This was supposed to be the week when all the City’s senior bankers returned to work and everything went back to normal. And if you look at the equity markets you’ll see it sort of has. There have been no big swings in prices, no panic and no overexcitement either. But look to the credit market and it’s clear that having the top men back at their desks has made little difference to anything.
The commercial paper and three-month lending markets remain paralysed as banks, terrified of other people’s potential liabilities and of the fact that they don’t quite understand their own, hold their cards and their money close to their chests; I’m getting just as many calls telling me about money market funds with hideous subprime-related asset bases as I was last week; and you still can’t open the paper without reading about a banker complaining that the Bank of England isn’t doing enough to help his industry to get out of the hole it has dug for itself over the last few years. This isn’t over yet.
On the plus side, there is one area that has been completely unaffected by the credit crisis – agricultural commodities, a long-term MoneyWeek favourite – and there are several good ways for us to make money out of it. You can buy yourself a farm (there might not be quite as much competition from bonus-wielding hedge-fund managers this autumn as last), or, if you like to keep things a little simpler, you could buy one of the new agricultural funds on the market, or shares in one of the agricultural infrastructure companies that are likely to do well out of the flood of cash hitting farmers’ wallets.
Also good news is that there might be some side effects from the softs boom that will give a boost to one of our other themes – Africa. John Vidal pointed out in The Guardian a few weeks ago that 850 million people across the world remain undernourished. At first glance, you might think that rising prices for food mean they will stay that way. But a letter from reader Thomas Lines points out that may not be the case. Instead, he says we should note that most of the world’s hungry are the rural poor, ie, those who depend entirely on unsubsidised agriculture for their livelihoods.
Depressed prices for cash crops have kept these people in poverty for years, but higher cereal prices might just change that: they’ll make more money and that, in turn, should enable even them (and Lines is thinking in particular of the farmers of sub-Saharan Africa) to “eat more and better food”. If that happens – and wouldn’t it be nice if Africans were helped by the free market for a change? – it will just add further fuel to our bullishness on the continent, which is now growing at around 6% a year. We’ve suggested getting exposure via Lonrho in the past and we are still convinced the company’s shares are an excellent investment – the management team are closing deal after deal. But there are now also several new funds offering an alternative way in. (See: Profit from Africa’s economic renaissance)