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Michael Berry has done it again! With his latest forecast for the financial markets in 2023, he's really going all out. According to him, the financial world is heading back towards the terrible era of the 70s. Oh no! The Euro world is in use, there is a threat of export data. Leander has discreetly called.
In the 70s, the stock markets halved, unemployment skyrocketed, and due to inflation, everything became incredibly expensive and barely affordable. This had never happened before. But the worst part was that all these problems lasted for a whole decade. In today's video, I'm going on a time-traveling adventure with the help of Michael Berry and explaining why the 70s scenario could return in 2023.
So watch this video to the end to be prepared for the coming wave of inflation. History doesn't repeat itself, but it rhymes. Michael Berry is convinced that we can transfer the scenario from the 70s to the present day. Why? Because he studied the 1970s intensively. Having studied and now recognizing several key patterns from that era in 2023, the inflation figures in the US, currently at 6.4%, signal a slowdown in inflation, and everyone believes that once the economy enters a recession, the specter of inflation will disappear completely anyway, along with the tinnitus that will continue to go on in Christ and over time.
But all of this is a huge misconception. The economy wo n't recover just because prices are falling. At least, that's what Michael Berry is convinced of. If we look at his latest tweet on Twitter, he's talking about the following: there is no strategy to get us out of a recession; nobody will get us out of it; we are facing a long-term recession.
But what exactly does Michael Berry mean by this tweet and a long-term recession? He doesn't mean the short pandemic recession we experienced in 2020, but something fundamentally different. Everyone wants to know how strong economic activity is and how quickly the economy is growing or shrinking. So let me explain this to you with the following animation.
Imagine the economy as a glass of cola; the current level of the cola... Is this the level or the economy? If the glass is full, then we see a strong economy. But if we were to drink the glass empty again, we would have a recession or a depression. Ideally, we want to see the glass half to completely full.
During the pandemic, the glass was almost completely emptied, and Fett felt compelled to pour more cola into the glass. However, they forgot that our glass is only 300 ml. So she took her one-liter bottle and poured all the cola into the glass. Of course, they not only filled the glass to the brim but also flooded the entire kitchen table.
To clean up the disaster, Fett now tries to suck the cola out of the glass. The glass now becomes a teacher and teacher, and the money slowly reaches the critical lowest point of the glass again. In theory, Fett's approach makes perfect sense, but in practice, Fett forgot the money on the table. The sticky money on the kitchen table represents the velocity of money.
If we were to continue the example and catch the cola from the table and pour it back into the glass... Then the glass would overflow again Michael Böll writes the following on this topic: the velocity of money is the nominal money supply M2. Here, quantitative tightening and higher interest rates begin to push M2 downwards.
Nevertheless, we see an emerging increase in the velocity of money. In the years 1978 to 1979, the rising velocity of money exceeded the decreasing money supply and drove inflation ever higher. A repeat of this would be a shock for all of us. Now let's look again at our cola example. So, the money continues to draw the cola out of the glass, but the remaining cola from the table will continue to fill the glass faster in parallel, even though the money is already doing everything it can to lower the level of the cola.
The result is that the glass remains full. The velocity of money—but what exactly is the velocity of money? The velocity of money represents the rate at which our money is spent on services and goods. And currently, we are sitting on vast amounts of unused money because people know that once we are in a recession, the prices of goods will fall, and they will then be able to get incredible bargains.
However, this would lead to a A very rapid increase in the velocity of money would clearly lead to this, as our money would suddenly be used again after its current standstill. However, this would be a bad scenario. If prices were to fall and the velocity of money were to increase as a result, prices would, of course, rise again immediately.
This would create our second major wave of inflation, and this is exactly what happened in the 1970s. Although the central bank reduced the money supply, the velocity of money increased so rapidly that inflation exploded to 14%. Bury has another dire theory ready. Now imagine that in this situation, the central bank were to get the idea to unexpectedly print more money.
Michael Berry believes that inflation could even turn negative from June to December 2023, i.e., deflation. The problem with this is that the velocity of money probably wouldn't accelerate before 2024. The fear is that the central bank will react too quickly and restart the printing presses to prevent the economy from stifling.
