We Live in Unprecedented Times

This week, the highest commoner in the UK, the Speaker of the House of Commons, Mr Michael Martin, resigned. He is the first Speaker to be ousted in more than 300 years.

In January, the Bank of England cut interest rates to 0.5%, the lowest level in its 315 year history.

The US has unprecedented levels of debt….. and so the global financial crisis continues to unfold.

Stock markets have rallied considerably since their low at the beginning of March 2009.

Who can we believe, is there anyone we can trust anymore? What does this mean for the man in the street? What on earth do you do with your assets? Is your pension safe? Should you buy or sell your property?

These are all questions that I am being asked on a regular basis and I am going to attempt to answer them here.

Firstly, it is important to keep up with the daily inflow of news from around the world, but it is vital to trust your own intuition as far as your finances are concerned. If you do not feel comfortable with the advice your financial advisor is giving you – do some more research, maybe get a second opinion – but do not invest in something that you do not understand and in something that you are not comfortable with. So in answer to the first question – who can you trust? You must trust yourself and your instincts. If something feels wrong, it probably is. There are always plenty more deals out there. If a deal has to be rushed through – don’t do it. You need time to think and time to read the small print. Take that time and if the deal falls through – then another one will be along soon.

How can you protect your assets? This is proving difficult for both rich and poor around the world. My advice is that you must have some gold and silver in your portfolio – even if it is a small amount – this is insurance against the whole system failing – and that is a distinct possibility. This is not to alarm you – but just as you take out house insurance in case you have a fire – this is no different. The economy is on fire right now, and you need to hedge your bets. Gold has no national identity and is therefore international. It is a safe haven. It will continue to rise vastly in value, so not only is it insurance, it is an investment too. You must be aware that gold and silver are very volatile – so be prepared to ride out the short term dips – you must be prepared to hold for the medium to long-term.

Pensions are not safe. If you are soon going to be getting your pension – be prepared for a drop in its value. You may need to make alternative plans – but please do not rely on the pension you thought you would get. Because most pension plans are based on stock market performance – and given that the stock markets around the world are falling – the value of your pension is diminishing. This is heartbreaking and grossly unfair – and when all the baby-boomers start retiring – this is going to be a massive problem. Older people will either have to work longer – at least until age 70 – or they will be living on the breadline. I do not think that people were made aware enough that the value of their pensions could fall dramatically too. We had many good years, and people were led into a false sense of security. We are coming in for some very lean years, and you need to start to learn how to do more with less. Every penny that you spend – ask yourself – do I really need this??

Property is a huge issue that is on people’s minds. Buy, sell, mortgages, banks, what to do? It is hard to generalise about the world property market – as each country has its idiosyncrasies. However, if you can wait before buying a property at this time, it is advisable to wait. Prices are going to fall much further and it would be a shame to have invested your money and then only a few months later to find that you could have bought that same property for 20% less money. This is even more painful if you have taken out a mortgage on the property – because you may owe the bank more than it is worth. So, if you can, wait it out until the market becomes more stable. In the meantime, rent and bide your time. Don’t be too quick to get into the market. Just because something looks like a bargain – it might not be.

If you are selling your property or land – you must price it to sell quickly. The sooner you can sell your property, the better as prices are likely to fall further. So, don’t be greedy – it is better to lose some money and to get rid of the burden, than to have the responsibility around your neck maybe for years to come. In a falling market, you need to price your property about 10% lower than the lowest price in your area. Like that, you will at least get some interest and hopefully buyers who will bid against one another and raise the price. This is the best way to go with property.

I hope this answers a few of your questions. I will be back again with more soon.

How to Buy and Store Silver - is it still a good investment?

What quantities does silver come in?
Retail investors often buy the 100 oz bars which weigh 6.8 pounds.
You could also consider the 10oz bars or the 1oz coins. They range from US Silver Eagles, Canadian Silver Maples, NZ Silver Ferns depending on where you are in the world. If you are in the US take a look at www.coininfo.com and they will guide you through the process.

