A big market crash is coming – this is the bad news I pick up these days from the world’s most successful investors.
Firstly, Warren Buffet sold and set aside US$344 billion cash for Berkshire Hathaway. Next, Ray Dalio said we are heading into very dark times. Then, Jim Rogers warned us about this worst market crash in his life. Similarly, Peter Schiff claimed that the coming collapse will change a generation.
I hope they are all wrong.
It started with crypto market crash
Last Friday (October 10) marked the biggest crash in the history of cryptocurrency. Panic investors dashed out with massive sell-off. The market turmoil liquidated the leveraged position of 1.6 million traders, resulting in a loss of $19 billion. In one day, a whopping $131 billion was wiped out from crypto wealth.
The crash ruthlessly peels off the mask of cryptocurrency as a good hedge of US dollar to reveal nothing but naked speculation.
A long-time crypto skeptic, Peter Schiff took the opportunity to criticize the volatility of Bitcoin, saying its temporary recovery is a dead cat bounce. Schiff said President Trump’s allies who shorted crypto on Friday likely reversed positions the next Monday. Trump is known to have rich friends with high stakes on crypto. What’s more, he and his sons reportedly made hundreds of millions from a crypto platform they launched.
Anyway, after the crypto crash, investors are holding their breath anxiously to wait for the free fall of the next asset. With prices of gold and silver going through the roof and hitting record high every day, it is not difficult to predict where the market is heading.
Peter Schiff is known as Dr Doom after he accurately predicted and alerted the public before the 2007 Global Financial Crisis. Recently, he warned us that the surge of gold prices signals another economic disaster is coming.
“The trajectory of gold prices in 2025 reminds me of the subprime mortgage crisis in 2007. The collapse of the subprime mortgage market – which I had been warning about for years – foreshadowed the financial crisis that erupted the following year. However, almost no one on Wall Street recognized this warning.”
Stock market crash and economic reset
Early this month, Bravos Research showed two alarming charts in a presentation.
In the first chart, consumer confidence in the stock market is near its highest in over 30 years. Yet sentiment on personal economic prospects is at its lowest near 2008 during the financial crisis. This unprecedented high disparity is clearly an investor euphoria decoupling from real economic expectations. It signals an unstable financial system.
The second chart shows real personal incomes adjusted for inflation have risen 50 percent since 2010. In contrast, S&P inflation-adjusted return has surged nearly 300 percent. This huge gap can’t last indefinitely. Asset valuations must eventually reset to algin with the real economy.
Bravos concluded that US, and much of the developed world, is heading toward a once-in-a-lifetime economic reset.
In a recent BBC interview, the outspoken head of JP Morgan Jamie Dimon shared his worry of a serious stock market correction in the next six months to two years. Looming uncertainties stem from the risks of geopolitical environment, fiscal spending and remilitarization of the world.
Last week, the Bank of England also compared the current overvaluation of AI tech companies with the late 1990s dotcom boom burst. The latter ended with a sharp market correction. Likewise, Dimon said some of the money invested in AI would probably be lost.
I am reading Emily Bender’s new book The AI Con: How to Fight Big Tech’s Hype and Create the Future We Want. Bender debunks the myths behind the AI hype. Can AI applications and profits meet expectations, or is it another tech bubble that will soon burst?
Nonetheless, it is difficult to predict when a market crash will come. As the saying goes, the market can stay irrational longer than you stay solvent.
The next Overall Big Cycle
Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund. I am reading his new book How Countries Go Broke: The Big Cycle.
“The Big Cycle” is an interplay of five interrelated cycles or forces that drives the world to progress from one order to the next:
1) Big debt cycles;
2) Political and social harmony and conflict within countries;
3) Geopolitical harmony and conflict between countries;
4) Acts of nature (droughts, floods, pandemics, etc.); and
5) Developments of big new technologies.
In a recent interview, Dalio said we are heading into very dark times. He is pessimistic about the future of UK and US. In fact, there are problems in America, Europe, Japan and China. We should worry about stagflation because the value of all the currencies will go down.
We live on promises to be able to convert debt assets into money. But there is not enough money to go around now.
Get some insights from Anthony Rowley’s latest article in South China Morning Post “Amid rising volatility, a new gold standard may be closer than we think”.
