Will it make any difference to gold and silver whichever of these appalling presidential candidates gets elected to govern what still remains the world’s most powerful nation? Obama has accelerated the decline in the nation’s superpower capability, arguably Bill Clinton’s legacy, and the erosion is set to continue with his wife in office but would […]
Markets never go straight up or down, they zigzag but still follow the trend. In a bull market there will be mainly higher lows and higher highs, while lower highs and lower lows will signal a bear market. A succession of similar highs and lows indicates the market is trending sideways and awaiting a breakout to the upside or downside. That is until a major trend reversal takes place. The time frame for a trend varies with the traders particular preference. A long term investor may look at the trend over a five year period whereas a day trader will be looking at the trend by the hour or even less.
Price action is a result of a combination of analysing news and past performance.
We in the West still suffer from the belief that the world economies revolve around us so when we suffer then so will the rest of the globe.
Not so long ago this was undeniably true but things have changed. The US is no longer the overwhelmingly dominant driver of world trade with Europe being dragged along on its’ coat tails.
That position has been steadily undermined since the turn of the millennium, arguably earlier, as a consequence of fiscal and political incompetence at the same time as the BRIC nations and oil producing nations have grown in economic strength.
- Look at major companies that trade around the world and are not dependent upon Western sources of revenue.
- Avoid businesses that have anything but the barest minimum of debt.
- Remember that in hard times even the most bombproof assets can take a hammering. Avoid property, most retailing, manufacturers and distributors of non-essentials.
- Buy essentials to living such as utilities.
- Beware of Bonds. Traditionally seen as safe investments during hard times. There is now a difference, and that is the relentless inflationary pressure building up as the printing presses continue to roll out the Dollars, Euros and Sterling. If the yields don’t match the rate of inflation you are losing money. Pick very carefully.
- If you believe that a company is a buy the chances are that you believe that its market sector also has strength. Consider buying the sector ETF to cut down on the risk of an unexpected calamity falling on your pick.
- Steer clear of risk. The best way for a non-professional to steer of risk is by only considering those companies that have strength in simple markets. Meaning that they should not be involved in complex products that may have a limited life before they are superseded by a competitor. Think Proctor & Gamble, Johnson &Johnson, Coca-cola.
- We would be remiss if we neglected to mention precious metals in this context. People throughout the world have always considered gold as a safe haven during turbulent times. The problem with gold is that, unlike bonds or top class companies, it does not pay a dividend and can cost to store and insure. Nevertheless now a global recession has developed it will mean that most paper currencies, none of which are backed by gold or any other asset, will devalue as inflation takes hold. This is why many analysts are suggesting that the yellow metal will reach $1000 an ounce (currently circa $800 an ounce) before the year end and with an eventual high over $3000 an ounce. 5%-10% of your investment funds in Streetracks Gold Trust (GLD) is an option to consider. This ETF actually buys, sells and stores physical gold based on the spot price and value of the fund at any given time and is traded like any quoted stock or share. Take a look at Bullion Vaults if you prefer to buy and sell physical gold in your own name and store it in Zurich, London or New York.
- Beware of miners, however bright you think the prospects are for the metal they produce, they are subject to many outside perils. Although the right miner can prove a very profitable investment they are speculative in recessionary times and are not for the faint hearted. By the same token take care with platinum, palladium and rhodium. Half of all platinum produced is used by the auto industry in catalytic converter exhaust systems. The industry is spending on research into replacing these metals with cheaper materials. If successful that is an awfully big chunk of demand down the swannee! If not, the Chinese, Indians, Russians and others are clamoring for cars as more and more of them join the affluent middle classes. After the recent massive drop in PGM prices it is only a matter of time before auto manufacturers buy back into the market, our guess is towards the back-end of 2009.
- You should keep some cash in reserve for a rainy day. Anything can happen. You may lose your job or have an unexpected large medical bill. Life being what it is you can bet that if you have to liquidate one or more of your holdings it will be just at the wrong time.
To summarize, think companies manufacturing or distributing simple yet essential products, with good cash flow and little or no debt and have a worldwide market.
Diversify your holdings by spreading your risk via a favored market sector ETF, buy a little gold and keep some cash handy for a rainy day.
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Have you noticed that in the last few days there has been a lot of talk amongst the cognoscenti that we are in a commodity boom bubble that is in the throes of bursting?
The pundits are not yet in full cry but there is a ground swell of ‘informed’ opinion that is beginning to paint the picture of oil retreating to below $100 a barrel, gold with $750 an ounce in their sights, even the soft commodities that feed the world and which have come off their tops recently are about to plunge.
Bursting bubbles are the latest fashion.
Lets face it each and every one of is confronted by some aspect or other of investing time in research every day of our active lives.
Whether it is looking up a recipe to give the old man and the kids something different for dinner and costing the ingredients, deciding on a family holiday, choosing a mutual fund to tuck a little cash into for a rainy day, the best auto insurance deal, and even choosing clothes out of the closet each morning for every day wear, for the kids, for the light of your life, for a special occasion, to go shopping in, what to buy at the supermarket, to go to work in, to be fashionable, where to go for a meal, that every day list is endless.