The 2022 Market Disaster… More Pain to Come
The comments below are an edited and abridged synopsis of an article by Matthew Piepenburg
If you think the current market disaster hurts, it’s going to get worse despite recent dead cat bounces in US equities.
Piepenburg has been warning about the Big Four: An inevitable liquidity crisis that would take zombie bond markets to the floor, yields (and hence interest rates) to new highs and debt-soaked nations and markets tanking dangerously into the dark days of stagflation.
Tracking empirical data and cyclical debt patterns means that one does not have to be a market timer or tarot card reader to warn of an unavoidable credit, equity, inflation and currency crisis, all of which lead to levels of increasing political and social crisis and ultimately extreme control from the top down.
This is precisely where we are today—no longer warning of a pending convergence of crises, but already well into a market disaster within the worst macro-economic setting that Piepenburg has ever seen.
Up for discussion: The ignored hangover; every market crisis is a liquidity crisis; the most important bond in the world has lost its shine; the Fed—tightening into a crisis; open and obvious (i.e., deadly) bond dysfunction; pointing fingers rather than looking in the mirror; the west and Japan: overplaying the sanction hand; don’t be (or buy) a dip; and gold.
Gold has held its own even as rates and the US dollar have risen—typically classic gold headwinds. When markets tank and the Fed pivots, yields on the 10Y could fall as global growth weakens, thus providing a gold tailwind.
Furthermore, the dollar’s days are numbered, as is the current high demand for Treasury-bill-backed collateral. As the slow trend toward de-dollarization increases, so will the tailwinds for gold price increases as the dollar’s credibility decreases.
In the interim, the fact that gold has stayed strong despite the temporary dollar spike speaks volumes.
In the interim, gold outperforms tanking stocks by a median range of 45%, and when the inflationary pivot to more QE returns, gold protects longer-term investors from grotesquely (and increasingly) debased currencies.