Rain and Other Good News

Rain, rain don’t go away, and come again another day. After three months of no rain in the London area we certainly need more rain.

The news from BHP Group (BHP) this morning was also good with record profits, a raised dividend and a positive outlook for the future. The share price is up 4.8% today at the time of writing. I continue to hold the shares.

Meanwhile ill-educated politicians continue to call for a rise in the energy price cap as it looks like the typical household will face a doubling or more in their bills over the next winter. But there is a very good article published by the Financial Times by Cat Rutter Pooley headlined “The energy price cap is a relic of another era”. She explains that when it was first introduced, the UK energy price cap aimed to solve the problem of the “loyalty penalty” — higher prices for people who didn’t regularly shop around for a new supplier. What it wasn’t designed for is the conundrum we now face: unaffordable energy prices.

Government attempts to control prices ultimately never work. The suppliers of goods such as energy will not sell at prices that mean they lose money, or can earn less than they can earn selling the same goods elsewhere. It’s a world economy and it’s the world market price of gas that is inflating energy prices. We have already seen multiple energy supply companies going bust with the largest being bailed out by the Government (i.e. by us taxpayers).

What is Cat’s solution to the problem? She says: “The price cap as it stands isn’t a sustainable solution to problems in the energy market that are likely to endure for some years to come. Some households will have to adapt to higher prices. Extra efficiency measures will need to be introduced. It is hard to argue against introducing some form of social tariff for the poorest consumers akin to that which exists in the broadband market. In the short-term, some kind of assistance with bridging the affordability gap will be required given the price shock consumers already face. In the longer term, the price cap needs to go back to being a market backstop, not its primary feature”. I completely agree.

On another subject, it’s not often that one wakes up in the morning to find that medical research has found a solution that might help to keep one alive. That happened to me yesterday with the news reports that a way has been found to change the blood type of a donated kidney (see https://www.kidneyresearchuk.org/2022/08/15/transplant-hope-for-minorities-as-researchers-change-kidney-blood-type/ ). Differing blood types can prevent kidney transplants from volunteers and is a particular problem for black and other minority groups which mean they typically have to wait a long time for a transplant when transplants are a key to providing a normal lifestyle and a longer life by avoiding dialysis treatment.

I have had a kidney transplant for over 20 years now but I need another one soon. I have a volunteer donor but he is the wrong blood type. There is a way around that by a pooled matching system but being able to change the blood type of a kidney would be a great step forward. It will need some clinical trials before it can be widely used but it could be a real game-changer. The research has been funded by charity Kidney Research UK – please support them – see https://www.kidneyresearchuk.org/support/donate/

Back to financial matters. The AIC have issued a press release on the subject of the cost of graduate student debt which apparently is as high as £45,800. This high figure is putting off people from attending university and those already attending are not optimistic they will ever be able to repay the debts they incur.

More grandparents are helping to take the strain apparently which I can quite understand. With one grandson already at university and two more possibly needing to do so in a few years’ time, this is something to consider. Discretionary trusts and Junior ISA contributions are two ways we have tackled the problem but the AIC does of course suggest that investing in investment trusts is worth considering. They point out that a monthly investment of £100 in the average investment company over 18 years would have generated £59,018.

The message is to start saving for your offspring at an early age. See https://www.theaic.co.uk/aic/news/press-releases/debt-worries-weigh-heavily-as-a-level-results-day-approaches for more information.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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