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Round up November 2008

December 2nd, 2008 by jamie | 0 Comments | Filed in Daily News, Debt, Global Credit Crisis, Recession

Trading in Woolworth’s shares was suspended today as the company is locked in talks over debt restructuring that may see the high street favourite go in to administration.

Woolworth’s employs almost 30,000 at stores all over the UK.

Another 1500 jobs are in jeopardy at fitted furniture firm MFI is also teetering on the brink of administration in a row over unpaid rents with landlords. 

Other big names in trouble are the UK’s biggest tile and wooden flooring retailer Topps Tiles.

The 320-store chain has seen like-for-like sales fall 18.3% in the past seven weeks. The company has quoted a 27% fall in profits and axed dividends. Topps shares fell 2.5p to 18. Eighteen months ago they were changing hands at 300p.

Bosses at Hull’s KCOM – famous for the city’s cream telephone kiosks – put the company up for sale after shares slumped 80% in the past year, valuing the company at £65 million. When the city council floated the company in 1999, giving local residents share priority, the business was valued at £180 million.

The Government now owns about 58% of the Royal Bank of Scotland at a cost of £2.7 billion to the taxpayer after plans to raise cash from shareholders stalled.

Royal Bank shares closed at 53.6p, a 2.8p, or 5.5%, rise on the day.

The taxpayer is also footing the bill for 43% of the Lloyds TSB group

Lloyds TSB, which is fund-raising at 173.3p a share, closed up 13.3p, or 9%, at 160.9p.

The US Federal Reserve pumped another $800 billion in to the mortgage and credit markets boosting confidence in the economy.

The markets on both sides of the Atlantic closed up yesterday – with the FTSE100 ending up 18 point at 4171 and the DOW up 36 pts at 8479.

The Pound finished the day at £1.535 against the US Dollar and £1.185 against the Euro.

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Don’t let the great VAT con dupe you!

December 1st, 2008 by jamie | 0 Comments | Filed in Daily News, UK Banks, VAT

The Great VAT Con comes in to effect today – most people believe that a 2.5% cut in VAT from 17.5% to 15% means a £2.50 drop in prices for every £100 spent at the tills.

Let’s demonstrate the con with some basic maths – £100 plus 17.5% is £117.50.

A 2.5% cut in VAT to 15% is not £100 plus £15 equals £115.

Why not? Because that 2.50% cut only chops £2.10 off the price.

So the great giveaway to encourage extra spending is not so great, and worst of all, the Chancellor Alastair Darling has spun the move to make everyone feel better in a bid to loosen purse strings.

The problem is the Government is following the doctrine of Keynesian economics that put us all in this mess in the first place. The great economist John Maynard Keynes talks about the ‘paradox of thrift’.

Basically this means people stop spending and hang on to their cash in a recession because they want liquid assets handy in case they fall on bad financial luck – as if a recession wasn’t bad enough luck.

This makes the recession worse because businesses can’t sell their products, so output declines even more, making the recession worse. The economy is stuck in an ever-decreasing circle until circumstances allow people to spend again. 

That’s why the Government wants us to spend their way out of recession to counteract the paradox of thrift.

The question is, have they done enough to kick-start the economy or will the whirlpool continue to suck in jobs and businesses? One the whole, it looks like too little.

After a week of more bad news in the High Street, with Woolworth’s and MFI going in to administration and B&Q closing nine trade depot superstores, the John Lewis partnership’s weekly trading report shows a continuing downward trend.

For several weeks running, the report has showed a consistent 13% year-on-year fall in sales.

Other big names teetering on the bring are electronics conglomerate Curry’s and PC World after announcing £15 million losses, Clinton Cards, Land of Leather, and DIY giants Focus and Fads. 

The car industry worldwide is gripped by crisis as all the big carmakers in the US, Japan and Europe undertake cost-cutting exercises. 

The ‘nationalisation’ of the Royal Bank of Scotland completed last week, as the taxpayer now owns just less than 60% of the bank.

On the housing front, Nationwide Building Society released figures showing house prices had fallen only 0.4% in November – a 13.9% year-on-year drop.

The markets were a little more forgiving last week.

The FTSE100 continued a slow recovery from the five-year low of 3665 on October 27 to finish last week at 4288 – a rise of 15% over the month.

Wall Street bounced back from 18.5% from a 12-month low of 7449 the previous week to close at 8229 on Friday.

