Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

The Gathering Financial Storm

Stock-Markets / Financial Crash Aug 28, 2007 - 01:32 PM GMT

By: Paul_Tustain

Stock-Markets

"...Only a lack of imagination can have allowed professional investors to suddenly think of the US Dollar as today's quality refuge..."

ONCE EVERYONE gets back from vacation and starts to focus on what's really going on, we may be in for a torrid few months in the financial markets.

I believe the current lull in gold prices could offer a good opportunity to defend yourself before the real trouble begins.


Since the end of June there has been huge damage done to the finances of hundreds of organizations worldwide. But much of this pain is still hidden inside investment funds holding obscure financial instruments which are now unmarketable.

Too many investment professionals have been backing the same short-odds gamble – residential housing – and the aggressive financial arrangements they set up are unraveling a little more every day.

The underlying problem of non-paying US mortgage debt is getting worse, not better, but this fact is being forgotten in the current rate-cut induced rally in shares and bonds. Short of organized double-digit inflation I don't believe there is a force capable of halting the slide in subprime US property prices.

On top of that, we still have the extended pain of increasing rates hitting more US home-buyers as their "teaser" deals end. Data compiled by Inside Mortgage Finance and Lehman Brothers say this trend has barely begun. It won't peak until the end of summer next year.

The world's largest financial organizations have already taken big hits – quietly, for the moment – but the collapse of the subprime sector really is hurting, and we are seeing things that just shouldn't happen in a well-ordered financial world.

  • Fund managers are not producing credible fund valuations; they have frozen values using old prices, and are forbidding the normal result, which is investors piling through the exits.
  • No-one can price mortgage-backed derivatives at the moment, and no-one really knows how the underwriters of credit default swaps are pricing the insurance time-bomb they're sitting on. These horrible investments are in many cases worth nothing, and in the case of credit-default swaps, less than nothing.

The current lull might prove an opportunity for the prospective gold buyer. Gold has not yet moved up; in fact, it has dipped a little as stretched investment funds have sold whatever they can to raise cash and reduce their margin calls.

Nor can any serious comment on the gathering storm fail to remark on the apparent "flight to quality" which on Monday last week saw US Treasury bonds put in their strongest day since Black Monday 1987.

US Treasury bonds are part of the fast-growing and utterly irredeemable $9 trillion public debt now outstanding in the United States . The US trade deficit was also on record-breaking form again last month. Only a few short weeks ago these dreadful statistics drove the US Dollar to record lows against a basket of major world currencies.

Only a lack of imagination would allow investors to think suddenly of the US Dollar as today's "quality" refuge. Any respite for the Dollar will surely be temporary; indeed, the bounce we saw during the sharpest stock-market losses so far may have simply been short-covering by Dollar bears (of which there are plenty) rather than fresh buying of “quality”.

Everything that has just happened in fact makes things worse for the US currency. At the heart of this current crisis lies the bubble in poor-quality US home loans. It is US consumers who are being pinched; it is the return on invested US Dollars which is now being cut.

Lower US rates on the back of America 's weakening domestic economy will re-kindle a Dollar slide in due course. So the current lull may offer only a brief window, in which fewer, stronger Dollars buy more gold than they soon will.

If you're interested in the protections which owning gold – outright in your name – may provide, then please do consider the option of buying and storing physical gold bullion in Zurich, Switzerland, through BullionVault .

As the Financial Times reported in a feature article about BullionVault at the weekend, "private buyers [used to find] it extremely difficult and often prohibitively expensive to acquire gold – not least because of the cost of storing and securing high quality bars of bullion." Now BullionVault "dramatically cuts the cost to customers of keeping their share of the precious metal," as the FT puts it.

And amid the storm now gathering in the broader financial markets, I believe gold could offer a serious defense against both volatility and losses in stocks, bonds and the US Dollar.

By Paul Tustain
Director
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2007

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Paul Tustain Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife