Steem Bounty - What is the Best Thing to Do When You Expect the Stock Markets to Plummet in the Next 6-12 Months?
I want to try out offering a bounty for the best in-depth answer to my question through a cool new project called Steem-bounty by @famunger and @knircky.
It is simple. Let's say I expect the stock market to crash in the coming 6-12 months. This because I think stock prices are artificially high, debts are higher then ever and the last crash was 10 years ago.
As a result of this, I expect some pension funds to get into serious trouble, I mean really serious trouble and maybe even defaulting. In the US, The Netherlands and a lot of other countries. In turn, this leads to more bankruptcies and stock price crashes. Not a good situation.
Alright. Now let's say you think the same thing is going to happen and you currently have $100,000 USD worth of relatively liquid assets (stocks, trackers, crypto, cash, precious metals, mutual funds etc..). You want to make sure you will not go down with the crash.
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The best in-depth comment will receive a part of the bounty I put on this post! :-)
Good luck!
P.S. You can find more information on the Steem Bounty project here.
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Disclaimer: I am not a financial advisor, trader or developer. I am just a blockchain & cryptocurrencies enthusiast. Make sure you do your own research, draw your own conclusions and do not invest any money that you cannot afford to lose.
First of all I think it has to crash. This can't go on forever. All stocks are heavily over-valued. The only reason it hasn't crashed yet is because it is been rigged by buying up stocks and bonds by central banks.
Maybe it's just wishful thinking but I think in crypto's would be a good option. Besides that gold/silver.
Because if it crashes, a lot of people gonna lose a lot of money. But at the same time, the long-term investors still will make profit when they sell. And they will sell. Maybe for a bit lower, but still with a good profit.
This money has to go somewhere, but I can hardly believe they'll put on a savings-account with their bank.
So my best guess will be crypto's/gold/silver (and in that order).
Hmmzz interesting @smasssh...
Crypto is definitely very interesting to me as you might know. Currently I don't own any precious metals. I know quite some people are fan of gold and silver and historically it has proven to be somewhat of a good hedge against the stock prices, but I don't 'feel' it yet. Maybe I should dive into it a bit more when I have the time :-)
Forgot to tell. Crypto's yes, but I don't have any gold and silver myself (except for some jewelry). But like you said; proven to be a good hedge against (falling) stockprices.
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Reduce monthly expenditures to minimise leakage of liquid assets.
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I'd say you forget that and invest in some hardware asset till everything stabilizes. You can hold them in the metals though, AUX more likely.
And as @thekenyansaid, you can get to farming😂. The manure market is booming. And seriously, that seems like the best thing for a long term future investment
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I can see the same thing happening and have all of my stock market investments locked up in retirement funds so I just HODL. That being the case, I would be looking for a more solid store of value investment-wise and a few Steemians have been very bullish on Silver lately.
In addition to that, @broncnutz proposed a very interesting option in the Gold-backed Chinese Yuan https://steemit.com/china/@broncnutz/china-oil-yuan-gold-bitcoin-you-better-pay-attention
I might be down the rabbit hole as well but hedging into Crypto is what I am doing as I believe as trade wars settle in, FIAT currencies take their hits, and the world gets increasingly fed up with government driving their agendas while the corporations fleece us sheep, crypto is part of the answer.
The BIGGEST strategy I would recommend, however, is to do what you can RIGHT NOW to pay off your debt, buy your freedom one chunk at a time, and live life. Here is an article shared by @briggsy that goes into some advice and details. https://cointelegraph.com/news/best-investment-mark-cuban-says-not-gold-or-bitcoin-but-paying-off-debts
Buy your life back as investments are supposed to be the fuel that empowers your lifestyle and gives you the power to make good choices for you and your family.
Thanks for the comment Zeke, great as always :-)
Some interesting things you refer to, I will definitely take a good look at those.
When it comes to debts, I basically have one big one: mortgage. I think for most people who don't want to spend a lot of time thinking about what to do with their money or who are risk averse, paying of their house is a good idea. Personally I prefer liquid assets, because if an opportunity comes by tomorrow and my money is locked-in in my house, I cannot take advantage of it ;-)
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Wow! Unexpected surprise! I will pay that one forward and do some extra upvoting of good content here on STEEMit. Thanks!
Well, if you expect/know that the stock markets are going down in a few months, as well as the entire economy, then I would say it becomes important to look at some place to 'cash out' into.
Normally I would say 'Sell all your holdings now' and wait for the markets to crash, and then buy back in. Like the big dogs do.
But the differentiating variable here is that the economies of the world are likely to take a hit too. Cashing out into FIAT may be suboptimal if that tanks too. It's tempting to say that crypto will flourish in these situations but this is a large gamble at the very least.
