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GOLD AND THE BANKING MELTDOWN

GOLD AND THE BANKING MELTDOWN

GOLD AND THE BANKING MELTDOWN

The realization (as pointed out in the Financial Times article today entitled "Rising CDS Action Increases the Strain") that the Lehman Brothers’ failure could create a Credit Default Swap (CDS) loss of $400 billion for counterparties is sinking into the market. This realization is leading to a continuing sell off in stocks worldwide.

It is just now dawning on people in the financial community that the two Icelandic banks failing this week makes a total of six CDS issuers who have failed in one month.  CDS buyers have no idea if they will get there money back or if their CDS’s are still in effect.  It will be a huge accounting mess, trying to decipher who owes what, and to whom.
I am more certain now, that my prediction of at least a mild depression will be correct.

The derivative mess is now coming unraveled.  The warnings were many, and some were wise enough to listen.  Belatedly, those who did not listen are starting to realize what is going on.

We can get rallies in stocks at any time.  On rallies, all financial companies are in danger of continued dilution from stock offerings, and government bailouts, where the governments take warrants and dilute existing shareholders.  Similar to the meltdown of the internet mania stocks, financial stocks will continue to fall…and many will disappear altogether.

GOLD

It appears that things will continue to get uglier for quite some time.  In this environment, gold will have its "big day in the sun".  Gold is already hitting all-time highs versus the Euro, British Pound, Australian and Canadian dollars, and many other currencies.

THIS IS A SOLUTION WE ENDORSE, LET US HOPE AND EVEN PRAY THAT IT IS ADOPTED

Financial Times
10/09/2008
http://www.ft.com/cms/s/0/af349090-959a-11dd-aedd-000077b07658.html?nclick_check=1

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