Thanks Eva, I had not seen that report yet.
I talked to an Insurance executive in early November and they were forecasting that the total worldwide insurance industry liability for Sept 11th to be $200-$300 billion USD. They also figured that the resultant after shock effects of idle planes, increased security, and lower consumer demand cost the economies of the world another $700-$800 Billion. Bringing the total impact of those terrorist actions at close to $1 trillion dollars.
As far as the FDIC insurance for bank accounts less than 1% of the money in savings is in actual reserves at this point. So , of there was a run or problem at one or two major banks, they would be able to accomodate the transition, but a nation wide bank run like the one in Argentina last week, would be the back breaker of the FDIC as it would not be able to cover. So the insurance is there for psychological reasons more than actual protection. As long as the public perceives them to be safe they will be, but if that security blanket is perceived to be unravelling then I doubt the FDIC will be there .
Same as gold, If you own Gold mining shares you assume you will be able to cash in on a huge spike in gold. BUT , if the short covering is so onerous as to cause many of the hedgers to default on thier obligations to deliver , then it is very probable that the gold mining shares may be halted from trading and not particiapate in the full swing of the rise in gold because the system of guarantees that delivery of gold would occur on demand would have been destroyed and henceforth the trading in Mining Stock would also be impacted. That is why owning physical gold and silver in this cycle along with Gold mining stock will be the only way to guarantee participation at all levels. Gold spot could climb to $2600 an once on short covering (example only) while mining shares are halted pending an announcement from the goverment on how to handle the crisis. Food for thought.
From today's Globe and Mail Vox column
globeandmail.com
Gold under cover
Just as sure as political or corporate turmoil firms up interest in gold, part of the rise in the metal's price is
bound to be attributed to short covering.
Yesterday was no exception. Gold rose a paltry 1 per cent, which was variously explained by nervousness over
the violence in the Middle East, economic troubles in Argentina, Enron and, as a consequence, short covering.
Exactly how much of the rise that short covering is responsible for is never quite clear, although it would have
to be less than $3 (U.S.) in the latest instance — not exactly frantic activity on the part of the shorts, in other
words.
Demand for gold is greater than production, and the short position, compared with production, is enormous.
When, or if, we ever see a real short-covering in the gold market, rest assured that it won't culminate in a
marginal increase in bullion prices.
It will end in one of the more spectacular commodity price runs ever. |