Beware of long shipping times. Long shipping times are a warning sign. Coin shops have been known to go bankrupt. Never buy more silver at one time than you can afford to lose. Therefore, if you buy silver from a dealer, break up your order over time, or use several different dealers at once. Diversify your investments at every stage.

Shop around. Prices vary. Everything is negotiable. But remember, the coin dealer also takes a risk just to sell silver, as silver prices can move up 5-10% in a single day, too! Take cash to a local dealer, negotiate heavily on price and show the dealer various price quotes from other dealers on the internet! If your local dealer cannot fill your order at a reasonable price (within 1% of the lowest prices), then go to another dealer, or break up your order, and order online. Make sure that you take delivery of your silver – don’t leave it in someone’s vault, or with an online company. You never know whether they are going to be around should the economy go belly up.

Don’t buy silver “certificates,” “futures contracts,” or ETF’s (Exchange Traded Funds) as you risk that there is no silver backing these bits of paper and you could end up with nothing. Make sure you take delivery of your silver and that you store it yourself.

Now onto whether silver could be considered a good investment. If you would be satisfied with an investment that increases in value of the medium and long-term, then silver is a good investment for you. The price is likely to rise substantially in the longer term. Global supply is limited and demand is growing, which should signify that it will increase in price in the future.

Short term, the situation is far less certain. Silver has fallen considerably over the last several months and I think that the upside potential is now larger than the downside risk, as long as you are not concerned about any short-term dips.

Asian Economies form and alliance the West cannot match

The U.S., U.K., and a number of the large countries that make up the E.U. began to form political and military and alliances after WWII and these expanded as the Soviet Union dissolved. Through the current financial crisis there has been very little coordinated economic policy among these same counties even though some of the economically weaker ones would certainly benefit from a program to shore up the financial health of the region by providing a pool of capital for temporary aid.
Asia is doing what the West cannot do despite political and military divisions among many of them that go back decades. Nations in the region are building a coercive plan to protect the region's financial stability.

According to Reuters, "Japan, China and South Korea have finalized details of an emergency $120 billion liquidity fund for 13 Asian nations." In the event of a financial crisis in one of the counties, this fund would be available to provide assistance.

There is a temptation to compare this new facility to the IMF, but that analysis would miss the move toward a financial alliance that will help serve to bring Asia together as a single, loosely formed economic entity lead by China and Japan, two of the four largest countries in the world as measured by GDP. The program makes the region financially stable, probably more stable than Europe is now with its rising unemployment, stagnant economies, and sovereign debt which faces downgrades in many cases.

The old alliance among the nations that support the military cooperation of NATO has not extended to a set of economic bonds that are even more important as the global financial crisis claims victims in countries such as Ireland and the old Eastern European block. That gives Asia an advantage as the recession continues. Quietly and unobtrusively, Asia is making huge strides forward. In the West, we had better watch their movements very carefully.

World Predictions 2009-2012

US unemployment will go up to at least 25%
Collapse of the commercial real estate sector
Food riots
Huge increases in crime
Gold goes up to at least $2000 an ounce
Bank holidays i.e. banks closing down altogether for a few days or longer
Civil unrest
US economy will collapse altogether
More draconian measures introduced by governments to raise more and more taxes
More enforcement, more inquiries, more scrutiny by governments worldwide
Dow Jones goes down to 4000
Vacant shopping centres and malls around the US
Governments being toppled
More natural disasters than we have ever seen before in our history in places that we will not expect them

With all the above predictions in mind, don’t get caught up in the hype and the media telling us that the economy has reached the bottom now and everything is going to be fine. If you are investing in stock markets – be very careful – know that you are playing with fire. There will still be some rallies and the Dow Jones may go up to 9000, but in a few months or by the beginning of 2010, expect to see it around 4000.

Currency markets continue to be volatile, and if you are trading currencies make sure you know what you are doing and that the money you are using you can afford to lose.

Watch out for China taking more of a lead in world affairs – quietly and stealthily they are buying up commodities, land, real estate around the world. They have increased their gold supplies by 76% over the last five years. Keep a close eye on their plans as they will affect us all in the future.