Market Outlook 20110605

In recent weeks, a few friends had asked me whether it was time to put more money into the stock market.  Due to the risks that I see out there, I had told them that I'd prefer to be cautious when it comes to committing funds on the long side.

Some of the risks that I see are:

• Sovereign debt crisis in Europe - risk of bringing down many European banks
• Continued deterioration of the US debt situation
• Slowing global economy, as evidenced by indicators from various countries
• Runaway inflation in many developing countries
• Unrest in the Middle East and the resurgence of the Muslim Brotherhood
• The nuclear disaster in Japan
• Power shortages in China and failure to fix the real estate bubble there

In recent days, even mainstream investment experts such as Mark Mobius of Templeton has publicly talked about the risks of another global financial crisis due to the fact that none of the ills which caused the 2008 crisis has been resolved.

For myself, I continue to favour physical gold as a way to tide through the current period of volatility.  It also has the added advantage of not requiring my constant attention, as I've really been busy with work lately.