What The US Bank Bail-Out Means For UK Investors

"I don’t like the sound of this!" exclaimed your editor Ben Traynor in this morning’s 8.30 editorial meeting. "Where’s this going to leave British banks? What’s it going to do to our economy? And to our readers?"

Ben’s away for the rest of the day. He asked me to write today’s Daily while he rushed off on an important fact finding mission for Fleet Street readers.

He and Fleet Street Letter investment director, Theo Casey, are off rubbing shoulders with some City big wigs. They’re after the lowdown on a new kind of investment — one that few investors know about. It’s a little off the beaten track — but it could revolutionise "safe investing" for private investors in the UK.

And let’s face it, that’s exactly what investors need right now: a way to preserve capital in the face of a mounting global financial crisis. From what my colleagues know so far, this could be a great wealth protector — the ultimate hedge, they’re calling it.

If it stacks up, they’ll be revealing it to readers in a forthcoming Fleet Street Letter issue. More on that soon...

Before Ben left our meeting, he sparked off a heated discussion. It’s a topic that concerns you and every man, woman and child in Britain. Because, if Ben’s concerns about what’s going on in the US are correct, then things are about to get a whole lot worse in our own back yard...

We were discussing the much-discussed (but far from clear) plan for the US government to save the world. In case you’ve missed it, the suggestion is to allow US banks to write-off all their dodgy debts at the expense of the US taxpayer. Although

"What if they get this bail-out through, but in such a way that, for political compromise, it excludes most non-US institutions? Who will buy the bad assets of, say, Fortis? Are we in Britain going to have to produce our own bail-out plan? How will we fund it?"

Ben makes an important point. And now that he’s opened this can, there are plenty more worrying little worms to come out; plenty more questions that need answering.

Will we get roped into helping a European plan? (I’d suspect not; we’re in the EU but the ECB’s not our monetary authority). Who will fund the European plan? Surely it will have to be a pan-European thing, given that banks from small countries have operations that span the whole continent. But how long will that take to sort out?

Lots of questions, no way of getting firm answers. What it does mean, though, is that we’ll see a further drag on our economy. And this is clearly what is on Ben’s mind. It’s a subject he’s been exploring for months now — that Britain is going bust.

The proceeds of what economic activity there is will have to be taxed in order to cover losses made over the last few years.

"The point is," said Ben, standing up to leave this morning’s meeting, "much like a student who lives off his overdraft, we all bought houses borrowing against our future income. Thanks to reckless securitisation by the banks, the whole thing was leveraged up until the entire system was stretched beyond its means. Now we’re going to have pay for it — in the form of publicly funded bail-outs."

Of course, as one of our other editors pointed out, the UK already has the Bank of England’s Special Lending Scheme (or SLS) in place. And America’s Federal Reserve has already started allowing overseas central banks to provide US$ funding in their own markets. These measures all help to provide liquidity, which is the nub of this crisis.

Still, Ben’s last words as he ran out of the door this morning are still fresh in my mind. "I smell a UK bail-out somewhere down the line..."

What’s clear is that there is more turbulence to come in the world’s financial markets. And, according to Ben, the UK economy is set to feel the full force of it. As he puts it, "Britain is going bust again". You need to protect yourself from this. You need to do it right now.

If Theo and Ben are right about the "ultimate hedge" investment they’re checking out today, then you’ll want to find about more about it. To make sure you do — and to discover their best advice on how to protect yourself from Britain’s deepening economic crisis — then I urge you to read their latest report.

Follow this link to read it now and discover more about The Fleet Street Letter.

Britain’s energy crunch has begun

Meanwhile, our angry commodities aficionado, Garry White, is not so angry today. In fact, he’s feeling rather pleased with himself. And for good reason. Yet again, one of the predictions Garry’s been making for years looks like it’s coming true.

I’m talking about the UK’s energy crunch.

"National Grid has warned that significant blackouts could return this winter after a 34-year hiatus," writes Garry in today’s Smart Commodities email. "It’s all down to repairs at aging nuclear reactors and pollution rules that limit coal burning."

Nothing to smile about there, of course. But the thing is, Garry’s been urging his readers to invest in ways to profit from the world’s energy crisis. The National Grid news is yet more proof that he’s on the right track.

To find out why this week’s sale of British Energy to French utility, EDF, was so important — and to get access to Garry’s latest "energy crisis" play, take a look at the piece he wrote this morning.

That’s all from me today. Ben will be back at the helm on Monday.

Until tomorrow

Best regards,

Frank Hemsley

Fleet Street Daily

Selected articles:

Erin and Isabel: Gold price going back above $900.

Garry White: Britain’s energy crunch has begun.

Tom Bulford: This Superstar Small Cap Doubled In 16 Months.

The Daily Reckoning — Hanging baubles on the bail-out

This has been a very good week for us. We can’t remember when we’ve laughed so hard.

"We’re not going to Christmas tree this bill," was how one senator — we think it was Chris Dodd — described how Congress would deal with the bailout plan.

We had never heard "Christmas tree" used as a verb. But leave it to a Washington hack to turn Christendom’s sentimental icon into a lobbyists’ grabfest. The boys on the hill began decorating the tree on Monday...they’ve been hanging baubles ever since. And according to today’s paper, they’ve agreed on the major issues; but they’re still going to take a few days to get the thing all trimmed out before it becomes law...

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.

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