Can someone condense this into a plain english sentence.Seems like a mix of movement from income to safety stocks and reverse, liquidity hence pricing anomalies on small caps and shorting.
"With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu
Last time this happened was 2007 to address massive Liquidity problems in the financial system. If the Fed didn't just step in then interest rates would have spiked up. The Fed are trying to keep the rates down so they make money easy to obtain for the banks and consumers. Higher rates would be detrimental to the economy right now.
Why would this have meant an interest rates spike? Liquidity freeze is when Banks don't know who to trust and are unwilling to lend to other banks as a result. This is why liquidity dries up. Basically, something has them spooked and the risk is too high. Typically they will want a bigger return from the loan to another bank which means a higher interest rate pushed onto consumers.
Why do banks loan to other banks? Because banks must have XXX amount on their balance sheet at the end of each business day. Often there is a shortfall, they make this up by taking a short term loan from another bank that has more than XXX amount on their books.
What has banks spooked? That is a Trillion dollar question! Not known publicly yet. Last time it was Subprime loans.. This time could be anything. Might be 12 months out from finding out like with Lehman brothers event in 2008 or we might see it this year.
Who knows, This hasn't happened for a decade. DYOR, This is mine.. I think this and the million of other market indicators flashing red we are on the edge of something big..
But we could also be 20 years away from a recession. Who knows! But this to me is a critical alert!
I sold my position a few weeks back for a return of just over 40 per cent (not talking big dollars here but the per cent is accurate, a lot of this was because our NZD went down substantially at the same time silver hit a three year peak. I still have a tiny gold position through PMGOLD (https://www.perthmint.com/storage/pe...-gold-asx.html) which accounts for 2.5 per cent of my total portfolio.
I'd love to buy some more but gold is almost $2500 in NZD - the most its ever been. Its much higher than in the darkest days of 2011. I just can't bring myself to buy at these levels.
Just 8 months ago gold and silver was for cranks. Now just about everyone is talking about it - just another reason I don't feel like buying it at this point in time. All of a sudden gold and silver are considered mainstream investments. But when they were 40 per cent cheaper? Not so much
Now don't get me wrong, I'm not some apocalyptic weirdo. However if gold drops a little, I'm bringing my precious metal holdings back up to 5 per cent of my portfolio. If it helps me sleep a little better, its a good investment.
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Originally Posted by tobo
Great trade buying Gold plays with FOMC coming up rate cut ??
, a lot of this was because our NZD went down substantially at the same time silver hit a three year peak. I still have a tiny gold position through PMGOLD (
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