Making money from panic #finance
It doesn’t matter what the panic is, a strike, a bread shortage or an oil glut. There will be people who will exaggerate the problem and so a belief will spread that things are worse than they really are. The speculators then make money buying up the commodity that is in short supply or taking advantage in some way. Has panic got worse? As far as the money markets and stock markets are concerned, I think it has and so there are now more opportunities for making money.
Making money from oil prices
I’m sure speculators made money this week from the decision to cut oil production by OPEC as the share prices of oil companies soared. Today the share prices are dropping back partly because global chatter by traders sent them too high and partly because traders are taking profits. It would have been wise to buy oil shares and make a fast buck from the panic, but I decided against it this time around. Looking at the week as a whole, it is obvious that the world economy is still in trouble and there is still a glut of oil.
A lack of trust
There appears to be a lack of trust throughout the developed nations in the people running the country and in ‘experts’ in general. The people who we thought were smart enough to send to university to train for all the top jobs. We no longer trust the economists, doctors or politicians. We would rather trust Joe down the road who tells us that all the experts are exploiting us. Joe knows this because he read it on Facebook. Part of the problem is the banks got too greedy and thought plush offices meant success when they really needed solid balance sheets. This week saw the banks failing stress tests set by the Bank of England. We also see new hospitals that look great on the outside, with staff that send out great sounding tweets on Twitter but the reality is a 6-hour waiting time in A & E if you get sick because under the triage system you are a low priority unless you’re dying.
We are seeing many changes in the world economy and we need to pay attention to those changes if we want to invest and start making money. The oil price rise is just the beginning of change, it will put many oil companies back into profit, but only just. Soon there will be some talk of the need for another cut in oil production. We also have to watch interest rates which are set to rise at least in the US and that will trigger rises across the globe. Watch too for moves to protect the US market from overseas competition. It might come in the form of import duties and restrictions or it might be more subtle but the new president will be making changes. My guess is the value of the pound will fall further on a US interest rate rise but could bounce back on the imposition of trade restrictions. Are there ways of making money from that?
Making money from panic
What will be the next event affecting the global markets and how will it be amplified into a panic? We have to watch the markets for signs of a panic and then look at the chatter which we can see in the financial press. I shall be watching for events which are usually politically motivated. It is sad but true that people have been making money from conflict from the dawn of time so we have to watch for signs of new conflict and the end of old conflicts. We also have to look for development in cities. London, for example, has a hugely successful financial district that is now threatened and struggling for survival. This is suppressing the share prices of banks. Will London survive? If you think yes, you can make money by buying shares in Lloyd’s Banking Group. If the UK and London’s financial centre is locked out of the single European market, that political decision could cause panic and crash a sector of the market. That panic will bring opportunities for smart speculators used to making money from the panic that grows out of global chatter across the internet.