Another Financial Crisis
Research for Online Investors

by John Dalt

3/03/09

There is problem brewing in the world economy that is under the radar. The Eastern European countries are falling into a financial quagmire that is going to spread across Europe and perhaps mark the end of the Euro.

This is a problem of regional balance of payments caused by localized currency fluctuations.  For the past ten years, the Eastern European countries have been trying to join the European Union.  Part of this process was to stabilize their currencies against the Euro. 

They were doing great while their economies were growing.  They were importing goods, and exporting manufactured goods.  They expanded their businesses and bought homes.  In many cases, loans from European banks in Euros were cheaper than local currency loans. 

They borrowed money in Euros. Now unemployment is rising, and the local currencies are devaluating against the Euro. Borrowers are being squeezed. As economies slow, they are making less, they are being paid in a devalued currency, and paying back loans in Euros. Ouch. Some Western banks loaned in local currencies against assets valued in Euros. 

The local banks are in trouble.  EU branch banks are in trouble.  Bailout talk is focusing on the World Bank and the Western European countries helping their neighbors.  It is a sticky wicket.  The banking crises is spreading and mastising like an octopus that grows new tentacles.  Eastern European countries and Russian consumers and businesses borrowed over $1 trillion dollars from Western Banks!  This crisis is playing out, and reflected in the strong dollar that is better described as the best among the bad. 

If you have a couple of minutes, you might check out this video on our form of government, and how we are threatened. 

Rep. Rush (IL) has introduced a ‘gun control’ law in the House of Representaves. You can read it here. This is scary but predicable. The lunatics are in charge of the asylum. 

If you think, the market cannot go much lower, look at the chart below.  It shows the Dow adjusted for inflation.  This is sobering.  When commentators talk about the Dow going to 4000, I shake my head in disbelief, but if investors do not get some confidence, we could see a real blood bath. 

To close today, if you have not seen Rush Limbaugh’s speech to the CPAC on Saturday you can see it here. He was supposed to speak for 20 minutes, but talked for an hour and a half. I think he was interrupted with applause more than the President was during his address to Congress.

If you have not read Warren Buffett’s letter to shareholders yet, you can here.  He combines the wisdom of Ben Graham with fresh honesty.

Now is a great time to join Galt Long-Term Portfolio.  You can buy some of our best stocks at a discount right now.  We just recommended a ‘bank’ that does not have any customers!  They only loan to the government and based on closing price today pay a 15% dividend!  You can join now for only $99 a year, less than $2 per week!  I guarantee all my services, we will return any unused subscription anytime you are not happy. 

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future. 

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