by Mary Anne & Pamela Aden
been one major blow after another on the market
and economic front. But the historical election
excitement provided a welcome distraction during
these uncertain times.
Thereís no question that events have been moving
fast and the markets remain volatile. Thereís
been a lot of blame throwing, concern and
worries as stocks and real estate values
continue tumbling, shrinking most peopleís
retirement funds, investments and savings at
best, and creating severe stress due to
foreclosures and jobs losses in other cases.
SOME CALM ENTERS MARKETS
Even though the markets have settled down
somewhat in recent weeks, the global financial
crisis continues. But the worst may finally be
over, at least for the time being. Itís still
premature, but weíre seeing some early positive
As youíd expect, this crisis has triggered a
flood of questions, comments and concerns. And
while weíd love to personally answer each e-mail
we receive, there came a point when we simply
couldnít or we wouldnít get our work done.
Considering whatís currently happening, however,
this time we are including the most frequently
asked questions and we hope youíll find these
MOST ASKED QUESTIONS...
--The first thing on many of your minds is, what
should our investment plans be under an Obama
Itís very possible that the initial reaction to
the new presidency will fuel a rebound rise that
could last several months in most of the
markets. This would be in response to a change
in leadership and direction, optimism and so on.
Unfortunately, however, the election will not
change the economic fundamentals. These are
already set and regardless of who wouldíve won
the election, Obama will have to deal with the
realities of a recession, credit crisis,
vulnerability in the banking system, the housing
crisis, bailouts and ultimately inflation.
Investment strategy should focus on these
factors, more so than on the Obama presidency,
aside from near-term reactions, which will
likely be positive. This means gold for
inflation, and cash for deflation until we see
how this crisis unfolds.
--Why isnít gold rocketing up when the
government is printing $700+ billion?
Thatís what a lot of you have been wondering,
especially considering the massive bailouts,
which are now actually more than $1 trillion and
counting. But at the same time, recession has
taken over and the risk of deflation has
This put downward pressure on all of the markets
as most assets were sold to cover losses, which
caused the dollar to rise and gold to fall. In
fact, in September-October it was hard to find
anything that was going up, which is very
unusual. We feel this is a temporary situation.
The election alone is beginning to ease some of
the uncertainty thatís been hanging overhead.
And once the markets calm down some, which is
already starting to happen, investors will again
focus on the fundamentals. These remain very
bullish for gold because all the excess money
being created and spent to keep the economy from
going over the edge is going to be extremely
inflationary, further down the road, and thatís
when gold will really shine.
--Which investments are best in a time of
recession or depression?
Thatís when cash is normally king because, as
weíve seen lately, most investments decline
during recessions. Thatís primarily due to less
demand, nervousness, concern about the future,
job prospects and other similar factors. Bonds
tend to do well too since they are safe and
--What do you think of the gloom and doomers?
(These are worst case scenarios forecasting the
end of the financial world as we know it,
suggesting the reader will lose everything.) Do
While the current situation is certainly serious
and a worst case scenario cannot be ruled out,
itís not a given. The worldís central banks are
doing everything possible to keep the global
financial system together. Theyíre working
together and while it will take time to resolve,
we donít think the end of the financial world is
upon us. These types of extreme views usually
coincide with market bottoms, and there are
signs thatís what weíre seeing now.
--How come you didnít see the huge crash coming
in the Dow and commodities?
Even though these markets were either bearish or
correcting and we identified this down time, we
never imagined the declines would snowball into
such dramatic moves. Once the turmoil really hit
in September, the situation rapidly
deteriorated. Panic set in and thatís difficult
to see beforehand.
Market research is an art. It provides you with
information which gives a good indication of
major trends, tendencies, which investments will
do well, probable scenarios, how to invest
accordingly and so on. But it doesnít anticipate
the magnitude and speed of an excessive market
drop prior to the fact. Research increases the
advantage of being in the right markets at the
right times, but itís not foolproof.
--Should I sell some of my stock assets now to
raise cash, even if itís at a tremendous loss?
No. Most all of the markets are extremely
oversold, theyíre due for a rebound and, unless
the markets turn bullish, thatíll provide an
opportunity to sell at a better price.
--With gold, currencies and the other markets
stabilizing or starting to move up, should I buy
new positions now?
Yes. Even if the rebound rises only last for a
couple of months, these bargain prices should
not be passed up if you want to add to your
positions or buy new positions. Of course, if
the rebounds keep going, thatíll be even better
but itís still too soon to know if that will be
the case. We will cross that bridge when it
comes. This would apply to precious metals, gold
shares, currencies and other stocks.
--What are your thoughts on the bullish break
out for the U.S. dollar?
The dollar surged due to a number of unusual
factors related to the credit crisis. But the
fundamentals for the dollar remain very weak.
Plus, the dollar is the most overbought itís
ever been. The dollar now appears to be forming
a top and itís likely headed lower while the
other markets rebound. Thatís the current
outlook, but over the long-term thereís no
question that the dollar will continue its long
road down, like itís done over the past 35
years. In other words, the dollarís bullish
breakout will end up being a temporary
--Is this the longest and steepest gold D
decline on record?
Yes, itís been the longest since 1980, and the
percentage drop has been the steepest since this
bull market began in 2001.
So these provide a good cross section of whatís
currently on your minds. Weíre witnessing
unprecedented, dramatic times and itís been
difficult. But things seem to be settling down,
at least for the time being, and thatís a relief
following the turmoil in September and October.
Weíll know much more in the critical months
ahead and while itís still premature, so far
things seem to be getting a little better.
Over the past week, for instance, gold shot up
nearly $90. It benefited as a safe haven and
itís currently strong above $802. The Dow
Industrials has risen nearly 1200 points over
the past week, the U.S. dollar is showing signs
of vulnerability for the first time since
September, currencies are starting to perk up
and gold shares are moving up too.
Despite the poor economic news, the markets are
telling us that they like what Obama is doing so
far, they like the bailouts and since the
markets lead the economy, these are positive
signs. So stay tuned.