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All the signs point to disaster

Many seasoned financial analysts and commentators are starting to issue warnings about the state of the global economy.

They point to key indicators that have proven to be critical red flags in previous financial collapses all starting to point to a giant meltdown in the pretty near future.

It has also been observed that many of those who are in a position to know what's going on have started selling investments and cashing-out.

So should we, the regular folk, be worried?

To be honest, I have no bloody idea. I'm not an analyst or well-versed in things financial. There's no huge investment portfolio in my back pocket and I'm not about to give anyone advice from this position of ignorance and inexperience.

However, listening to those who are smart and savvy enough to spot the signs and cover their arses, I think it would be prudent to assume that there is going to be a significant "correction" to the markets fairly soon.

One only has to look at how many people are divesting themselves of stocks and retreating to the safety of precious metals to realise that those in the know are readying themselves for some pretty dramatic changes to the economic landscape.

Many have already pointed to the parallels between the present AI-bubble and the dot-com boom of the late 1990s. Companies are being given huge valuations based solely on "potential". In reality, many of these companies are only being propped up by speculative investment and this is creating a dangerous "domino" scenario where a single huge failure could bring down an entire industry and its investors.

This X post is worth a read. Although the data provided here is factually correct, there is quite a bit of "doomsayer" bias applied to it so bear that in mind when interpreting what's presented there.

As someone who witnessed first-hand the crash of financial markets in the 1980s and the dot-com boom in the early 2000s I have to admit there are a lot of worrying parallels right now. Combine this with the massively escalating levels of geopolitical tension around the world and it has to be admitted that a crash is more likely than not.

We're now also seeing the effects of the shift to precious metals as a safe haven for investors. As the price of gold and silver skyrocket, the flow-on effect is that products (especially technology products) requiring the use of those metals is also going up in price. I saw today that the cost of even something as rudimentary as an HRC fuse has leapt 30 percent in a month due to the use of silver in their construction.

If you're looking to invest in precious metals as a hedge then might I suggest that instead of chasing gold and silver, take a look at platinum. The smart money will now be investing in platinum because those folk will have noticed that a year ago, an ounce of gold would have bought three ounces of platinum but now it only buys 1.8 ounces. Clearly platinum is appreciating far more rapidly than gold and it is a metal which is valuable for almost entirely its real-world applications rather than as eye-candy which means it's less likely to crash in future.

One slight caveat on that -- one of the major uses for platinum is as a catalyst in the emission control systems on ICE-powered vehicles. The transition to EVs may reduce that demand in future and as we know, in sane markets price is a factor of supply and demand.

So how would such a financial crash likely affect the average man in the street?

Well the credit supply would all but dry up. Banks would be left hugely exposed to corporate bankruptcies and defaults so the little guy would be left to carry the can in many respects.

It is likely that such a crash would also result in a surge in unemployment which, in turn, would see a dramatic fall in depand for goods and services -- thus producing even more insolvencies and job losses.

There is very real potential here for quite a steep and dramatic downward spiral that would produce a period of severe austerity and all the social/economic pressures that would flow from that.

Fortunately for those who are very rich, they'll likely have insulated themselves from this by liquidating their shares and holdings in affected companies well ahead of time. They'll still be safe onboard their yachts in the Mediteranian while the peasants fight in the streets over loaves of stale bread :-)

My only advice is to hope for the best but plan for the worst.

Bottom line: Just make sure your pantry is stocked with food and water... you'll be okay.

Carpe Diem folks!

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