My Super Crash Manifesto

I’ve noticed a great new influx of readers and commenters lately, and that warms my heart. Thank you for being here.

However, you’ve jumped right into the middle of the action – with our recent 60% gain on TSLA and the wild market action following Brexit – and you may be feeling a little lost.

If that’s the case, this article’s for you.

Today, I’ve distilled my “Super Crash” philosophy and my most important reports and profit recommendations into a quick overview. As always, I focus on what’s going up, what’s going down and how to profit. If you are a new reader, welcome to Sure Money – this is a great place to start.

What’s Going On:

We are headed for a Super Crash. Over the past 30 years, the world has gorged out on debt in a massive Debt Supercycle – today there is more than $200 trillion of total public and private debt outstanding in the world, with over $600 trillion in derivative contracts sitting on top of that, a veritable debt bomb crushing global balance sheets waiting to explode. You can read my full Debt Report here.

  • The global economy is stuck with sub-par growth because this debt was used to fund unproductive things like consumption, housing, stock buybacks, dividends, M&A and financial speculation. After six years of largely uninterrupted gains in stock prices between 2009-14, the markets are overvalued by almost every measure and running on fumes.
  • Central banks are actively debauching the value of fiat currencies with QE and money-printing. Everybody’s buying power is being demolished. Inflation is raging. Meanwhile, central banks artificially suppressed interest rates to levels that actually confiscate savers’ capital. The government is effectively stealing savers’ money. All this was done in the name of stimulating growth, but all it did was suffocate growth.  Now central banks have no cards left to play. This is “the terminal stage of monetary policy.”
  • With interest rates barely above zero, and its balance sheet stuffed with debt, the Federal Reserve can’t do much more to stimulate growth or bail out markets when they collapse. The Fed has already fatally mismanaged this credit cycle, and cowardly interest rate moves in either direction won’t change any of the underlying issues. Central bank policy has reached its limits. Other central banks (ECB, Bank of Japan) are trying to pick up the slack, but ultimately all of these programs are doomed to fail because they try to alleviate a debt trap by creating more debt.

What all this means is that we are headed straight for a $200 trillion “Super Crash.” You can read my full report here.

In order to protect yourself, you need to get a strong bear market portfolio ready ahead of time.

What’s Going Up:

Go here to see the five categories that should be in your portfolio. However, I’ve listed the most important two right here:

  • Cash: Cash should also comprise 10-20% of your portfolio. Cash may not be the most “exciting” of the asset classes, but in terms of protection, it’s absolutely vital. I consider it second only to gold in importance…for several reasons. First, if you have cash then you can be a “liquidity provider” when things fall apart. That means you can buy distressed real estate, distressed stocks etc. that have to be sold by highly leveraged owners forced to sell. Second, cash is important because it will hold its value better than assets whose values are inflated by high amounts of debt such as real estate, stocks etc. It will depreciate against gold but will do better than high priced financial assets like stocks when the dam breaks. Third, cash is important in a crisis because it allows you to buy items essential to survival. If things get really bad, cash is really king!

Investors should always hold as many of their assets as possible in U.S. dollars. While the value of all paper currencies will continue to be destroyed by central banks, the U.S. dollar should fare much better than other major currencies like the Euro, the Yen and the Yuan. You should store your cash somewhere safe and liquid like 1-3 month Treasuries (not stocks or bonds). Click here to see how to do that.  If you use a bank, it should be a large regional bank without exposure to derivatives, like Fifth Third or BB&T, or else a bank that’s “too big to fail” like Wells Fargo or Morgan Stanley.

While you are consolidating your assets in cash and precious metals, you should avoid the asset classes below, which are headed down as we approach the Super Crash.

What’s Going Down:

  • Paper currencies: Over time, central banks plan to entirely destroy the value of paper money (including the dollar).  Right now, the hierarchy of currencies is: Gold-USD-Euro-Yen-Yuan. Gold is not a commodity; it is a currency, and it will be the last man standing when all the paper money in the world has been destroyed. The next strongest currency is the dollar, as we discussed above. Right now, the dollar is strong and has been putting pressure on global commodity markets with a disastrous ripple effect. (Click here to see how to profit from the strong dollar.) However, keep in mind that this will not last forever. Eventually, the dollar will become devalued as well – but for now it is still a relatively safe haven.

The Euro, the Yuan and the Yen are all headed down on a much faster timeframe and are good short candidates. You can get those recommendations here.

  • Stocks: Central bank stupidity has largely destroyed both stocks and bonds as investment classes. Earnings are inflated by massive stock buybacks and by artificially low interest rates. Since 2008, investors reluctantly but steadily increased their investments in risk assets like stocks, junk bonds, MLPS, venture capital, and real estate that are theoretically capable of providing higher returns. Unfortunately, however, you can’t eat theory. In fact, policies that drove interest rates down to zero effectively destroyed fixed income as a viable asset class and created a bubble in Internet, social media and biotech stocks while leaving the rest of the market overvalued. So now investors face years of low returns on risk assets because the Federal Reserve cannot suppress interest rates forever.

A select few companies will be good long plays (I’ve recommended some here, and will continue to find opportunities), but most stocks are highly overvalued and should be avoided.

  • Bonds: The bond market is in a similar predicament. Bonds were turned into “certificates of confiscation” by the Federal Reserve. One key concept investors need to understand is the difference between “nominal” and “real” returns. Governments thrive on their citizens’ failure to understand this difference. “Nominal” returns are measured in constant dollars unadjusted for inflation. “Real” returns are measured in inflation‐adjusted dollars. The U.S. government continues to promote the fiction that the prices of goods and services are falling when real world prices (other than energy since mid- 2014) actually are rising at double‐digit rates. You can read my full report on the destruction of bonds here.

