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  • Writer's pictureMark Watson-Mitchell

Inflation – yes it really is running away and it will get worse

Towards the end of last November, I wrote that the economic recovery was pointing to levels different to those of the Bank of England.

They were stating that the rate of inflation was around 5%, when even the EU rate was 6.5%. My suggestion at that time was those figures were well under the true levels.

Prices were rising fast, with upward moves of 10%, 15% even 20% higher, being more than commonplace.

And that was then – just look at it now

Set aside any worries about Eastern European conflagrations or just how we are doing in the Beijing Olympics.

Today’s biggest worry for every housewife and businessman is what is happening to prices.

Inflation is now higher than it has been in the last thirty years.

With fuel prices looking very toppy, $100 a barrel for oil is seen as a new standard level in due course. Heating and transport costs are going through the roof.

Where do I see any hope?

Well like holding a plastic football being held down by your feet at the bottom of the swimming pool, its sudden release sees it explode well above the surface in reaction, before falling back below the surface again. It then bounces back above the surface, but not so fast or high, before then resting on the surface – before someone else takes the ball again and the cycle is repeated.

That is just what happens to market pressures on prices of any sort. It takes events to see a new price level being created and then endure gyrations around that new level.

Give it time and markets adjust and so do we.

I am not concerned about prices getting higher

And those that complain and moan should stand back and consider the global pandemic of the last two years – the various ways in which we managed to live and cope with it, together with the exorbitant costs that ensued in the protection of life.

Personally, I am very pleased with having had the ability of preventive injections and the following booster – probably much to my wife’s distress I am still very much alive.

Living with the higher prices

We must stop whining about the decisions that were made ‘on the run’ by the Government and its advisers – I would not like to have had to make such decisions, no matter what advice was being offered to me by all and sundry.

Yes, I suppose I would have been an indecisive coward – so no doubt you are very glad that I was never elected Prime Minister.

We just have to live with new price levels and do the best that we can from now onwards.

So where does that leave us?

The market may well get it wrong from time to time – but generally it makes the right assumptions to ‘value’ – that is the same for gold, silver, copper, sugar et al - no matter what is being dealt in by its traders.

It may take time to be realised but sense will always prove through.

Stay away from unproved ‘early stage’ and others

Do not get tempted to invest in ‘early stage’ or SPAC-type situation stocks – the hype is generally far greater than the reward could ever be.

As for ‘super fit’ bare-chested entrepreneurs, friends of Number Ten, they too are further examples of ‘pumping’ by highly incentivised corporate brokers, who blithely dump their clients into lines of stock that may be the media ‘flavour of the month’ despite the true merits of the underlying business.

Deftly steer away from ‘whizz bang’ stocks

Let those with deep ‘gambling’ pockets take on playing in those stocks – they can be very dangerous and severely dent investor wealth – generally to the advantage of ‘third party’ players who help to manipulate the scenario.

As always – my edict is that readers should stick to the UK Small Capital ‘Value Stocks’ – they offer a good buffer as markets continue to suffer from convulsions.

(Article published on 24 November 2021 – ‘Amazon calling’ – What does the delivery drop-off cycle mean for equities?)


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