Ah! This is more like it!
You know how the official, Consumer Price Index (CPI) inflation figure was 3.0% last month? Well, I don’t know about you, but that felt a bit low to me.
I buy things. And a lot of the things I buy have been getting noticeably more expensive — and not by a mere 3% either!
So I read with great interest the findings of a survey by Verdict Research. It found that a typical basket of shopping costs 6% more now than it did in January. That’s not an annual increase of 6% — that’s a 6% rise in five months!
Have a rummage around in the basket, and you see some pretty alarming rises. Cauliflowers are up 44.7%. Basmati rice is 33.3% more expensive. Margarine’s up 19.2%... frozen peas 9.5%. A medium whole chicken is up 25.3%.
The cost of food is soaring. So is the cost of commodities — especially oil. Theory tells us that higher oil prices make us poorer, and not just at the petrol pump. Now we’re seeing the evidence to back up that theory.
High oil costs push up the costs of transport — and of packaging, since oil is used to make plastic. We’re seeing the increase every time we go to the shops — whatever the CPI figures might say.
So... yeah. Britain’s becoming a much more expensive place to live. But that’s only half the story!
I reported yesterday that house prices have fallen 4.4% since last year. They were down 2.5% in May alone. And I don’t think we’re done yet. The housing market’s still looking for its equilibrium. And it’ll take time to find it... with a few false dawns along the way.
Many Britons have a significant portion of their wealth tied up in their house. Now they’re getting less wealthy — right at a time when they need more wealth to maintain their standard of living.
We’re getting poorer while our shopping’s getting pricier.
We’ve got slowing growth and rising prices. Stagflation Britain has become a reality.
But is there anything you can do about it?
Yes. Yes there is.
You see, we can take two important lessons from the ongoing economic strife. The first is that houses are not a great asset to hold (in truth, I’ve always been of the old-fashioned "Houses are for living in, not investing in" school of thought).
I’m not saying rush out and sell your house. Of course not (where would you live?). But if you have some money to invest, well... property ain’t the place to put it. Not right now at any rate.
Where then? Stocks are the obvious answer. But that brings me onto our second lesson.
A lot of UK firms will struggle in the coming months. Their costs are rising, but their consumers are poorer. So they can’t simply pass on all the increased costs.
That spells a profit margin squeeze.
But might there be a loophole? An escape hatch? A way to diversify your portfolio so your investments won’t be dragged down by the British economy?
Our research department tells me there is!
You see, not all UK businessmen are biting their nails every time they open a newspaper. Frankly, some of them don’t even care what happens in our economy...
Fleet Street Research is currently looking at a number of companies who, far from viewing the future with trepidation, are positively bullish!
The team is preparing a report that will tell you the best way to protect your investments in a future downturn.
I’ll be in touch with more details very soon...
Should you still ‘Sell in May and go away’?
As we march steadily in the direction of June, Theo Casey’s been pondering an old investment adage:
Sell in May
And go away
Don’t come back
‘Til St Ledger’s Day
I’m always suspicious of financial advice that rhymes. It feels about as sensible as buying your shares through a dancing broker. But is there anything in the ‘Sell in May’ philosophy.
"Maybe," says Theo. "Once-upon-a-time. But, to be honest, there are a lot of reasons right now to expect stocks to go down, not just the month on the calendar."
Today, Theo takes a close look to see if there’s any logic behind the saying
"The worst week for stock markets since February"
A bear market is forming. That’s the view of John Authers, writing in today’s FT. He says we’ve just had "the worst week for stock markets since February".
Authers cites the ailing US housing market as one of the culprits. But no prizes for guessing who the big baddy is...
Yep! It’s the oil spike!
"Those who like charts," says Authers, "might try comparing the S&P since it peaked in October with the way it behaved in 1973 and 1974 when, as now, an oil spike combined with fears of stagflation."
It’s a big, bad, 1970s-shaped crisis. And we’re right in the middle of it!
As Authers continues: "So far, stocks have moved much as they did in 1973. That is concerning, as 1973-74 proved to be a nasty bear market, with a fall of 50%"
Of course, there’s no guarantee that history will repeat itself. Past performance, so the old sea-shanty goes, is not a reliable indicator of future results.
Nevertheless, it doesn’t hurt to prepare. Like us, Authers sees commodities and emerging markets as the big growth areas.
Here at Fleet Street we have those areas well-covered.
On the commodities beat we have Garry White. Garry’s commodities portfolio has delivered a barnstorming performance — as you’ll see for yourself right here.
And on emerging markets we have Manraaj Singh, the power behind Profit Hunter.
If you’re an adventurous type, and you like your investments with a dash of Tabasco, then Manraaj is your man.
His latest recommendation is a stroke of genius. A way to play both China and America off against each other... and profit from their insatiable thirst for oil!
Until tomorrow
Ben Traynor
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