Philip Madden lawyer global comment

Why Australia is buoyant and well placed for the next shocks in this GFC

Resources growth, infrastructure construction, technology advances, business opportunities and optimism have served Australia well since the last quarter of 2007 which is when history will place the commencemnt of this world crisis cycle when major financial institutions began to distrust each other's credit commencing a squeeze which sent many to the wall and a re-assessment of asset values which is not over yet. If anyone wants direct no nonsense guidance about business, investment, companies and opportunity in Australia come to www.maddenslaw.com

Sydney small and medium business is ticking over nicely but nervously....

As I move around the city of Sydney from meeting to meeting, all report that small and medium size businesses in my clientelle are ticking over nicely but directors and managers are nervously sniffing the breeze to assess what kind of economy unfolds. The brief excitement in the spring residential market in this city seems to have subsided with fewer sales going through conveyancers. And of course, the big end of town is content with funds raised in their rights issues and the outcome of the Federal government stimulus package despite volatile share prices and shareholders sniping at directors' remuneration in recent round of AGMs.
I suspect that assets will reach their true value early in the new year at somewhat lower levels despite what the share market may do in the coming months.

Conflicting information but a big bet on the US economy & the US$ by Buffett

« What next? Roubini says we have time before next catastrophe

What can it mean? Gold price goes higher & the Sage buys a railroad & Roubini predicts crash as US$ goes up

By philipmaddenlawyerconsultantaaastrategic

4 Nov. The IMF gold 200 tonnes of it went to the Indian central bank despite the Chinese offer to buy it. Who bought the the other 203 tonnes? No doubt the Chinese will keep buying on market. Would that mean the price must go higher to US$1200 per oz  or is the market flooded? Now piece that with Warren Buffett’s bet on the US economy recovering quickly by buying a huge railroad based in Texas.

  If Buffett is right the US dollar appreciates as the US economy comes good then Professor Roubini’s prediction that the international carry trade & its asset bubble borrowing USdollars to buy assets shall crash with some considerable havoc. Interesting times are not over! Never dull is it?

And from Europe: “But the surge in gold prices may be a thing of the past soon. Gold prices are set to fall to $800 or below $800 levels thanks to the decision of the G-20 countries allowing the International Monetary Fund (IMF) to sell 400 tons of gold reserves in the open market to raise funds for its global projects. ‘ – Commodity Online.

”Gold prices are set for a big fall in the next two to six months mainly because of the IMF gold sale. There will be abundant supply of gold in the market in the coming months thanks to the release of 403 tons of IMF gold. Moreover, with stock markets looking up after the big falls, gold prices are likely to fall to $800 or below $800 levels,” bullion analyst Mark Robinson told Commodity Online.

Falsely high equity markets presage the second crash (historically) + moral jeopardy

Now Cassandra what time is it? Time to take a second hard look at the share markets when share Price/Earning ratios are averaging 27! and there are reduced profits, reduced dividends or none! What else is this? They are talking up real property too soon, when most banks are just starting the mortgagee sale process (inter)nationally because they did not want to take the write downs while raising capital or begging assistance from government. Have you seen any loans to small-medium-enterprise? It is now so tight for even big business unless they had a rights issue recently.

Brave hearts may remain in the market and fools may now wade in, but have a look at the historical crashes, always a repercharge almost like nothing has happened (like now) after the first awful crash and then....who took the floor away....freefall for a total shock. So stay in cash, get into cash, be prudent, be vigilant on the data and spot the vested interest(s) talking up risk again. Keep smiling and be kind to your fellow man (and woman)

Gold at US$1050/oz and dealers predict US$1500 - what can it mean?

It must mean some very wealthy people, cashed up corporations and governments, all well-informed, are extremely nervous about the world economy and the US dollar in particular. Historically, this kind of hedging in gold immediately precedes major dislocation like wars, economic catastrophe, national collapse. This flight to gold is more evidence that this GFC is not over and may be just starting whatever else may be about to break.

So, apart from buying gold, what can anyone do to prepare for whatever may come? Plenty! Get out of debt, stay out of debt, look for sustainable solutions for your next major decision. Thinking creatively what am I doing now? What goes into this communications device? My Blackberry and my cellphone too? Rare earth metals, molybdenum etc., a whole range of them and where is 90% of the worlds known supplies mined? China and they are using them not exporting them. No brainer really, invest in miners of rare earths in the rest of the world and you will make your fortune. These rare earths are rarer than gold, more valuable and more useful in our world of communicating devices. Gold runs like this always make me think....

Second global crash before the end of March 2010 - why?

Not alone in this one. A few commentators are hedging their bets with a strong inclination to a second crash or let us call it another probably last major adjustment. Locally see David Bassenese Australian Financial Review late last month and comments from Sir Ron Brierley (I am in Sydney). But why? For a start, why not ask these questions?

Are assets over-valued? Is good real estate an attractive return on price? Are price/earning ratios on listed shares good value? Where are the earnings?

Where is that other US $2.5 trillion toxic debt (secured over bad useless assets) of the $4 tril. reported and $1.5 tril. dealt with? Would it surprise to find there was much more unreported?

Is unemployment up everywhere and doesn't it usually have a multiplier effect?

is cash tightening up lately after the stimulus packages have been spent?

Where's the real pain from the Global Financial Crisis if it is an event of greater magnitude than the Great Crash?

If I am right this is not a time of anxiety but opportunity, if you have an asset sell it now. Buy it back and live well on the difference. Downsize, find efficiencies, look for sustainable choices. Let's see what happens after Christmas!