More than anything, the key factor propping up the entire financial edifice right now, all across the world, is low interest rates.

But despite the apparent hopes of our central banks, this can’t go on forever. as MoneyWeek editor-in-chief Merryn Somerset Webb pointed out on her blog this week.

Why not? Well, for one thing, “if they do you’ll get inflation. Lots of it”. The fact is,  “the UK spent the last 40 odd years in a battle against inflation, a battle we aren’t so good at winning”. Even in the past six years, “consumer prices are up 20% or so”. And don’t forget “the fast rise in the stockmarket, the price of art, and now, again, of houses – that’s inflation too”.

Of course, Bank of England chief “Mark Carney will hold interest rates down as long as he can”. But however hard he tries to delay, eventually “inflation fears – brought on by a rise in borrowing, lending and the money supply – will mean he can delay no more”.

More importantly perhaps, raising interest rates is just a matter of fairness. There are some big winners from current policies. These include “the very indebted – and in particular those with mortgages they couldn’t dare to dream of servicing at normal interest rates”.

There’s also the “zombie companies” – the as many as one in seven firms who are “currently generating only just enough cash to pay the interest on their debts.”

But there are even more losers, reckons Merryn: “anyone who wanted to buy a house at the right price or to get a return on their savings”, and people who have to buy, or are near to buying, an annuity right now.

So while rising rates may push some mortgage holders and firms over the brink, “savings rates will rise too – giving those with cash savings something of a return on them”. Overall, there will be, “more winners than losers. Which is surely as it should be”.

Unsurprisingly, this has generated a lively debate in the comments section. Alec agrees that, “savers greatly outnumber borrowers and they are going to have their say in 17 months’ time on the antics of Cameron, Osborne and the Bank of England”.

Bond Sales liked Merryn’s “thought-provoking” piece, but noted that: “into my sixth decade I have realized life is not fair… in fact my children were taught at an early age that the only statement that would get them sent to their room was the bleat ‘that is not fair’. I spent 33 years in the fixed income market and the only abiding lesson is how little you know.”

Kicking up a controversy over fracking

Bengt Saelensminde’s recent article on fracking in The Right Side email generated a lot of feedback from his readers.

So last week he tried to address some of their concerns. The main objections Bengt received were about the environmental impact of fracking. This “debate comes down to priorities”, he reckons.

“The government has commissioned considerable research on the topic of safety and environmental impact”. While it has obvious pro-fracking motives, these have “been done by respected bodies”. Overall, “they say that given adequate regulation, then they believe contamination risks are tiny”.

And even if it does have some sort of negative impact on the environment, “just about everything does”. Besides, there are big risks to “doing nothing”. While “energy doesn’t consume too much of my income”, this is clearly not the case for most people, “especially the most disadvantaged in society”. There’s also the very real threat “of the lights going out” without fracking.

Of course, one big risk of going ahead is that it might simply “produce more cheap energy that will allow us, once again, to ‘pee away’ yet another resource” as we did with oil. So Bengt thinks we should follow his home country of Norway, where they “refused to allow much of the oil wealth to enter the real economy” and instead “assembled the world’s largest sovereign wealth fund”.

Banned from investing domestically, “its aim is to provide a savings pot for when the oil runs out”. The Norwegians also use taxes to make sure that investment in energy efficiency and renewables still takes place.

The big lesson from this is that, “the decision to frack should be made alongside a long-term energy strategy, or plan; a strategy that has energy sustainability at its heart”. While many politicians “aren’t known for their long-term planning”, such thinking is “a darned good idea”.

As you might imagine, not everyone was convinced by Bengt’s arguments – but  if it’s got you interested, you can learn more about fracking in the UK by reading this report from the Fleet Street Letter .

Avoid getting burned by churning

One of the biggest problems investors face is coping with their own psychological quirks – our instinctive behavior can be useful in some circumstances, but when it comes to investing, it usually leads to us shooting ourselves in the foot.

