Investor disenchantment

A dramatic degree of investor disenchantment has fallen on a considerable section of the world financial fraternity. The world's economy fundamentals are excellent - witness the financial ratios of Nokia. The depression of the 1930s inevitably pushed Hitler to power in Germany, and caused the radicalisation of Fascism in Italy and Japan. Economic failure at home turned the mind of political leaders to war, and it is threatening to do so again.

The trouble is that George W. Bush will be tempted to overextend his hand in Iran to obliterate American capitalism's temporary failure with the subprime banking crisis as he faces the fact that the US has oil reserves for a further 10 years. The subprime banking crisis is a first cause of investor disenchantment but it is little compared to the political economic dangers facing the world.

Iran's growing nuclear power threat and its promise to mine the Strait of Hormuz stand out much more prominently. Oil in such circumstances would be set on an upward trajectory to $250. In a short time, the world economy would contract immediately by 10 per cent, sending gold on the road to what would be a disastrous re-monetisation path provoking a massive dollar fall.

Sterling will definitely echo the dollar's destiny, and the Maltese who have always had such faith in that currency will be seriously affected. Authoritative voices of alarm were raised in the Financial Times last Monday, stating that Britain must act to prevent an attack on Iran. From the moment Israeli munitions fall on that country, all western hopes of stabilising Afghanistan will be lost. The writer might have added that the Strait of Hormuz would be immediately blocked, and its re-opening would necessitate American's de facto occupation of the Persian Gulf for the next 50 years.

Nicola Horlick, the famous 'superwoman' money lady, has stated that the world's stock exchanges are not expected to recover for another two to three years. Barclays chairman Marcus Agius has been courageous and public-spirited enough to state that the Federal Reserve, the US central bank, has unleashed an inflation shock that will rock financial markets. Tim Bond, his chief equity strategist, has obviously been instructed to speak out euphemistically on the investor disenchantment storming into his bank. He has highlighted it by using colourful words, stating: "We are going into a tortoise mood and are retreating into our shell".

Can the common investor make money in these circumstances? The answer is an emphatic 'Yes' - if he has a hardworking stockbroker to help him make profits by energetic trading.

UK funds have fallen by 11 per cent over the past year. Much more bad news is to come. Sterling is due for more than a dive. Investors should beware of any fund, British or not, which has a disproportionate amount of its money collected in Malta.

There are companies which will probably do well in the coming hard times. They will be those having a global strategy. One of them would probably be Peter Hambro Mining which seeks to mine gold in Siberia, making use of equipment made in China. The Hambro old man is the banker with whom the Malta Development Fund was negotiated. This was Malta's most successful company ever delivering money and not never-ending crazy promises about it. Peter Hambro Mining will have its trading update on July 21. In the meantime let us celebrate the anniversary of the day when the present financial troubles started. It has, after all, offered fabulous chances of profits in commodities, such as gold, copper, wheat and silver. Not all investors are disenchanted, some are tasting even more expensive champagne which rewards their hard work. They have profited from the mistakes of others who invest money without seeking to develop a cultural background.

Mr Azzopardi Vella, economic consultant with DBR Investments Ltd, has promoted the Malta Development Fund and advised S & P.

johnazzopardivella@hotmail.com