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Monday, September 29, 2008

Discussion Point

Many are curious as to whether the 700b bailout will make a bottom of this market. Will it? Financial issues over?

1 point to note is that in the past, purchases were all made on leverage (US), but no more.
Moving forward, purchases will be cash based. So what's the impact?

Companies will need strong cash holdings to make acquisitions, thus reducing buyers in the market.
This will lead to slower assets price appreciation.

Further more, the credit market stands at 62 trillion max on leverage and has to be unleveraged which will bring more pressure on the market as it unwinds.
Compare the size. Americans will have to pay more then 100% tax if they keep using the people's money to support the market.

Technically, dollar is expected to weaken further in the weeks ahead.

Gold and silver on the other hand is expected to strengthen. US government running out of gold, spot price running high.

Technical charts shows potential run up within the next few months. And gold run inversely with the dollar.

Silver generally has a thinner market and carries a higher risks, so gold will be a better choice.
Options are bullion, unhedged gold related stocks or gold futures, but if you going for long term, do not use too much leverage.

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