MoneyWeek Roundup: Don't get 'blown up' by your broker
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Associate Editor
David Stevenson Aug 28, 2010
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David Stevenson highlights some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we've published in the past week.
• This week, 'double dip' jitters – mainly in the US – have been right back in the news.
If you recall, the financial crisis kicked off in 2007 when America's housing market went pear shaped.
And this week, there were some truly awful US home sales figures. These suggested a fresh property plunge is on the way in the States.
Throw in some pretty grim durable goods orders, and second-quarter GDP being revised down to 1.6% from 2.4%, it's no wonder Wall Street has been heading south again on balance.
Over here, the FTSE 100 has been dropping too. Even a slight nudge up in the last quarter's GDP number – from 1.1% to 1.2% – didn't get people too excited, as business investment fell by 1.6%.
Meanwhile, BBA UK mortgage approvals fell 3% in July compared with June. That's not exactly a good sign for house prices in this country either. And somehow I reckon we'll be seeing a lot more headlines on this front in the coming weeks.
• In fact, are we facing something worse than a double dip? Maybe Britain, along with much of the rest of the West, is about to 'go Japanese' economy-wise and enter a sort of perma-slump.
"We're apparently on the verge of setting off on a long and depressing deflationary journey during which bank lending will contract, consumer credit will disappear, prices will keep falling, stock markets will collapse and no one will ever buy a new dress again", says Editor-in-Chief Merryn Somerset Webb in her latest blog.
In a nutshell, that would mean lots of long-term gloom. But maybe not doom, says Merryn. "There are a few things that make me wonder if it will really unfold in the same way as it has for the poor Japanese", she says. And to find out what, read on here.
• But even if Armageddon is off the agenda for the moment, there's no doubt the current state of affairs is rather scary. So in Money Morning this week, we've been focusing on what you might expect to see next in the markets, and what to do about it.
Dominic Frisby has just spotlighted the two key numbers you must watch out for on the US market. Meanwhile, John Stepek has been looking at how investors should handle the growing double dip threat. And yesterday, I talked about a strategy that should do you nicely in the long-term.
• Yet not everywhere on the planet is falling or shrinking. As our Asia analyst Cris Sholto Heaton points out in his weekly MoneyWeek Asia e-mail – if you're not a subscriber, you can sign up free here – "the headline-grabbing story last week was that China has passed Japan as the second largest economy in the world".
"But is this a milestone?" asks Cris. "Not really. It's not like China suddenly doubled in size – it was almost as big last year. The only reason it's a story now is because the media is fascinated with milestones and anniversaries. They make an easy way of filling space".
Further, says Cris, "GDP is just a measure of how large an economy is. It doesn't tell you anything about how wealthy the country really is in terms of how much its citizens earn". But "that's what people really care about. China is poorer than Japan, yet its economy has been larger for quite some time. And that's worth knowing because it tells you a lot more about the country than the day it passed some arbitrary benchmark".
"Why is this relevant? Because one favourite emerging market theme these days is the emerging consumer. Yet there are still hundreds of millions of people who aren't going to start consuming much more anytime soon".
In other words, there's money to be made here.
• Staying on the 'still growing' theme, something else just keeps on climbing. Gold. It's back to within a smidgeon of its June high.
Now some experts will tell you that this shouldn't be happening. That's because another major nosedive in the economy should mean prices falling, not rising. We all know that inflation is good for gold, but surely not deflation?
Or maybe gold is on the up because, in a world where the economic and financial woes are spreading ever wider, investors are searching for the ultimate safe haven?
MoneyWeek's 'Gold Insider' Dominic Frisby has prepared a timely special report detailing what's going on with the gold price. Even better, he runs through the most profitable ways to play gold right now. In addition, he has uncovered what he believes are five stunning profit stories just breaking in the gold world.
We first sent this report out to readers of Money morning on Thursday and have had an incredible response. If you missed it, here it is again.
• On another tack, Bengt Saelensminde in The Right Side says Don't get 'blown up' by your broker. His piece is all about the pitfalls of discretionary fund management, and how to avoid being cleaned out. It's well worth a read.
• As ever, time is running short. Monday being a bank holiday, Money Morning will be back on Tuesday. So to finish up. here are two pieces you might have missed this week that you could find well worth a read:
Our personal finance writer Ruth Jackson has been looking at where to find the best credit card deals., in her free email MoneyWeek Saver. And again in The Right Side, Bengt has highlighted a commodities fund that pays an inflation-busting return.
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