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« Agnico-Eagle: Turning South? | Main | The Future US Dollar Carry Trade »

Sub-Prime Crisis: What If?

By now we are all familiar with the term 'sub-prime' and have observed the ramifications of this problem as it spread across the globe. However it raises another question;

What if
the very same banks and managers of the the sub-prime problem are also the responsible for finance in other areas of industry?

If these people can make an almighty mess of loans for houses, what sort of mess have they made in the financing of projects in other areas such as; pharmacy, retail, autos, property, petro-chemical, oils and gas, etc.

The ability of one or two adults to finance a mortgage can be calculated in your head. The ability of an oil company to calculate the finance of a billion dollar project over a five year time frame requires individuals of considerable intelligence and the use of sophisticated software.

If the managers of our financial institutions can not get the simplest of loans to perform as required, then why are they entrusted with bigger and more complex tasks? When we first watched the film 'Rogue Trader' we thought that it was a one-off situation and that our institutions and the financial fraternity would have learned from this incident, however Societe General have popped that illusion.

Soc Gen logo 03 feb 08

A colleague of ours who has an impressive track record in the field of Project Control on major EPC (Engineering, Procurement and Construction) projects has taken up a new challenge in the city of London. He has been tasked with the implementation of 'Compliance' for his new employer. Our discussions with him were predictable as he revealed his astonishment that the Directors of this illustrious enterprise did not understand such basis terms as ' deliverables'. To explain; A Purchasing Manager analyses bids from competing companies and places an order with one of them. The placing of the order can be considered to be a deliverable. Our colleague is particularly skilled in when it comes to interrogation in order to formulate the scope of a given project. From this scope a series of deliverables can be defined. Having explained the process to members of the board his exasperation grows as they do not grasp the need for such procedural checks and balances. One cant help but to suspect that this particular board of directors do not want their deliverables defined, as failure to deliver would be auditable and lead right to their desk.

What has this got to do with us you ask? Well all the employees of Societe General have suddenly had their ability to earn put at risk by their own management, it could be your turn next. If we widen the debate a little the very same people are in charge in charge of or advisor's to many pension funds. The future could be littered with headlines about failed pension schemes, leaving elderly people in poverty.

Our point is:

You are responsible for your own physical, spiritual and FINANCIAL health, so take control today by investigating the merits of investing in the precious metals sector.

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