Hello 2008

HAPPY NEW YEAR AND A PROSPEROUS 2008

Well here we are 4 days into 2008 and already we have oil at $100.09 a barrel, Gold at a record high of $869.10 and possibly going higher why what's going on? Well with turmoil in Kenya after dodgy elections, the death of Benazir Bhutto in Pakistan and sabotage in Nigeria around it's oil facilities investors are again heading for the safe haven of gold that has returned 31% over 2007, compared to 6.4% if you invested in the US stock market.

2008 promises to be a very interesting year with tight money (credit crunch), more fallouts from the sub-prime debacle, a US presendential election year, a slowing housing market, rising commodities the rise and rise of sovereign wealth funds, rising oil prices, high food costs, inflationary pressures and the real chance that the US will plunge into recession. I have general concerns for all of the above as many are trying to ignore the cold facts and spending money they don't have with no care for the consequences.

What we will see in 2008 is more bank writedowns amongst the major banks namely Merrill Lynch and Citigroup. Many banks are having to turn to Sovereign wealth funds for additional cash injections as the major source of cash tries up, many banks are still wary and are sitting on huge reserves despite the intervention of the central banks.

Both Merrill Lynch and Citigroup report Q4 figures in January so look out again sadly for huge bank writedowns expect anything between $6-10bn writedown for Lynch and a further $5-10bn for Citigroup.Dates for reporting are:

Citigroup 15-Jan US FY2007 Q4 Earnings

Merrill Lynch 18-Jan US FY2007 Q4 Earnings

Deutsche Bank AG 07-Feb DE Preliminary Final

Credit Suisse 12-Feb CH FY2007 Final Earnings

Expect the Federal Reserve to cut interest rates but they have a fine balancing act with the prospect of higher inflation for the US economy, the Bank of England are also under immense pressure to cut rates in the UK as figures from manufacturing and retail sales show a general slowdown in the UK economy coupled with this high oil and food prices, above inflation travel costs for season tickets and the real threat of high inflation currently at 2.1%

Oil prices will continue to rise despite OPEC probably agreeing to increase production, tensions around the globe, low US oil stocks and the chances of a frigid US winter will raise prices added to this demand from China and India.

So what about Gold, Silver and other metals? Yes they will rise many investors will look for a safe haven as the dollar has lost it's sheen and vigour. Gold has already hit a 27 year high trading above $850 a oz and many experts will tell you by year's end we could be looking at $1,000-$1,200 a oz. Silver and Platinum will also see gains due to demand from manufacturers and emerging economies it's never been a better time to invest in gold it's a good hedge against inflation and seen as a wealth creator so get in now.

Now to the presedential elections it will be close but whoever wins will have a major job to turn round a ailing economy, address issues around immigration, the Iraq war and a general concensus that the US is up for sale. With the problems surrounding the banks and liquidity sounds are already being made about the amount of foreign money buying american assets . Such is the power of these wealth funds estimated to be worth in excess of $12 trillion dollars they will become the drivers of asset prices in 2008 expect more dramatic bailouts this year who said macroeconomics isn't fun?

On closing is China a bubble waiting to burst?