Soros, Buffett and Trichet said It Ain’t Over Yet

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May 21 2008
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Oil prices going for $130 a barrel – FinanceTwitter screamed back in early Mar 2008, slightly more than two months ago when the black gold was traded at $102 a barrel. While there’re only a handful of readers who thought it was possible, many readers wrote personally to say it was nonsense to think for a minute that oil could reach such level. My justification was quite simple and in fact it was over-generous. The June contract shot to a record intraday high of $129.60 before settling at $129.07 a barrel yesterday. Guess what, the oil futures are now selling for about twice what they were just a year ago *Holy Cow!*.

Oil Price $130 chartDow plunged 200 points and it was all about oil prices, nothing else. Gold gained and the dollar fell. Allow me some minutes to talk about gold. One of the readers asked if it’s wise to invest in gold instead of stock or shares. Of course it is a good idea especially at current trying time. In fact if you noticed how investors ran helter-skelter seeking shelter under gold when dollar plunged, you know gold was traditionally a preferred “save haven” over other commodities such as palm-oil, silver, cocoa, grains, beef and so on. It’s easier to keep gold under your pillow than to put grains or beef, silly. Of course you can buy non-dollar currencies but I’ll leave that for another day. If you wish to trade currency, you can try it for free here.

Although there’re some financial institutions that allow you to purchase gold, my investment in gold was quite primitive. I had Gold collection to hedgebeen buying gold in the form of jewellery since 2003. Besides wearing it, these “assets” were good in the sense that its value will appreciate during bad times, so I thought back then. Of course I can buy gold-bar but it would be weird to wear them, not to mention my head would be swinging from one end to the other by doing so. When I was a kid, I was made to sit there for hours to hear how my grandma and grandpa suffered during Japanese occupation and how the “banana-dollar” became instant de-facto currency. The most precious currency was gold. But it’s sure super-dangerous to wear gold jewellery nowadays unless you fancy getting your hand or head chopped off by those illegal immigrants.

And so, my collection of gold has appreciated in values but I’ll keep it for the rainy days. Anyway if you think the bull is about to charge again in the local stock market in the middle-term, say within six-month, then you might be disappointed. Even if U.S. sub-prime problems were to vanish overnight, the local political situation would be the biggest obstacle. European Central Bank President, Jean-Claude Trichet and Warren Buffett on Monday warned that the credit crunch problem still persists.

“These are demanding times, challenging times… It is an ongoing, very significant market correction,” Trichet told BBC radio in Britain. “I’ll talk about the United States. I don’t think the effects of the credit crunch are far from over at all. I think there will be rippling secondary, tertiary effects.” – said Warren. Meanwhile billionaire George Soros said in an interview with BBC Radio 4 “Financial institutions have been severely damaged and we are currently in a situation that will probably, I think almost inevitably, result in a recession certainly in the United States and most likely in England also.”

George Soros Warren BuffettAccording to data from NPD Group, consumers in the U.S. bought 31 million mobile phones in Q1, spending $2.7 billion but the problem is the figure represents 22% year-over-year decline in unit shipments and a 7% decline in revenue from Q1 2007. This means many consumers may be holding back on new handset purchases, especially those tied to new pre-paid plans.

On the other hand, U.S. Federal Reserve Chairman Ben Bernanke said last week the healing process from the credit crisis would take some time – said Reuters. While the above three individuals do not own any crystal balls, their opinions carry weight and could be the closest we have in predicting the near future. So, what can you do? Allocate a healthy cash reserve proportionate to your stocks, unit trust, property and others because “cash is king” during bad period.

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[…] written, back in May 2008, that I had been buying gold in the form of jewellery since 2003 (read here). And back in May 2008, the gold was traded at about $920 – $930 an […]

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