“Buy when the blood is in the streets.” That saying - or words to that effect - are attributed to Mayer Amschel Rothschild, later known as Baron Rothschild, and also to a number of other Rothchilds, sometimes Nathan. This European banking family with the same name made a fortune during the period followed Napoleon’s defeat at Waterloo and in several other crises, including a real estate bubble in Paris.
At Waterloo they had advance information that the English had won; however, the rumors driving the market were that the English had been badly defeated. The debt instruments of England's banks plumitted in value, only to be scooped up by the Rothchilds at a fraction of their real value. When the news replaced the rumors, most who had traded had lost a lot of money, with the exception of the Rothchilds, of course, who now had this money. It sometimes pays to be a contrarian.
Certainly, there is blood in the streets now, both literally and figuratively. The populist uprisings in Egypt spread throughout the Mideast and the aftershocks are still being felt in Syria and Libya. Afghanistan remains a war zone and will remain so whether the US stays or comes home. Every nation that borders the South China Sea has its own set of Gerrymandered maps which include the Spratly islands and the waters around them. Formerly the islands were nearly deserted fishing way-stations of little interest; now it seems there may be oil in the area.
Very real blood was shed in Norway as a crazed gunman set off a bomb in Oslo killing 8 and killed at least another 68 people in a youth camp on Utoya Island. China is unsettled by a collision of two bullet trains, symbols of their industrial pride, which killed at 39 people.
Europe is worried about the debt of Greece and several other countries, known as the PIIGS. In Washington the GOP and the Democrats have been bloodying each other for weeks concerning the national debt. This may be the costliest brawl in the history of the planet. On Monday, the stock market finally started to realize that these problems may not go away. It fell moderately.
Will the Dow dip below 10,000 if the national debt issue is not resolved? Yes. Will this be a buy signal? Yes. The only question is what to buy. Here are some possibilities.
- Strong currencies such as the Swiss franc, the Canadian and Australian dollar.
- Gold and silver – ETFs which hold the physical metal are GLD and SLV. Miners include Anglo Gold (AU), Newport Mining (NEM), Yamaha Mining (AUY), Freeport - McMoRan Copper and Gold (FCX) and Barrick Gold Corporation (ABX).
- High quality international bond funds such as the Templeton Global Bond Fund [TPINX], Dreyfus International Bond Fund [DIBAX], Delaware Pooled Trust Global Fixed Income Portfolio [DPGIX], and Delaware Pooled Trust International Fixed-Income Portfolio [DPIFX].
- High dividend paying US and International Blue Chips such as AT&T(T) 5.7% yield, Total, SA (TOT) 4.9% yield, Johnson and Johnson (JNJ) 3.4% yield, Telefonica, SA (TEF) 7.3% yield, Shell Oil (RDS.B) 4.5% yield, Abbott Labs (ABT) 3.6% yield, Bank of Montreal (BMO) 4.6% yield and Proctor and Gamble (PG) 3.3% yield.
- US farmland.
Disclaimer: No recommendation is made or intended by the above and you should proceed prudently with due diligence before any purchase of securities.