British Financial Crisis deepens, All Ords to follow bear trap!?

British Financial Crisis Deepens

Royal Bank of Scotland

The UK financial system took another huge blow earlier this week with the Royal Bank of Scotland announcing it will post the largest financial loss in British history with 2008 losses expected to be around £28 billion. As result of the announcement Royal Bank of Scotland closed down 67% on Monday. As the chart shows, strong sell signs were present a a good 18 months ago.

Chart 1: Royal Bank of Scotland - the chart says stay away!

Instead of letting RBOS and insolvenet firms fail, the British Government has tried a new wave of reforms. More Government intervention will not fix the crisis. It hasn't worked yet and it won't work going forward - it's only going to add fuel to the fire!

The British Government has now:
- Offered banks to take up government insurance against their expected bad debts
- will increase its stake in Royal Bank of Scotland o nearly 70% from 58%.
- The Bank of England will be able to buy up to £50bn worth of assets in companies in all sectors of the economy.
- Allowed Northern Rock extra time to repay its loans from the government

The otther remaining big banks are also falling as a consequence of RBoS announcement. Barclays is down over 30 percent and Lloyds is down over 50 percent so far this week. Total nationalization of the whole banking system is all but guaranteed in the UK. (Don't think it won't and can't happen in Australia someday soon....)

Pound Sterling plummets

Meanwhile the Pound Sterling is free falling against other major world currencies. It is now at its lowest level against the US dollar since September 1985, and heading towards parity with the Euro. This is the economic consequences of a faltering economy.

Measuring the loss of purchasing power in Pound Sterling vs other fiat currencies is really a side issue. All fiat currencies continue to loose their purchasing power towards their true value - zero.

Chart 2: Gold measured in £Pounds is showing some strong price movement once agian.

All Ordinaries Index

Back in Australia, the All Ordinaries index is showing another bear trap setup! The recent sideways movement is looking very similar to the previous pauses in this bear market.

The market fundamentals are not improving. The financial crisis is becoming more noticeable in Australia these days with recent high profile job losses by large companies such as BHP, Rio Tinto, David Jones. Companies continue to scramble for equity injections to reduce exposure to debt. Market conditions are not healthy... Proceed with caution.

Chart 3: All Ordinaries - January 2009

2009 Outlook Videos

I thought it would be worthwhile to put up some more recent videos on some of the commentators I follow.

James Turk: Key "Factors That Will Drive Precious Metals' Bull Market" (1 of 5)


Micheal Maloney: Predictions 2009 (1 of 5)


David Morgan: Predictions 2009 (1 of 2)


Peter Schiff predictions for 2009

and


Peter Schiff & Steven Keen on Dateline Sept 2008 (1 of 2)




Cheers
Scott