Tuesday, March 18, 2008

The economy is on amber alert

This comes from Stuart Goldsmith:

" I know it’s a bit early in the week to be sounding alarms but
I think it’s about time we upped the alert level to ‘amber’...

Consider two things if you will...

Firstly, have you been following the price of gold?

Last week it broke through the critical $1,000 per ounce
mark. Whilst there is nothing ‘real’ about such a ceiling, it
is a powerful psychological resistance point. If you dabble
in shares, graphs and suchlike you will know that a market
will ‘test’ a resistance point several times, never quite
seeming to have the courage to break through.

But if it does break through it often hardly looks back and
soars away. The old resistance line (e.g. $1,000 gold)
becomes a new support line.

Gold has broken through $1,000, decisively.

More importantly, is has stayed the other side of the line
and is currently $1022 and rising. This despite ‘dark satanic
forces’ conspiring to keep gold low, according to an ‘in the
know’ friend of mine.

Here is what internationally renowned financial writer Doug
Casey says:

“For many years now, a number of people in the financial
arena have been alleging that there is an active conspiracy
to suppress the price of gold. Some see it as a sinister
backroom affair. Others claim that it’s just the way the
world works, and that it happens right out in the open, if
only you know where to look.”

If you’re interested, you can read more on this complex story


Be that as it may, you should take note that whatever
suppression there is has failed to hold down the price of
gold against an avalanche of buying.

The second thing to consider is falling bank shares...

Take Barclays, as an example. They opened the year at around
£5.20 but are now £4.25. Now that’s quite a hefty 20%+ drop
in three months, which for a solid and reliable share like
Barclays is quite something. They are not alone of course.
Lloyds TSB have seen a similar fall, as have other leading

Put these two pieces of information together and you get the

“People are dumping banks and fleeing for a quality commodity
(gold) which has a real value.”

And when I say ‘people’ I mean, of course, the smart money –
the hundreds of billions that swishes around in pension funds
and suchlike. The fact is that you and me selling a few
Barclays shares and buying a few Kruggers has little effect.

And if you think THAT’S interesting, check out the price of

So how bad can things get?

If one major USA bank has had to run for a handout due to
derivatives exposure, I can promise you that if you open the
closet at any other bank you’ll be buried neck-high in a pile
of skeletons. My friend, they have all had their snouts deep
in the ‘easy money’ trough for years.

Right now, I can only imagine the frenzied scenes at all
major financial institutions as they:

a. Seek to find out exactly WHAT their exposure is, because,
astonishingly enough, most of them don’t even know.

b. Seek to off-load their more trashy investments onto some
greater fool.

c. Engage in some ‘restructuring’ to make the situation look
rosier than it really is.

d. Sell as much as possible to improve their liquidity

This, I am convinced, is happening even as you read this.

So what am I saying? I’m suggesting that you put yourself on
‘amber alert’ right now and do not assume it will be business
as usual for the next couple of years. It’s time to get heads
out of the sand and take a good long hard look at your
finances, your net worth and where you are invested. This is
one story you need to follow carefully. Please do not assume
‘they’ will sort it out and all will be well.

‘They’ are looking after THEIR interests, not yours. ‘They’
will gladly and willingly sacrifice you if it means saving
themselves some money.

Believe it!

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