This would be another reason for a wave of inflation and would drive up the inflation figures. Let it explode, just like in the 70s. Barry already explained that inflation has reached its peak, but it 's not the last inflation peak we've seen in this cycle. So we'll see a negative one at the end of 2023, and by definition, we'd then be in a recession.
To cut to the chase, Michael Berry suspects that the government will be ready to fire up the money printing presses again and flood the market with fresh money. This would reignite inflation. Now let's go back to our Coke example. Now we not only have the remaining Coke on the kitchen table, but we also have the government pouring fresh money from the bottle into the glass again.
The result is a ninth overflow of the glass, only this time much faster and much worse. Exactly this scenario occurred in the 70s. There was an inflation peak at the beginning of the 1970s and then a second inflation at the end of the 70s that was much higher than the first. Now you're probably thinking that the government knows all this and only has our best interests at heart, but Michael Berry thinks that this scenario would even play into the hands of the fat companies, given their poor track record.
Michael Berry accuses the fat companies of allegedly selling off share packages in the fall of 2021, right at the peak of the stock market bubble. At that time, some fat companies sold their shares, a very bad signal for investors. So, don't fight the dot-com bubble. And today, even though we find many parallels to the 70s, we also have to talk about the dot-com bubble era.
The number of similarities between then and now is frightening. Just like before the dot-com bubble, we had a huge number of IPOs in 2021, but not only startups going public, but also numerous crypto coins launched with questionable features and essentially only one goal: to make money. Anyone who remembers 2000 knows exactly what we experienced back then: companies without any foundation going public and accumulating money despite deficiencies.
And today, when money is being turned off, we see that fraud is also rampant in the crypto scene. The step has been revealed, okay, at this point I really don't want to harp on about finance YouTubers, but the phrase " both dips, both dips" is still ringing in my ears. Who else feels the same? It seems as if in 2020 to 2021 it wasn't just the big companies that lined their pockets with money, and is the crash now over?
Michael Berry says maybe. In 2001 we saw a slight recovery in the stock market before it declined further. We are seeing a similar pattern today. Currently, the markets are also rising again. Berry believes that we still have the potential for another 25 to 35% drop. How should I invest now? If you saw my first Michael Berry video, you know that he made a huge amount of money because of the 2008 financial crash by betting against the market.
Currently, Berry is not betting against the market. Why? Because he actually sees positive signs for the market, at least in the short term. Since we currently have several possible scenarios, building a gold position is advisable, at least according to Michael Berry's advice. Gold's performance could be above average in the coming years.
The demand for commodities, and of course gold among others, seems to have arrived, and after the Bitcoin crash and the subsequent surge, gold will be a good alternative in a portfolio. Berry also recommends buying shares of companies that generate high returns, the so- called cash cows. He recently invested in massive companies in China, adding Alibaba and JD.com to his portfolio.
This might surprise many, as China seems uninvestable to many, but those who know Berry know he takes a contrarian approach. Okay, I personally don't hold individual stocks in my long-term portfolio, but I also took the opportunity and expanded my Merchant Markets ETF with another one-time payment in December 2022.
If you're interested and want to know which ETF it is, I'll write the ISIN in the video description. This ETF also includes Alibaba, JD.com, Tencent, Samsung, Taiwan Semiconductor, and another 500 companies from the emerging markets sector. Furthermore, this ETF pays an annual dividend of 2.6%. Michael Berry assumes that the Chinese market is totally undervalued and anticipates a potential price increase of up to 40%.
However, his portfolio is n't solely invested in China. He's also recently added other stocks, preferably companies with the following characteristics: high cash flow, low valuation, high debt ratio, and a competitive advantage. In addition to the Chinese stocks, the following have also been added: the hotel chain MGM Resorts, the book company Zac Night, and Wolverine World Wide.
Michael Berry already held the prison operator George Group in his portfolio in 2022, and it's also present in 2023. Interestingly, it still has the largest weighting in his portfolio. What do you think? Are Michael Berry's theories and investments correct? Feel free to discuss them in the comments.
At this point, I'd like to thank you for watching the video to the end. I hope you enjoyed it. If you'd like to support my channel, please subscribe and like. Thank you very much, and see you next time! Oh, and here 's another interesting video for you.
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