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.
● The big story of the week was ‘the cuts’. You might have noticed that we keep putting those words in inverted commas. It’s partly for ominous effect, but it’s mainly because the government isn’t actually cutting spending. In cash terms, spending will still rise, just by a lot less than we’ve been used to over the past ten years or so.
That’s not to say these cuts won’t make a difference. After all, they’re cuts in ‘real’ terms – after inflation. And we think that rolling back the state is a good idea. When you look at the amount of money that’s been spent, and what it’s been spent on, in the last decade, it’s hard to believe that there’s absolutely no scope for reducing it without causing huge distress.
● Not everyone believes that of course. There’s the whole “all spending is good spending” brigade who reckon that a single pound knocked off the annual community support officer budget will send the economy hurtling back into recession.
And there’s no guarantee that it won’t end up in a double-dip in any case. Our economy is hardly champing at the bit right now. House prices are stalling – and sales really have collapsed in recent months. That’s never good news for the British economy.
So, crafty politician that he is, George Osborne has made himself a little ‘get-out-of-jail-free’ card. He’s loudly announced that his budget (because that’s what the spending review basically was) has given the Bank of England free rein to “deploy monetary policy tools as well.”
In other words, if this all goes pear-shaped, don’t blame me, blame Mervyn King for not printing enough money.
● So for all the fiscal austerity that’s being planned on the one hand, there’s still plenty of scope for monetary madness on both sides of the Atlantic. This threat of more money printing is one reason why even the mortally-flawed euro is rising against the pound and the dollar right now.
And it’s also something you have to protect your portfolio from. In MoneyWeek magazine, that’s exactly what Simon Caufield shows you how to do.
There’s almost no doubt in Simon’s mind that Western central bankers will continue to try to print their way out of this. Never mind that cheap money is how Alan Greenspan got us into this mess in the first place – it’s the only solution that central bankers understand.
That means there are two trades that investors should be involved in right now: long gold, and short government bonds.
Fine. But how do you do it? That’s what Simon’s cover story is about this week. He shows you the secret to knowing when gold’s bull run is at an end. And he also shows you how you can bet against government bonds without having to time the market, which is the one big problem with shorting.
It’s a very useful piece, dealing with probably the most important investment issue of today. So if you’re not already a subscriber, I urge you to free emails – you’ll get your first three issues free and you can read Simon’s piece right away.
Also don’t forget – Simon’s newsletter, True Value, is open to new subscribers, but only until December 10th – so check it out now if you want to be sure of getting a place.
● Another of our investment experts who favours gold is Tim Price. Tim, who writes The Price Report newsletter, agrees with Simon that governments are hell-bent on destroying their currencies. But gold is just one of three investments that Tim believes are critical to protecting your wealth in the months and years ahead.
● As you may have noticed, we’re becoming increasingly convinced in general at MoneyWeek towers that inflation rather than deflation is what we’ve got to look forward to in the West. Our editor-in-chief Merryn Somerset Webb discusses the topic with Personal Assets Trust’s Robin Angus.
It’s a very entertaining interview, covering everything from the British obsession with property – “the national religion” – to why giving women the vote might be why modern governments pursue inflationary policies (it’s one of Merryn’s favourite topics at the moment – you can read more on it here).
But for me, one of the most intriguing bits was this – Robin Angus’s interest in the “realigning of stipends in the Scottish church in the 19th and 20th centuries”. Why is this interesting? Examining how stipends have changed, notes Merryn, ‘is a way to look at the status of the clergy and how stupendously it has declined. Robin once worked out that, were the current Bishop of Durham to have the same post-tax purchasing power as those of the 1930s and 1940s, he would need a stipend of around £25m a year. And even an ordinary local vicar would need something in the region of £100,000 to live the life of a 1930s vicar. Disappointing for modern vicars, I say. “Better for their souls,” says Robin.’
● Other than gold, what should you be investing in just now? Well we still like nice, solid, income-paying defensive stocks. And a man who knows all about those is Stephen Bland. And he had some good news for income investors this week.
As he told his Dividend Letter subscribers, “total UK dividends returned to growth in the third quarter of 2010 for the first time since the start of 2009, according to Capita Registrars.” If you strip out BP, third quarter dividends grew by 13% year on year. That’s pretty good going.
If you’re interested in securing an income from your portfolio, Stephen is the man for you. Every month, he picks a new high-yielding blue chip stock to add to the portfolio for his Dividend Letter newsletter. It’s one of the most straightforward stock-picking systems I’ve ever come across, which is why I also believe it’s effective.
It’s perfect for ‘buy and hold’ investors, and people who don’t have the time to spend monitoring minute-by-minute price charts and pulling off fancy spread bets or fiddling around with futures and options. Dare I say it, it works well for lazy investors, which frankly, is what most of us are. And nothing wrong with that.
● If you’re not entirely clear on what a dividend yield actually is, then please check out the free video guide from our deputy editor Tim Bennett. Tim’s new online beginner’s guides for investors are going down a treat I have to say. They’re just simple, short videos in which Tim explains basic concepts such as the dividend yield, the p/e ratio or the difference between fixed and variable costs for new investors, or anyone who wants a quick refresher.
This week, Tim’s been tackling the price-to-book ratio, another key term for stock-pickers.
Watch the video here and give us your reaction (and any requests for other videos) in the comments section. Tim’s currently working on ideas for a complete beginner’s guide section, so now’s the time to send us your requests.
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
• Merryn Somerset Webb
• John Stepek
• Tim Bennett
• Ruth Jackson
• James McKeigue
• David Stevenson