Why we can’t trust the bank with our finances

“Let all men know how empty and
worthless is the power of kings.”

That is supposedly what King Canute said to his courtiers as he sat up to his knees in seawater on the beach.

This week I haven’t been able to get an image out of my head of the Monetary Policy Committee, with the waves lapping around their ankles, staunchly defending their “wait and see” policy.

I really don’t know how long one can defend a “wait and see” policy, in face of 12 consecutive months of above-target inflation, and the current figure standing around 1% above their predictions made earlier this year.

Every time that inflation comes in above the 2% target, Mervyn King needs to write a letter of explanation to the Chancellor. I would imagine that he now has a form letter that he just changes the date on the top of each month – and George Osborne must now have enough of these letters to paper the downstairs toilet of Number Eleven.

The concern is that to do anything that might compromise growth (like raising interest rates) would immediately swing the delicate balance the other way – causing deflation.

However, the MPC seem blind to the fact that we are experiencing intense inflationary pressures from international sources – which aren’t affected by our domestic slow-down.

Inflation looks here to stay

The CPI inflation figure that’s been banded about this week is 3.3%. However, this doesn’t accurately reflect the inflationary pressures that fall on the everyday man in the street.

The RPI is a better gauge of this – it measures goods and services bought by the vast majority of UK households, and includes housing costs (so is affected by interest rates). And the RPI is currently standing at 4.7% – which is the real speed at which our £s are losing their value.

If you’re one of the many employees who have a wage freeze, or if you’re living off a nest egg, 4.7% is the real rate at which that money is diminishing each year.

And if you’re waiting for the Bank of England to do something about it – you’ll probably be waiting a long time.

Which means that as investors – we’ve got our work cut out.

How we’ll be making our money work harder in 2011

1. Looking for the best and most consistently successful strategies out there, and hunting down the most useful trading tools.

I’ll be reporting on how trading strategies are faring – letting you know the kind of results they are bringing in.

PLUS, I’ll be adding to our archive of trading tools and resources that make your work that bit easier.

AND, you can expect more exclusive reports on hedge funds, spread betting, and more …

2. Managing our money across those strategies to maximize returns.

It’s an unfortunate truth, that where most traders fall down, is money management. That’s why it pays to devote time to this less-glamorous aspect of trading.

One of the most important things to remember about making money – is to not lose money. No trading strategy will perform at optimum levels all the time – it simply isn’t possible. But by careful money management, that shouldn’t matter to the investor.

Whether you’re playing the markets with a handful of different strategies, or you’re just finding your way in the markets with one system – by limiting the funds you invest in any one area, we can look for consistent long-term returns (rather than the “fast buck” offered up by so many get-rich-quick systems).

So here’s to a challenging, exciting – and very profitable – 2011!

Trader’s Bulletin over the holiday period

A reminder that Trader’s Bulletin Weekly and Thames Publishing HQ will be closed from Thursday 23rd December until Tuesday 4th January. Personally I do not trade over the holiday period – largely because the reduced market volumes make it very unpredictable (but also because I reckon that I deserve a holiday – and I’m sure that you do too!)

Regards,

Mark Rose

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