Van’s note: Van Bryan here, Jeff Brown’s longtime managing editor. At the end of every year, I sit down with Jeff to discuss his biggest predictions for the coming year. Remember, you can always catch up on earlier editions in this series by going here.

Today, we’ll be stepping back to look at the economy in 2022. I’ll ask Jeff his opinion on recent inflation levels, what might cause the next market crash, and his prediction for America’s next president. (It’s likely not who you think.)

Read on…

Van Bryan (VB): Jeff, let’s take a broader look at the economy and financial markets. And let’s start by talking about inflation. The most recent consumer price index (CPI) reading came in at 6.8% for all items. What’s your view on that?

Jeff Brown (JB): Inflation is absolutely skyrocketing right now. That figure you listed, 6.8%… that’s a 39-year high.

All year we’ve been told that inflation is “transitory.” We’ve been told that it’s simply a symptom of the supply chain problems and the shortages that we’ve been experiencing for things like semiconductors. And that’s part of it.

For instance, the cost of new vehicles in that latest reading is up 11% year-over-year. And that is being driven by the semiconductor shortage, which we talked about in this series. Over time, these prices will stabilize.

[Van’s note: For Jeff’s full analysis of the semiconductor shortage – the “Tech Shock” – go right here.]

But we need to understand that the money printing we’ve seen in the past 18 months will result in permanently higher prices for many of the goods we depend on every day. All the government “stimulus” – the $5 trillion+ – is already having an impact on normal people.

Let’s just look at one common item – the cost of housing. According to official inflation readings, the cost of “shelter” is up only 3.9% year-over-year.

But it’s been well-documented how real estate prices have jumped over the last 18 months, especially in places like Florida and Texas where restrictions have been limited. And we’re seeing it show up in the price of rent. Apartment rents are up significantly in the top 30 U.S. metropolitan areas.

And I believe we’re going to see sustained levels of higher inflation in 2022.

VB: Now the obvious question. What should investors do about this?

JB: The first thing we need to understand is that if we are just keeping our money in a traditional savings account, we are losing value in real terms every year. Many investors are probably thinking about “hiding out” in precious metals like gold and silver.

It’s a personal decision, of course, but that’s not my recommendation. Gold is down 6.36% this year, even with these sustained levels of higher inflation.

The Brownstone Research strategy in 2022 will be to find assets that are growing faster than the rate of inflation. And that means high-growth technology and biotechnology trading at reasonable valuations.

We still have near-zero interest rates and a flood of private capital looking for a return. And the result of this is that we are going to see a continuation of higher valuations in the most exciting tech and biotech companies.

The other reason why I continue to be bullish on growth investments is because technology is progressing at a pace that would have been unimaginable just a few years ago.

Just think about what we’ve seen already. We now have cars that are essentially fully autonomous. There are active metaverses with their own economic incentives. Decentralized finance applications now hold billions of dollars’ worth of assets. In the next few weeks, we’ll see a 3D-printed rocket go into orbit.

Any of these developments would have sounded impossible even just five years ago… But this is the nature of exponential growth. It sneaks up on us, and then it goes vertical. And as investors, that is precisely the time we want to invest in the most exciting technology and biotechnology companies.

VB: I’ll play devil’s advocate. What – if anything – could change that? What do you think could cause another market crash?

JB: There are really two things that could cause another crash. The first is if governments get even more heavy-handed with pandemic policies. In other words, if countries revert to the lockdown policies we saw last year – which did absolutely nothing to stop the spread of COVID-19 – then that would absolutely crash the markets.

Now, I don’t think that’s going to happen. This totalitarian approach was not based on scientific research. And while we’ve seen new variants, they appear to be less dangerous. Despite what many believe, the Omicron variant, while highly transmissible, has resulted in zero deaths so far.

And I’m very encouraged by the peaceful protests we’ve seen around the world against lockdowns, against vaccine mandates, against vaccine passports, against this violation of human freedom.

Now, what does concern me is if fiscal policymakers start printing even more money. They’d essentially be stealing from future generations to the point where inflation gets into the double digits.

This could force the Federal Reserve to ramp up interest rates. That would be very bad for equity markets.

Now, I don’t think that will happen in 2022. And there’s reason to be optimistic with the midterm elections coming up.

VB: How do you mean?

JB: I’ll make a prediction on this. I believe control of the House and the Senate will shift into Republican control after the midterm elections. And if that happens, let’s look at it from an objective lens as investors.

If Congress and the White House are controlled by different parties, it means many of the more egregious spending policies likely won’t get through. This should stop the more egregious levels of money printing and the rapid devaluation of the U.S. Dollar.

I believe moderates on both sides of the aisle are starting to feel the effects of rampant inflation. Their constituents are feeling the higher prices for groceries, fuel, electricity, housing, everything. There’s not going to be an appetite for this continued level of reckless spending.

And I have one more political prediction if we’d like to go there…

VB: Sure. Go ahead.

JB: This might be a little controversial, but I don’t believe Biden will finish out his current term. I’m not talking about impeachment, but I do believe he will step down at some point. And I’m making this prediction as an analyst reviewing the data.

His overall approval rating is around 41%, which is bad. But Biden’s approval rating when it comes to the economy is even worse, it’s only around 37%.

And the DNC has a problem because Kamala Harris’ approval rating is even worse. I saw a recent poll that had her overall approval rating at 28%. That’s the worst rating for any modern vice president.

So, here’s the prediction…

Kamala Harris will get a cushy job somewhere in the administration and will step down as Vice President. And they’ll put somebody else in there who will ultimately replace Biden. And once that happens, I think Joe Biden steps down.

Will this happen in 2022? I don’t know. But I believe that’s what’s coming.

VB: It’ll be interesting to see how it plays out. Thanks, Jeff.

JB: Anytime.

P.S. Be sure you check your inbox tomorrow for our final installment of Jeff Brown’s 2022 Prediction Series.

I’ll ask Jeff about a unique class of investments. Some readers may now be familiar with special purpose acquisition corporations – more commonly known as SPACs. SPACs have had a busy year in 2021… And I’ll get Jeff’s take on where he sees things heading.

Not only that, but we’ll also discuss some of the recent changes in crowdfunding regulations… and how that’s opened up a whole new world of opportunity for investors.

Be sure to tune in…

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