As the Federal Reserve continues to hike interest rates, investors should expect markets to “break,” said Clem Chambers, CEO of Online Blockchain.
“If [The Fed] really does want to drive out inflation, something has got to break,” he said. “If they really mean it, there will be an almighty crash.”
Chambers claimed that stocks and crypto, assets which have experienced significant declines in 2022, are in the midst of an “oncoming storm,” prior to a major crash.
“Everyone remembers the big drop in 2008, but there was a bear market in 2007, which was an oncoming storm,” he said. “I think what we’re in now is potentially an oncoming storm.”
Chambers spoke with David Lin, Anchor and Producer at Kitco News.
Investing in Bear Markets
Some analysts have suggested that stocks and crypto are experiencing a bear market. Chambers claimed that, as a hedge, he had taken a heavy position in cash, despite his assets being “eaten away by the moths of inflation.”
“I’d prefer to have my money in Benjamins than in Facebooks,” he said, implying that cash would lose less in purchasing power than equities.
He said that his strategy was to wait for the markets to reach a bottom, and then “pile in,” using cash reserves to buy bargain assets.
“Rather than try to surf this downhill slope, just let it base,” he said. “Save cash, let it base, and then pile in at the bottom.”
However, he suggested that if investors want to go long in certain assets, that they invest in “high-risk” companies.
“Snap a little bit of money off your pile and put it to one side and [invest in] high-risk stuff,” he explained. “You’ve got to look for special opportunities.”
Inflation and Equities
Inflation peaked in 2022 at 9.1 percent in June, before coming down to 7.7 percent in October. Chambers said that inflation is fundamentally due to excess money.
“Inflation is being driven by money supply,” he said. “If you keep printing more money because you’ve got a fiscal deficit of a giant size, you’ve got feed that deficit… If you’re printing an extra $1 trillion every year to fill up your government deficit, you’re going to get underlying, medium-scale inflation of 4, 5, or 6 percent.”
Although loose monetary policy can lead to asset bubbles, this is not always the case, said Chambers.
“Some people will say, it’s inflation, so a Microsoft share is going to be worth 11 percent more if you’ve got 11 percent inflation,” he explained. “That didn’t work in the 1970s, the last time we had high inflation. The equity market really suffered because everybody [thought] it was a scary environment.”
To find out Chambers’s ‘secret investment tip,’ watch the video above
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