Welcome back to your weekend edition of Money Morning.
Here, we highlight some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we’ve published in the past week.
● So Gordon Brown’s gone. I felt strangely empty on Tuesday night. After all, I’ve spent most of my working life under the current government. Where would I be without all his catchphrases to rail against? All those little stealth taxes to look out for?
Then I came to my senses, danced a jig, and rejoiced that regardless of what form of hideous ConLib mutant emerged from the dark halls of Westminster, it still couldn’t be as bad as New Labour had been. As long as they stick to the promise to repeal some of Labour’s worst laws, and stop with all the guff about the ‘new politics’, I’ll give the new bosses at least four weeks before I start quoting The Who’s Won’t get fooled again in Money Morning every day.
● Anyway, I think this coalition business might end up being a good thing. The fact that it’s a coalition means it’ll be harder for any one belligerent voice to get its policies pushed past the rest. So we won’t have the ridiculous government-by-Daily-Mail-headline-scatter-gun-legislation that we got from the last mob.
This way we get the benefits of political paralysis (less fiddling) combined with agreement on the big things that matter (cutting the deficit and eventually the national debt). We’ll see.
● And once again, at least we’re not Europe. We have a coalition government; they have a coalition currency. And it’s falling apart. Gold has absolutely rocketed this week, as people realize that the euro – the world’s current number two paper currency – is a joke. In fact, I’ve just this second had a research report land in my inbox from Capital Economics, who reckon that the euro will go to parity with the dollar “by the end of 2011”.
As Tim Price put it in his Price Report newsletter, “the stunning euro support plan buys Europe’s beleaguered periphery governments a little time, but it changes nothing about the bigger picture. There is simply more debt outstanding in the world than can be comfortably serviced.” My colleague Tim Bennett also wrote about shorting the euro on our blog earlier this week. If you fancy taking a punt on the euro, you could check out our spread betting comparison service to find a provider.
● So how high could gold go? On Wednesday, Dominic Frisby, our gold correspondent wrote: “Gold has finally become the safe haven that everyone flies to. Technically, there is now no overhead resistance, so there is no telling how high it could go. It’s very exciting. Enjoy the ride. But let’s get a weekly close above 1,224 before we start sounding the trumpets and ringing the bells.”
As I write, gold is sitting at around $1,225 an ounce, so it’ll be a close-run thing. I’ve just rattled off an email to Dominic asking what he thinks will happen next. But in any case, I’m sure he’ll have plenty to say about gold in Money Morning next week.
● Gold’s rise is ultimately about the markets finally twigging that fiat money may not be worth the paper it’s printed on. And I can tell you that it’s definitely not worth the same as its scrap metal value, that line was crossed years ago. Riccardo Marzi, who writes the Events Trader newsletter, is an ex-City trader. So he knows a lot about how markets can move from complacency to panic in a matter of minutes – it’s just a case of watching for when the penny drops. And he thinks he sees the trigger point for the next big spasm of fear coming around the corner.
What many people don’t yet fully appreciate is what lay behind the big Greek bail-out last week. The fact is that the intra-bank lending markets (the ones that caused all the trouble during the subprime crisis) were showing signs of seizing up again. When the Americans spotted this, Barack Obama was on the phone to Europe in a jiffy, demanding that they sort something out by the time the markets reopened on Monday.
No one knows how close we were to revisiting a Lehman-Brothers-style crash, and few people want to find out. The trouble is, the banking system is no less vulnerable than it was back then. And Riccardo reckons it’s about to get another serious scare.
The truth is, says Riccardo, that “there is a major black cloud hanging over British and American banks – commercial property.” Terrible lending decisions were made before the big bust in 2008. And the toxic legacy of those decisions is still haunting banks’ balance sheets. Hundreds of US banks have already hit the wall. But Riccardo reckons this rate is set to “absolutely skyrocket over the next two years.”
Being Riccardo, where other people would see disaster, he sees opportunity. He’s put together a report explaining exactly what why hundreds more US banks could go bust and how he intends to profit from it.
● When it comes to oil, the BP spill is still the biggest story in the sector. In fact, my colleague David emailed me with a really interesting suggestion about how to play the spill earlier today – it’s one I haven’t seen anywhere else, so I’ve asked him to write it up for next week’s MoneyWeek magazine – subscribe to MoneyWeek magazine if you’re not already a subscriber.
But for oil investors, the bigger news was almost certainly that the Falkland Islands story was back on. After a disappointing initial drill result from Desire Petroleum, it was Rockhopper’s turn for a crack at the whip. And they struck paydirt. Shares in all the companies involved have rocketed. One person who’s really been on top of the Falklands story for a long time is Tom Bulford.
I’ve asked Tom to write a story for MoneyWeek magazine, explaining how he finds small cap oil explorers – it’ll be out at the start of next month. But meanwhile, Tom released a brand new Falklands Special Situation Report to his readers only yesterday – and the response was fantastic. I’ve asked him if Money Morning readers could take a peek, and he’s very kindly agreed – take a read at it here. It’s a good way to get up to scratch on the story and find out what Tom thinks could happen next – and if there’s still time to get in on the action.
● I’m running out of time and space as usual – too much to say, too little space… what else did I want to flag up to you this week? Dr Mike Tubbs was discussing what he believes is one of the biggest themes of the next decade – vaccines. In his Research Investments newsletter, he said that there are three reasons why the vaccines market is thriving, and will continue to do so:
“1. Immunistion programs from international health organisations like UNICEF.
“2. Governments stockpiling massive quantities of drugs and vaccines against possible pandemics – the swine flu episode being a very recent example.
“3. Increasing travel to explore interesting countries where, unfortunately, serious diseases like rabies, malaria, TB, hepatitis and yellow fever are prevalent.”
“Research from themedica.com gives an idea of the phenomenal growth in recent years. It says the global vaccine market stood at $11.42bn in 2006 and will grow at a rate of 16.5%, to $21bn by 2010 and up to $23.8bn by 2012.
“What’s causing this growth? It comes down to new product development giving new and better vaccines. It is always better to prevent a disease with vaccination than try to treat it. Until recently, paediatric vaccines have dominated the markets. But now there is also an increase in the need for adult vaccines to deal with the threats of hepatitis, influenza and other diseases.” Vaccine stocks form a key part of Mike’s portfolio.
Useful links
That’s all for this week. I’ll be back on Monday. Meanwhile, if you want to find out more about any of the newsletters and contributors I’ve quoted today, just click on these links:
• Tim Price’s newsletter, The Price Report
• Dr Mike Tubbs’ newsletter, Research Investments
Events Trader, The Price Report and Research Investments are regulated products issued by MoneyWeek Limited.