John Stepek highlights some of the best bits that we’ve published in the past week.
● So now we know. Or rather we don’t. Britain has been stuffed with a hung parliament. The best outcome still on the table (in terms of delivering a government that might actually be able to act on anything) is for the Conservatives and the LibDems to team up. But with Labour showing no signs of going quietly, we may be waiting a while before we learn how it’s all likely to pan out. Sterling took the biggest hit, but if we don’t see some movement, gilts will be on the line too.
● We could be stuck with political chaos for the next few days, or even longer. But at least we’re not Greece – yet. That benighted country saw three people die in riots in Athens this week. The €110bn deal went through the German parliament yesterday; with an important regional election coming on Sunday, German Chancellor Angela Merkel will be hoping she hasn’t sacrificed her majority to get it through. Yet so far the bail-out has done nothing to help the euro or Greece – indeed the situation became far worse this week, as markets around the globe plunged. We’ve more on the Greek situation and the implications for the euro in the latest edition of MoneyWeek, out now. If you’re not already a subscriber, subscribe to MoneyWeek magazine.
● Of course, we’re already receiving emails from people looking for the buying opportunities – property in Greece, stocks in Greece, the works. As my colleague Merryn Somerset Webb pointed out on our blog, everyone’s a speculator these days. Bear market expert Russell Napier, who she interviews in the current issue of MoneyWeek, puts it down to the state of our pension system.
Trouble is, as my colleague Theo Casey puts it, there’s contrarian and then there’s just plain mad. “I think that Greece, right now, is a trade too far,” he writes in the Fleet Street Letter newsletter. Although stocks have fallen hard, “the fear over Greek bonds has not abated… until the fears pass, these shares would continue to be an incalculable risk.”
● The big fear from Greece is ‘contagion’. As I noted in Money Morning earlier this week, we’ve already seen some tremors in the interbank lending market – which last blew up during the Lehman Brothers crisis. If banks start getting fearful of lending to one another, then we’ll really be in trouble.
But Riccardo Marzi of the Events Trader newsletter reckons dodgy Spanish and Greek debt could be the least of the banks’ worries. While everyone is focusing on sovereign debt problems, the banks have another pile of potentially toxic assets on their balance sheets. Riccardo’s in the midst of putting together a report on it just now, which we’ll be sending you later this week or early next.
● Bad news for lots of us then. But BP chief executive Tony Hayward must have been thanking his lucky stars for Greece and the election. Imagine how many more column inches BP and the Deepwater Horizon oil spill in the Gulf of Mexico would have garnered had it not been for those distractions. As it was, BP’s share price tanked.
Now plenty of pundits thought there might be a buying opportunity in BP’s shares. But Paul Hill went further. He told readers of his Precision Guided Investments newsletter about an opportunity to profit from the longer-term consequences.
“The spill has already proved a major boon for companies involved in the clean up. Especially those manufacturers of chemical dispersants – powerful industrial detergents that break oil into tiny droplets – that are being used to clean up the mess.” So it’s “hardly surprising therefore that shares of Nalco, the US water treatment and dispersant maker have already surged, along with a bevy of other manufacturers.”
But Paul thinks he’s found a company that remains under Wall Street’s radar. He reckons this will lead to some wide-ranging new rules on deepwater drilling and safety practices. And while that could be very expensive for some oil companies, others are set to do extremely well out of it.
Now I can’t tell you what his top tip is, because he hasn’t even told me yet – he’s saving it for next week’s edition of PGI.
● I mentioned Dr Mike Tubbs’ Research Investments newsletter briefly last week, but I just wanted to elaborate on it after running out of space – maybe it’s because I’m a bit of a science geek on the side, but I particularly enjoy reading Mike’s newsletter.
Anyway, as I mentioned last week, he’s found an opportunity to profit from ‘Moore’s Law’. In layman’s terms, Moore’s Law simply describes the fact that computer chips are getting cheaper and more powerful all the time.
Now this means that we can afford ever better gadgets – we’ve gone from the rubber keyboard of the Sinclair Spectrum to the slick touchscreen of the Apple iPad in less than 30 years. But picking the next Apple isn’t easy. And with new gadgets coming out all the time, how do you know which will take off?
The good news is that you don’t have to, says Mike. He’s been looking into the “picks and shovels” stocks underpinning the ongoing chip revolution. Basically, these companies help microchip manufacturers to cram ever more transistors into a chip. So for as long as innovation continues in the sector, it doesn’t matter what tomorrow’s most fashionable new gadget turns out to be. These guys will have all the work they need.
I think it’s a really interesting story. And this week, Mike is talking about what he sees as being one of the most important pharmaceutical investment trends of the next ten years.
● That’s all for this week. We’ll be back on Monday, by which time we may or may not have a better idea of who’s going to end up in power. Meanwhile, my colleague David Stevenson is taking a look at Romania, to find out what really happens when the IMF comes calling on a country – something that might be useful for British investors to bear in mind if our next government doesn’t hurry up and come together to sort out the deficit.
Useful links
Want to find out more about the Research Investments newsletter I quoted today? Just click on this link:
• Dr Mike Tubbs’ newsletter, Research Investments