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Osborne shares: sell now

After yesterday’s champagne-popping as the FTSE-100 rolled past the 6,000 mark, share prices surged, and the Tory press hailed the New Year as the turning point of recovery, comes the cold truth of the next day’s dawn.   There is a very real risk that a febrile recovery in the UK-US will be killed off by sharply rising commodity prices reflecting an inauspicious conjuncture of climate change impacts, unusually cold weather and fast-rising demand in Asia.   It will push up CPI inflation, and if that triggers a rise in interest rates, all bets are off.

Floods in Australia , drought in Argentina, wheat harvest disaster in Russia from raging fires, and winter kill in the northern hemisphere – with high prices perhaps propped up by specualtors too – make for a cat’s skein of shortages bumping up prices.   Coming on top of the 2.5% VAT hike, the surge in prices of foods, metals and oil are ominous and could choke off a febrile recovery.

The Government’s anxiety about this is exposed by Cameron’s seeking to resuscitate the ‘fair fuel stabiliser’ proposal that was raised in the summer and then quietly dropped for the daft idea it is.   It’s far too open-ended a risk when oil has already surged from $70 a barrel in the summer to over $90 now, is predicted shortly to hit $100, and given the excessive pressure from China-India’s relentless growth could reach the previous record of $147  in 2011.

Last year’s price rises of 20% for copper, 32% for soybeans, 47% for wheat and 55% for cotton are already enormous and must now herald a very bumpy ride for the 2011 switchback.   I wouldn’t like to be in Osborne’s shoes.

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