The rains are still gushing down on middle England.
If youve been affected, you have our sympathies. Being flooded is not only very distressing, it's also an expensive business. Insurers reckon they're looking at a record bill of at least £2bn.
Meanwhile, investment columns across the newspapers - perhaps a little insensitively - are looking at ways investors can benefit from the floods. One of the key plays is to invest in companies developing infrastructure and technology that can help us cope with freak weather more effectively in the future.
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Of course, you wont find many of those sorts of companies here in the UK
Tom Stevenson makes an interesting point in his investment column in this morning's Telegraph. He talks about the floods, and ways you could benefit from the growing belief that global warming is behind the bouts of unusual weather we've all been having.
The move to greener' investing is certainly an interesting trend that throws up plenty of opportunities - some of which were mentioned in Nigel Milton's recent cover story on the renewable energy boom: How to cash in on the renewable energy boom.
Another suggestion put forward by Mr Stevenson is forestry (which MoneyWeek editor Merryn Somerset Webb wrote about last Christmas Timber: the ultimate growth investment). He reckons itll benefit as timber prices rise and demand for bio-energy increases, driven by governments trying to hit new targets on renewable fuels.
But probably the most interesting suggestion is what this means for spending on infrastructure and new technology. "Engineering is a likely beneficiary on many fronts; the need for new power technologies, both fossil and renewable; demand for better heating and air conditioning systems; desalination, irrigation and water treatment facilities; and consumer demand for more energy efficient products, to name just a few.
"I wonder how many of those investment opportunities will be found in Britainand how many in places such as Germanywhere making things never went out of fashion?"
It's this last point that got me thinking. A notion has arisen, gaining in strength in recent years, that manufacturing is essentially now up to emerging market economies. Their workers are cheap, their materials are cheap, they are adequately educated - we can't hope to compete.
Instead, here in the developed world, with the likes of China and Vietnam as our workshops, we are able to devote all our time to the 'creative', 'fun' industries - and to financing it all. We create marketing campaigns for the goods that flow from China. We crunch the numbers and help them to raise money.
And that's good news apparently. Because manufacturing is the donkey work of the global economy. It's low margin, it's volatile (all those fluctuating raw materials prices and fickle consumers at the end of it), it's dreary and it involves getting your hands dirty.
It's an attractive argument. They make junk, we sell it. They build companies that make junk, and we float them. They do the work, and we make the money (if you'd like to read more about this theory, FantasyIsland' by Larry Ellison and Dan Atkinson is well worth a look).
There's just one huge fly in the ointment. It's called Germany.
Which country has the world's largest share of export trade? China? No, it's Germany. Why? One simple word - quality. If a competitor can make a product more cheaply, you don't just give up. The best way to compete with them is simply to make yours better.
In other words, if you want quantity, you opt for Made in China'. If you want quality, you opt for Made in Germany.'
Now you might not think this is a problem. After all, if we can buy high-spec goods from the Germans, and low-spec goods from the Chinese, why do we need to bother making anything?
But it's not good to be over-reliant on one sector of the economy. Just as African countries are blighted by their reliance on commodities, so the UK could find that its dependence on the financial sector the City of London basically becomes a serious problem when that sector turns down. And with the US subprime problems continuing to ripple across the credit markets, that downturn may well be upon us.
And when our financial services wealth dries up, how will Gordon Brown and his colleagues foot the bill for our over-indebted country's faulty plumbing?
Turning to the wider markets
The FTSE 100 ended 39 points higher at 6,624 amid more bullish trading on Wall Street. Friends Provident was top riser, up 14.75p to 201p on news of a potential merger with Resolution. For a full market report, see: London market close
On the Continent, stocks also ended higher. The Paris CAC-40 was up 52 points at 6,009, and the Frankfurt DAX-30 gained 69 points, to 7,944.
Across the Atlantic, the Dow Jones rose 92 points to close at 13,943. The tech-laden Nasdaq was 2 points higher, at 2,690, and the S&P 500 gained 7 points, to 1,541.
In Asia, this morning, the Nikkei rose 0.2% to 18,002.
Crude oil was trading at around $74.65 this morning in New York, while Brent Spot was at $79.36 in London.
Spot gold was trading at around $683 this morning. (For in-depth daily gold reports, see: investing in gold). Silver, meanwhile, was trading at $13.29.
In the currency markets, the pound was at 2.0628 against the dollar and 1.4933 against the euro this morning. And the dollar was at 0.7242 against the euro and 120.49 against the Japanese yen.
And in London this morning, BP reported that second quarter profits have fallen, but by less than expected. Replacement cost profit fell 12.5% to $5.35bn, compared to analysts' forecasts for $4.98bn.
And our two recommended articles for today...
Commercial property: investors rush for the exit
- We've been warning readers to avoid UK commercial property for some time and now it seems we are being proved right: Commercial property: investors rush for the exit
MPC hawk argues a stitch in time...'
- Bust follows boom as sure as floods follow rain. Not every time, to be sure. But after a real downpour, you might just wish you'd got sandbags to hand: MPC hawk argues a stitch in time...'
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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