A Money Manager Warns Bad Times Are Ahead: Should you prepare for the worst?

A market crash is coming, fiat currencies are doomed and many of the criticisms you have heard of cyber money are wrong. And the United States’ economic policies are putting it on the road to a Weimar Republic or another Zimbabwe.

Those were among the startling assertions recently offered by hedge fund manager and executive Mark Yusko at the recent FEW (Family Enterprise Wealth) Conference in Manhattan.

Yusko, the CEO of Market Creek Capital Management, in a session on alternative investments, said that many in the securities industry are trying to fight inevitable economic forces and have already missed the tide of change.

“How many of you predicted last year,” Yusko asked the crowd, “that bitcoin would be the best performing asset of all assets?”

No one in the crowd raised a hand. He argued that many in the securities industry have railed against bitcoin, even though it could help many investors.

Why?

He said that “disruptive technologies make the incumbents uncomfortable.” Nevertheless, he added that some of the same securities industry critics are now quietly conceding that bitcoins “are real.”

There Goes the Dollar

Yusko also contended that recent fiscal and monetary policies are destroying the buying power of average Americans.

“That is a problem. They have devalued their currency,” Yusko said. He asserted that American wealth is being stolen through inflation.

All of this, he warned, will lead to a market crash. Indeed, Yusko, in a recent commentary, also compared the average American retail investor to a frog that is being slowly killed.

“U.S. equities are the pot of hot water that is on the verge of the boiling point and investors are an army of frogs on the verge of becoming permanently impaired. There is still time for investors to collectively jump out of the pot before they are no longer able, but the warmth of the pot seems to be lulling the army into a false sense of security,” Yusko wrote in a recent commentary.

“What is also seemingly lost on market participants,” he added, “is how the slow and steady rise in asset prices is slowly robbing them of their wealth as the dollar is devalued and their wealth loses purchasing power.”

Money Mischief

Yusko, in his talk, said a sign of this backdoor monetary chicanery is the lack of recent market volatility. He argues this is a sign of monetary hijinks. Yukso warned that “volatility has been abolished. This is the most manipulated market we have ever seen in our lifetime and we need to be afraid.”

He added that investors should seriously consider cash because volatility, despite the efforts of bankers and the government, will make a return.

At his talk, he also contended that this buying power crash amounts to “a transfer to the top one percent; because there is a wealth tax through this insidious inflation.” He said income equality is now greater than it has ever been.

Citing the worthless currency of Zimbabwe, Yusko warned that these cheap money policies of the American government are a “classic banana republic trick.

A Cheap Dollar?

Yusko also warned that Trump administration policies will not strengthen the dollar but will repeat a pattern of economic history.

“No, he’s not going to make the dollar stronger. He is going to destroy the currency just like every other overindebted nation always must.” Every fiat currency, Yusko says, “will eventually go to zero.”

Cheapening the dollar, he added, will lead to the end of the dollar as the reserve currency. The world, he predicted, will have multiple currencies.

Yusko’s “the sky is about to fall” predictions are difficult. What should the average investor do?

The MoneySense Moves

First, as a person who has lived through three crashes, let me say there is no doubt that we will have a crash sometime. It is inevitable given the at times reckless monetary and fiscal policies pursued by both left and right-wing governments of the past 30 years or more. It is easy to enjoy stock market gains and forget some hard facts: They have been achieved with dirt cheap interest rates, which now must be raised. One of the causes of the crash of 2008 was the easy money policies of the American central bank, the Fed, which had repeatedly lowered interest rates in the prior 15 years or so whenever the stock market looked like it was about to slip. Finally, it crashed in 2008 and did incredible damage to tens of millions of Americans and others holding investments in American companies. Something like this seems on the horizon again. When and how damaging it will be, I don’t know. But it is likely to happen.

What Should You Do?

Be sure to have some of your assets that don’t correlate or move in the same direction as the stock market. Besides financial assets, such as stocks and bonds, it makes sense to have some hard, or non-paper, assets in your portfolio.

Use it as kind of insurance policy in the next crash. These would include commodities funds, gold and real estate. And, if we are on the verge of a new outbreak of inflation, as we lived through in the late 1970s and 1980s, it makes sense to have some of these assets as well as some bonds that are designed to do well when inflation roars.

Don’t get lulled into thinking that, because we have been on a bull market tear since the crash of 2008, that it can continue forever. Everything is finite.

Neither bull markets nor bear markets last forever. The best time to prepare for a bear market is in a bull market and the best time to prepare for a bull market is in a bear market. Many believe the latter is around the corner.

I don’t know if it is around the corner. But it is coming. Remember your gains of the past decade or so could be quickly wiped out. Remember what happened in 2008 and prepare.