Wednesday, October 31, 2007

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Financial Predictions

by Akiva at Mystical Paths

IN BIG BOLD LETTERS - I am not a navi (a prophet), nor is it my profession or special expertise to predict financial markets. (If it was, I'd probably have a much larger bank account.) This IS NOT investment advice, this is me pontificating (thinking out loud). I tend to watch a wide view of sources to detect certain types of trends. On one side is quite a bit of wild economic news coming out of the US, on the other is ongoing concerns of conditions for Geulah, Gog uMagog, and associated financial turmoil and/or predictions...

The US economy faces a major structural imbalance right now, in many ways brought on by ongoing world economic conditions that send major outflows of US money to China, India, and the Arab oil Middle East. Huge portions of those American outflows are reinvested back in America, as the US is the economic engine of the world and the best place (and most stable) for your money to make money, whether it's your 401k retirement investments or some Arab sheik's billion dollar profits.

Awash with cheap money in the 80's, it unbalanced the US stock markets and we had a mini-crash and a moderate recession. Awash with cheap investment money in the 90's, .com's were able to boom and then bust (as 99% had no functional value), leading to a light recession.

The 2000's brought us the highest level of cheap money ever, and the investment of choice this time around was collateralized loan bonds. Meaning, cheap overseas money funded US house loans, especially "home equity" loans. Suddenly, every American was able to pull 'value' out of their home for a (seemingly) cheap price. And they did.

Of course, money follows money, so each round became cheaper (for the Americans) and riskier (for the investors). Then comes the results of the imbalance, the crash...

Too many bad investments, too much money offered to people who couldn't really figure out the complex terms and if they could or could not pay, too many investment bond bundles that hid the riskiest elements.

Now we're in the crash, though it's still somewhat hidden. The real estate bond investment market is dead (Wall Street firms have laid off over 10,000 employees involved in that area). Foreclosures are way up. New loans are hard to get. Property values (because people literally can't afford the money anymore) are falling (20% in many markets, some markets much more, some less). People aren't borrowing, taking the cheap money to upgrade lifestyles (the boat business is dead, luxury car sales are down).

The US is in the beginning of a recession, most people just don't realize it yet. You see the stock market swinging wildly, some have realized and are getting out, others still operate by the 'old' way and think they're going to make a killing picking up on the down swing. However, each swing will settle lower. (A classic "dead cat bounce", though this dead cat is springier than most.)

So the big question is, when there are lots of foreclosures, real estate bond bundles value falls apart, and banks start taking big hits, will the system "collapse"? From a practical point of view, central banks have been very active in stabilizing big financial swings, and with the international reach of the markets nowadays, working closely together as a group to keep these types of situations from spinning out of control. (After all, it would be practically impossible for a major country collapse not to affect others.)

News reports point out the early rounds of those actions are being taken right now. Because it's so technical, it's still rather 'quiet'. Yet, you also see some practical real results, as in the falling value of the dollar, down 25% in the past year. That's massive! (The Israeli shekel is now worth more against the dollar than it was 10 years ago, and the Canadian dollar is at a 47 year high against the US dollar.)

Why is it falling? Because the value of America, all that money collateral, property, is falling.

On to advice. I am not a financial adviser, this is not investment advice, and my advice hasn't made me any great returns in the past for me. All I can say is here are my thoughts:

1 - Get out of the market. No one can predict the top, but we've clearly entered major instability. Up, down, don't want to be caught on the wrong side. Personally, I reduced my market exposure in February, and again in July. I didn't catch the high, but I haven't been caught on a down swing either.

2 - Traditional hedges against money value instability are commodities, in particular precious metals (gold, silver).

3 - If you are truly concerned about real meltdown or real major near term national or world instability, then moving some investments to gold and silver that you can personally hold and transport is feasible. Meaning: gold coins, silver coins, platinum coins.

4 - If you are concerned about an _immediate_ meltdown, walk into your nearest jewelry store and buy them out. I remember stories of Iranian Jews, who were not permitted to take their currency abroad. Many a family walked out of the country with their assets around their necks.

We clearly seem to be in conditions for Geluah and Gog uMagog. Yet, ongoing predictions from various sources _do not seem to have not been accurate_ on a national basis. The predictions of the chassidic rebbe's seem to be closer to fulfillment.

We can only hope and pray that the path of the geulah is tempered with chesed. There is a set of interpretations that say the geulah will be a 3 part event, as almost no one could survive the geulah as a single event. If you read navi Daniel as a single event, you find most of the world being destroyed, most of Israel being destroyed, almost all of the Jewish people being killed, and a tiny tiny remnant surviving.

The other approach would say that through World War 1, World War 2, and the spiritual holocaust of our time, numerically most of the Jewish people have been killed, those of Torah and emunah are the tiny remnant surviving, and the events of Gog uMagog can occur in a relatively bloodless but still painful fashion, such as we saw with Gush Katif (may Hashem have rachamim!)

Can Gog take on Paras with Israel only experiencing fear, yes. Can the troops of Gog march into Israel with the IDF as an escort, to 'protect' the PA in the Shomron and to divide Jerusalem, as only intimidation and herding the population rather than slaughtering them, yes. Can the power of Gog be broken through natural events and "unmanageable economic collapse"? Seeing California now and New Orleans, yes.

Cry to Hashem for the path of rachamim, for the other path is too terrible to consider.

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