When Ray Dalio—founder of Bridgewater Associates, the world’s largest hedge fund—placed a $1.5B bet in November 2019, betting the stock market would crash before March, 2020, the financial industry was stunned. And here he is now, right again. Did he foresee the coronavirus? Not at all. For over a year, Dalio has been talking about the strained financial system and how we are just waiting for a trigger, a sharp edge to rip the tight fabric of the global economy that’s barely able to contain the global debt, fiscal madness, and central bank monetary intervention, which have created huge asset bubbles in stocks, bonds, and real estate. Enter coronavirus.
As financial triggers go, this virus may be the worst. This week, the stock markets went into correction territory, in what can only be described as a meltdown just like in 2008, and, just like then, what we are witnessing is just the beginning. The current sell-off is due to de-leveraging by hedge funds and speculators. The smart money is exiting the markets early on to secure large profits before the next stage ensues.
The second stage of the collapse is when the amount of people infected with coronavirus booms, halting consumer and business activity, and when the repercussions to major corporations is spreading. This is when our economy will enter its next recession.
And this is where we are now. Leaning on Wall Street’s self-serving strategies of having our retirement accounts invested 100% in the equity markets—and leaning on their mantras of buy-and-hold to keep us warm in the brutal bear market that’s inevitably coming. But don’t take my word for it.
Chief Economic Advisor at Allianz, Mohamed El-Erian, explains that “It’s [the market] pricing in a significant economic slowdown and it’s pricing in corporates—especially the multinationals—being hit by both lower revenues and higher costs. And finally, it’s pricing in some de-leveraging.” The next stage, he says, will be the market pricing in the worsening prospects for the economy and the corporate sector “that … unfortunately will results from the coronavirus scare.”
Any sane investor that has funds in the stock market should be alarmed by such statements by a market veteran like El-Erian, especially while they are dealing with shock after shock this week as the S&P 500 made its fastest correction in history.
But it’s not just El-Erian, so you simply must take notice. Thursday, Goldman Sachs announced that US companies will generate zero earnings growth in 2020. The renowned investment bank expects the Coronavirus to spread globally and severely impact economic activity. This slowdown is going to be devastating to the over-leveraged US and global corporations. What will corporations saddled with debt do without enough revenue? Default! And what will that do to the stock market? To the bond market that investors are now rushing into, thinking they will be saved there? And to your retirement accounts?
I have been writing numerous articles in the last few years about the reckoning to our economy due to corporate debt. If you follow the opinions voiced on our site, I’ll emphasize that this article is not about being right or about gloating how well our clients are doing at this time. It’s about having you take action to defend your portfolio, your family’s nest egg, before it will evaporate in a severe market correction as corporate defaults will melt the stock and bond markets.
We can show you how and why gold and silver are the best stores of value protecting your wealth. We can show you how anyone following our advice gained many times more than the stock market’s “buy and hold” zealots both short-term and long-term. But at this point with such clear evidence and with voices of the world’s smartest investors giving you a clear warning, this article is about you just taking action to diversify away from being 100% in Wall Street–issued paper assets. Any action that’ll take into consideration a highly probable terrible period for stocks in 2020 and beyond may save your portfolio. If you’ll do that, this article was worth writing.
About Kevin Troy
Kevin has spent over 16 years in the financial industry, focused primarily on precious metals as investment assets. He has published many articles on buying and selling precious metals along with the best entry and exit strategies for various financial assets. He has helped thousands of clients protect, preserve, and safeguard their investments with precious metals and has been with Gold Alliance for more than two years as a leading Sr. Portfolio Manager, overseeing a large portion of our clients’ portfolios.