Ask Nathan: Why do you think shares will collapse later in 2020?

I often make predictions 12, 24 or even 36 months in advance. 

Two to three years ago, I foresaw something occurring at the start of 2020, which I call the global financial depression (GFD).

This began to unfold in February, when a lot of people lost 30% of their super fund and 30% of their share portfolio, over a period of around 10 days.

I called a universal basic income, which we’ve seen with JobKeeper, JobSeeker and other stimulus packages; I called zero to negative interest rates, which we’ve got in 2020; called stimulus packages around the property market and lots of tax deductions.

I made these predictions by understanding financial markets and seeing where currency is traded from and the amount of liquidity in the system.

We’ve been going through an easing stage recently in the economy, with lots of controls in place to allow for capital to flow and stimulus packages to prop up markets.

In 2020, we’ve seen money flow out of the marketplace and businesses put in lockdown, but there’s one thing I believe we haven’t factored in.

Bankrupted zombie companies

I believe that some time in August, September, or October of 2020 we will see a sharemarket crash globally, because that’s when stock market companies do their reporting. 

These organisations will start reporting their profit and losses for the year and a lot of investors will start seeing they are not getting a return. Then we’re going to potentially see massive selldowns and something called a Mark to Market.

A Mark to Market is basically a margin call, where you’re required to pay more capital into your portfolio, or you have to have it depleted.

Empty food courts

When looking at the last quarter of 2020, try and think of a shopping centre.

You go to the shopping centre and look at the food court. There’s hardly anyone there so all those outlets are struggling.

We’re in a recession. Every second shop is closed down, saying something like “Due to corona we’re taking a little break”. 

Businesses are struggling, but nobody yet knows the true impact. We haven’t seen reports yet from Westfield or Stockland, so how many of those tenants occupying the shopping centres are not paying rent at the moment? How many zombie companies are there out there?

Delayed effect

The movies have been closed for three months. Take cinema revenue out of entertainment companies and what will they look like come stock market reporting season?

Then there are banks. Banks pay dividends to their investors. I believe CBA recently said only about 5% of their home loan borrowers have opted to pause their mortgages. Well, that’s 5% of the bank’s revenue not coming in, so if that 5% was all the profit for the bank, suddenly all the investors who normally get paid their disbursements…will they be getting paid those this year?

False bottom

The stock market is heavily manipulated at the moment, you’ve got the central banks around the world which have come out and said we’re going to buy up the marketplace, buy up the balance sheets and help stimulate the economy, by putting a bottom there so it doesn’t collapse and fall.

Will it be manipulated and the prices keep going up, or will we see a collapse?

Personally, I believe we are going to see the real after effects of what has occurred, which is the global financial depression.

You should know

I’m not personally invested in any paper assets, but I’m heavily invested in property as well as other financial instruments. I’m also not a financial adviser, so make sure you get tailored financial advice on your position.

Any questions or for help devising a strategy, reach out to my team by booking a free Discovery Session and we’ll get started on creating your personal road map to financial freedom. 

 

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