Monday 12th January 2008

While Gaza remains the principal issue internationally, a significant fall in the price of oil today suggests that the market is not expecting Gaza to result in a wider conflict. The oil market is very close to ME affairs and while market prices are not generally a good barometer of international tension (they tend to be panicky, over-reactive and based on a short-term perspective) the oil market is different.

So cautious optimism on Gaza -- at least from the viewpoint of the west. I don't have a clue how the poor folk involved on the various sides are going to resolve their differences.

So we are back to much of the same news. Progressively gloomy reports from companies. Consumers spending less. Banks lending less. House prices and sales volumes falling. Industrial output falling. Stock markets falling. Unemployment rising. In such a scenario, with the UK and, later perhaps, the EU, starting their own versions of Quantitative Easing (printing money), we can predict with near certainty government revenue shortfalls on an unprecedented scale.

In you private and business lives, expect taxes to rise and -- most importantly -- existing taxes to be assessed and collected with an enthusiasm and rigour that you have never seen before. This might be the time to consider a tax accountant even if you haven't had one before.

Meanwhile, stock markets are likely to continue their decline, as will interest rates and currencies will continue their 'race to the bottom'.

Never before has gold looked like such an excellent investment. At the time of writing, spot is at $845. I expect it to continue its rise in the very near future.