‘This Time It’s Different’ – The Next Economic Downturn

The most important thing about investing, hands down, is doing your own research. I have given advice to a lot of my friends about investing in crypto but I always tell them afterwards that they should not take my word for it. I tell them that I am very happy to give them advice but it is incredibly important for them to do their own research as well. But I have found that no one is actually willing to do that. I’ve even had people say to me ‘Nah I just want your take on it’. And as a result, they come back to me a few weeks later, very worried because as we all know in crypto, things move very very fast. And as such a coin that may have looked good, might not look as attractive a few weeks later. Those people are very lucky, however, as I am not a bad person, at least I’d like to think so, and I wouldn’t give them advice that I could exploit. But there are lots of people who would, and those people wouldn’t stand a chance against the manipulative whales in the crypto sphere.

I recently watched ‘The China Hustle’ on Netflix, and this same concept is seen in the documentary. The documentary investigates the fraudulent mergers of small Chinese companies that found ways around both the Chinese legislation and United States legislation so that they could get their stock trading on the US stock market. These companies had been claiming that their revenue was 10x their actual revenue, and as a result, it looked like China’s economy was booming. The Chinese economy seemed to be growing 9% each year, which is unbelievable growth. And unbelievable it was. These small companies were claiming that they would grow 50-75% each year. As a result, investors jumped on the bandwagon and rode this wave of insane growth. But investigators suddenly realised that the companies were lying through their teeth.

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Some of the stocks went from trading at $9 to a few cents. The intelligent investors mostly made it out with great profit but the average working people, the so-called ‘mom and pop investors’ lost all of their capital. The total accumulated loss was somewhere along the lines of $14 billion. BUT  no one went to jail. The loophole they found, made it completely legal for these companies to do this. And the SEC didn’t do anything because they were making money from it and there was no way they could get in trouble for it either. The only people who lost out were the general public who didn’t know any better because they didn’t do any research for themselves and just jumped on the hype train.

Then there is Alibaba Group. Alibaba Group recently had the largest US IPO (Initial Public Offering) in history. But Alibaba Group hasn’t released any of its accounts and the CEO has said at conferences ‘Just trust us, Just trust us’. The total net worth of all Chinese companies trading on the stock market is now well over $1 trillion. The lawyer who worked on the Alibaba case was also recently elected head of the SEC, by none other than Mr Trump.

I think a major economic downturn is coming. It’s very evident that the money is back and economies are growing very rapidly, especially the Asian economies. Even in Ireland, people are beginning to move jobs as better positions have opened up. They say a recession happens every 1-2 decades. The next one seems like it’s going to be massive and it’s going to have an awful lot to do with China.

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The main point to all of this is to never follow the pact. The bankers and hedge-fund managers who were encouraging people to invest in these worthless stock made huge money and knew that there would be no consequences for their actions. Never trust anyone in the world of finance. Everyone has their own interests at heart, and those interests usually have something to do with making bank.

If you don’t have the patience to do your own research then you don’t have the patience to invest. And you’ll usually find that those who don’t do any research are the ones who always lose out, and those that do extensive research become incredibly successful. There is a running joke on Wall Street that ‘this time it’s different’. But every time it’s just a different method that leads to the same horrifying result.

Cormac

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