Thread by @Crypto8Fi

The global markets are going to worsen.

Here's a framework to understand in simple terms, why:

I have witnessed for the last two years how we have been in a speculative market bubble.

It was hard to discern where exactly we were, at the top or bottom.

What I realised was that this was an enveloping crisis.

This thread shares my macro view of global markets : Doubt.

Let's start with a suitable quote.

Mark Cuban: "Everyone is a genius in a bull market"

There are three core features to focus on:
-Optimism
-Pessimism
-Misdirection

A quick examination of each:

Optimism

Inflation (CPI) has risen 7.9% in 12 months to February 2022, the largest 12 month gain in 40 years.

During Covid-19 we experienced supply chain crunches which contributed to inflation.

Let me present to you an analogy.

Imagine every country in the world is a kid in a classroom.

They all have to sell their one sweet they own by the end of the day.

The teacher says they cannot talk.

They are forced to use whatever resources are available other than their lips to sell their sweet.

This is analogous to the massive amount of online shopping that was forced.

There was simply not enough supporting resources.

Infrastructure struggled to scale alongside.

Moreover, the war in Ukraine is putting further pressure on supply chains in certain industries.

So what exactly is my positive case?

I measure this relative, what is positive to me may not be positive to you or my grandma.

Should political tensions fall - China/Taiwan, Ukraine/Russia and we move to end all restrictions globally.

Perhaps some excess demand can be shifted.

The end of Covid relief checks should reduce outwards demand pressure.

If we manage to avoid a significant wage price spiral of 5-7%, things may equilibrate.

Companies are strongly funded and unemployment is low at 3.8% (USA).

The economy and our markets may recover nicely.

Pessimism

The worst is yet to come. And a while away at that.

The FED is running a loose fiscal and monetary policy by all means.

Should the war worsen, or China use this as a side shield to make moves on the global stage.

Political tensions will worsen.

Politicians are part of the problem.

Not only does it take time to reach and pass laws.

Often the consensus is only enforced by upcoming elections, with a lot of the promises being nothing more than a fallacy.

They also tend to focus on one issue at a time.

Should the war oversea worsen, this will be their area of concern.

Public debt will continue to rise as it has been doing, particularly in EU member states.

A confidence crisis therefore comes into play.

Banks lacking trust in each other and numerous defaults.

Another risk factor which has come to play is oil.

In the postwar era in the U.S, every instance in which oil has spiked above $100 per barrel in real terms has been followed by a recession.

This pattern has played out in 1973, 1979, 1990, and 2007.

Ngmi.

Misdirection

Central bankers appear in the media and tell the politicians they are serious about fighting inflation.

Policy rates may rise to 1 or 2%.

By keeping real rates negative and nominal government bond rates below nominal GDP.

A government can finance itself.

This level of nominal policy rate will result in a recession.

It won’t dramatically alter the fabric of society, and the government can still finance its war effort affordably.

Though with many factors at play, it becomes hard to evaluate the interdependance of such variables.

An issue to raise is the cost of energy.

The central banks are not in control of the cost of energy, which is likely to continue getting more expensive.

We may then experience social unrest as individuals see their expenditure dramatically rise in front of their eyes.

Advice:

We require patience.

Select your portfolio: mine goes-- $BTC, $ETH, gold, real estate, fiat.

Stay there.

Spend time evaluating future changes to assets such as the Ethereum "Merge".

But otherwise, keep a steady hand and you surely will win.

Main Takeaways

There is now more downside risk than upside risk.

We must be proactive before the full bull/bear market materializes.

Individuals should try to lock in long term fixed mortgages at today’s low rates while they still can.

Start managing your finances better.

That was a framework to help you. Give it a share if you enjoyed it!

Follow me @Crypto8Fi for more threads on writing, growth, and more

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Some individuals to follow who inspired this post:

@Darrenlautf @KyleLDavies @balajis @nosleepjon @GarlamWON @knowerofmarkets @0xShual @JackNiewold @blocmatesdotcom @SmallCapScience @RyanSAdams @TrustlessState.