Welcome to 2022!
The New Year’s edition of the Economic Prism brings a flurry of predictions and estimations. Today, we peer through our unique lens to examine the upcoming year. What lies ahead?
First and foremost, 2022 promises to unfold exactly as it should, featuring a mix of both triumphs and challenges. Each day will present its own unique set of events, a dance of harmonious chaos. You can bank on that.
But what else? What notable occurrences could we anticipate?
Will gold soar to $3,000 an ounce? Will Beeple release another NFT masterpiece for $69 million? Could a Starbucks coffee cup, filled with syrupy milk froth, reach $10 before the year concludes?
And what about key financial indicators like the S&P 500, the 10-Year Treasury yield, and oil prices?
Will the Federal Reserve’s tapering spark turmoil in both the stock and bond markets? Will Fauci find himself ousted from Washington like a charlatan of the past? Could China invade Taiwan? Is the onset of World War III upon us following the crisis in Ukraine? Are we on the verge of complete societal upheaval?
You likely have your own opinions on these pressing issues—and you’re not alone. The answers will undoubtedly emerge over time. For now, our advice is simple: trust your intuition. Your instincts may be more reliable than you realize.
After the tumultuous year of 2021, especially under the leadership of Jen Psaki as White House Press Secretary, we must acknowledge the wide range of possibilities for 2022—including the potential for a catastrophic collapse!
While we’re not venturing into exhaustive predictions for the upcoming year, we do have valuable insights to share.
With both humility and realism, we present one critical opportunity—often overlooked but essential—meant to help you navigate the impending mega collapse of 2022.
Let’s delve into it.
Significantly Overvalued
A look at the S&P 500 serves as a good starting point. This broad market index has once again reached a new record high. However, does the S&P 500 possess the earnings to validate this growth?
Analyzing the S&P 500’s current valuation against its historical data dating back to 1871 reveals significant risks. As of December 30, the Cyclically Adjusted Price Earnings (CAPE) ratio stands at 40.09.
This figure exceeds the long-term historical average by over 137 percent, and is significantly higher than the 32.56 CAPE ratio recorded in September 1929. The only time the CAPE ratio was higher was during the dot-com bubble peak in December 1999, when it reached 44.19.
Following both instances of high CAPE ratios—September 1929 and December 1999—the stock market experienced remarkable crashes.
In essence, the current CAPE ratio indicates that the S&P 500 is more than double the historical average. Other indexes like the NASDAQ and DJIA are also hovering at dangerously high levels.
In addition, the Buffett indicator, which measures the total market capitalization in relation to gross domestic product, further suggests that the overall stock market is highly overvalued. At present, this ratio stands at approximately 209.5 percent, with a fairly valued market falling between 98 and 119 percent. Anything above 141 percent signals severe overvaluation.
It’s clear that the most effective investment strategy involves buying low and selling high, whereas buying high and selling low guarantees financial losses. Given current valuations, investing in major U.S. stock market indexes at this time equates to buying high.
Though it might be tempting to buy high with the hope of selling even higher, this approach is akin to gambling. Successful long-term investment typically means acquiring holdings when the market is undervalued—when the CAPE ratio sits below 15 or the Buffett indicator falls below 76 percent.
With the current CAPE ratio and Buffett indicator signaling overvaluation, we face the possibility that major U.S. stock indexes could experience a rapid peak followed by a dramatic collapse. This doesn’t mean you should liquidate all your stocks and hold cash entirely, but it does suggest that thoughtful adjustments to your portfolio may be wise.
How to Survive the Mega Collapse of 2022
The reality is, as inflation spirals out of control, cash is quickly losing value. Bonds are similarly becoming less reliable.
Moreover, reckless policies from Washington are methodically dismantling the very foundations of our economy and society. Here’s a brief overview of some of the unintended effects stemming from such governmental interventions:
- Price inflation
- Supply chain disruptions
- Labor shortages
- Energy shortages
- Food and fertilizer scarcity
- Widening wealth disparity
- Bubbles in stocks, bonds, and real estate
- Increasing incidents of crime and disorder
For these reasons, and many more, we are forecasting a mega collapse in 2022, some signs of which are already unfolding.
Regardless of the steepness of stock market valuations, and the unrealistic expectations investors may have for future returns, your savings and investment capital. must be strategically handled.
While a stock market crash may or may not be on the horizon, the economic collapse seems inevitable.
So, what should you do?
Gold remains the most reliable safeguard for wealth. While paper currencies, debt instruments, and various financial promises might falter after a mega collapse, gold is expected to endure.
It’s important to clarify that gold is not an investment in the traditional sense; it does not generate dividends or interest. However, it serves as a safe haven for preserving wealth, especially in turbulent times like these.
If gold is an anti-investment, what about silver?
Silver is an industrial metal with various applications, yet it too serves as an anti-investment—a hybrid form of wealth protection that will also persist post-collapse.
Thus, we believe this is the one critical—though often overlooked—opportunity for surviving the mega collapse of 2022.
Currently, silver is undervalued, even among precious metal enthusiasts. This is evident from the gold/silver ratio, where the price of gold divided by the price of silver indicates that silver is particularly cheap at present.
When the gold/silver ratio rises above 80, silver is considered inexpensive relative to gold. According to GoldSilver, in past instances when the ratio exceeded 80, silver prices soared by 40 percent, 300 percent, and even 400 percent.
As of market close on December 30, the gold/silver ratio sits at 78.78—remarkably close to 80. Need we say more?
Happy New Year!
[Editor’s note: As mentioned earlier, physical silver should not be viewed as a conventional investment for price speculation. However, there are lucrative strategies to capitalize on low silver prices, which paid subscribers of the Wealth Prism Letter will discover in the upcoming January issue, set for release early on January 3. If you’re interested in seizing this opportunity as well, consider subscribing today! Wishing you a prosperous 2022!]
Sincerely,
MN Gordon
for Economic Prism
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