If you’ve been following Charlie Morris’s work over the past few weeks, you’re probably feeling pretty content right now.
Why? Well, Charlie’s two portfolios are already up 19% for the year. So if you’ve been following his advice to the letter you’ll have smashed the market pretty comprehensively.
But that’s not what I mean. I mean Charlie’s plan for 2017 is already shaping up nicely. Remember, it’s what we’ve called a “Money Map”. It is defined by two key trends: rising inflation and rising bond yields.
Charlie showcased that idea at our conference back in October. Since then, every piece of data has backed him up – first, inflation expectations here in Britain moving up, then the bond rout after the US election seeing bond yields spike. And yesterday we got another data point in that trend. Inflation accelerated at its fastest pace for two years.
Driven by jumps in gasoline and clothing prices, the headline inflation rate moved from 0.9% in October to 1.2%. That’s not earth shattering. It’s probably not enough to really cause concern. But it does show that a) Charlie was right and b) the key trends in the financial world are changing, and you need to change with them.
By the way, since Charlie published his report a few weeks back he’s added two new tactical positions. They’re both what I’d call “aggressive” moves: opportunities very few other investors would consider, but ones that could make big money in 2017 if they come off.
That’s what Charlie is all about. Seeking opportunities. Moving quickly to take advantage. Building and creating wealth. Which is what the vast majority of investors should be doing most of the time.
An oilman in the White House
Ever heard of Rex Tillerson? You have now. He’s just been appointed as President-elect Donald Trump’s secretary of state.
That’s significant for two reasons. Firstly, Tillerson is an oilman through and through. He’s been chief executive of Exxon Mobil for a decade. He’s worked in the oil industry for virtually his entire career.
Secondly, he’s seen as having “close ties” to Russia. That seems to be a kind of euphemism the press use to frown on someone without quite saying why. No doubt his relationship with Russia will be scrutinised by Congress. We’ll look at the geopolitics of that move another time.
But what does an oilman in the State Department mean? It certainly underlines the importance of energy to diplomatic relations. But then, shale oil has transformed America’s reliance on foreign oil, which throws the appointment into a new light. Maybe it’s a chance to build relationships with foreign oil consumers, rather than producers. And perhaps it sends a signal that Trump’s presidency will look on the oil industry favourably as a whole.
Remember what I said last week though. Technology is reshaping the dynamics of the oil markets, no matter who is in the White House. Electric cars, battery storage and renewable energy supplies won’t stop getting better, cheaper and more efficient.
The Stone Age didn’t end for lack of stones. The Oil Age won’t end for lack of oil. That’s another way of saying that demand is the important factor in the market for the next decade, not supply. Technology will eat into oil demand in a big way regardless of policy. Peak demand is dead ahead.
Watch this date: 31 December
When you’re preparing for an enjoyable night with friends this New Year’s Eve (or, if you’re like me, moaning about it) spare a thought for Italy. If struggling bank Monte dei Paschi di Siena doesn’t resolve its financial issues by then, either through a restructuring or a capital injection, it could lead to a nightmare January.
Last week the bank asked the European Central Bank (ECB) to extend the deadline to 20 January. The ECB refused. The bank needs €5 billion. The clock is ticking.
Remember, this is something Tim Price has been warning about all year. Non-performing toxic debt is dragging the Italian banking system towards crisis. Monte dei Paschi is leading the charge. And now the Italians are without a recognised leader to help sort things out.
So, keep that in mind this new year. If things go sour… be sure to make reading Capital & Conflict every day your new year’s resolution (if you don’t already, that is).
Until tomorrow,
Nick O’Connor
Associate Publisher, Capital & Conflict
Category: Economics