When everything goes to hell I think it's important to look for investments that will always be valuable. Some people swear that Gold qualifies for this but I'm not so sure. You'd have to check the correlations between stock market crashes and the gold price for this.
Other things that will always be in demand are: food, undertaking/burials, high luxury goods (the rich are never truly poor), gambling (according to the Sopranos it's never in a recession!).
You know what's a good investment that pretty much always makes money? an ice-cream stand.
It all depends on how big things are going to crash though. If we're all going to end up in extreme poverty and in hunger, you might want to buy farmland instead. Or land in general, is always a good investment (they ain't making any more of it). So you'd have to know more about the extent of the crash too.
More practical though, you could try looking for economies and opportunities that exist outside of the affected region. Perhaps there is an investment opportunity in some small 2nd or 3rd world country, which trades with a neighbouring country, and which exists more or less seperate from the global world economy. Maybe invest in emerging (asian?) economies.
The more I think about it, the more I think that when the true black swan crash happens - nothing will be safe. No asset can retain value when the mass is selling whatever they can to cut their losses. Possibly the best thing to do is try and acquire human capital or just get land. People will always be able to produce value, and land is limited and will go up again in due time unless millions of people die/disappear overnight.
Or, yeah, buy Bitcoin?
Thanks for the reply @pandorasbox!
Gold seems to hold up pretty well during crashes of the stock market (https://goldprice.org/gold-price-chart.html). Also, gold seems to go up when more money is printed (USD). On the other hand you might say that the gold price is artificially high now since the US started printing a s***load of it in the last 10 years. Not sure what that will do.
Land is indeed interesting, it has its use and supply is finite. I do however think that land and houses are positively correlated with the stock market (based on 2008 crash). But, that is more of a feeling than fact checking from my side.
Extreme poverty is unlikely, I expect something like 2008, maybe a bit worse. Governments saving private companies etc...
I find it difficult to determine what will go up if the rest goes down. I'm also tempted to say crypto, but we'll have to see whether the rest of the world thinks so too. Actually, the big guys getting into crypto and realising nice gains, might temporarily cover up the problems and delay a crash. But that is only when they get in big time, and fast ;-)
We'll see.
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'The best thing to do' would be to get a financial advisor. They can go over actually examples of securities you can personally hold. "Best" is subjective and it's all dependent on your risk tolerance.
For one person's preference, it may be best to run face first into the declining market, shorting leveraged options left and right.
For a different person, it may be best for their preferred risk tolerance to simply choose not to participate in the stock market in the Next 6-12 Months.
Ultimately, get an advisor who is able to make recommendations for you. And if you don't like that advisor's recommendations, go get a different advisor until you find a good fit. It's not a sexy answer, but finding a professional is best.
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You have to buy put options, let's say IBM is at 100$ now. You pay a few $ for the right to sell at 95 in 1 year. When the crash is e.g. 50%, you can buy at 50$ and use your option to sell at 95$. You make 45$ with a few dollars.
Writing out call options is similar technique..
That is an interesting one. I don't have any experience with put options actually. I will look into it. Maybe shorting some financials in the US is not a bad idea ;-)
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This crash will be nasty.
The coming stock market crash will quickly transform into a currency crisis and then a bond rout
Gold and silver are best. Oil also. All the money that you want to leave in the financial market should be in these asset classes.
Keep enough cash for daily use
Buy farming land, agricultural machinery, grains with the remaining money. This can be 50 - 60%.
The coming crash will cause a lot of disruptions and supply chains will be broken. Food will be of most importance.
If you have food that you can sell or land that you can use to produce food, you stand a chance of making money from the crisis.
Farming land is also not in a bubble like other real estate.
Give all crypto a pass
Maybe I should invest in canned food ;-)
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Pay off all debt.
Reduce monthly expenditures to minimise leakage of liquid assets.
Invest 80% in high yield GIC or bonds with staggered due dates over five years.
Invest 10% in gold and silver.
Invest 10% in cryptos that do something like Steem, EOS, Bitshares.
Number 2 is the golden rule if you ask me. Something that most people thing of only when it is too late. Bonds could be a good hedge indeed, although with the last crash that was not necessarily the case for all.
I had a boss who once said it isn't what you earn, it's what you keep.
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But I see a very interesting and tricky future for cryptocurrency in the scenario you have described here. Trust on cash/gold based economy may plummet altogether and investment on cryptocurrency will jump over the roof. Even the ones who are slamming the crypto business will come aboard, thus legitimizing the aims/claims of crytpcurrencies.