Rica, the State Bank of Pakistan, and the Central Bank of El Salvador would also be in attendance.
Another country that’s also fallen apart is Sri Lanka in Asia. They are going through one of the worst crisis in history, the government didn’t manage the finances properly during COVID, bringing the country to its knees. There is no petrol, shortage on commodities, food etc.
Turkey has also been another country we have seen recently hit with high inflation rates at a whopping 70% as we speak.
Here is a list of countries and their inflation rates currently. Country inflation rates
Here is an interesting article that was written in 1988 by Gerald Swanson a US professor of Economics then at the University of Arizona. In this essay he talked about the subject of Hyperinflation and the fact that the USA needed to learn the lessons to avoid a similar issue in the future. AT that time USA total debt was at $2,600 Billions,
Clearly no one paid attention to his article, he was “spookily accurate”! and as a result US debt today is over $30 Trillion according to the US government. A few years ago I spoke with a US professor of economics who told me that when you add in the future debt liabilities of the US government the figure is over $100 TRILLION.
This site claims that as of today the REAL USA debt figure is actually $142 TRILLION Truth in Accounting
Argentina’s inflation rate is 58% and you can see in the “Country Inflation rates” article above, the problems facing South America still to this day.
So what now?
I then went on to discuss some options and choices we can make to try and protect our wealth and even prosper.
Trading of course is a great way to make money whether prices are going up, down or sideways. Master the skill and you can make money anywhere in the world, in any market.
As said, I still believe in crypto. It is revolutionising business, not just in terms of payment solutions. I only invest in tokens or projects that have a real world use. That are solving problems or simply are faster, cheaper, more secure ways to trade.
Big firms are seeing it now and are beginning to pile in. As mentioned yes there is a massive drop on all the coins but if we use the Amazon example, it ALSO crashed 90% twice before getting to its recent high of $3780 and was down 45% again last week.
Experts always talk about the scenario of “if you had invested $1000 dollars in Amazon in 1997 you would now be a multi millionaire.” Whilst factually correct, how many investors hung on as it dropped 95% in its early years?
I discussed this today and also in this article yesterday:
This is the same approach I have with with crypto, and it requires big guts to hold through this phase. But you have to think of this is an investment for the LONG TERM.
If you want this to be stress free, only invest money that you can afford to lose.
Also the The world’s largest crypto asset manager launches a first-of-its-kind campaign to help push for SEC approval of a spot bitcoin ETF
Another Article I wrote earlier this month on crypto as to why I am still bullish on crypto (you make think I have lost my marbles, you may be right!
(Only members have access)
Then you have other options such as GOLD, Silver, gold mining stocks , commodities all of which I discussed in the session.
Gold has been the ultimate safehaven for 1000’s of years. Added to that there are many rumours in the gold community that China and Russia actually own considerably more gold than has been declared. That their goal is to peg their currencies to gold (take them back to the gold standard as opposed to all the FIAT currencies we have now) and thus take over the US dollars position as the reserve currency of the world. If that is true then that could massively impact gold as other central banks would probably need to follow suit
In the last 20 minutes or so I looked at M2 trades and Ashley showed us the best Earth & Sky setups in his opinion. So a packed session!
Here is the recording of todays live session. Click the arrows bottom right to view full screen: