A week of turmoil?

Over the course of this week, we have seen a dramatic turn of events in the financial markets. The collapse of Lehman Brothers, followed by the sale of Merril Lynch to the Bank of America for $50bn has sent the markets into turmoil. The bail out of insurance giant AIG along with the takeover of HBOS by Lloyds TSB, were also signs that we were in trouble. Now the US President George W Bush is urging the American people to support the $700bn US bail out to ease the troubled financial markets. Even though the likes of Warren Buffet still managed to secure an excellent $5bn dollar deal with Goldman Sachs, stocks and shares have plummeted.

In the UK, the Lloyds TSB takeover of HBOS was pushed through in an attempt to bring confidence back to the failing markets as banks tighten up their lending. Government intervention was already necessary in the US as the Federal Reserve looked to inject some life into the crumbling financial system, and the latest bill by the Bush administration will see over $700bn pumped into the economy, if passed by congress.

As the pound gains this week over the US dollar, it stands its ground along with the Euro whilst in the CEE, the Polish Zloty and Czech rates remain strong over most currencies.

Chancellor Alistair Darling also pledged this week to deal with the "extraordinary turbulence" in the UK financial system. The FSA also placed a ban on short selling until January 2009.

If you have read this weeks’ newsletter, you will see that one of our only ‘alternative’ investments would be the commodities market. The commodities market definitely has potential for growth into the future and in our office we agree that we are in the middle of a long-term upward cycle that could last for 10 years, particularly in the area of soft commodities. The mechanics of investing in commodities however are difficult. Commodities have made gains this week as investors look to real assets. Oil is at $98 a barrel, whilst gold has seen a 10% rise.