Archive for the 'Finance' Category

Personal Finance: Invest your Savings in Gold

Published on March 2, 2009 in American Gold Eagle Coins, Bullions, China, Commodity, Currency, Economy, Finance, Foreign Investment, Global Meltdown, Gold, Gold Price, India, Investment, Money, Personal Finance, Reserves, Savings, Stocks, US and WP. 15 Comments Tags: , , , , , , , , , , , , , , , .

Housing bubble burst followed banks going bankrupt. What next? Tax revenue collected will decline as unemployment rises further, and the US dollar will weaken further and will not have much value in the months to come as more investors worldwide will invest in more tangible commodity assets like gold rather than volatile paper money, or in the next strongest currency.

Bullion dealers are seeing business revving up in this global meltdown and many have sold their houses in return for gold as historically gold prices have never gone down to zero, even if they dip periodically. 2008-2009 have shown increasing trends in the gold price in commodity terms.

Year     USD/Troy Ounce
2000    272.70
2005    513.00
2008    865.00
2009    925.00 -1200.00 (Current-Expected)

London has the world’s largest market for gold trading, and in 2008, the value of gold trading rose 58% to a record $20.2 trillion (£13bn), according to trade body International Financial Services London (IFSL).

Americans are overpaying on American Gold Eagle coins by hundreds of dollars due to the huge mark-up by dealers, or even if they are bidding on eBay. Yet, it seems like a good proposition for short term gains. For long term gains, it would make more economic sense to invest in gold mining stocks or gold bullion bars that trade close to their bullion value.

For those who do not know, South Africa China is the highest producer of gold in the world since 2007, and may soon overtake India, the highest consumer of gold today in gold consumption also with the demand for gold being triple in 2008. China has an estimated $1.3 trillion invested in dollar-denominated investments, a mere 0.9% of its reserves in gold (600 tonnes), whereas US has 77.3% of its foreign reserves in gold. To increase China’s reserves even marginally, China will have to mass-purchase bullions which will skyrocket the prices to way more than the expected $2000. Gold is the only back to back the yuan as the dollar’s status as a reserve currency will decline sharply, and China is all set to do it.

Gold prices in India have hit record highs over the past few weeks, partly reflecting a sharp depreciation in the value of the rupee that has made dollar-priced yellow metal a lot more expensive, and more people are selling their gold jewelery or exchanging old jewelery which is good for short-term gains. But bad for long term gains as the price of gold is only expected to rise to as high as $1200 per oz by the end of 2009.

It’s time to act – Diversify your virtual gold portfolio, invest in gold mining stocks and hold your gold until you get the best value selling it.

Fourth Bailout for AIG’s Record $61.7bn Loss

Published on March 2, 2009 in AIG, Bailout, Economy, Finance, Financial Companies, Loss, Market, Recession, Stocks and Warren Buffet. 3 Comments Tags: , , , , , , , , , .

Wall Street falls on AIG’s biggest quarterly loss in corporate history. The government is willing to pump another 30 billions of tax dollars once again into American International Group (AIG) for the FOURTH time, the first time being in September 2008 when Lehman Brothers collapsed.

Recent bail-outs received:

  • AIG – $180bn
  • Bank of America – $45bn
  • Citigroup – $50bn
  • JP Morgan Chase – $25bn
  • Wells Fargo – $25bn
  • Goldman Sachs – $10bn
  • Morgan Stanley – $10bn

That makes a total of $345 billion in the recent bail-outs to some of the biggest financial companies, not to mention the multi-billions of dollars received earlier, and AIG receiving more than THREE times the bailouts received by BOA or Citibank.

The government owns nearly 79.9 percent of AIG’s holdings, which involved a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to capitalize it’s toxic assets, further spending $30 billion additional capital in return for preferred stock. The Treasury Department said it would convert it’s preferred stock into new preferred shares, similar to common shares. This $62 billion is the highest ever loss recorded in corporate history.

Warren Buffet says the economy is in shambles as a consequences of the US housing bubble, and this will continue in 2009, however gives some hope that the best days for America are still ahead and while it may take time, the economy will recover.

Given the bailouts after bailouts, it would be no surprise if AIG breaks it’s own record once again. Is there a cap on bailouts or would the Obama government go on spending until it has nothing left to spend?