Dr Mike Tubbs tackles the problem of overtrading in his newsletter, Research Investments. Mike is a firm believer in being patient. When it comes to the Research Investments portfolio, “we believe in the stocks we select and rarely change our mind quickly; we want to give them time to prove their true worth which most of them do”. It’s important to do this because “stocks in the high-risk portfolio can be quite volatile and go down significantly before rising again by 100% to 200% or more”.

However, the biggest reason for trying to avoid over-trading is “the costs involved in ‘churning’ a portfolio”. As Mike points out, some actively-managed “funds change up to 80% of the shares in their portfolios each year”. And nearly “all of the biggest churners perform below average”.

So while ”the churning may have been done to try and put right poor initial stock picking decisions”, the shares selected to take their place “were little better”. In contrast, Mike’s more patient strategy seems to be working. “Fully 73% of all our selections from 2009 to date have outperformed the FTSE 100 with 34% outperforming it by more than 50% and 22% by more than 100%”.

Of course, past performance is no guide to future performance. But if you want to find out more about Mike’s newsletter, you can do so here .

What you can learn from Andy Murray

“For many years the Wimbledon Tennis Championships reminded the world of Britain’s prestige, and its total inability to win at tennis”, writes David Thornton in his free email, Penny Sleuth .

Then, this summer Andy Murray won the championship. As well as winning silverware, the tennis champ “robbed commentators of a favourite analogy – ‘Wimbledon syndrome’ – where Britain provides the wonderful venue but foreign competitors run off with the spoils”.

However, in some cases foreign ownership can be a good thing. In the 1970s the British car industry was a “national joke”. State ownership and poor labour relations “resulted in failure and a controversial demise”. Things only started to improve in the 1980s, “with Japanese manufacturers opening new factories, backed by innovative deals with the labour unions”.

At the moment, Tata of India owns Land Rover, while the Germans control Rolls Royce and Bentley. As a result, “UK automotive output is on a firmly rising trend and exports are at an all-time high”. This is good news for “many suppliers, component manufacturers and support businesses.”

One such firm is Wiltshire-based AB Dynamics (Aim: ABDP). which focuses on brakes, steering and suspension. Thanks to ever-tougher safety legislation, there is “increasing demand” for AB’s testing equipment, especially the automated systems that enable testing to be “carried out systematically to produce consistent data”. Growth in demand will also come geographically as AB extends its reach.

“AB Dynamics provides a good example of a small British firm’s ability to compete in world markets by drawing on our tradition of engineering skills”. Just as “Andy Murray shows it can be done in sport”, it seems that “AB is doing it in the global car industry”.

In case you missed it, David has also been writing about a huge story – ‘big data’ and its impact on sectors from medicine to mountain rescue – for MoneyWeek magazine. And if you want to read an in-depth report on what David describes as the ‘Sixth Revolution’, check it out here .

The US market is overpriced – but there are still some things worth buying

In yesterday’s Money Morning, I took a look at US shares. They certainly look both “overvalued compared to the long-term” and “pretty expensive in the short-term. As a result, “you’re taking a big risk by piling into a general tracker or active fund with lots of exposure to the US”.

There are several signs that we might be nearing a top. Robert Royle of Smith & Williamson North American Trust, for example, “is worried by the amount of margin debt that investors are taking”. Meanwhile, corporate profit margins are “at record levels”. While this “might sound good”, experience shows that “the only way is down”. Indeed, “the long-term average is more like 6%, compared to today’s 9.3%”.

It’s impossible to predict the exact timing of any crash. However, while it might be possible “to get out at a higher point… this is a very risky bet”. It “makes far more sense to simply invest in something else instead – something that actually represents some sort of value”.

The good news is that “not every US-related company is ridiculously overpriced”. Outerwall (NASDAQ: OUTR) runs vending machines and coin counters, while London-listed Rentokil (LSE: RTO) could profit from America’s bed bug boom – you can read all about it here if you missed it yesterday.

• The Right Side and The Penny Sleuth are unregulated products published by Fleet Street Publications Ltd. The Fleet Street Letter, Red Hot Penny Shares and Research Investments are regulated products issued by Fleet Street Publications Ltd. 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. 0207 633 3600.

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