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.
● I noted in last week’s round-up that the markets were surprisingly sanguine about the turmoil in the Middle East and North Africa. This week they finally started paying attention. On Monday, my colleague David Stevenson was mulling over whether it might be a good time to short the market (A correction is coming – here’s how to trade it) given the massive levels of bullish sentiment – by Tuesday, that looked like a very good call for anyone who acted on it.
That’s assuming the market manages to stay open of course. The London Stock Exchange breaking down on Friday isn’t a great omen for its up and coming merger with Toronto’s TMX exchange – as we talked about last week. If you’re not already a subscriber, subscribe to MoneyWeek magazine.
● As the markets tanked, it was scary predictions time for the oil price. As I noted in Money Morning on Thursday, analysts at Nomura set the bar pretty high with a warning that $220 a barrel might even be overly-conservative should production in Libya and Algeria shut down altogether.
Like I said in the piece, these sorts of headlines usually get me thinking that the panic must be nearly over. But I’m not so sure this time. Earlier in the week, the FT Energy Source blog quoted John Roberts, an energy security specialist at Platts.
To sum up his point, Libya has plenty of oil money and should have been able to bribe its citizens into submission. But they decided they want freedom instead. And if “that is the case with Libya, which has a comparable ratio of income to population to Saudi Arabia, one might worry more about the stability of Saudi Arabia, which is of course the big one”.
That’s an understatement. Suffice to say we’ll be keeping a close eye on the situation.
● Dominic Frisby thinks too much. That’s the confession he made in Wednesday’s Money Morning. What does he think about? Second-guessing the silver market, that’s what. Dominic was looking at the action in the silver market – gold’s sister metal has rocketed in recent weeks – and lamented ever trying to trade in and out of it.
“Back in November, I recommended selling some silver at $30. I saw it as a huge number. I caught an intermediate top and for a couple of weeks thought I was pretty clever.
“But the problem then is getting back in. I bought a little back at $26, but not as much as I would have liked, given that it’s now at $34…
“That’s what I mean by thinking too much.”
When an asset is in a bull market, you can be too clever, concludes Dominic. Sometimes the best money is made by “just sitting”, as Edwin Lefevre put it in his Reminiscences of a Stock Operator. You can read more about that in Dominic’s piece here: The best way to trade silver – don’t.
● In Britain, the long-running central bank soap opera took a new twist. Now there are three people on the Monetary Policy Committee calling for higher rates. And one of them, Andrew Sentance, upped the ante by calling for not just a quarter-point, but a full-blown half-point hike.
Meanwhile, in the ‘doves’ corner, Adam Posen still fancies printing some more money. But it does seem as though a rate rise is edging closer. It remains to be seen what impact the surging oil price has on opinions – on the one hand, it’s hardly good for the economy, but on the other, it’ll make the inflation figures look very nasty indeed. Keep any eye on these in our inflation indicators page.
Meanwhile, some pretty poor figures came out yesterday. The UK economy shrank more than the first estimate suggested in 2010’s final quarter as private consumption and investment fell. And the services sector – everything from hotels to hairdressing – is now declining too. Not good.
But if you want a laugh, our regular columnist Matthew Lynn does a brutal but funny take on the letter that George Osborne should send Mervyn King the next time he misses his inflation target.
● The Middle East isn’t the only place seeing political change. Tom Bulford warns in his free Penny Sleuth email that investors in mines have to be very wary of political risk. “Tension between the world’s mining companies and the governments of countries in which they operate is mounting. Much as the industry’s leaders promise to engage with governments and support local economies, the fact is that they are making a huge amount of money but not many friends. Even in Australia, a persistent debate over a possible extra tax levy on the miners refuses to go away. But the real concerns lie with South Africa.
“Mixed messages coming from the South African government caused Julius Malema, the strident leader of the African National Congress Youth League, to claim that nationalisation had in fact become government policy.
“And President Zuma has hardly knocked this on the head. He recently described the country’s mineral wealth as a ‘national asset and a common heritage that belongs to all South Africans, with the State as the custodian’. Is this the beginning of a backlash against miners?”
The good news is that Tom is well aware of the risks, and has been looking for some of the most “promising mining prospects where I believe the governments are very unlikely to launch a surprise attack”. You can learn more about Tom’s picks in his Red Hot Penny Shares newsletter.
● This week’s ‘big issue’ was women in boardrooms – or the lack of them. My colleague Merryn Somerset Webb noted that although no one likes the idea of quotas, if we genuinely want to see more women becoming directors of FTSE 100 companies in the very near future, then quotas are the only practical way to do it: If we want more women on company boards, then quotas are the only answer.
Merryn was just being pragmatic rather than delving into the rights and wrongs of women in the workplace. But as you might expect, the issue sparked some vigorous debate in the comments section. Alex argued that it’s all about who does the childcare – and the problem is that “aggressive successful women do not seek out the kind of man who wants to be a house-husband – they seek their ‘alpha’ equivalents… quotas would just degrade the management quality of the board and short-change the shareholders, who are both men and women”.
Other arguments were along the lines of “we wouldn’t have quotas for plasterers, so why for FTSE directors?” or “we wouldn’t have quotas for disadvantaged men”. But of course, if you take almost any argument to a ridiculous extreme then it’s easy to knock it down. And in this case, I’d say the best arguments were made by those who supported quotas.
Woodberry noted: “It’s not about career breaks or part-time working. It’s about making full use of the best of your staff. It’s not credible that a company with a board and a top management tier which is predominantly male… is making the best use of its staff resources. If the gender split is 50/50 at Oxbridge then a lot of talent is being wasted”.
And Ellen noted that: “When women don’t progress in their careers and are out performed by men, the general view is that this is the fault of women… when boys don’t progress in school and are outperformed by girls, extensive research is done to find out how the system is failing boys. The notion that male is superior to female is so entrenched that a lot of the time we hardly notice it. And it is not just men who place a higher value on the male gender.”
I’m sure you’re dying to have your say on the issue – give us your tuppence worth here.
● It’s that time of year again – Isa season. You can expect to see lots of adverts urging you to use your individual savings allowance on this fund or that fund. But what is an Isa? My colleague Tim Bennett explains everything you need to know in this video: Beginner’s guide to investing: Why you need an Isa.
Also, Tim has a warning about one investment you definitely shouldn’t be putting in your Isa – structured products. They’re everything we dislike here at MoneyWeek – complicated, opaque, and of course, expensive. Get the lowdown from Tim here.
● What will next week bring? People are busy speculating about which Middle Eastern regime could be next to topple. But come Monday, well, maybe everyone’s eyes will be back on the eurozone. Ireland is having its general election. But perhaps more importantly than that, the European Central Bank seems to be growing increasingly keen to raise interest rates. That could result in all sorts of new turmoil for the eurozone.
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Have a great weekend!
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