Markets are crashing, how to react?
Only one week ago Trump said “stay calm and it will go away“. Well, Trump maybe will go away when the time comes to re-elect him, but COVID-19 is just getting started and if we can believe this research, then not only Europe, but also UK & US might get into lot of trouble - specially considering their delayed reaction.
If reading 20 pages is too much, check out this Twitter thread with main conclusions:
What will happen?
Expect more lockdowns like these - only grocery shops and pharmacies opened, everything else shut down:
Jobs will be lost:
“18% of U.S. workers have lost jobs or hours since coronavirus hit”, latimes.com
“More than half of American jobs are at risk because of coronavirus”, edition.cnn.com
Bailouts are coming:
“The clock is ticking for the government bailouts to begin“, qz.com
“The Coming Bailout Is a Moral Failure“, theatlantic.com
Epidemic might last a lot longer than many expect:
“UK coronavirus crisis 'to last until spring 2021 and could see 7.9m hospitalised'“, theguardian.com
Lot of money will be printed:
What have I done?
I might be wrong, but I don't expect that situation will improve soon, actually I am betting on the opposite, so my reaction in last couple of weeks has been following:
I've sold my stocks
I've stopped my Auto Invest portfolio in EstateGuru, don't plan to sell anything in secondary market yet, but might consider it later
I've sold 70% of my Mintos portfolio and expect to sell last 30% soon as well
I've increased my gambling portfolio about 10x
In general - the idea is to get as much cash as possible to use it when I see a good opportunity. In my opinion P2P is a good way to park your spare “cash“ when times are “good“, but in market crisis like these - you can get the same 10-12% return, but the risk is much higher and I better hold cash and have 0% than risk losing much more.
What I expect to do later?
Sell my PUT options with profit, if the market continues to go down
Buy Bitcoin - in my opinion the price of $5000 is already good, but if it gets lower - even better
Start buying stocks if they get much more cheaper
Consider buying Gold - the unprecedented printing of money should lead to a significant Gold price increase in next couple of years
What can go wrong?
If some miracle happens and suddenly everything goes back to “normal“, then stock markets should have a “V“ type of reaction and huge bounce back. In that case my PUT options will go to 0 very fast, and I would have missed an opportunity to buy stocks with a discount.
And in theory - the same thing of stocks going up might happen because of government reaction - we are not far from helicopter money - if every country that matters starts giving away free money like in Hong Kong & US, and people start getting used to it, it can get very unpredictable, what will happen to economy & stock markets - it might be good in the beginning, but end up with hyperinflation like in Venezuela.
P.S. Join “High-risk investments“ Telegram group for an informal discussion.
What are your thoughts on the PAX gold token? They state its the equivalent of owning real gold and it can even be staked on nexo for 8% per year...
Kristaps, thank for your valuable input. I have also decided to liquidate the majority of my p2p/crowdfunding investments, but i end with about 20k eur spread over a few platforms on both p2p and real estate crowdfunding. I mistakenly did not think about the possibility of having to liquidate those investments, (since i can make 20k in less than 3 months through work) but now i want to and i cant - how can i hedge that risk? Any tips will be appreciated.