The $1.7 trillion private credit market, now larger than the 2008 subprime mortgage market, poses a significant risk due to its illiquidity during economic downturns.
A triumvirate of asset bubbles in credit, real estate, and stocks threatens to crash the fragile US economy and jeopardize millions’ retirement plans.
The US non-financial debt has reached $77.9 trillion, or 256% of GDP, surpassing levels seen during the 2000 NASDAQ bubble and 2008 financial crisis.
The Fed’s balance sheet has expanded to $6.2 trillion in October, indicating a potential panic response to credit market instability.
Bank reserves have surged to $3.5 trillion, reflecting the Fed’s aggressive liquidity injection through debt monetization.
The Fed is likely to overreact to a crisis by printing trillions to buy various securities, including long-term US treasuries and corporate debt.
The M2 money supply has grown vertically since 2000, with a significant COVID-19 surge in 2020, contributing to the massive economic bubble.
Housing affordability has worsened to 7 times income, exceeding the peak of the previous housing bubble.
The MAG7 stocks now comprise 34% of the S&P 500, indicating extreme market concentration and potential overvaluation.
A credit market fracture is expected to trigger a rapid market plunge, followed by a truncated period and recession.
The bursting of the credit bubble is likely to be caused by a combination of inflation and insolvency, leading to severe economic consequences.
Gold is positioned for upside due to de-dollarization trends and negative real interest rates, with a recommendation to hold 5% in physical gold.
A cautiously long market position with hedges, including precious metals and shorting long-term bonds, is suggested as a defensive strategy.
Utilizing an inflation-deflation economic cycle model is crucial for managing capital through the impending crisis and identifying shorting opportunities.
Diversification into markets like India and Australia, along with specific sectors such as IBM and aerospace & defense, is recommended with appropriate hedges.
Gold’s parabolic move and FOMO in the past week indicate a crowded trade, creating a herd mentality and signature of a bubble.
The double top in gold prices, followed by a plunge to $4,100, suggests a sharp violent pullback like 2008, potentially followed by a rebound with a vengeance.
Gold could pull back to a 38-61% retracement of its current run, potentially to $3,800-$4,200, before rebounding and stabilizing.
Cash is king in market uncertainty, earning 4-4.5% interest and providing better protection than risking 20-50% wealth loss.
Inverse ETFs are effective for trading during market weakness, allowing investors to catch drops and exit after weeks or months.
Real estate is not yet a good opportunity, with homes still overpriced and rents not down, but could become attractive when numbers work.
The 2007 analog shows that when the stock market had selling, gold started to pull back, indicating current stock weakness could lead to a gold pullback before a big leg higher.
Silver’s chart pattern is concerning and could drop to the 30s in 3 days if the trend continues, due to its small market and high volatility.
The stock market’s weakness is a huge warning, with big money rotating out of equities and gold going parabolic as a potential last high before a financial reset.
Chris Vermeulen’s strategy is to wait for charts to paint a perfect setup for assets before investing, rather than relying on specific prices or levels.
Vermeulen focuses on logical investors who aim to be in upward-moving assets and maintain wealth during resets, rather than those chasing every market fluctuation.
Gold prices are projected to reach $6,000 to $8,000, with potential for even higher values in a significant monetary reset scenario.
The current gold market is part of a secular bull market, driven by central bank buying and the ongoing “debasement trade“.
Gold has transitioned from a “tinfoil investment” to a “TINA” (There Is No Alternative) investment, with portfolio managers increasing allocations from 5% to 20%.
Gold miners remain significantly undervalued on price-to-earnings and price-to-net-asset-value bases, with upcoming earnings reports expected to demonstrate robust project economics.
The mining market is healthy, with companies able to raise capital, including outside money, though the quality of deals has decreased.
Silver is poised for a big catchup to reach its real inflation-adjusted levels relative to gold prices.
Copper is the most dynamic non-monetary commodity, with every major known deposit needing development to meet future demand.
Vanadium shows tremendous potential, particularly for utility-scale applications with the vanadium redox battery, despite challenges in finding primary projects.
Zinc, an unloved asset, is experiencing a price response due to supply constraints and growing demand.
Silver mining equities offer substantial potential through stacked leverage, benefiting from both silver and gold price movements.
Investors should focus on larger producers like Newmont and Newcrest in the near term, while also exploring opportunities among developers and exploration companies.
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