“Risk involves the chance an investment’s actual return will differ from the expected return. Risk includes the possibility of losing some or all of the original investment.” (Investopedia)
So there we have it. Risk means that you can lose part or all of the investment. Normally valuations take risk into account. But is the world really valuing the following risks accurately:
A VERY RISKY WORLD
Wars
- North Korea – South Korea – USA – Japan – China – Russia incl. nuclear war
- Ukraine – USA – Russia
- Syria – Israel – USA – ISIS – Al-Qaeda – Saudi Arabia, Yemen – Iran, Iraq etc.
- China – India – Pakistan – Afghanistan – USA
- Plus many more
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Civil war and terrorism
- In most countries including USA and Europe
Economic risk
- Global debt $230 trillion – can never be repaid, nor financed when rates normalised
- Unfunded global liabilities $250 trillion – will never be honoured
- Central banks’ balance sheets $20 trillion – all insolvent
- USA insolvent – only supported by overvalued dollar and military
- China’s debt explosion from $2 trillion to $40 trillion since 2000 – massive bubble
- Most industrialised and emerging countries only survive with QE – untenable
- Interest rates at zero or below in 20 countries – unsustainable
- Paper money system – currencies going to zero.
Financial risk
- Global derivatives of $1.5 quadrillion – will all implode as counterparties fail
- Bankrupt European banking system – unlikely to survive
- Over-leveraged global banking system 20x to 50x leverage
- Bubbles in most asset classes – Stocks, bonds, property
Political risk
- USA has a lame duck president – risk of irrational or no actions
- EU elite – unelected and unaccountable – destroying…