As the Federal Reserve continues to raise interest rates, investors should expect a “break” in the markets, said Clem Chambers, CEO of Online Blockchain.
“Whether [The Fed] really wants to chase inflation, something has to break,” he said. “If they really mean it, there will be an almighty crash.”
Chambers claimed that equities and crypto, assets that have seen significant declines in 2022, are in the midst of a “looming storm,” ahead of a major crash.
“Everyone remembers the big drop in 2008, but there was a bear market in 2007, which was a looming storm,” he said. “I think what we’re in now is potentially an impending storm.”
Chambers spoke with David Lin, presenter and producer at Kitco News.
Investing in Bear Markets
Some analysts have suggested that stocks and crypto are experiencing a bear market. Chambers claimed that as a hedge he had taken a strong position in cash, although his assets were “chomped on by the butterflies of inflation”.
“I would rather have my money in Benjamins than in Facebook,” he said, implying that cash would lose less purchasing power than stocks.
He said his strategy is to wait for markets to bottom and then “hoard” by using cash reserves to buy assets at bargain prices.
“Rather than trying to ride that downhill slope, let it rest,” he said. “Save the money, let it sit, then pile it to the bottom.”
However, he suggested that if investors want to go long on certain assets, they invest in “high risk” companies.
“Cut some money from your heap and set it aside and [invest in] high-risk things,” he explained. “You have to look for special opportunities.”
Inflation and stocks
Inflation peaked in 2022 at 9.1% in June, before falling back to 7.7% in October. Chambers said inflation is fundamentally caused by excess money.
“Inflation is driven by the money supply,” he said. “If you keep printing more money because you have a budget deficit of a giant size, you have to feed that deficit…If you print an additional $1 trillion every year to fill your government deficit, you’re to obtain a medium-scale underlying inflation of 4, 5 or 6%”.
While loose monetary policy can lead to asset bubbles, that’s not always the case, Chambers said.
“Some would say it’s inflation, so a Microsoft stock will be worth 11% more if you have 11% inflation,” he explained. “It didn’t work in the 1970s, the last time we had high inflation. The stock market has really suffered because everyone [thought] it was a scary environment.
For Chambers’ ‘secret investment advice’, watch the video above
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