Here’s today’s selection:
Q: I rely on my investments as part of my income. I think that sterling will take a nosedive in the not too distant future. Is there anywhere that I can invest that is not in sterling? Ideally I’d also like to take the interest off as part of my income. — ML
A: Someone’s on my wavelength! I’m also very worried about the future of the pound. By my reckoning, we’re seeing a lot of the same ingredients we had in the 1970s. If you remember, the last Labour government had to go cap in hand to the IMF in 1976. The run on the pound had brought the country to it knees. Take a look around today, and there are eerie similarities:
- An unelected Labour PM who’s drowning in the polls
- A large (and growing) budget deficit. This is being exacerbated by the fact that Britain is involved in two wars
- Wranglings over pay in the public sector
- A surge in the cost of energy, particularly oil
- A slowing economy while prices are rising
I think the euro looks attractive. It is coming of age as a truly global currency. The European Central Bank has taken a firmer line on inflation than either the US Fed or the Bank of England. And the economic size of the eurozone means, in time, the euro could trump the ailing dollar as the world’s reserve currency — something the pound will never be again.
I don’t, however, suggest you simply swap a load of banknotes down the Bureau de Change. The exchange rate spread would be murderous.
I’ve just finished writing a recommendation for the next issue of The Fleet Street Letter that deals with this exact issue. We recommend an investment that not only hedges against a sterling crisis — it pays you an income as well.
This recommendation is going to subscribers this Saturday. So if you want to read it, you need to act immediately. You can subscribe quickly and easily right here to The Fleet Street Letter.
Do this right away, and you should be in time to get this new recommendation — our favourite way to play a run on the pound.
Q: The news that our Chancellor is contemplating a windfall tax on ‘profiteering’ energy companies is not good for investors. Should I sell my oil holdings? — HV
I passed this one onto our sector guru Garry White, editor of Smart Commodities
His reply:
"A windfall tax on oil profits would be a populist move... but I don’t think even Alistair Darling is that stupid.
"I agree with BP chief Tony Hayward’s assessment that the reason for soaring oil price is due to a lack of investment in finding news reserves over the last 25 years. With the world facing an unprecedented energy crisis, discovering new sources of oil is vital. "Oil companies know this — that’s why they are boosting capital expenditure significantly. Royal Dutch recently boosted this year’s capex spending plans by 7% to $35-$36bn.
"Taking this cash away and putting it in the pockets of consumers would take away the investment in future production and transfer it to current consumption. This is crazy. It will not happen — so no, I don’t believe this is a reason to sell oil companies."
If you have an investment question, send it to the team at askfleetstreet@fspinvest.co.uk
Should Paris Hilton be the next US President? Garry White thinks so...
"That’s brilliant! That’s actually a really, really good idea!"
Garry was sat watching a video when he said these words. I went over to his computer to see what had prompted the outburst.
I was a little taken aback to find Garry watching a video of Los Angeles socialite Paris Hilton.
"What’s this brilliant idea, Garry?" I asked.
"Paris Hilton’s energy policy! No joke — it really makes sense."
Find out why Garry reckons Hilton’s policy makes fools of both McCain and Obama...
Until tomorrow
Ben Traynor
Editor
PS Don’t forget — if you want to receive our new recommendation — a hedge against a sterling crisis — you need to be a Fleet Street Letter subscriber. You can secure your copy right here of this Saturday’s edition of The Fleet Street Letter
The Daily Reckoning — Once you’re dead, you’re dead forever
The next big trend, dear reader....
It’s coming. Consumers — especially the baby boomers — are about to change their way of looking at things. And when Bernanke & Co. realize what is happening, they will greet the new trend like the citizens of Atlanta welcomed Sherman.
"War is hell," said the yankee general, before burning the city down. So is a correction.
Yesterday’s news brought more details. The Dow rose 40 points. Oil remained where it was. Gold lost $3. And the dollar seems to be strengthening a little against the euro. You can now buy a euro for only $1.56.
You can read the Daily Reckoning in full here.
P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.
