It's the End of the Financial World as We Know It (and I Feel Fine)

This may sound weird coming from a Religious Studies scholar, but I am a former finance worker, and long-time investor. I think everything is going to hell. Yay! Enjoy my unorganised bearish ramblings.

Last year, I predicted (via Facebook): I anticipate a 50%-85% drop in the market within the next 1-2 years. Switching superannuation, shares, etc, to cash right about now seems a pretty reasonable course of action. Gaining a few % per year seems much more appealing than potentially losing up to 85% really quickly. Though I was a financial adviser, this is not financial advice, not even limited or general. This is just my (somewhat educated) opinion. I am concerned by China, the lagging economy, the superficial debt-fuelled growth of the past few decades, sovereign debt crises (such as how there is now more debt than cash - ridiculous), China, the upcoming wars/acts of terror, the lessons not learned from the GFC, the continual efforts to stave off the inevitable rather than just letting it happen, our crazy (even criminally) low cash rate (which, like debt, artificially leads to overinflated investment values), Dr Doom’s bearish outlook (Roubini - the guy we all thought was an idiot until the GFC hit), China, ‘lucky’ Australia running out of resources to sell, irresponsible fiscal policy, crazy high P/E ratios, and China. In other words, I think things are going to get very ugly. Investment wise, job wise, and the like. GFC mk2 or even Great Depression mk2. Interestingly, if such a financial disaster does not occur, we are already pretty much overdue for a negative year anyway (usually happens every 5-7 years), so this is worth thinking about.

Since then, we’ve seen already more than a 20% drop, with more to come according to major figures and institutions like the Royal Bank of Scotland. That lower end of my gloomy prediction (50% drop) looks very achievable now, and the upper end (85% drop) is a real possibility, given that there are even more things to worry about, that probably haven’t been factored in yet.

The ASX200 is *currently* where it was 10 years ago. ‪#‎madgainsbro‬ ‪#‎marketsalwaysgoup

I’m also concerned about income inequality, for many reasons. If people don’t have money, how can they stimulate the economy/market by buying shit they don’t need? A billionaire just needs one iPhone. Many millions of people can’t afford one. This sort of capitalist market cannot keep growing forever. In fact, it contributes to its own destruction.

Also note that a declining market is caused by a crappy economy but ALSO causes it. During bear markets, investors tighten the pursestrings and spend less, which further hinders economic growth, which drives prices down further.

We are due for a fall. It could well be a ridiculously big one. I believe I am better prepared for this than before I researched into this. But even I am scared. Jobs may be harder to come by. And while cash is king, it is also not guaranteed, and is subject to inflationary pressures. Something bad is coming and I can only hope that we all consider the various options, and choose the one most appropriate for us.

And as if this didn’t make you feel shitty enough, let me randomly throw this in there. The debt fuelled economic growth of the past few decades has also accelerated climate change. Yay.

I would consider moving everything into cash. Consider liquidating some of your overpriced assets to pay your debts. Get skilled up. Heck, consider downshifting. I moved from six figure incomes in health and finance to earning less than minimum wage, teaching people about philosophy and religious tolerance. Despite these gloomy musings, I’m loving life right now. Love is free, sex is free, rock climbing is free, etc. Best get used to the simple life now...

Raphael Lataster 2018