It's been a fairly mediocre week for stock markets. It started with investors giving two cheers to the new rules on banking regulations. The Basel III rules essentially let banks off the hook as I noted in Money Morning on Tuesday. However, as James Ferguson (who also writes the Model Investor newsletter) writes in this week's issue of MoneyWeek magazine, the fact that the Basel committee went so easy on the banks is a cause for alarm, not celebration.
Why? "Because it shows how grim the current picture must be for banks." The regulators have "clearly listened to the lobbying banks' concerns, appreciated the harsh reality of their situation, and agreed there was no way they could stand tighter regulations yet. What's scary is that full implementation won't be required until 2019. That implies that many banks are deemed to need almost a decade to get into shape." If you're a subscriber you can read the rest of James's piece here.(If you're not already a subscriber, get your first four copies free here, plusimmediate access to James's story).
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The stock market rally rather fizzled out towards the end of the week, as fears over the US recovery rose again. No, if you wanted excitement this week, you really had to be in the gold market. It hit fresh all-time highs, and even managed to get up above $1,280 per ounce at one point. Perhaps it's been paying attention to the banks' woes.
We're fans of gold at MoneyWeek as you'll no doubt have noticed by now. In the short term, of course, there's every chance that gold will fall back indeed, I know that our precious metals correspondent Dominic Frisby reckons there's a good chance of that happening. And it always unnerves me a little when I see a favourite investment starting to crop up with a lot more regularity in the mainstream press.
But as our editor-in-chief Merryn Somerset Webb pointed out in Wednesday's Money Morning, there is every reason to believe that gold will go even higher in the long run. The fact is that our governments and central banks want inflation in the system. The more frightened everyone gets of the bogeyman of deflation, the more likely they are to start printing money again (or quantitative easing, as it's called these days).
So we're still firm believers in gold (indeed, in the next issue of MoneyWeek, we'll be looking more deeply at how our monetary system really works I think you'll find it quite an eye-opener).
Japan was another big story this week, as Merryn also noted in Money Morning. But while the yen intervention and the challenge to the Prime Minister were important, another story that you may have missed could actually have a longer-term impact. Turns out that the Japanese population is not as ancient as everyone thought it was.
As Merryn notes on our blog, officials in the country recently found out that the man who they thought was Tokyo's oldest resident had been dead for 30 years. His family had been keeping his bones in a drawer upstairs so they could keep getting his retirement benefits. In Leo Lewis's report in The Times on the story, he noted that of Japan's 41,000 centenarians, at least 5,100 are 'missing'.
What does this mean (apart from being a bit 'icky')? Well, as Merryn says, "If we don't know how many 100 year-olds there are, do we have any idea how many 70-90 year olds there are? Or for that matter what Japan's total OAP population is, given that according to the BBC over 200,000 old people are 'missing?' If we take off all the 'probably dead' people, is one in five Japanese people really over 65? And if we don't know that, then how accurate are our ideas of Japan's GDP per head, or the real burden on the public finances represented by the country's apparently aging population?"
The key to successful investing, as Bengt Saelensminde puts it in this enjoyable piece for his free Right Side newsletter, is having a strategy and sticking to it (Find out more about The Right Side here). There are many different investing strategies, and some work better than others at different time periods. But if you lack a disciplined investment approach, then any money you're making is coming through luck rather than skill and luck tends to run out.
That's why I like to see a clearly defined strategy when I'm reading a share-tipping newsletter, particularly if it involves investing in any sort of speculative stocks. And the strategy used by Dr Mike Tubbs in his Research Investments newsletter is one of the most compelling I've seen.
Mike's approach is based on the idea that successful companies stay ahead of the game by investing their profits in research and development (R&D). Apple is a very obvious example of how this can pay off for a company. And if you look at Mike's portfolio, the approach is paying off for him and his subscribers too. As a whole, from February last year to the start of this month, he's up around 35% based on both his closed and open positions (you can check out his performance in full here).That's pretty good going in anyone's book, although of course, past performance is no indicator of future performance, so you can't take it as read that this will be repeated.
And Mike's just had another big hit. Back in February this year, he tipped a Dutch vaccine company, which was going for less than €14 a share. The company had just signed a deal with healthcare giant Johnson & Johnson to partner up on the development and commercialisation of a number of vaccines, including a universal flu vaccine.
Yesterday, the group's share price shot up to more than €24, as J&J bid €24.75 a share for the company. A nice way for all its shareholders to start their weekends.
Of course, not all of Mike's stocks have done as well as this one some have lost money, as you'd expect. And he doesn't just stick to low or medium-risk plays there are some real high-octane, high-risk stocks on there that won't be suitable for all investors, although Mike does outline all the risks involved in each and every tip, so you can make an informed decision.
Why am I telling you all this? Well, because I think those sorts of returns while of course not guaranteed, and past performance is no guide to the future suggest that Mike's on to something special. And frankly, I think that a lot more people should be reading his newsletter! So I'd urge you to at least find out more about it you can find out more about Mike's three latest R&D-intensive recommendations here.
Last week, we mentioned Tim Price's favourite book on economics, Henry Hazlitt's Economics in One Lesson (which, as one very helpful reader pointed out, you can download free here[pdf]).
We asked you to send in your own nominations for financial must-reads. We had quite a few responses. Rather pleasingly, there were a couple of MoneyWeek favourites among the authors one reader nominated Debt and Delusion (1999) by Peter Warburton, while Russell Napier's bear market bible, Anatomy of the Bear (first published in 2005), was another top pick.
Another wrote that "the book I think best explains the mess we're in is Fleeced! How We've Been Betrayed by Politicians, Bureaucrats and Bankers." It's by David Craig, whose polemic Squandered! took apart Gordon Brown's wasteful expansion of the public sector, and Matthew Elliot of The Taxpayers' Alliance.
Other suggestions included the 1930s self-help book, The Richest Man in Babylon, and The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers (1953) by Robert L. Heilbroner which I haven't read, but is "a cracking read compared to the average economics tome, especially the antics of America's 'robber barons' which included colliding loco-engines to settle railroad disputes." I'm tempted to put that one to the top of my financial "must-read next" pile. Keep your suggestions and reviews coming in to email@example.com.
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Have a great weekend!
Figures for Dr Mike Tubbs' Research Investments are calculated as of 1 September 2010.
12 month performance figures since service began on 6/2/09.
Average Closed Positions: 2/9/09-1/9/10 +68.36%, 6/2/09-1/9/09 n/a.
Average Open & Closed Positions as at 1 September 2010: 35.47%.
Forecasts and past performance are not reliable indicators of future performance. Shares are by their nature are speculative and can be volatile and you should never invest more than you can safely afford to lose. Information in Money Morning is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision.
MoneyWeek Magazine, Money Morning, all free emails and MoneyWeek reports are unregulated products published by MoneyWeek Ltd.
Dr Mike Tubbs' Research Investments, The Gold Profit Plan are a regulated product issued by MoneyWeek Ltd.
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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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