2022: Reckoning Year (A Special Essay)
What is actually going on in the investment world right now?
Will 2022 be business as usual?
Or are you witnessing, right now, the late-to-the-party investors wanting to make up for lost time and money…as quickly as possible?
Are these investors about to finally face the wrath of another reckoning?
If so, what should you do now, so you’re not one them?
I have an announcement to make on these very questions very shortly.
First, I just want to make sure you’ve read our just-published research on the China debt contagion.
Its spiraling effects could soon reach Australia.
Greg has pinpointed China as a key ‘code red’ for Aussie investors going into 2022. But, as you know, we have a range of differing views here at The Daily Reckoning Australia.
We don’t pander to you or the latest headlines. We don’t stick to a ‘company line’.
All I ask is that my editors argue their corners logically and passionately.
And then trust you to make your own judgements.
Callum and Catherine, as you know, believe firmly that a huge downturn is coming. But not until 2026/27! That’s when they believe the current property cycle peaks out.
Nick Hubble, on the other hand, believes ‘the third-greatest misallocation of capital in history is at hand.’
And that the post-pandemic recovery is destined for a massive crash.
With so many ranging views, who should you trust? Well, that’s very much up to you. Both arguments are argued convincingly.
But I’m writing to you now to announce a different perspective.
It’s a big one.
And it’s centered on the latter premise: that we may indeed be headed for a historic ‘reversion to mean’ in the markets.
And not in 2026. Soon…
If you’re inclined to think this madness must end, and that it may end sooner than many people think…I think this perspective could be of great benefit to you.
We’ll come to it shortly.
Before that, it’s important I give you a very quick history of the e-letter you are reading now, The Daily Reckoning Australia.
It was started in the mists of time, in a different world, by Bill Bonner back in 1999.
Back then, investment e-letters pretty much didn’t exist.
The Daily Reckoning was ‘patient zero’.
Bill had spent the previous 20 years writing to contrarian investors the old-fashioned way, through snail mail.
And they were good at it.
By the turn of the last century, the company had become one of the largest financial newsletter companies in North America.
They’d resisted this new ‘Internet’ thing for several years by then. But as yet another credit-fuelled investment bubble neared its conclusion, they figured they needed a better way to warn as many readers as possible.
They decided to give this World Wide Web thing a whirl.
How to Survive Australia’s Biggest Recession in 90 Years. Download your free report and learn more.
The Daily Reckoning was born
I remember Bill and co-conspirator Addison Wiggin got quite a lot of flak from their publishing teams when they proposed it.
‘So how much will we charge for it?’ they asked.
‘Nothing,’ replied Bill.
‘What do you mean nothing?’
‘I’ll write to our readers, every day, about what I think are some important things. And I’ll do it for free.’
‘Well, we’ll go broke! How do we make money from it?’
‘Figure it out.’
They did figure it out. Bill now presides over what is very likely the largest financial newsletter empire in the world today.
And it all comes back to this very e-letter. And one simple idea…
When a system faces its reckoning,
it pays to be wise before the fact
What The Daily Reckoning did — and still does — is look at the messaging you’re getting from mainstream financial journalists, professionals, and economists, and declare: smart investors should not be spoken to in this way.
‘Economics has been called the “dismal science”. Economics is dismal, but it isn’t science, ’ says Bill
‘At best it is merely voyeurism, peeping in people’s windows as they go about their business and trying to figure out what they are doing. At worst, it is pompous theorizing about how to get the schmucks to do better.’
This pompous theorising caused many investors who listened to it to get wiped out right after The Daily Reckoning launched in 1999.
Then once more in 2009.
Which brings us to today.
A frequent (and to be fair, possibly justified) criticism of The Daily Reckoning lies in the name itself.
How can you take a message of doom seriously in the middle of a bull market?
It can’t always be reckoning day.
Where was that reckoning when you received a daily missive of this e-letter in 2017? Or 2019?
Just like today, those years seemed like we were peak in euphoria, greed, hubris, and stupidity.
Yet the reckoning never came.
As we hurtle towards a new year, we’re still peering from the platform down the tracks. If you listen hard enough, you can hear the train coming.
Or is it just the wind?
We’ve been fooled before, many times.
And yet, the broken clock at the train station gets the time right at least once a day, as the old analogy goes.
Which begs the question…
Are we reaching just such a time
— another rare ‘reckoning year’ — in 2022?
No one knows for sure.
But one objective fact is the level of overshoot in the current market is bigger than at any time in this e-letter’s history.
And that, unlike other cycle peaks, it involves almost every asset.
Not just one or two.
Almost every valuation metric on the financial planet is screaming ‘Sell!’
Central banks and their economist stooges are screaming ‘No. Buy!’
And the industry experts (read: spruikers) agree. They are saying what they always say: there is never a bad time to load up on MORE investments.
This is pure, self-serving nonsense, obviously. We all know that.
It adds nothing to a constructive and informed debate.
There are times in the cycle when the market offers more returns.
And times when less is on offer.
Invest at a high = lower future returns.
Invest at a low = higher future returns.
This is not rocket science.
It’s as true today as it was when Bill sent his first ‘electronic mail’ Reckoning to readers 23 years ago.
Let’s say the broken clock is right in 2022.
What prudent measures should you put in place now to prepare?
What investments in your portfolio are most at risk?
If the next reckoning finally comes, how might it impact Australia in particular?
And are there some simple things you can do to potentially MAKE money, even as this bull cycle reaches its spectacular conclusion?
Fat Tail Investment Research’s Vern Gowdie has been working on a five-part strategy plan for surviving and thriving in the next bear market.
Multiple risks are hiding in plain sight within the system.
The Fed and all the central banks are not going to warn us about these.
Their head-in-the-sand attitude amounts to willful negligence.
We know from the dotcom and US housing experiences; the Fed’s bubble warning system is seriously flawed.
‘What bubble? Nothing to see here…’
And when it all does go pear-shaped, ‘No one saw that coming.’
Therefore, it’s incumbent upon each individual to conduct his or her own market intelligence. And make the right decisions before the herd gets slaughtered.
Vern’s new research aims at helping you do exactly that.
You can expect it this coming Friday.
Stay tuned for that…
The Daily Reckoning
PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.