Dear Reader, ‘I don’t hold many mainstream economists in high regard,’ writes Jim Rickards… ‘They mostly cling to obsolete or defective models (such as random walk, efficient markets hypothesis, Phillips Curve, wealth effect, and many more) and they are impervious to contrary data, alternative models, and common sense. ‘However, there are exceptions. ‘One of the few mainstream economists whose work I follow closely is Robert Shiller, winner of the Nobel Prize in Economics in 2013. Shiller is a true pragmatist. He develops models that reflect reality rather than creating abstract models and forcing data to fit some preconceived and erroneous curve. He has also developed metrics such as the Case-Shiller home price index and the CAPE Ratio to track price movements and potential bubbles in key asset classes. ‘Savvy investors are well advised to follow Shiller and be alert to his warnings.’
So, what is Shiller thinking right now? He actually just issued one of his most dramatic warnings ever. He’s warning that stocks, housing and cryptos may all be in extreme bubbles at the same time. And, using data series that go back over 100 years in some cases, Shiller has a deep insight into business cycles and prior bubbles on which to base his forecast. As Jim Rickards explains: ‘If you think that stocks and cryptos or housing and cryptos are unrelated markets, you may be in for a nasty surprise. ‘These markets seem unlinked when times are good, but severe problems in one market tend to spill over into other markets quickly. Investors suffering huge losses in cryptos will sell stocks to raise cash. Investors suffering huge losses in stocks may put off buying a new house or even sell their existing home to deleverage. Crashes in one market quickly lead to crashes in other markets because of leverage, liquidity preferences, and simple panic. ‘In a market meltdown, you don’t sell what you want, you sell what you can, and that often means dumping assets in one market to make up for losses in another. That’s how uncorrelated markets become conditionally correlated in a meltdown.’
Shiller is not saying markets will crash tomorrow. He’s saying they’re exhibiting the kind of melt-up behaviour that often precedes a crash. How do you prepare for it? Click here to access Jim Rickards’ own market-crash survival plan. Regards, James Woodburn,
Group Publisher | 
