The worst of all worlds
The Bank of England raise rate by the biggest amount in 27 years. They did it because they forecast that inflation will hit 13% by the end. They further forecast that the UK economy would slide into a 15 month recession later this year with GDP shrinking 2%.
What a surprise!
You create massive monetary inflation, raise taxes, increase regulation and then epect prices to remain the same. What planet are these guys on?
But now they are trying to undo the damage of their profligate fiscal and monetary policies. Now comes the global recession. Give the Bank of England credit for acknowledging the obvious. The US Fed and the ECB apparently don't think there will be a recession.
Here's what is going to happen.
I agree with the BOE. They have tough times ahead in the UK. But we will see even worse problems in Europe but they will start later in the coming year. The US is already in a recession and the recession won't bottom until perhaps 2Q2023.
So how do we make money from this?
Right now the stock market and other speculative investments are rallying in a feeble manner. Normally, stock prices go sideways in a midterm election year then drop sharply starting near the end of August. Makes sense to me.
So that means we might make a bit more money on the long side with selected stocks but the big money will be made in a month when the bear market reasserts itself and drops sharply.
So I am largely in a waiting mode. Yes, I have some stocks on right now. I'm fortunately making a little money.
But I look for the next big move to the downside so I'm putting together a list of stocks to short.
Some areas I am looking at:
- Homebuilders like XHB
- Foreign stocks Like EFA
- Weak balance sheets
- Junk bonds Like HYG
- Zombie companies
That list will keep me busy and hopefully very profitable!
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