It’s been another miserable week. Not only has there been more horrible news on housing (volumes at 30-year lows and so on), and more bad news on inflation, but it is getting close to impossible for anyone to pretend that Britain – as Gordon Brown continues to insist – is in any way ‘resilient’.
Unemployment ticked up to 5.3% in the three months to April, making a huge 1.68 million Britons officially unemployed. That number will be higher when we get to the end of the next few months – just think of the layoffs taking place at housebuilders and estate agents across the country. And just to add to the worries of the average consumer, mortgage rates are still on the up. Bank of England figures show that the cost of a five-year, fixed-rate deal is now at its highest for eight years.
It doesn’t feel like a great environment for making money does it? But before you get too depressed, we think there are huge opportunities in the Japanese market. For the rest of us, the current situation (a collapsing economy combined with out-of-control inflation) is a nightmare of falling purchasing power and financial insecurity. For the Japanese, it could be the thing that finally catapults the country out of deflation and on/off recession. My own Isa is stuffed full of Japan-related investments and after a bad year, I now have high hopes for all of them.
Otherwise, this probably isn’t a bad time to top up your holdings in the precious metals sector. I was fortunate enough to see Graham Birch, head of the BlackRock Natural Resources team, this week and get a moment to ask him what his top picks in the sector are right now. The biggest holding in BlackRock’s Gold and General Fund (which also features pretty heavily in my Isa) is Kinross Gold (NYSE:KGC), which he likes because, unlike most gold stocks, it has some growth potential (it is just starting production at a new mine in Russia).
But Birch’s favourite stock is Fresnillo (LSS:FRES), the world’s largest silver miner, and one of this year’s few new listings on the London Stock Exchange. The shares listed at 555p, but didn’t really take off from there: they are currently trading at around 500p. This is still not a bargain basement price, says Birch, but Fresnillo is a very high quality, ‘proper’ company and one he expects to perform well over the long term.
Finally, I must tell you that we have just had our latest property roundtable. Our last one was six months ago and featured two very convinced bulls, neither of whom were prepared to accept for a second that a house-price crash was a possibility – ever. This time, one of them didn’t turn up on the day and the other said he had changed his mind. So what does he think now? That house prices will be down 50% before all this comes to an end. For the full transcript of what was a lively, if faintly depressing, conversation, look out for next week’s issue.