Early evening on the April 14th 1912 and a passenger on the first class deck of the Titanic would be, no doubt, enjoying the opulence of their surroundings, and the wealth that the British Empire had created. More recently, the “Celtic Tiger” has created new wealth in Ireland so that one can now enjoy a similar fine dining experience as the passengers of the Titanic as the menus show. Yet, we know that the very next night it all lay at the bottom of the Atlantic and no amount of Edwardian engineering could save the ship. One of the key lessons learnt from the Titanic tragedy was that there weren’t enough lifeboats for all the passengers. Today, we are in the midst of a Global crisis and potentially face a new breakdown in the established world order. Just as the death of Queen Victoria in January 1901 at the peak of the British Empire was followed by two World Wars and the emergence of the United States as the dominant Global Hegemonic Power, many commentators such as Paul Kennedy in his bestseller The Rise and Fall of Great Powers, are claiming that Global Hegemony is in the process of shifting. It is possible if not probable that even within our lifetimes, this power will shift east to China or India and just like the situation faced by Great Britain at the turn of the Twentieth Century there is nothing the United States can do about it. This time it isn’t Edwardian engineering that is failing to save us, but financial engineering. Of course nobody knows for sure how events will play out or if we are heading for a recession or even a depression.
Cramer is an over-the-top wind bag who I would not trust with a ten foot barge pole (he uses sound effects!) but he is observed and followed by many on Wall Street and his recommendations will lead to increasing speculative and investment demand and his prediction of gold over $1,650 per ounce is conservative. He does make the interesting point, however, that when the IMF talks about selling gold it is really buying paper currency; "and I don't want to stock up on paper currency right now."
Psychological research shows that people are systematically biased in their assessments of future events; not only will the future be good, it will be especially good for oneself in particular. All investors should have an understanding of risk based on an analysis of both their capacity for risk and their willingness to accept risk.
Excuse our cynicism, but shouldn't this story be dead already? The IMF, which has the worlds third largest holdings of gold bullion, has announced yet again plans to sell some of their gold holdings. As we reported before, in our Feb 29th Gold Market Update: Our belief that the latest International Monetary gold proposal story was more spin than reality is seen in the fact that the IMF said on Thursday that no timetable has been set for the sale of a limited portion - about 12.9 million ounces (403.3 tonnes) - of the IMF’s gold stocks of 103.4 million ounces. The news was not widely reported unlike the previous ‘news’. In a background paper, the IMF said if the gold was sold on the market, as opposed to off-market transactions, the sales would be phased over time to avoid market disruptions, as recommended by an independent panel. Factsheet - Gold in the IMF : http://www.imf.org/external/np/exr/facts/gold.htm What is more interesting here, is not the obvious rehashing of an old story, but the changing spin it is given this time around.
It was obvious to any casual observer that debate about whether the US was in, or approaching a recession, was increasing. According to a January article in The Economist "[in] recent opinion polls, almost six out of ten Americans believe the country is already in a recession." And the media are increasingly willing to confront the situation head on.
“Too much money chasing too few goods” – a basic, monetarist definition of inflation. In the long run, inflation is generally believed to be a monetary phenomenon, i.e. it is attributed to growth in the supply of money. While in the short and medium term it is influenced by the relative elasticity of wages, prices and interest rates. The question of whether the short-term effects last long enough to be important is the central topic of debate between the Monetarist and Keynesian schools.
Mark Twain said; “Buy land, they’re not making any more of it” One question I am repeatedly asked is this: “which is a better investment, Property or the Stockmarket”. As with so many things in life, the answer is “it depends”. I have to agree with Mark Twain’s observation. Land is a finite resource, and we live on an Island. You don’t need a PHD in stating the obvious to realise that an investment in land or property should, over time, appreciate. Property isn’t a bad investment.
And does it matter? The foundation of Modern Portfolio Theory was a 1952 paper, “Portfolio Selection” by Dr Harry Markowitz in which he established a theory explaining the best way for an investor to choose a portfolio. Modern Portfolio Theory is of such fundamental importance in investing that the economists that formulated the theory received the Nobel Prize in Economic Science in 1990. Asset allocation involves dividing an investment portfolio among different asset categories such as equities, commodities, fixed interest, cash, property and the process of establishing which mix of assets to use, is largely determined by investment objectives, time horizon and tolerance to risk.
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