Blog : Greece is First EU Domino

by Peter Leeds on May 9th, 2012

There have been a few drop offs in global stock markets as of late.  This has affected commodities, blue chip and larger stocks, and penny stocks as well.

The problems have been stemming from Greece, specifically the election, which really leaves no one in total charge.  The global concern is that Greece is putting their foot down, and will not accept any more austerity measures.  The suicide rate in Greece has doubled compared to what it was at last year.

If they don't agree to more austerity, then Germany and France may pull the bail-out packages that Greece needs to pay it's bills.  If that occurs, Greece defaults, giving it's creditors a big hit.  The majority of Greek debt is held by other EU nations, and not Greeks themselves.

At that point, Greece may decide to leave the Euro altogether, and return to the drachma as their currency.  This is something I suggested they should do, going back to last October, in radio interviews, on the penny stocks blog, and in press releases.  See our release: European Union Near Breaking Point Explains Peter Leeds, Authority on Penny Stocks

Spain, Ireland, Portugal, and Italy would then fall next, basically fragmenting the Euro and European Union.  An experiment that failed.

So, what does all this mean for penny stocks and you?  Well, it's really been dragging North American stock markets down over the last month.  At the same time, precious metals have fallen off a cliff, and oil is down 10% in the last week.

The reason for the dropping commodities is the fear of a global slowdown, meaning that there will be less demand for raw materials, oil, and investment metals.

Keep in mind that there are two kinds of precious metals.  Those such as gold are mainly for jewelry and investment.  Others, such as silver, are a hybrid between investment and industrial metals.  Silver is used by investors, but it is also in demand for building computers and solar panels.  Thus, when the economy slows, so too does silver.

Our outlook for precious metals is still much higher from here, and we believe that when the smoke clears, money printing, global uncertainty, global inflation, and decreasing purchasing power of world wide currencies, will conspire to push prices of gold, platinum, and silver higher.  This is especially true after the recent sell off.

Personally, I am positioning right now to acquire more physical gold and silver to add to my own long term position (which I do not keep at my office or house, so please don't come looking for it)!  Besides that, I almost exclusively own select penny stocks.

Our expectation is for precious metals to recover much of their lost ground over the summer, when nobody is paying any attention.  We believe a lot of people will be coming back after the summer, and shaking their heads at the missed opportunities.

This will also help our penny stock picks to recover some of the ground that they have lost.  Valuations in mining penny stocks are ridiculously low.  We recently profiled one gold mining penny stock that now has more cash per share than their current share price!  This penny stock sell of has gotten far out of hand.