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Investing ideas in a high inflation economy. #financefriday

Banks have always been mean when setting interest rates for savers. Inflation is running at over 10% and savers are lucky to get 3% on their savings. House prices are going up at over 10% yet mortgage payers pay a fraction of that rate on their mortgages. Banks make money on loans and mortgages so favour those customers but when a logical analysis is done, we actually find that in real terms banks are losing money on loans and mortgages and savers are being robbed blind.

In theory, those in the buy-to-let market should be doing well, but they are used to ultra-cheap mortgage rates and now have cash-flow problems. They would be laughing all the way to the bank if they hadn’t been greedy and overstretched their line of credit.

This week saw Rolls Royce shares soar after posting results. This was the same company whose CEO said the company was a “burning platform” just weeks ago. Was he trying to trash the share price? After that comment, I got out and bought Centrica instead. At least I’ll get dividends with Centrica but I did miss out on the 23% rise in the share price of RR. RR increasing its profits by 57% is hardly a “burning platform” but we have to ask, can we trust this new CEO not to do anything else stupid?

The FTSE 100 is still on course to rise to 8,000 but slowly. I made some good choices in buying ABF, BAE, BEZ and GSK and I’m making a profit on Standard Chartered which I bought last year. One disappointment is Reckitt but it is fundamentally a good company. I made a fundamental mistake buying Marston’s and was swayed by my partiality to Bank’s beer. They do have assets that are valued above their NAV though so I think it is a good long-term investment.

Crypto has an awful reputation now, and there has been more fraud, with some crypto companies being total frauds. Bitcoin is around $23,500; if you gamble on crypto, BTC is the one to buy. Make sure you buy through a reputable service. For those in the UK, now is the wrong time to buy because the pound is low against the USD.

Overall, investing in stocks is still better than taking 2 or 3% interest from the bank but don’t expect the market to do well for a while. Now is an excellent time to buy defensive stocks, mainly in the FTSE 100. Look for cash-rich companies that are doing share buybacks. We need to get a return of over 10% now just to stay ahead of inflation.


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