Just like everyone predicted, Big Merv is getting out his Big Crayon and writing his Big Letter to the Chancellor, Sam The Eagle.
This morning’s inflation figures showed Consumer Price Index (CPI) inflation last month was 3.3% year-on-year.
So Mervyn King, as Bank of England Governor, has to explain why it’s a full 1.3 percentage points above the Bank’s target.
Here’s a brief summary of what that letter will say:
"Oil... food prices... the weak pound making imports more expensive... come on, Alistair, you know why this happened. This is a waste of paper (and crayon wax)."
And next month, when the Bank again misses its target, Merv can photocopy the same letter, change the date on it, and send it in a second time.
Short-term, the implication for interest rates is clear. The Bank must raise them. Certainly it can’t afford to cut them — that would be a total dereliction of duty.
Longer-term, this inflation is a one-way ticket. Britain’s place in the world is on the wane. The economic action is elsewhere now — and as a result, most of us are going to feel poorer in years to come, as we compete for resources with those of the booming emerging economies.
One such resource is oil. Yesterday oil tested $140 again. But, as my colleague Bill Bonner keeps telling us, the cure for high prices is high prices. The more something sells for, the more incentive to find new ways to supply it. Below, Garry White takes a look at a novel approach to the oil crisis.
Also below, I report on how the rising cost of living is making the traditional retirement a thing of the past.
But before that, a word on what you can actually do about all this. Because you can take action — now — to protect your standard of living.
I’ve been accused before of being overly negative. It’s a fair comment — after all, I report the main economic and financial news, and that’s hardly cheery right now, is it?
But at Fleet Street we’re all about finding solutions, not just bemoaning problems. This edition of Fleet Street Daily is, as ever, packed with links that offer you the chance to grow your wealth and beat inflation.
In particular, I’d like to draw your attention to two very diverse opportunities we present today. At the end of this edition, Manraaj Singh shows you how you can grab a share of the oil wealth that eluded Mark Thatcher and his chums — he of the failed coup in Africa. And you won’t need to hire an old Etonian mercenary to do it...
Manraaj is offering a great investment for the future. One which has the potential to grow and grow over the coming months and years.
But if you want to make profits sooner, take a look at the ad immediately below. It’s an ingenious device that helps you trade the largest, most liquid market in the world — the £1.6 trillion foreign exchange market...
Do you really want to work until you die?
"The future," a wise man once said, "is not what it used to be."
There was a time when we looked forward to retirement. After forty-odd years of loyal service, our employer would reward our diligence with a pension package you could actually live on. We could devote our final years to the pursuits that bring us happiness, rather than those that merely bring profit for someone else.
A fair trade-off, I’m sure you’ll agree. But one which the harsh realities of life have consigned to history. Now we all — with the possible exception of civil servants — have to be a lot smarter when it comes to planning for the future.
That or carry on working right until we die. Take a look at this chart I nicked from the FT’s website earlier on today:
More and more of us are working past retirement age. Last year saw an 8.8% rise in such workers. Of course, there are a number of reasons for this.
The average 65 year old in 2008 is healthier than his or her counterpart of 50 years ago. Many people also enjoy work — and as far more jobs today are sedentary (as opposed to involving back-breaking labour in, say, a shipyard or a mine), would-be retirees can stay on and enjoy the social benefits that come with employment.
Be that as it may, it’s no exaggeration to say that many stay in work because they have no choice. And even if you would prefer to work — none of us wants to be compelled to do so. There’s a big difference between working simply out of choice and working because you’ve been robbed of your retirement.
As I wrote above, the cost of living is rising. And it will stay risen. Smart investors realise this — and they’re fighting back!
None of this will be a revelation to you. You receive this e-letter precisely because you’re interested in investment. But it doesn’t hurt to go back to basics sometimes.
After all, the principal reason why we’re in the investment business is to be wealthier in the future than we are now. To have options. I know that’s why I’m in this game.
Personally, I envisage working well beyond the traditional retirement age. I enjoy working. But — and this is crucial — I want it to be my choice. Not something foisted upon me by economic hardship.
For me, the chart above was a wake-up call. But I’m running the risk of being gloomy here... so I’ll hand you over to Garry, who may just have solved the oil crisis — how’s that for optimism!
An alternative fuel that may actually work...
We need to be careful when it comes to alternative fuels. Many people got excited when scientists started making ethanol from corn. Corn, after all, is dead easy to grow. It’s renewable — and that, so we all thought, was enough to make it a panacea.
But corn ethanol has let us down. It’s contributed to the global food crisis. And, to add insult to injury, it actually takes more energy to create corn ethanol than the stuff actually contains.
In short, it wasn’t what it said on the tin.
Our commodities man Garry White is a long-time opponent of corn ethanol, and of biofuels in general. So when he told us at this morning’s meeting of a new technology that actually works, we all sat up and took notice.
Garry has a science background, so I’ll leave "the techy bit" to him. In today’s Smart Commodities, Garry dusts off his lab coat, and takes a look at a technology that could be about to blow Peak Oil theory clean out of the water.
This "Criminal Bastard" could make you rich!
In 2004, British mercenary Simon Mann was arrested — along with the 70 men under his command — on the tarmac of Harare airport in Zimbabwe. Mann and his men were about to fly to Equatorial Guinea and attempt a coup to install exiled opposition leader Severo Moto. Mark Thatcher was later convicted of co-financing the plot.
Mann — whose trial begins today — has claimed the coup was all about deposing a dictator. But — as Manraaj Singh explains in today’s free edition of Profit Hunter — Mann’s motives were probably far less noble.
"It’s all about the oil," says Manraaj.
President Obiang of Equatorial Guinea — himself a rather unsavoury chap — has called Mann a "criminal bastard".
Be that as it may, Mann’s actions are testament to the country’s valuable oil reserves. And Manraaj has an investment which is a great play on these reserves — and doesn’t involve you financing a shady coup d’état!
Read today’s free Profit Hunter for all the lurid details.
Until tomorrow
Ben Traynor
Editor
Today’s Daily Reckoning — When a roof over your head becomes a millstone round your neck
"Housing, Inflation both getting worse," says a headline at MarketWatch.
The price of oil held steady yesterday — in the face of Saudi plans to pump another 200,000 barrels a day. The dollar held steady too. And the yield on the 10-year note rose to 4.24%. Gold jumped $13.
Unless you own an oil well or a goldmine it has been a bad year. Out of the world’s 52 leading stock markets, 49 are down for the year. Ireland, for example, has lost 15% of its equity market value. Vietnam has been crushed...everyday is a down day in Hanoi.
In the US, the fall in stocks has cost investors almost a trillion this year. Losses from housing are said to be about a third of that. But that is just the beginning. From 2006, the value of US housing stock is said to be down about 16%. Case/Shiller, the experts on housing trends, think another 15% will be lost before the housing market bottoms out in 2010. That will mean a further $3 trillion hair cut for US households.
You can read today’s Daily Reckoning in full HERE.
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