6min read
PREVIOUS ARTICLE HELP! Investor's Guide To Surv... NEXT ARTICLE Stocks to avoid: broker sells ...

The trader who became an internet sensation with his outburst on BBC television – declaring that “the market is toast” and that the smart money is moving its assets to safer investments like treasury bonds – has become an instant enemy of the corporate media. His views on the global financial crisis were belittled as attention swung to how much his house is worth (not much), and whether or not he is a hoax. He has been named ‘the trader from hell’ by the Australian media.

Alessio Rastani is an ordinary trader who is trying to make sense of the daily turmoil of the global financial crisis, much like the rest of us. He candid views on television delved into the market fuelled by fear and influenced by the agenda of players such as investment bank Goldman Sachs, the same bank that profited from the subprime meltdown and the same bank that received billions in bailout money from Washington only to distribute it out in executive bonuses. A Senate panel concluded that Goldman Sachs profited from the financial crisis by betting billions against the subprime mortgage market, then deceived investors and Congress about the firm’s conduct.

Rastani said: ‘The governments don’t rule the world – Goldman Sachs rules the world.’ He went onto say that Government bailout packages were doing little to stem fear.

In many ways he is right. Many European countries are bankrupt and today face an uncertain future governed by the demands of the IMF, European Central Bank and European Commission. Protestors in Greece blockaded several ministries on Thursday last week to protest against austerity measures; the latest 8 billion euro EU and IMF aid package will involve tough measures and EU/IMF targets for Greece to fulfill.

Remember Argentina? It too ran aground when its officials gorged themselves on debt, only to face the wrath of IMF austerity measures for years afterwards – plunging the once prosperous country into poverty. It has never recovered.

Citizens of Europe have little to celebrate. Mismanagement of debt at the top has crippled their standard of living for decades to come; and it’s not limited to Greece. Other European nations are facing a similar fate.

“This economic crisis is like a cancer,” said Rastani on BBC television. “If you just wait and think that this is going away, just like a cancer it will grow until it is too late.”

Rastani’s advice for investors: “The first thing people should do is to protect their assets. Protect what they have; because in less than 12 months my prediction is that the savings of millions of people is going to vanish…The biggest risk that people can take is not acting.”

It’s exaggerated, indeed, but Rastani is right in some ways. The crisis in Europe is severe and isn’t likely to disappear overnight. Investors in this climate are wise to reduce risk in their portfolios and most definitely to protect their assets. This isn’t a time to be punting on speculative investments or to gear up in the hope of quadrupling your wealth. It’s a time to play it safe.

Rastani’s comments echo the sentiments of thousands of traders around the globe. A recent Bloomberg survey found that traders were anticipating an economic slump in Europe and heightened social unrest. Three quarters of respondents thought the euro-zone would fall into recession during the next 12 months, while fifty-five percent of respondents from Asia are raising the amount of cash in their portfolios.

Rastani, who doesn’t work for anyone, had the freedom to say it how it is. As the Guardian newspaper reported: “Rastani is small potatoes, but he’s a real trader. And he said nothing that would suggest otherwise; he simply described what he does, more honestly than a true insider would, but quite accurately. ‘Every night I dream of another recession,’ Rastani said, and explained that it’s possible to make huge money from a big crisis even when millions of others lose their life savings, and worse.

Well, duh. Don’t we all know that Goldman Sachs bet against the same housing market they were such a big player in, and made $1bn in profit when the sub-prime crisis rendered millions of Americans homeless? John Paulson, the manager whose hedge fund was betting for Goldman, could have honestly said exactly what Rastani said, but of course he knew better – possibly because unlike Rastani, Paulson’s firm had a major, immediate and provable impact, and there’s no telling how his millions of victims might have reacted. Unlike Rastani, true industry insiders like Paulson, Geithner et al remain silent about the way their system works, couching it all in technical jargon and full-on deceit. They’ve been doing it for decades, and, since Ronald Reagan’s day, with increasing consistency.

Lately, it hasn’t been working so well. Something has been speaking in very plain language to millions of people. The crowds amassing in cities from New York to Athens to Paris are just the tip of the iceberg, just the most visible of all those who have long known, viscerally, that Rastani’s point of view is actually mainstream. Those people also know that, armed with truth and awareness, anything is possible.”

The Occupy Wall Street movement is now onto its second week of protests against bank bailouts and the mortgage crisis. Renowned philosophy Noam Chomsky’s note to the movement was posted on its website:

“Anyone with eyes open knows that the gangsterism of Wall Street – financial institutions generally – has caused severe damage to the people of the United States (and the world). And should also know that it has been doing so increasingly for over 30 years, as their power in the economy has radically increased, and with it their political power. That has set in motion a vicious cycle that has concentrated immense wealth, and with it political power, in a tiny sector of the population, a fraction of 1%, while the rest increasingly become what is sometimes called ‘a precariat’ – seeking to survive in a precarious existence. They also carry out these ugly activities with almost complete impunity – not only too big to fail, but also too big to jail.’

The courageous and honorable protests underway in Wall Street should serve to bring this calamity to public attention, and to lead to dedicated efforts to overcome it and set the society on a more healthy course.”

Please note that TheBull.com.au simply publishes broker views on this page. The publication of these views does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.