Hi everyone I am back after riding the rough seas last week in Brighton. I now have total respect for the sea and all those who risk life on the high seas. Our team bonding event was let's say an experience.
Now back to the economy and the run up to Christmas which is just a few months away. Apart from the woes of Northern Rock and the sub-prime fallout out retailers are now sending out warnings of a slow down on the high streets. Curry's who are owned by KESA the Anglo-french electrical retailer are very nervous as profits slumped £10 million to £38million, a wet summer and consumer debt woes have been cause for concern however with sterling so strong bargains are plenty, perhaps that trip to New York can now becomes a reality remember your allowance its around £145 before you start paying tax and duties.
The Dollar's problem persist and the half a point cut last week in US interest rates have not helped. The worry is that foreign investors will begin to cut the flow of money into US securities and shift to the oil rich middle east. This is the worst time for the US to be dependent on foreign inflows. The fact is Bush has allowed the dollar to fall to help the trade deficit, the problem long term allows Forex traders and investors to start a run on the dollar. What has happened is the shift in economic power has now moved to China Europe and the Middle east. Just last week oil-enriched investors started buying stakes in the London Stock exchange and the Nasdaq. Dubai bought 28% of the LSE,and 19.99% of the Nasdaq.You can bet the American authorities will take a dim light of this especially after last year'attempt by middle east investors to take over US Ports, this was blocked by congress due to security issues.
UK Banks have started reducing credit card limits and have been turning down new credit card applications as the credit cruch deepens. 500,000 Barclay card holders had limits reduced on concerns of debt and some card holders being stretched. The UK's consumer debt stands at £1.3 trillion pounds add to this the worry of bad debts, the housing slow down, expensive credit lending and consumer confidence.
The rate at which the Bank of England lends to banks stands at 6.75%, 1% above base rates so when they made £10 billion available for the money markets they found no takers. The bank expect recent market developments to reduce significantly lenders capacity to extend corporate credit over the next few months. If companies can't borrow you then have the risk of business confidence being hit also investment and jobs. Look for a cut in the base rate before Christmas.
On closing be careful what you wish for, Roman Abramovich's parting of the ways with head coach Jose Mourinho could come back to bite him in the rear. Why sack your most successful head coach who has won more honours in three years, then what the club did in 100 years.Tinkering moneymen and football don't mix remember Michael Knighton?
The man who claimed he'd received a telepathic message from a UFO saying "Don't be afraid Michael" he kicked out manager Mervyn Day at Carlisle and installed himself as coach. Result? United got relegated to division three, Roman you have been warned....
Wednesday, September 26, 2007
Tuesday, September 18, 2007
Personal debt crisis still lingers
OK, Bernanke cut the interest rate today by a full half a point but will it be enough? Lehman Brothers revealing losses of $700million due to the fallout this led to a 3% fall on profits but lower than what the experts expected. Shares rose on the news of the rate cut but the under lining problem still exists debt!!! As these mortgage rates reset in early 2008 it will lead to more turmoil in the housing markets. People just don't have the extra money so that new car, fridge, holiday,Plasma TV will be put on hold, retailers will see a slowdown as I see a consumer led recession. Oil prices up, so gas and heating will go up also air travel. We are in a viscious circle and the Atlantic Hurricane season has not even ended yet. Wheat prices are also up hitting $9bushel so what's really going on? The era of cheap money is coming to a end as the debts mount up as pay rises have not really kept up with the cost of living.
The UK now charges £650 for naturalised residents to file for citizenship it use to be £150, a whopping £500 pound increase, gas prices in the UK are around the $7.50 a gallon added to that the tax burden. The UK economy is built on borrowed money and housing, the baby boomers who lead a life of saving are being replaced by a generation who borrow, and borrow consumer debt is at a worrying £1.3 trillion pounds we are a generation who likes to live beyond our means. The pawnbrokers and Hock shop are seeing a huge increase in money being borrowed as credit becomes harder to get, and the stigma attached to poor people is simply not true a lot of middle class folk are just as likely to hock a wedding ring for cash.
So where do we go next? The Fed and BoE will use lower interest rates as a tool to steady the financial markets and consumer spending with Christmas just 3 months away but with this huge debt hang over don't expect lavish presents this christmas. Try and find a institution that gives a good rate of interest for your hard earned money.
