-- Posted Monday, 12 January 2009 | Digg This Article | | Source: GoldSeek.com

This particular week has that same unsettling quietness that preceded the collapse in October last year, and to be fair I flagged it up with my article ‘Dow at 7,000, FTSE to 3,300′ at the end of September, see: http://arabianmoney.net/2008/09/29/dow-to-fall-to-7000-ftse-to-3300/

Yes we have had stocks rally by 20 per cent since the collapse of last autumn but where are the next lot of buyers going to come from? Anybody who wanted to buy on the dip will now have done so. The next move is therefore down.

Downside trigger?

What could trigger the sell-off? There is scary talk from the UK about accountants unable to sign off on big bank audits for 2008. Well, they are all bankrupt, that is the small technical problem.

Indeed, the full year figures from quoted companies are not going to look good, and the profit outlook is truly awful now. It is the profits side of the price-to-earnings ratio that is coming into focus, and that will not justify p/e ratios at present levels, and so a downward adjustment of share prices is unavoidable.

President Obama is coming on January 20th but that is already a known known. So too is his only weapon, the stimulus package. These factors are written into current share prices, so they offer no downside protection.

Bottom picking

After the recent bear market rally the next step in another leg down. Will that then be it? Will the bottom be in the market? I suppose that depends how low we go.

My own prediction for this market bottom is 4-5,000 on the Dow and for gold to surge to $4-5,000 an ounce. However, the initial impact of the stock crash will be a dollar rally, so the gold price surge will have to wait until that is done and then the dollar and bonds will crash.

In this environment it makes sense to sit on cash or precious metals and do little else while the financial professionals lose their clients another massive amount of money.

-- Posted Monday, 12 January 2009 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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