10th May 2006 AD

THE PONDERINGS OF A RISK ANALYST 

Yesterday we watched as gold hit levels not seen since 1980, a trend that continued again today. Yesterday's Daily Dig read, "clearly there is something wrong behind the scenes that is starting to unravel before our eyes." "The outlook for energy is no better, I am forecasting 
record high oil prices this coming summer", emailed a reader who spends most of his time charting commodities. 

Monty Guild agrees and sites these reasons for coming record oil prices; 
1. Summer driving season 
2. Hurricane season, all the specialists say the season will be long and violent in North America and the Caribbean this year. 
3. Continued nationalization of energy assets in Latin America, and proposed windfall taxes on energy in several parts of the world, including the US and Europe. We all know that  nationalizations decrease production. [Note Venezuela in the last couple of years.] 
4. Windfall profits taxes have an excellent track record of sending energy prices higher (many historical examples).

Benjamin is a friend and resources risk analyst in a large international resources and mining company. "Is there any stopping the brilliant metal?" he asked this morning, "I guess not if the Fed keeps doing what its doing." 

He continues, "why is the US stock market about to hit an ALL time high, oil gushing to $70+, gold and silver are at the highest levels in decades, meanwhile the US is in extreme debt? Our friend's email is right; none of this makes any sense, "Explain that phenomenon? Such differences and disparity in markets, economies and currencies." 

"The geo-political situation is making investors, especially in NYC, London etc, nervous. Why? Because they do not understand the relevance of history, business of cultures, society-driven markets and the economics of regions." 

Benjamin is a professional risk analyst; risk analysts are paid to think and question in this way. He finishes, "Obviously, there are very challenging issues out there; Iran, Iraq, CIS, parts of Africa, and now closer to home, Latin America. For some reason, I am not sure Americans are aware of the potential damage that is soon to come - Skyrocketing interest rates, foreclosures etc. So really the question is; what is holding all of this economic devastation back? Who is holding the key to change the dynamics of current market economics? 

I think Benjamin answered his own opening question; "Is there any stopping the brilliant metal?" only time will tell. 

As Individuals - our job is to equip ourselves with the knowledge that will help us survive and prosper in our changing world. At Daily Dig - our job is to dig up the relevant information that will provide you, our valued readers, with this knowledge.

Sincerely - Philip Judge pjudge@anglofareast.com