Northern Rocks queues may have abated but this does not alter the fact that public confidence in politicians and bankers is at a low ebb. Banks do go bust, long gone, too is that relationship with the bank and its manager,so people will hoard cash and move money around in the fear that more collapses are near. What we need now is a period of calm Bernanke cutting the rate today goes some way to helping but runs the risk of fueling inflation and recession. On closing in our real world A total of 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in the same month a year ago.
The UK now charges £650 for naturalised residents to file for citizenship it use to be £150, a whopping £500 pound increase, gas prices in the UK are around the $7.50 a gallon added to that the tax burden. The UK economy is built on borrowed money and housing, the baby boomers who lead a life of saving are being replaced by a generation who borrow, and borrow consumer debt is at a worrying £1.3 trillion pounds we are a generation who likes to live beyond our means. The pawnbrokers and Hock shop are seeing a huge increase in money being borrowed as credit becomes harder to get, and the stigma attached to poor people is simply not true a lot of middle class folk are just as likely to hock a wedding ring for cash.
So where do we go next? The Fed and BoE will use lower interest rates as a tool to steady the financial markets and consumer spending with Christmas just 3 months away but with this huge debt hang over don't expect lavish presents this christmas. Try and find a institution that gives a good rate of interest for your hard earned money.
Northern Rocks queues may have abated but this does not alter the fact that public confidence in politicians and bankers is at a low ebb. Banks do go bust, long gone, too is that relationship with the bank and its manager,so people will hoard cash and move money around in the fear that more collapses are near. What we need now is a period of calm Bernanke cutting the rate today goes some way to helping but runs the risk of fueling inflation and recession. On closing in our real world A total of 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in the same month a year ago.
Monday, September 17, 2007
Northern Rock on the rocks
Northern Rocks fall continues, 60% wiped off share value, £2 billion pounds withdrawn in 2 days the former building society now valued at £1.1 billion pounds. Fear and panic still in the high street as assurances from the Bank of England and chancellor of exchequer ignored by customers of the bank. Added to this the pound tumbles on fears of the economic impact, they could be forced to cut interest rates with the run up to christmas. The credit crunch fallout now hitting the UK financial services sector and not just Northern Rock. The BoE are loking for a suitor for the bank rather than have the bank go under, however any buyer would want assurances that they get access to funds promised to Northern Rock. Lloyds TSB, Royal bank of Scotland and Citibank are said to to be in talks with authorities.
This week marks the US Banks reporting third quarter earnings to the markets and admitting just how much billions of dollars the credit crunch is costing them. Lehman Brothers, Bear Stearns, Goldman Sachs and Morgan Stanley all report this week. Experts predict that the top ten investment banks could see around 40% or $25 billion wiped of profits. The subprime mortgage crisis has also reached motor loans with lenders seeing a rise in late payments and repo levels. Wall Street is worried that the same mortgage borrowers who are falling behind with their home loan repayments will also miss repayments on their car loans. Many of the banks that lent in the mortgage market are also providing loans for cars and facing added exposure to losses. However note it is far easier to repossses a car than a house so looks for a spike in car repossessions. Added to the economy woes is the real threat of an attack on Iran by the United States as reported byFrance's foreign mininster Bernard Kouchner we should prepare for war if a peaceful resolution cannot be found.
This week marks the US Banks reporting third quarter earnings to the markets and admitting just how much billions of dollars the credit crunch is costing them. Lehman Brothers, Bear Stearns, Goldman Sachs and Morgan Stanley all report this week. Experts predict that the top ten investment banks could see around 40% or $25 billion wiped of profits. The subprime mortgage crisis has also reached motor loans with lenders seeing a rise in late payments and repo levels. Wall Street is worried that the same mortgage borrowers who are falling behind with their home loan repayments will also miss repayments on their car loans. Many of the banks that lent in the mortgage market are also providing loans for cars and facing added exposure to losses. However note it is far easier to repossses a car than a house so looks for a spike in car repossessions. Added to the economy woes is the real threat of an attack on Iran by the United States as reported byFrance's foreign mininster Bernard Kouchner we should prepare for war if a peaceful resolution cannot be found.
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