The stock markets are inching deeper into bubble territory. Bond markets are highly unstable. The weakening US dollar is under pressure. With global debts at record US$324 trillion, are central banks with a record holding of US$4.5 trillion gold able to save us in a mega market crash?
“Are we destined to experience the mother of all such crises in the foreseeable future and do central banks have the resources – beyond the inflationary printing of money – that would enable them to ride to the rescue in such an apocalyptic event? At the risk of sounding pessimistic, I argue that the answer is “yes” to the first question and “no” to the second.”
Buying or holding properties is not a good idea
Ray Dalio reminded investors not to buy or hold properties in this market. Because real estate has become more interest rate sensitive than inflation sensitive.
Unlike what most people think, real estate is not inflation-proof nor a good hedge against inflation. The rise and fall of property prices is determined not by inflation, but by the ease and cost of borrowing. Even when there is high inflation, if there is tightening of borrowing, property prices fall. Because few can buy from you. Think what happened in the 1970s.
“In this environment, it goes down in real terms. It is also an asset that is a fixed asset that is the easiest asset to tax. It is not an effective diversifier. And also being able to move money from one place to another. The real estate is nailed down.”
When I was holding a few investment properties, I paid high taxes: property tax plus higher income tax after adding rental income. Whenever the country needs money, it is most handy for the government to raise taxes on private property owners. Now I am paying zero tax for my gold and silver.
Also, real estate is a notoriously illiquid asset. During bad times, if cash is stuck in properties, there is opportunity cost to buy cheap and good assets.
In the darkest times, Dalio quoted a Chinese idiom “a rabbit has three holes” (兔有三窟). Sticking to an asset such as a house limits this crucial flexibility in a fast-changing world.
By the way, Skye at Holland was 99 percent sold over the launch weekend. Hopefully, property developers can launch their new projects in time to pass the hot potato to buyers before the turn of the tide.
A perfect storm for the middle age
When I was in my 20s and 30s, I would shrug off any talk of a market crash. Why should I bother? If it really happened, I didn’t have much to lose anyway. I was young and I had time. Whatever I lost, I could easily make it back.
Fast forward to the present, I am no longer young now. People my age may still have outstanding home loans and other debts. We are the sandwich class supporting both school-going children and old parents. To make matters worse, our jobs are the most vulnerable.
Thanks to our former Prime Minister, over 50 is considered “young seniors” in Singapore. When fresh graduates remain unemployed despite sending hundreds of job applications, can the young seniors find re-employment?
We are heading for stagflation with high unemployment and high inflation but stagnant growth. With our CDC vouchers running low, Singapore’s food prices, grocery expenses and COE continue to hike.
What if a perfect storm in the form of market crash wipes out our hard-earned savings and investment returns that we accumulated for decades?
I retired from full-time employment years ago. Yet I haven’t reached the age to withdraw CPF savings or enjoyed CPF Life payouts. According to my Zi Wei Dou Shu chart, I am going to live a long and healthy life. Long may imply living beyond 90 or 100 years old. It is critical to keep some money for this healthy old woman to have some fun.
There is no choice but to be conservative and play safe. I am moving my money to all the safe and boring places. It is perfectly fine with low return as long as it won’t be gone in the next financial crisis.
Be safe or be sorry
“An observation from previous crises: Many Singaporeans lack sense of crisis. They believe that there is no need to worry too much. In case of a financial crisis, the government will come and save us. This is exactly the mentality of sleeping beauty or Cinderella waiting to be saved by Prince Charming. People tend to emphasize on hindsight rather than foresight. When things go bad, they wonder what happened.”
– “Buying homes under inflation? What will happen next”, PropertySoul.com
Never put money in any asset, currency, country, bank or financial platform that can’t stand the next crisis. Also, Singapore banks covered by SDIC insure up to S$100,000 for Singapore dollar deposits only.
Of course we pray nothing bad will happen. I don’t want to be pessimistic. But I must be realistic. After all these years, I am not so naïve to believe that we can all be intact amid looming uncertainties and crises.
Darwinism will have its natural selection to leave only the strongest to live and advance. When the next market crash comes, whoever loses the least wins.
If you miss “The Future of Singapore Homes” education seminar, you can watch the recording here.
Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.
My book Behind The Scenes of The Property Market is available for preview and order online.
If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.
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