Financial Predictions

Expect to see many more banks coming unstuck, but the worry is that the FDIC in the USA and other governments around the world who have guaranteed bank deposits, that they will run out of money and will not be able to honour their commitments. Imagine this: you have put your money into a “reputable bank” thinking that in the worst case, your government will be able to cover your savings in case the bank goes bust. But what happens if the government goes bankrupt? Don’t expect to get a penny of your money back if that happens.

Another thing to remember is this: if you must keep some money in a bank, try not to be persuaded into a “high-interest” savings or bond account. There is always a reason why you are getting more interest: it means there is more risk involved. Given the volatility of our environment today, it is best to take the minimum risk in all your financial dealings. So my recommendation is that you have a simple checking account and maybe an online saver or similar savings account that doesn’t penalise you if you decide to take out your money immediately. Do not tie yourself into any longer term deals. Here are my reasons for this: number one, if the bank gets into trouble, you are not going to appear at the top of the list when it pays back any money it may still have in its possession. Number two: what looks like a great rate now i.e. 7% or 8% for 5 years – may look terrible in just a year or two’s time. What happens if interest rates go up to 15% and more? How are you going to feel if you are stuck with only 7%?? Be very careful and don’t be talked into anything you don’t understand.

So we have Swine Flu which has now become a pandemic. On a practical note, I have been saying for months and months that it is important to have some provisions in case we are unable to get normal supplies of food and water. Ideally, at least three months is great, and here we are with a possibly serious outbreak of Swine Flu and many people could be either quarantined, or there could be so many sick people that our services are unable to cope with demand. In this event, you will be very glad that you stocked up and prepared for the worst. How much better it is to be prepared rather than panicked and caught out. Again, I am saying this not only in the event of a pandemic, but also in case of a natural disaster, in case oil becomes scarce and the supermarkets shelves are bare…. in these very uncertain times, it is better to be safe than sorry. And remember, that when a panic sets in, it is already too late. Just look how quickly Iceland fell apart. It may look rosy right now, but it could turn on a dime.

There is a lot of illusion, delusion and unreality out in the world. The stock markets have largely been rallying, despite the dreadful unemployment figures, numbers of foreclosures, companies going bust, governments getting into more and more debt, increasing crime… the list goes on. So certainly, until the middle of July, we will be seeing more optimism, more talk of “green shoots of recovery” and “the housing market has turned a corner.” Expect more of this but don’t be fooled by it. This crisis is far from over and we have many years yet to learn how to survive and thrive in times to come. It has been very pleasing to see that some local communities have already started to come together. People have one another’s telephone numbers, they know who has what strength and ability, they are able to call on one another should the need arise. This is a very positive outcome of the crisis.

There is the threat of war, violence, unrest in so many areas. Last week Israel carried out its most extensive precautionary emergency drill ever. They are preparing for a possible outbreak of war with Iran. Obama sent another 17,000 troops over to Afghanistan. And this week, there have been riots and demonstrations in Iran. Words used in the media have been “revolution” and “toppling the government.” These are words I have used over the last several months describing the effects of this opposition. As more and more young people are unemployed, we are going to see a much stronger possibility of revolution and drastic change around the world. Indeed, make no mistake, the fact that there are now British National Party representatives in the European Parliament, is a step in this direction. Expect to see much more civil unrest, uprisings and revolutions. This is just the beginning.

Well, I hope I have made up for missing out on a blog last week as I was just so busy. To recap: be careful about tying your money up anywhere, especially with a bank – all banks are scary. Remember to keep on stocking up on provisions. Try to be considerate – if you are not feeling well, DON’T go out and give it to other people. Let’s try to contain any infections in our communities. Watch out for unreality in the markets, in the media, from our governments – don’t be sucked in. Start to think for yourself. If you are reading something about the housing market for example, check out who is writing that piece. If it is coming from the Real Estate Institute, then you can expect it to be optimistic. Make sure that you are aware of the possible bias of any author. In the end, the best thing to do is to think for yourself and make your own decisions. Don’t go along with the crowd – that’s a sure fire way of getting into trouble. Make your own choices and stand by them. Good luck!