A wobbly old week on markets. Why? Inflation and Musk. Which sounds like a new aftershave for teenage boys.
People have been whispering about inflation for a while. OK – the idea of global prices shooting up as we were stuck at home going nowhere, spending nothing and building nothing might have seemed a bit daft. But if you looked ahead to the hatching of 2020’s economic chrysalis, it was always going to be true than as we started to venture out, hop back on planes, start the production line and spend spend spend– well all this stimulus was going to result in the head of steam that is inflation.
Yes yes ok but who cares……
Well – you do. It will impact your pocket, your ISAs, your pension and your mortgage.
As this head of steam builds up, the powers that be at the Bank of England get twitchy. Demand pushes prices up. Wages go up as fewer people are out of work so competition hots up. Left unchecked, inflation can end up in the crazy world of hyperinflation where a loaf of bread costs more one day than it did the next. So to give us all a massive money chill pill they put interest rates up.
Some are worried that the line on a graph of economic growth from 2019 to 2029 will look like the path of a tennis ball. On the floor last year. Sky high later this year and next. And then BANG the brakes go on as inflation nibbles, interest rates go up, boo hiss we stop spending and OOF the ball ends up on the floor again.
Translating this across to our investments, I wrote about the jump in commodities prices last week. More expensive oil and steel = more expensive stuff/hello inflation. Lower commodity prices announced today have calmed anxious inflation watchers temporarily. Watch this space.
Worries also in the US this week as inflation hit 4.2% - the biggest jump since 2008. If interest rates go up (remember the money chill pill), it’s more expensive for companies to borrow and grow, which can eat into revenues and profits and so shares can slump as a result.
Much slumping ensued across the world on Wednesday and Thursday as people got the heebie-jeebies about inflation. But things look a bit rosier today. I should think we’re in for this hokey-cokey narrative for some months ahead.
Inflation commodities YIKES out! Oh maybe not just yet stop worrying Horatio and BUY! In!
Mercurial Mr Musk
In other money news bitcoin fell by over 10% on Thursday because the automotive Wizard of Oz changed his twitter tune on bitcoin. Tesla will no longer accept the currency for its cars. He cited environmental angst as his reason. Recent estimates put bitcoin’s carbon footprint on a par with Singapore’s this year.
(For those confused about this bitcoin mining business...People with the time, patience and tools can run hardcore computer programs to essentially audit bitcoin transactions. If you verify 1MB worth of transactions and you are the first miner to successfully do this, you get paid. The concept is a bit like having solar panels and selling energy back to the grid. You do some work to help. And you get rewarded. Except with bitcoin, the mining is filthy nasty coal-y business and it takes whopping amounts of energy to do this.)
As much as I am intrigued by cryptocurrency which I think is here to stay, it’s hard not to be sceptical when a tweet from an odd bloke causes such carnage.
One of the newest recruits to Boring Money went home on Wednesday, having spent all day editing our new pages on budgeting apps for beginner investors, which largely tell people not to dabble in crypto unless it’s a punt and they can afford to lose it. He ignored all of this and bought £100 of Ethereum. Less the £5 trading fee it was £95. When he woke up on Thursday it had slumped to £82 so he bottled it and sold. Less transaction fees that was a 23% loss in about 13 hours. Nice one!
As well as teasing him I have sent him the £23 he lost and told him to open an account with Wealthify (they open accounts for those with just £1) and learn about investing in a calmer way!
We know that our readers want to hear more on crypto so we are working behind the scenes to help you find the best exchanges and wallets out there. If you have bought crypto, would you give us a quick review of the provider you used? Would be hugely helpful to be able to share the real-life customer experience too. We’ll give the best 4 reviews a £25 Amazon voucher.
Over and out for this week folks. We leave you with news of our first ever Boring Money webinar for our readers. We’ll be inviting you to join myself and various guests to unpick a whole host of topics. Our first webinar in June is being created to help women in their mid 40s to mid 60s who feel less well-informed than they’d like to be – but the thought of diving into this world feels a bit like signing up for a tooth extraction! If this sounds like you, jump on the wait list here and we’ll be in touch with the details. For a fun, jargon-free, no BS session. I will of course invite Brad Pitt…but no promises ladies.
Thanks all. Have a great weekend
P.S. As more readers write to us, sharing experiences of dealing with financial firms, or looking for solutions, we plan to publish more reader content moving forward. If you’ve looked for a good adviser, or moved platform, or investigated the best place for a drawdown pension, would you write an article for our site? As much as we do our research, we can’t replicate your experiences and I know they would be super helpful to many who have similar questions. Please contact Caoilainn if you’d be willing to contribute a piece for us?