Markets will see a major correction soon, most likely before presidential election, said Clem Chambers of InvestorsHub, who has allocated all his holdings into cash.
“I got a warning from the market about ten days ago…so I cleared the decks because I think it’s highly likely, not absolutely certain, but too likely to be in the markets that we’re going to be in for a crash,” Chambers told Kitco News. “Normally before a crash, I experience what I call a market malfunction where my portfolio just doesn’t behave as it should.”
Chambers added that he has a 65% to 70% certainty of a market selloff of over 25% happening in the coming weeks, and under such conditions, it’s best not to be long on particular equities.
“It’s like a piano falling out of a window, you just don’t want to be under it,” he said.
Under such a “flash crash” scenario, most assets have a positive cross-correlation and tend to fall together.
“When it happens, there will be so many margin calls that pretty much all assets are going to get smacked, just as they did in the crash earlier in the year. Gold got smacked, crypto go smacked, it all got smacked because when the market crashes, it’s the people that get margin calls that get causes the knock-on vicious circle,” he said.
Under normal market scenarios where a major market sell-off is not expected, Chambers would recommend an equal allocation of 33% cash, 33% stocks and 33% gold and cryptocurrencies.
On the economy, the full effects of the pandemic have not yet been felt, and the increased money supply from quantitative easing is going to drive up prices and create inflation.
“We’ve got a massive deficit situation where governments can’t afford their budgets, and that’s an absolutely textbook example of what creates hyperinflation, let alone inflation, it’s when governments can’t cover their budgets, they just print money. We’re seeing the beginnings of that, not the end,” Chambers said.