The FBD Blog – investments, insurance, pensions, savings in Ireland

A couple of weeks ago, we shared Mark Twain’s opinion of gold miners – liars standing next to a hole in the ground! If you share this sentiment or merely feel that gold is another asset bubble in the making, you may be interested in Water – the “blue gold” of the 21^st century.

Benjamin Frankin stated that “when the well is dry we learn the worth of water”. Certainly many Irish people stopped taking water for granted recently when floods to reservoirs meant they were without water for up to 2 weeks.

However, in normal times, we assume that fresh water is constant, safe, cheap and practically free. We may be in for a rude awakening when we look at the global picture. Consider this:

• We use 6 times more water than our grandparents did;
• China has 5 times the population of the US but only same amount of water;
• The UN estimates that ⅔ of all nations will be “water-stressed” by 2050.

All very interesting you will agree, but investors should be interested as one study estimates that an investment in water-related projects of $22 trillion ($22,000,000,000,000!!) is required over the next 20 years.

If you are interested in reading more about how to exploit this opportunity as an investor, click here to read about KBC’s Water Fund.

- Ian Cooke

House prices rose by a faster-than-expected 1.4% in November as the property market continues to improve, according to Halifax in the UK.  The rise for the fifth month in a row was driven by higher demand and a low level of properties for sale.

Back in April house prices had sunk 17.7% over 12 months – but the latest figures mean that the annual rate at which house prices are falling is now just 1.6%. But Halifax told Sky News it is “virtually certain” that by the end of this year prices will have actually increased overall in 2009.

The average cost of a home now stands at £167,664 – the highest level since October 2008.

But the group warned that the prospects for the market going forward depended on the state of the economy and whether there was an increase in the number of homes put up for sale. Halifax added that it expects house prices to remain flat during 2010.

Economist Howard Archer, from IHS Global Insight, says that “despite the further significant rise in house prices reported by the Halifax in November, we remain sceptical that the house price rally seen since early-2009 can be sustained for much longer.

“Consequently, while house prices may well rise further in the near term from their early-2009 lows, we suspect that they they will be prone to relapses in 2010.”

The latest house price figures come after the Bank of England reported that the number of loans approved for house purchase had increased for the 11th consecutive month in October. They rose to 57,345, their highest level since March 2008. Nationwide also posted a rise in house prices for November – but at a more modest 0.5%.

This means that in the UK both the housing market and the Commercial Property Sector are showing signs of recovery.

How long before this positive development spills over to Ireland?

- Steve Garavan

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Some time ago, Mark Twain opined that a Gold Miner was a “liar standing next to a hole in the ground!” Keynes described gold as a “barbarous relic”.

More recently, Jim Rogers  wrote that “Investors ignore supply and demand at their peril. And nowhere else do emotions and other psychological factors get more in the way of seeing those fundamental forces clearly than on the subject of gold.”

Yet, the price seems to be heading in one direction only – upwards!

If you fear this is another asset bubble in the making, you have an ally in the UK’s Investors Chronicle where Daniel O’Sullivan compares the current gold frenzy with the oil price spike last year, and finds many similarities.

- Ian Cooke

Nouriel Roubini was laughed at 2 years ago for predicting global meltdown. He is affectionately known as Dr. Doom and he is now predicting major weakness in the U.S. Dollar.

I see our own David McWilliams has joined him in this outlook and here is Robert Fisk defending his view that international oil trading will shift from the US Dollar into other currencies with devastating effects on the value of the dollar:

If you believe the Dollar is goosed, then a new type of currency bond that comes with capital security makes for an interesting bet. While there is a lot of detail to be considered, the basic concept here is quite simple: that, for economic reasons, the U.S. Dollar is likely to weaken in value and the currencies of Brazil, Russia, India and China are likely to strengthen.

Investors in the BRIC Bond will benefit from any change in these currencies with the comfort of capital security.

Summary of BRIC Currency Bond Key Features:

• 2 Years 11 months Investment Term with Unlimited Return Potential.
• Choice of 100%, 95% or 90% Capital Security
• Up to 425% of Potential Gains from BRIC Currencies vs. US Dollar.
• Capital Security Provided By Bank of Ireland, bank deposit structure.
• No currency risk to investor’s protected capital amount.

Might be worth checking out!

- Ian Cooke

Hands up time – most of us interested in investment markets were spooked in January, February and March of this year. My personal moment of reassurance that the world may not end came from a presentation by the legendary Anthony Bolton of Fidelity Investments in March.

As I watched the U.S. stock market climb, I was reminded of the article I read on Bloomberg around the time of the Bolton presentation:

March 4 (Bloomberg) — Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said now is the time to buy equities because investors are too fearful about the economy.

“These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” he told Bloomberg Television in an interview today. “We’ve been in much worse, much more panicked and more scary situations in the U.S.”

The economy isn’t as bad as it was in 1974, when stocks began rebounding, said Leuthold, who oversees $3.2 billion at Leuthold Weeden Capital Management in Minneapolis. He predicted the Standard & Poor’s 500 Index (compiled from the largest 500 Company Shares in the U.S.) will “surge to at least 1,000 in 2009, representing a gain of 44 percent from yesterday’s 12-year low of 696.33.”

Maybe we need to look beyond the doomsayers and get some positive perspective or opinions. Can’t do us any harm! The S&P 500 closed at 1079 points on last Friday!

- Ian Cooke