John Stepek highlights some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we’ve published in the past week.
● Gold seems unstoppable. It hit another record this week. No wonder. Japan cut its key interest rate from a whopping 0.1% to a target of 0.0 – 0.1%. Doesn’t sound like much (because it isn’t), but the central bank also blew the starting whistle on the next round of quantitative easing. It’s going to be buying everything from corporate bonds to exchange-traded funds apparently. As Dominic Frisby put it in Money Morning: “I have some old junk that I was planning to sell on eBay. I’m wondering if I should just cut out the middle man and contact the Bank of Japan directly.”
Japan’s decision gave investors the hope they need that other central banks – notably the Federal Reserve – will soon flood the world with money. And there are few assets that would benefit more from that prospect than gold.
So now everyone’s talking about it. And that’s not comfortable for contrarian investors. Never mind that gold is now a regular in the money sections of the Sunday papers, or that it made it on to the Today programme a few weeks ago – The Sun’s page three model got in on the act this week. Peta from Essex noted in the “News in Briefs” section that the discovery of gold in the Chilean mine where all those miners are trapped came at a good time, given that “gold futures reached a record $1,340 an ounce after recent market volatility boosted demand for the metal.”
Top of the market? Maybe in the short-term – a correction seems to have kicked in over the last couple of days. But as Dominic’s discussion in Money Morning of historic bubbles demonstrated, we’re a long way from gold’s bull run being over.
● Of course, gold’s nothing like as cheap as it was. For those who didn’t buy in at $250 an ounce ten years ago (and for those who just like the idea of making even more money from gold), Bengt Saelensminde in his free The Right Side email has developed a high-risk, high-reward strategy. It’s designed to profit from gold’s bull run, all the way into the mania stage – should it materialise. It’s too detailed for me to go into here, but if you’re comfortable with the idea of spread betting – and please do bear in mind that it’s very risky – then you can find out more about it here.
● What else happened this week? Oh yes. While gold was hitting fresh records, UK house prices started falling again. Or rather, they’ve been gradually dipping over the last few months, but now they’re down year-on-year too.
What am I talking about? The Halifax house price index saw a record monthly plunge in September (down 3.6%). That left the headline year-on-year rate up 2.6%. But that’s the three-month-moving average – if you actually compare September 2010 with September 2009, prices are down 0.7%.
What’s coming next for house prices? Well, we had our annual property roundtable at MoneyWeek magazine this week – subscribers can read it here. I know how popular house price stories are, so I’m sure you’ll be interested to know that our panel members gave both their one-year and five-year forecasts for property. Go on, free emails – you know you want to read it.
● Moving away from the UK to a rather more promising part of the world for investors – our Asia investing expert, Cris Sholto Heaton, headed out to Singapore for a research trip around the region this week. He’ll be filing his weekly MoneyWeek Asia email from various locations over the next month or so. Next week’s will be coming from Jakarta, I believe – given that Indonesia is one of the hottest markets in Asia right now, it’ll be interesting to see Cris’s ‘view from the ground’ take on it.
In fact, Cris has already tipped an Indonesian family-run company whose weird-tasting chocolate bar is taking the country by storm – and could be about to make an impressive gain.
But what I’ll say right now is, if you’re serious about investing in emerging markets, and you want to get beyond the usual handful of funds and ETFs that everyone else uses to play Asia, this is the newsletter for you. And I expect Cris will no doubt uncover a few more little-known gems while he’s out there.
● Another of our writers was looking at Indonesia briefly this week – Tom Bulford of the Red Hot Penny Shares newsletter. Tom was discussing one highly sought-after soft commodity – palm oil. It’s one of the more obscure softs, but as Tom points out in his Penny Sleuth email, it’s becoming ever more popular as a food ingredient.
“The number of hungry mouths in the world is growing inexorably, but on top of that the Chinese are increasingly developing a taste for fried food.”
That means using more cooking oil. But “the global palm oil industry is struggling to keep pace. In the last four decades the area of Malaysia devoted to the oil palm has increased five-fold. The land used to grow the trees in Indonesia has risen by an astonishing 23 times. Today 12 million hectares of land around the world are covered in oil palms. But it is not nearly enough. According to the World Development Report on Agriculture a further 6.2m hectares must be planted by 2020 if global demand growth is to be met.”
But there’s a problem here. The vast majority – 85% – of palm oil comes from Indonesia and Malaysia. But “both countries are running out of space.” The palm oil industry has been accused of contributing to deforestation and therefore greenhouse gas emissions. And this threat of bad publicity is deterring big business from using Indonesian palm oil suppliers.
So the hunt is on to find suitable land elsewhere. South America is one region – with Colombia the biggest producer in the Americas. But perhaps the most promising is West Africa.
Why? Because, says Tom, “Elaeis Guineensis – the oil palm – originated in the tropical rain forest of West Africa. For centuries local people have been hacking down bunches of its red fruit and squeezing out the oil.”
Indeed, “In the nineteenth century the region was the centre of an emerging global trade. It supplied palm oil to lubricate the wheels of the industrial revolution or, as Lever’s famous Sunlight Soap, to clean the hands of the workers.”
And now the industry is being revived. While freight costs might keep West African palm oil out of the Chinese market, “it is closer to Europe and America’s east coast. But for the time being there is the domestic market to satisfy. Amazingly, given its heritage, West Africa is an importer of palm oil to the tune of some 500,000 tonnes per year.”
It’s an exciting story. Better yet, Tom’s found a way to play it – it’s in the latest issue of the Red Hot Penny Shares newsletter. If you like, we can send you this issue with our compliments, just for checking out Red Hot Penny Shares. And you’ll also get details of Tom’s top “break out” tech play. ● Just to end back where we started – when will gold’s bull run be over? Well, Simon Caufield (who writes the True Value newsletter) will be revealing his key gold price indicator to MoneyWeek readers later this month. Simon is no gold bug – he’s all about value, and approaches the whole thing with the calm detached approach you’d expect from a bona fide value investor.
● One final, final thing. If you’re just starting out in investing, or you know someone who is, you should take a look at our latest online video beginner’s guide. MoneyWeek deputy editor Tim Bennett put together a guide to the p/e ratio a few weeks ago. Now he’s followed that up with a primer on dividend yields – take a look and give us your reaction (and any requests for other videos) in the comments section.
• To hear about other bits and pieces on the internet that have amused us or made us think, sign up for our Twitter feeds – we’ve listed them below.
Have a great weekend!
• MoneyWeek
• John Stepek
• Tim Bennett
• Ruth Jackson
• James McKeigue
• David Stevenson
• Forecasts and past performance are not reliable indicators of future performance. Shares are by their nature are speculative and can be volatile and you should never invest more than you can safely afford to lose. Information in Money Morning is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision.
• MoneyWeek Magazine, Money Morning, Penny Sleuth, all free emails and MoneyWeek reports are unregulated products published by MoneyWeek Ltd.
• Red Hot Penny Shares, The Right Side and True Value are regulated products issued by MoneyWeek Ltd.