Investor Warns of 40% Market Crash, Moves Everything To Cash
During a recent interview, Clem Chambers of InvestorsHub said about 10 days ago he got a warning that a market crash is on the way. Also, he says stocks could plunge as much as 40%.
“I got a warning from the market about 10 days ago. And I went “ah, we’re going to crash” so I’ve cleared the decks, because I think it’s highly likely, not absolutely certain, but too likely to be in the markets that we’re headed for a crash.”
Chambers was asked what warning he got. To this, he said he noticed a market malfunction where his portfolio isn’t behaving the way it should. Because of this, he said with 65-70% certainty that we will see a major correction in the market. This may happen between now and the election.
“Normally before a crash I experience what I call a market malfunction when my portfolio just doesn’t behave as it should, as it has been behaving and I thought “well, there’s something wrong here”… So I just cleared the decks because I think coming up to the election we’re going to get a crash and I would say 65-70% sure of that and a crash is just not something that you want to be in the market for unless you are a dyed in the wool buy and hold sort of person, so I’m out. I can’t bear the way the market is at the moment.”
Chambers says a crash is normally “a very short-term thing. It’s basically a blip. It’s like a piano falling out of a window. You just don’t want to be under it.”
He added that he defines a crash as at least a 25% drop in prices. Meanwhile, he described a massive crash being a 40% drop. He said the market is at such an extreme right now. With this, it’s hard to tell how bad the crash will be.
“This time it’s so extreme it’s very difficult to judge. But I call a crash 25%. And if it’s a massive crash it’ll be 40%. But somewhere between 25-40% are nine times out of 10 the crashes that occur and even if you look at the Wall Street crash, it crashed but then recovered a long way, and then it basically slid off. And you can take that whole 82% fall as the crash, but really, the crash is the first part of things and I think we are going to get a severe downdraft that will be 25-30% somewhere between now and the election.”
Stimulus Money and the Stock Market
He says all of the stimulus money has pushed into the stock market. It also created “mind-blowing” valuations in some companies.
“Because the way the market is set up, the drop is so steep. So many companies have mind-boggling valuations. Just mind-blowing valuations and we know why they are so high, because all the money printing, and that money has gotten caught in the banking and financial system and it’s being pushed into lots of stocks and the glory stocks we all know. And that is all very fragile, and now we are going through a fragile period up to the election where pretty much anything can happen and none of it particularly good.”
He says once the crash is underway, every asset class will get “smacked.”
“If the US goes, and I can’t see it not going sometime in the next few months, then it’s going to smash everything else. Talk about a liquidity trap, when it happens, there are going to be so many margin calls that pretty much every asset is going to get smashed just as they did in the crash early on in the year. Gold got smacked, crypto got smacked, they all got smacked, because when the market crashes, it’s the people getting margin calls that cause the knock-on vicious circle.”
When asked how he would position his portfolio to prepare for the crash, his answer was simple.
“Cash is the only place to be in a crash.”
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