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 news of the week was that credit ratings agency Standard & Poor’s finally decided to point out that the world’s only superpower has no clothes on.
Yes, one of the companies that helped foster the credit crisis by rubber-stamping defective mortgage-backed products, warned everyone that the US might lose its AAA-rating if its politicians can’t agree a plan to get to grips with its deficit.
It’s not that big a deal. Everyone knows that America’s finances are in a terrible state. And the same thing happened in the UK before the last general election, which helped give our own politicians a little nudge towards making some spending cuts.
But is this the beginning of a turnaround for the dollar? Will the US get its fiscal house in order and start to embrace responsibility? I very much doubt it. Things will have to get far worse on that front before they get better. Small wonder that gold hit $1,500 an ounce, a fresh record.
● Tom Bulford was in America recently. In his free Penny Sleuth newsletter, he talked of America’s culture of excess and how it relates directly to the national debt. Even $38bn in cuts proposed by Barack Obama will “barely scratch the surface of the USA’s mounting debts.”
And with the election approaching, “the fact that the US government is spending four dollars for every three will surely be lost beneath the usual electoral razzmatazz.”
It’s pretty bleak. “The dollar is coming under pressure. The property market is dead in the water. Who would invest in America right now? Well actually, maybe I would…”
Come again? No, you heard right. Tom reckons that US property might be worth a look. He visited a resort in South Carolina – Myrtle Beach – where he found fancy apartments going for $150,000 a pop, down from $400,000 at the peak.
“These properties are now selling way below their building costs. And I have to admit the rental yields look very enticing. This particular flat would yield an annual rental from holiday lets of about $30,000. That is a 20% yield on cost…
“It just goes to show how delusional we are about property prices in this country. Can anyone point me in the direction of that kind of value in the UK? I’d be delighted to see it. Hell, I might even buy in.”
● Of course, if you wanted to buy in the US, you’d have to do your homework on rental prospects and all the other things landlords have to consider. And as a UK investor, you have to think about the dollar. But – and this may surprise you, given MoneyWeek’s generally bearish views on property – Tom’s right. On many measures, US property is genuinely cheap.
Indeed, as I’ve been writing this piece, I’ve also been emailing back and forth with our editor-in-chief Merryn Somerset Webb, and we both agree that US property warrants closer investigation. We did a cover story on it about 18 months ago and our overall conclusion was that there might be some opportunities, but that US property still had further to fall.
It’s about time we had another look. We’ll tell you all about what we find in an issue of MoneyWeek magazine in the near future.
● I know we keep mentioning this, but we don’t want you to miss out – block out Friday 17 June in your diary. That’s when we’ll be holding the first MoneyWeek conference – 2011: Crisis or Opportunity?, in central London. I don’t think we could have picked a better time to hold it. The end (or not) of QE, gold hitting new highs, the dollar hitting new lows – it’s all going on. And of course, the venue – One Whitehall Place – is rather pleasant too, as you can see below.
The venue for our first MoneyWeek conference on 17th June, One Whitehall Place. Mark the date in your diary now!
We’ll be sending out full details and application forms in about ten days’ time. Look out for them – you don’t want to miss this!
● Things to watch out for this weekend – with the long weekend coming up, I think traders start to get a bit stir crazy and bored, but a couple of big rumours have been rumbling around. One is that Greece might restructure over the weekend, the other that China might decide to revalue the yuan renminbi. The first seems unlikely (it’ll happen eventually, as we discussed in last week’s MoneyWeek magazine cover story – but why this weekend?). If you’re not already a subscriber, subscribe to MoneyWeek magazine.
However, the second is more plausible. As I noted earlier in the week, Chinese inflation is becoming a serious problem and the Chinese are caught between tackling it and stifling the country’s growth.
The renminbi could prove a useful tool in helping the Chinese tackle their domestic inflation problem. But it’d be inflationary for the rest of us – their exports would become more expensive, and they’d have even more buying clout in the commodities market. It’s definitely one to watch out for.
● Meanwhile, Chinese citizens, fearful of inflation, have every reason to buy more gold. I mentioned earlier this week that I’m a bit nervous of the silver market at the moment, but gold hasn’t seen anything like the surge that its more volatile counterpart has.
As well as checking out the US property market, Tom has recently found a way to profit from Chinese demand for gold. It’s a risky one – we’re talking a small mining stock here – but it could be very profitable.
● If you have a spare moment over the Easter weekend, you should take some time to browse deputy editor Tim Bennett’s video library – if there are any financial terms anything you’re a bit foggy on, he’s your man. Indeed, his recent video explaining balance sheets received one of the most elaborate endorsements from a reader I think I’ve ever seen – thank you, Susanmba:
Tim Bennett Tutorials – The Balance Sheet
Assets
+Straightforward approach
+Understandable explanation of critical messages
+Clear and practical style
Liabilities
None on display
=
High Net Worth
Funding – Tim’s time and MW facilities…
Profit – knowledge/entertainment for viewers and goodwill towards TB and MW…
On Balance – a profitable result for all
Thank you
His latest video talks about earnings per share (a key component of the p/e ratio) and how directors can fiddle the figures – and Tim also highlights an alternative measure that can give you a more trustworthy picture of a company’s financial health. Well worth watching.
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Have a great weekend!
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