On a personal level, it was more of a food crunch than a credit crunch…

It was the spare ribs last night… a favourite, but demanding in terms of mastication. So there I was happily munching away when suddenly… crunch! Perhaps ‘crack’ would be more accurate, as an upper molar succumbed to the pressure. At times like these it’s fortunate to have the necessary help close at hand, which is why I’m grateful my dentist lives three doors down.

Talking of dentists makes me think of something I was reading by Nassim Nicholas Taleb (a personal hero now, after only a few pages!) in his book The Black Swan. He recounts begin advised at Wharton Business School to do something scalable in his work. ‘Scalable’ meaning you could generate more income without commensurately more effort unlike, say, some professions such as dentistry. Their earnings are limited by the amount of people they can see who have broken teeth. He dismissed the advice, but wound up in an investment bank on Wall Street anyway. An investment bank must be hard to beat as a scalable business. As Taleb says, it takes as little effort to buy 100,000 shares as it does to buy 100.

But I digress. What happened this week? Well, it was something of a week where ‘past performance is not necessarily an accurate guide to future results’. UK employment levels have never been higher, yet job cuts in retail and the City are starting to mount. In the City 1,300 jobs will go from UBS and Merrill Lynch, and late on Friday Citigroup announced cuts of 9,000 staff worldwide. Home catalogue and educational supplies business Findel plc had a record year last year, but dished out a profits warning on Thursday and duly saw its shares punished.

Prime Minister Gordon Brown has been in the US. His visit coincided unfortunately with that of the Pope and he’s not Tony Blair, so he was ignored to some degree according to press reports. He’s been talking to the investment banks and asking for transparency so we can all know the worst and get on with our financially-squeezed lives. Around $250bn in subprime related losses has been disclosed, to date, from a total estimated by the IMF and others to be in the region of $1trn.

The unfolding impact of the credit squeeze has seen three-quarters of the mortgage deals available last summer withdrawn, according to the Daily Mail, though mortgage lending rose 5% in March over February. It is also expected to see a huge rights issue announced next week from Britain’s second largest bank, RBS. It is thought £10bn will be asked of shareholders. A sum approaching a third of its market value.

---

Recommended

30-year City veteran blows lid on secret that could TRIPLE your investment returns!

It’s a secret those in-the-know call the “Invisible Stock Market’.

Brokers, fund managers and financial advisers NEVER tell you about this kind of investment.

But this guy tells you three specific ‘invisible market’ stocks that he believes will soar in the months ahead… even as panic and uncertainty grips the financial industry.

Don’t waste any time. Click here for the full report

Forecasts are not a reliable indicator of future results. Your capital is at risk when you invest in shares; never risk more than you can afford to lose. Please seek independent financial advice if necessary. Fleet Street Publications Ltd. Customer Services: 0207 633 3600.

---

London equities have had a positive week and recaptured the 6,000 level, in what is widely seen as a bear market rally. Commodities continue to find higher ground on tight fundamentals. Oil hit $115 this week, as a Russian oil executive says Russian oil has peaked. Further jitters were added on reports Nigerian production could fall by a third by 2015. There the problem is less one of supply than funding with Big Oil – Shell, Exxon, Chevron – finding an unreliable partner in the Nigerian government.

Gold remains popular as a hedge against bubbling global cost-push inflation driven by ever higher commodity prices and dollar weakness. It traded at $935 late on Friday. Food shortages continue amid panic breaking out among importing nations such as the Philippines and Bangladesh who are struggling to secure necessary supplies. One in the eye for Ricardian economics of specialisation and competitive advantage. These nations if they have any sense will want to be self-sufficient in future. Rice hit a record $1,000 a tonne. Wheat, maize (corn), soybean etc. are similar stories of higher prices. With maize (corn) it has US biofuel demand helping it along.

On the currency markets, the dollar is weak and so is the pound, except against the dollar. The euro continues to strengthen and inflation ticking up to 3.6% will dampen hopes for an interest rate cut and do little to weaken it in the short term.

Finally, there is no sermon from Peter this week as he is away on a well-earned break. Okay, gotta run. The dentist’s chair awaits. Oh joy.

Enjoy your week-end.

Regards,

Rob Mackrill
The Daily Reckoning