How to respond to another global financial crisis
Posted on 17 November 2010 with 4 comments from readers
ArabianMoney readers will be well aware of our warnings about the immediate outlook for global stock, bond and real estate markets as well as commodities. Yesterday the Dow fell 178 points. Another storm is about to break and may revisit the dramas of late 2008.
Those who have bought into the rally and made money should now sell, or short the market. In particular we would suggest the following action list:
1. Sell stocks and commodities and either buy T-bonds or stay in US dollars or short the market for further falls.
2. Then consider your future strategy by subscribing to the ArabianMoney investment newsletter (click here). Subscribers who listened to our short ETF ideas in May and last month will already be well placed to see their portfolios rise as others fall.
3. Hold on to gold and silver and buy more if the price drops significantly. If you try too hard to time this you may miss out on the big upside to come so it is not worth that risk.
4. When the stock market appears to have bottomed out either swap your dollars for commodity-related shares or into a commodity-related currency like the Canadian or Australlian dollar. We would count stocks in the GCC as commodity-related shares and see this as a major buying opportunity as these bourses are already bombed out.
That is it in a nutshell. The devil is in the detail and that is what our investment newsletter subscribers will get and this free website will not provide.
4 Comments posted by readers:
Very good advice, Peter!
Regarding Point # 1 Above:
Even with the very low yield, bonds are OK, provided that they are short term bonds. If an investor believes that the global economy will experience significantly more deflation ahead, and if he/she is a risk taker, then buying long term treasury bonds, though very risky, may pay off in the intermediate term.
That selloff looks like it was short lived as the market is up about 176 points as of this minute. China is strong and bullish. I think the market sold off due to tightening news out of China and Ireland problems and now that those are out of the way we resume our bull run lol.. The second stimulus package with POMO is still in place which means we continue to go up for the time being. These days every time shorts enter they get taken to the cleaners so as much of a Bear I am at heart I don’t have too big of balls these days to short the market because the FED has more money to lift the market by means of manipulation then the people do to short the market.
@Andy:
Yeah, I understand where you’re coming from!
However, try to muster up some medicine for those “cajones”, because the US FED can’t continue to alienate the entire world; you’ll notice from Bernanke’s deplorable speeches in EUR over the past 2 days, he’s launched a desperate “counter-offensive.”
If you carefully pick a few shorts (e.g. banking sector, etc.), then just hold on for the eventual ride.
Expecting the AUD to reverse it’s recent rise once the next shock hits. Are you expecting a similar fall in the value of the AUD?
Ed Note: yes.