Dangerous Times...

Things are starting to heat up and the Year of the Tiger is living up to its reputation. Hold onto your horse this is going to be a rough ride.

Since I have posted last quite a bit has been happening:

- The PIIGS are heading for a roasting - don't think they are the only ones in this precarious situation - most of the developed world is including the UK and USA. Have a look at who is the next domino to fall

- Greek debt has been downgraded to Junk levels... other PIIGS not that far behind.

- The Greek populace is rioting and airing their discontent with regards to the austerity measures imposed. Think the money loaned to Greece will ever be repaid...?

- EU provides a $1 Trillion dollar package to help alleviate stresses in the EU financial market and save the Euro - what are they thinking.... will it be 2 trillion next month - why not just round it up to a cool 10 trillion, Then the world will know how SERIOUS the EU is... does any of this smack of desperation. These guys don't actually know how to solve this - they have one bazooka to fire and of late it has been misfiring... Albert Einstein once said "The definition of insanity is doing the same thing over and over again and expecting different results" Think throwing more debt after bad is going to solve a problem causes by over-indebtedness?

- Last week we saw an incredulous drop on the DOW of 9% intra-day. This 1000 point slide was terrifying to even the market- makers on the open-outcry market. Think this is a warning of things to come? You better believe it. Think a 20%/30% drop in one day is impossible? Think again. When a market should be sliding but is constantly propped back up the stability is compromised and even though it is successfully held up temporarily, the situation gets ever more precarious. Think of this as a volcano that has been suppressed for years, pressure has been building inexorably as sure as the progression of time - artificially it has been suppressed but the inevitability lies ahead. When this market drops limit down - exchanges will be flooded with orders, servers will crash and pandemonium will break out. People will want to get out at ANY price. Do you feel confident putting your hard earned cash in an environment where you could loose 9% in 20 minutes?

- Trading bots or High Frequency Traders have stirred the ire of the Big Eye in the sky. These guys which provide 73% of liquidity in the US market have been fingered as one of the causes of the dramatic 9% slide. Anyone out there care what fair value is or where a share should be....? Who cares when you can trade in and out of the market sub-second and fleece the unsuspecting public by pushing prices ever so slightly higher/lower and making minuscule amounts although a couple of million times over sub-second.

- Goldman Sach's which does, I quote "...Gods work ..." seems to be the fall guy for the financial crisis. Remember the witch hunts of the 15th century - sure Goldman's is no saint but who really is? If Morgan Stanley, JP Morgan, Citibank etc had to be investigated - they would be found wanting too.

- Gold has made a new high. This is the once place that has shown remarkable stability together with Gold shares. Gold has not yet gone parabolic - when this happens you know it is in its final bull phase - till the spike higher comes - rest easy in your gold investment. Just know that things don't go up or down in a straight line and a correction could be due at any time.

- China is over-heating and its property market is on the brink of a collapse. China imploding could have some dire-consequence for SA short to medium term. China is the main importer of our heavily resource based economy and this could damage our economy and job prospects.


My take on things now with regards to investments and equities: Stay vested in Gold Shares, physical Gold and cash. Agricultural shares and base metals should also hold value although less so. Precious metals and cash are the place to be. I'm happy with cash as long as inflation does not start rearing out of control. I ultimately still believe we are heading for a deflationary crash of epic proportions.