"A thing is worth how much a buyer willing to pay"
Based on the above statement coin by Adam Smith, we can see the stimulation effect of different economic cycle and the effect of the generational endgame of different asset class.
Asset class are something that people see of monetary value.
The asset class can be cowry shell, cows, tulip, salt, silver coin or paper money depending on the hype and demand for them by the people living during a particular era.
Currently the asset class that i will discuss about will be mainly stock, gold and precious metal, crypto, property and REITS, antique, arts as well as cash.
Stock will be a certificate that we partly own a company. Stock will have buyer and seller but they will be subjected to extreme price due to bipolar nature of stock participants which is bullish due to greed and bearish due to fear. We should be greedy when others were fearful and fearful when others will greedy.
Recession: Stock will drop extensively.
Inflation: Stock that have good asset backing will go up extensively.
Hyperinflation: Inflation proof stock such as Grab, Ground, Gasoline, Gold, Gourd and Gun will do extensively well.
End game: Every eighty years there will be a superbear and superbull due to the primary cycle or debt cycle. There will be bearish for one to two years or bullish every two to four years due to secondary cycle. The tertiary or yearly cycle will make the stock on uptrend or downtrend. No matter how good or how bad we are at stock picking we will be wiped off during the superbear cycle like the great depression in 1920s, asian financial crisis in 1998s, dotcom bubble in 2000s, subprime crisis in 2010s, Covid pandemic in 2020s. Stock can drop from few hundred to few dollar in 2000s dotcom bubble and 2010s subprime crisis whereby AIG and Citibank drop till 1 dollar. During Covid pandemic in 2020s stock drop from few dollars to few cents or go bankrupt all together like JC Penny stock. In conclusion, stock is gambling due to extreme greed and fear of participants and cash is king. If we are trapped in the great superbear stampede our result is that we will lose all our saving and worse of all become insolvent, emotional stress and suicidal whereby many people commit suicide during the great depression in 1920s and asian financial crisis in 1998. The only way to overcome this problem is by buying only good investment grade stock and not buying stock hype at the moment as all that glitters is not gold, diversify across the board and diversify across asset class. Just remember price is what we pay and value is what we get.
Gold and precious matter on the other hand will always remain the status quo during inflation which means gold is good as a storage of value but not a good medium of speculation. If interest rates drop demand of gold would increase and vice versa.
Recession: Price of Gold will drop due to lower demand.
Inflation: Price of Gold will go up with inflation due to the nature as a storage of value.
Hyperinflation: Price of Gold will remain their purchasing power even when paper currency is useless.
End game: Gold had been able to withstand the test of time, but we cannot fill our stomach with gold during war, pestilence or famine. Price of Gold drop during covid pandemic and rose dramatically due to quantitative easing.
Crypto is akin to nasdaq or technology stock but crypto have higher risk to reward ratio that is ten time more volatile than stock.
Crypto can drop from hundred dollar to less than 0.000001 sen for each crypto like what happen to an infamous crypto term luna. Making billionaire become pauper with less than a thousand dollar in the span of few days.
End game: Crypto is more like russian roulette if stock is more like gambling on the roulette wheel. In russian roulette either you win the spoilt or you kill yourself in the process. Many people commit suicide due to loss in luna.
Property on the othet hand have a good storage value buy will depends on the personal disposable income of the citizen. If the PDI is high there will be high demand for property and property price will rise. If the PDI drop there will not be demand for property and price will drop.
REITS are the same as property but is easily tradeable without the need to sell as a piecemeal, high administrative fees, banking loans and repair as REITS is manage by professional with yearly income of 85 percent distributed as dividend.
Recession: PDI drop and people will have problem servicing their loan. Property price will drop extensively due to low demand as there will be more motivated seller than buyer.
Inflation: Property will go up depending on location and buyer ability to get bank loan with a ceiling price due to PDI.
Hyperinflation: Property price will hyperinflate extensively. However, there will be price but no buyer as there is not much motivated buyer with PDI to buy from you at hyperinflated price unless your property is at prime location that foreigners with foreign currency would be happy to invest in.
Antiques and arts stand by itself as many people like to reminiscent of the past. The value of antique will increase overtime as there is more awareness and demand but supply reduce extensively.
Here, a thing is worth how much a buyer willing to pay and when there is a motivated buyer the price will be higher and the price will be lower when there is motivated seller.
So, price fluctuate alot on the short horizon of every boom and bust cycle depends on the general economy. However, if we take the long term horizon of more than 5 years the price will be usually on the upcycle. Price will usually go up by then as new generation and new player enter the market. Therefore, arts and antique is a patience game and only suitable for those with deep pockets as it will go up extensively when there is massive increase in PDI during good times and vice versa.
Recession: Price will drop extensively as demand dried up and there will be mostly motivated seller during this time.
Inflation: Price will up depend on the rarity of the items and availability of PDI. There will be more newcomer becoming motivated buyer as they will be buying the items as collection.
Hyperinflation: During this time, arts will be hyperinflated as well but there will be difficulty to find buyer as there will be price but no demand. If you live in a hyperinflated country it is better to sell your items in a neighbouring country that can better appreciate the price of your art or collectible antique.
Endgame: If you are in need of cash, this is not an asset class to keep as it is very difficult to find buyer and during bad times buyer will press you for a very low price, you might need to sell at a loss.
Lastly, we will talk bout cash. Cash is the heart of every transaction that we use for pricing. Without cash all that we can do is barter trade.
Recession: Cash will be in high demand and cash is king.
Inflation: Cash will be in demand but the purchasing power will drop, making more money required to buy the same item of desire.
Hyperinflation: Cash will be useless as a medium of exchange and this makes lives difficult for the citizen of the country such as what happen to Wilmar Republic, Hungary, Federated United States and recently Zimbabwe and Venezuela. Honestly, there is and will not be any currency that survived more than two hundred years in the history of mankind. In a hyperinflated country, the citizen will spend the money as fast as they obtained it as price will increased more than 50 percent every other months.
Endgame: There is no currency that survive more than 200 years in the history of mankind as currency will soon be printed to oblivion.
Moral of the story: Diversify your asset class and remember to build your asset in heaven where moth cannot destroy and thieves cannot steal.
Bon Voyage,
Dr. Lion.
