-- Posted Wednesday, 17 September 2008 | Digg This Article
| Source: GoldSeek.com
By: Peter J. Cooper
A newspaper in Dubai has asked me to write an article on the best future option for career investment bankers who now find themselves unemployed. This is intended to be a humorous item although it will clearly depend on whether you are a casualty or not.
But it occurred to me that the best alternative for ex-investment bankers would be to enter the business of coin shops in a modest way where they could use their trading skills to run a daily book of gold and silver coins.
Precious metal prices are going to remain volatile as the true nature of the period ahead of us become clear: namely state capitalism and a reflation of the economy. We have seen $300 billion injected by central banks in the past two days alone to keep the ship of global finance afloat, and this junkie is going to need bigger and bigger fixes.
This is pretty much what happened in the late 1970s after the 1974-3 oil shock and the 1974 stock market crash. You can not expect to see the Federal Reserve walk away and watch the economy tank. So there is $85 billion for AIG, $200 billion for Fannie Mae and Freddie Mac and the central banks of the world assist with printing cash to keep the game alive: $300 billion in two days this week.
Inflation or reflation, it is a darn sight better than a true deflationary bust like the 1930s, although for certain sectors – like investment banking – it will be deflation. As in the 1970s this will be a stunningly poor market for investors in most asset classes, including traditional equities, real estate and as inflation picks up bonds too.
Cash was the best performer in the 70s, topped only by gold and silver for investors in the second half of that decade. It will be the same again, and a coin shop for gold and silver coins is going to be a very lively, profitable business, and ex-investment bankers have all the right skills to handle this sort of operation, even an aversion to risk from recent experience.
The writing is on the wall for coin shops. This summer the price of gold and silver has had a pretty nasty correction but the price of coins has hardly shifted – mainly because stocks have run so low. Coin shops suffered a run on their stock earlier this year.
Retail investors have been a bit quicker to jump ship than many experts on Wall Street who will now gradually see the logic of investment in precious metals during a period of reflation. So there is going to be big money in owning a coin shop where retail clients can buy and sell gold and silver coins, both rare coins and bullion with a close to spot price.
Peter J. Cooper
http://arabianmoney.net/
-- Posted Wednesday, 17 September 2008 | Digg This Article | Source: GoldSeek.com
