We’re experiencing one of the biggest stock-exchange turbulence in the last 20 years. Just take a look at the economic press on any given day, both last week and the present, to graphically see the magnitude of the price action due to the fear of the unknown.
On the 6th of March, three of the largest US investment funds went bankrupt, news that has gone almost unnoticed due to the coronavirus crisis.
The behavior of the central banks and the markets have been a mirror effect of what happened in 2008, when Lehman Brothers presented their formal bankruptcy declaration on September 15.
However, 15 days before it had a TRIPLE A rating from major U.S. rating agencies. From one day to another it passed entirely into the hands of Barclays Bank and Nomura holding, who took over the Asian business. The name of Lehman Brothers has since then been closely linked to the phenomenon of “subprime” or junk mortgages granted to people without resources to face the payments and yet had extremely low interests. The domino effect and financial engineering to place these qualifications did the rest. Since then, everything has changed in the financial world.
Today, financial institutions are still using similar praxis. We’ll come back with this topic in another article.
THE ENEMIES OF OUR MONEY: 1/ The insecurity
It seems obvious that one of the enemies of our savings is fear (real, fictional or interested fear), and therefore the insecurity as a feeling associated with it.
Due to the safety absence that affects all, we will leave aside any type of feeling and will analyze facts from the perspective of the information.
- Dow Jones has opened and closed, just a few minutes later, on several occasions throughout this month (March) to avoid a sales collapse. (It lost 7% during the first week of the month).
- Ibex 35 loses 11.93% as I write these lines (18/03/2020). It accumulates losses of more than 110 billion Euros, about 25% of its market value.
- The mortgages granted in Spain during 2020 have fallen by 67 %, which is partly due to the legislative amendment of the current executive, but its not the only reason for the reduction. (Request for higher-income/liquidity of applicants and greater guarantees for the granting of credit, all this to reduce the credit risk.
- The European markets have lost between 10% and 15% of their market value.
- Brent oil is below $30 a barrel, the lowest price in decades.
- Several European countries ban short-selling after markets plunge…
They are all very clear signs that something is changing and very fast… But wait, there is more…
- “But isn’t this a catastrophic analysis, because of the similarity to the same thing that led us to the 2008 crisis?” you might ask me.
- “No! I don’t think so… I have tried to put together all the data and information that is being diluted in a “mare magnum” covered by a smokescreen. For this reason, I believe that we are in a cycle change and have just entered the prelude to a recession.
What to do then in these circumstances?
It is precisely the situation that leads us to seek refuge to protect our heritage, or effort to obtain it, in times of storm.
But let’s go a little further!…
Being able to do a panoramic analysis of all signals that are piled on our desks, between reeds and reeds that camouflage the information and divert our attention, we must carefully read those that are interrelated and linked.
The refuge by excellence in convulsing times has always been, throughout the history of humanity, GOLD and SILVER. At CRIPTORO we have the opportunity to find the best shelter to protect your patrimony from the incoming hurricane whose winds already blow with intensity.
- “Okay, that’s how it has been, but you might say… it has also fallen in price significantly these days”…
- That’s true, however, I would like to point out that this decline has been mainly because institutional investors have made a cash flow for, among other things, paying their financial assets in a massive sale as we have witnessed in the stock markets.
We are, without doubt, at a critical moment for protection or patrimonial creation… We can´t let the opportunity pass by. Fiat money has its days counted.
I’m Jaime Martinez-Burgos
Director of CRIPTORO GOLD and SILVER