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.
● We’re back to the days of triple-digit moves on the Dow and big swings up and down on the FTSE 100. The markets have plenty to fear, it seems – from the earthquake in Japan, to more debt woes in Europe, to ‘Days of Rage’ across the Middle East.
● But in reality, these are all just convenient news hooks for reporters to use to explain the latest panic. The one thing that’s really worrying investors is this: what happens when the cheap money runs out?
Markets might not act as though they’re rational a lot of the time, but they are certainly forward-looking. And right now, investors are wondering what’ll happen when June 30 rolls around and the latest batch of quantitative easing (QEII) is finished.
● They’re right to worry. If you want some clear proof that QE has had an impact on markets, take a look at my colleague Merryn Somerset Webb’s blog. There’s a rather complicated looking chart on it, courtesy of Diapason’s Sean Corrigan (you may have seen the same chart elsewhere on the internet, it’s been doing the rounds). Don’t be put off by the acronyms. All you need to know is that the lines show asset prices, and that they rise rapidly as each new batch of QE has been announced.
So given that QE has clearly had an impact, can the economy stand on its own without it? My fellow Money Morning writer David Stevenson doesn’t think so – you can read why in the latest issue of MoneyWeek, out now. If you’re not already a subscriber, subscribe to MoneyWeek magazine. And that leads to another big question – if the US economy looks like faltering again, will QE even end at all?
● I think there’s a good chance it won’t. Ben Bernanke will face stiff resistance from some politicians and some of his own Federal Reserve team if he tries for QEIII. But it can’t be ruled out. Given Bernanke’s apparent conviction that the only way the US can avoid turning into Japan is to obliterate the dollar, I’m pretty sure he must be thinking about how to shove more printed money into the US economy. A few more weeks like this one and he’ll probably get the backing too.
● How should you be investing for this? Well, buy gold to protect yourself from the money-printing. Stick with big defensive stocks too – the ones that can bear up to the toughest economic conditions. And if you want to add a little spice to your portfolio, have a read at Cris Sholto Heaton’s latest piece. In his MoneyWeek Asia email (which is free – sign up here if you don’t already get it), Cris notes that emerging markets seem to be at a very different stage in the economic cycle to developed ones.
From Cris’s point of view, you should play defensively in developed markets, but if you’re investing in emerging markets, you can afford to be more adventurous. He likes Asian small caps, and I have to say I find his reasoning pretty compelling. Better still, Cris tips a few nice and easy investment trusts that you can use to get access to the theme – if you’re looking for ideas as to how to use this year’s Isa allowance, read his piece here.
● If you’re looking to strengthen your portfolio, there’s something else I’d urge you to check out – Dr Mike Tubbs’ Research Investments newsletter. As you’ll know, I’m a fan of Mike’s approach anyway, but my colleagues who work on Mike’s letter have also sent me some of the feedback from his subscribers, and I think their reaction is worth sharing with you.
“Thank you so much for a splendid advisory service. Where else can one find an “advisory” service which pays for itself in such a short time?” – Burford Cupper, Crediton
“As a retiree who watched his asset value and income disappearing at a rate of knots over the past two years you have been an absolute life saver and I think it only right you should be aware of the effect you have had on my financial situation.” – Vic Arcari, Helensburgh
“I have been trading shares for over 30 years and have tried numerous services, and this is the best by a country mile…What I like about the service is the amount of research that goes into a recommendation before it meets all the key investment criteria – and also the promptness of the services – it gives me the confidence to invest and not worry too much about the ups and downs of the market.” James Kelly, Andover
I really like Mike’s approach. Despite my sometimes cynical and often bearish outlook, at heart I’m optimistic about the human ability to come up with ways to improve our lives and generally make progress. And Mike picks out the shares that are best placed to solve those problems and to profit from doing so.
That strikes me as a sensible long-term investment strategy, and I think the comments above give some illustration of how well he’s done so far.
● Meanwhile, another big story which has been bubbling under for a while is the trial in the US of Galleon hedge fund boss Raj Rajaratnam. “Insider trading (or dealing)” is a term that gets bandied about in the press a lot. It conjures up images of ‘Wall Street’-style sharp-suited traders meeting in dark alleys to rig the markets together.
The truth is typically rather more prosaic – anyone can be an inside trader, as my colleague Tim Bennett explains in his latest beginners’ guide. Tim describes what insider dealing is, and how the rules are enforced – it’s well worth watching.
● Back in the UK, Tom Bulford stirred up a bit of controversy with one of his latest commentaries in his free Penny Sleuth email. The topic? You can probably guess – property prices. Tom had an interesting take – his view is that both commercial and residential property prices are set to fall, because ‘there’s nothing to prop up land prices in this country’ anymore. You can read the full piece here.
● And if you can’t get enough of property stories (and judging by the list of the most popular stories on our website, you probably can’t), Merryn has some advice for anyone starving themselves in an attempt to get a foot on the property ‘ladder’ – maybe you don’t need to bother. If you’re in your 20s, there’s an argument to say that you should value flexibility over gambling on the property market – particularly with jobs hard to come by at the moment. Read her piece and have your say here.
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
• Dr Mike Tubbs’ Research Investments is issued by MoneyWeek Ltd.