Large bond funds like PIMCO and Vanguard are turning in real (i.e. inflation-adjusted) returns of zero, making them nothing more than glorified money market funds (with little glory). However, they are considerable more dangerous than money market funds because of their high exposure to derivatives and use of leverage. Investors should minimize bond exposure as much as possible. I do see one good opportunity in the fallen angel space, which you can read about here.

How to Profit:

Because of our overarching debt problem, a great many companies are headed for ruin. (Banks in particular are often exposed to debt in the form of credit derivatives, which are deadly.) You should avoid all exposure to these companies, but also be aware that many of them make good short candidates. (My favorite “short trade” is buying puts – this allows you to maximize your upside and minimize risk. I do not often recommend pure short selling.) A few of our latest shorts include:

Here’s a detailed guide to finding companies that are about to collapse (we call these toxic stocks).

You’ll also have some opportunities to short the bond market as it collapses – here are some recommendations.

Sincerely,

Michael

16 Responses to “My Super Crash Manifesto”

  1. Michael:

    I remember you had mentioned several months ago, that because of intervention by all CBs, your timely of the Super Crash has been delayed out to another year or two. Has Brexit moved your timeline back up to this year? In own view, the super crash will happen within the next 3 months.

    Thanks.

    Anne

  2. The next crash is coming now. The markets will decline around 15%, the CB’s will have no choice to intervene. This will lead to an epic bounce back. The it will be supercrash time. The CB’s still have a few bullets, wait till you see the whites of their eyes

  3. Hello Michael,
    Just some of my thoughts for you and your readers. I think your advise to hold gold and cash is excellent.

    Where I disagree with your advise is holding other forms of “NON-Cash” such as stocks, bonds and
    the GOLD STANDARD OF BONDS US TREASURY NOTES. Should we talk about The Bank of Bearing, Enron, or the Crash of 1929—when disaster strikes–it is too late for the common man ( or woman ) picking up the paper and looking at the news after the disaster has occurred to take any type of effective action. Ask any employee of ENRON what there safe and secure retirement plan is worth–that was securely invested in one of the top ten energy companies in the US. My mother
    who was blind invested a major portion of her retirement savings in Enron on the advise of her stock broker. She lost it all. She cried when she told me about it.

    Let just suppose you have correctively identified the largest risk–derivatives and Let’s just take a imaginary situation that DEUTCHE Bank fails due to it being unable to pay off all its derivatives exposure due to a default by Greece, Italy Spain and Portugal and in a series of cascading dominos it takes down the EURO banking system—and as the chain reaction occurs it takes down the US Stock Market–and it crashes like in 1929. That in turn takes down say Goldman Sachs and then other banks fold as the FDIC can not cover the massive losses. I do not think any bond, stock, or even the US Treasury note would not be effectively frozen by the US govt in such a crisis. I even would venture
    to say the money in your checking or saving account would certainly be unavailable—or possibly you would find that the Bankers wrote the Banker Reform Act after the 2008 Banking Crisis and not your
    assets in the bank are no longer federally insured but the people will find they are uninsured creditors
    of a bank in receivership and they will be able to get their money as fast that casino you talk about.
    Or American depositors may find that their funds are available –like in the Greek financial crisis–they can get 60 euros –63 dollars American green backs–or bucks every week –if their atm has the cash.
    Now the above situation is just from my imagination so I am not saying Goldman Sachs will be the first major bank to fail. I am sure it is as sound as the top ten energy companies like my mother was told should be in her stock profilo.

    Disasters have a way of taking on a life of their own–of if one looks at the crowds outside the
    as the streets were packed with tens of thousands of people in 1929 –or a series of events which sunk an unsinkable ship like the titanic–once the peoples trust is lost–it is as easy to turn it around as it was to save the titanic.

    Like you Michael there was a man who predicted the Crash of 1929–his nick name was Cassandra

  4. I think holding cash and precious metals such as gold and silver are two best advice you gave thus far.. Investors should stay away from long term investment in a down fall market until things get back to normal..

  5. If I buy gold or silver what form do I buy it in? Do I keep it in my house, do I keep it in my bank, do I just have a piece of paper that says I own it? I have a broker, a bank account and whatever. BR

  6. Yet today, in response to more phoney high job numbers from the BLS (which are always subject to revisions) the N. American stock markets have shot up ever higher. Most short positions are being killed today. And by taking short positions you are challenging the central bank swindlers who have seemingly unlimited capacity to print money and support long positions.

  7. If central bankers are pumping money continually in to the system how can the markets crash? This has been since 2008 this nonsense has gone on for. If it continues to jack up the markets for 8 years and the FED starts up QE4 what is to say the dow is not gong to go to 50,000? You and others talk about a market crash over and over and over and it does just the opposite. Is anyone talking about why would anything change as long as they pump money into the system? I keep WAITING for this crash and in the meantime I am missing out on the DOW going to the moon. Ridiculous and very scary.

  8. I enjoy and follow your advice. As such I shorted DB via Jan10.00 Puts @ 0.946 (premium included). You claim to be over 100% in the black with your trade, whereas I am deep in the red (target at 8.00 and presently price at 13.98). Where did I miss the boat?

Leave a Comment

View this page online: https://suremoneyinvestor.com/2016/06/my-super-crash-manifesto/