On the money markets, the Pound strengthened slightly to £1.49 against the US dollar. Against the Euro, the Pound moved slightly from £1.18 to £1.19.

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The Central Bank Swindle – Part Four

October 31st, 2008 by admin | 0 Comments | Filed in Central banks, Daily News, Loans, Money Management, Recession

The government must eventually tax the citizens to repay the money it owes to the central bankers. As time goes on, the tax burden grows and grows until the peasants can’t be taxed anymore and the government can’t borrow any more. So you will go to work…work 5 days a week…and at the end of the week, a bigger and bigger chunk of your earnings will go to repay the debt that the central bank says you owe to it. You work for the central banks mystery shareholders. What…didn’t they tell you?

If you have wondered why your taxes are rising and the services you get seem to be getting worse and worse as you get hit with more and more punitive charges from the state for everything from fuel to fines to everything else…now you know. The money has to go to the central bank’s shareholders.

But where does all the money that the central bank makes in profits go to? Well, like any bank, it goes to the shareholders. The Treasury of the UK owns half of the bank of England and the other half is owned by other parties, who are not publically known. So these guys collect half the interest on our national debt, which they supply out of thin air and have a legal monopoly on. WE can’t buy shares in the central bank….if we could, I’d sell everything I own and do it! 

 The second is that the central bank is a fantastic business model and an exceptional means of social control. All you do is create a few bits of paper and send it to the government and then wait until new houses, yachts, bars of gold and anything else you want comes flowing back in through the door! 

More importantly, you can regulate the economy through the creation and destruction of credit, the imposition of tight or lax lending standards over the population. Best of all, you get to play the stock markets and the property markets knowing the future….because you create it! What a wonderful scam…I just wish I’d thought of it first. The best part is….no one knows anything about it….people are completely oblivious to the existence of the other shareholders and the money creation process. I remember sitting in economics class when I was 15 having parts of this explained to me and I immediately thought that I had to become a banker…so I did. Now…don’t tell anyone!

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Cameron calls out Gordon Brown

October 30th, 2008 by admin | 0 Comments | Filed in Daily News, Energy Prices, Money Management

David Cameron called Gordon Brown today on his ill fated plan to spend his way out of the current economic crisis. He went as far as to call Gordon Browns plan a con trick….and he is exactly correct.

You see, the government have been telling quite a few fibs lately. We have dealt with the central banking fib that is the most closely guarded secret in society. Most people have no idea how money is created, what inflation is, where it comes from, where their tax pounds go and that there are shareholders who directly benefit from those tax pounds eventually.

  • But Gordon’s also been caught in a few other fibs. “The business cycle is dead”. Erm….what do you think now Gordon?
  • “We don’t need to save any money because there will never be a rainy day”….good call buddy.
  • “The banking bailout will work”….jury’s still out…but the past record doesn’t inspire confidence.
  • “Selling a big chunk of the UKs gold reserves was a smart move”….not nearly as smart as a long walk off a short peer would have been Gordon.
  • “We didn’t see the crisis coming”…but everyone warned you about it. Work on those listening skills.
  • “The economy is in safe hands”…completely laughable looking back.
  • We will fix the pension system by taking it for £5bn in tax and make it easy to invest in pensions again and ensure workers have some dignity in retirement….yeah.

Mr Brown…you have no one to blame but yourself. We gave New Labour a chance and it turned into Old Labour…complete with Keynesian drivel…before our very eyes. Now we are paying the price for trusting you again. That price looks like a winter of discontent…a return to boom and bust and we have a poorer old age, a huge mountain of debt and less gold than we had before you arrived.

“Things can only get better” – We all really wanted to believe you…but this was a cruel lie. Go and read an economics text book and put down that public relations manual….for once in your political life.

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Flash Gordon …. loadsamoney in disguise?

October 21st, 2008 by admin | 0 Comments | Filed in Daily News, Recession

“He saved every one of us!”…or did he?

Nothing like a good old fashioned war or a crisis to shore up the public’s perception of an unpopular leader. It works every time. The one thing I’m surprised about is that Flash Gordon hasn’t evoked memories of the blitz and a “we’re in this together” message. Except, we’re not all in this together, are we? MPs, even if they lose their jobs, have the best pension plan in the UK bar none, they have lecture tours, board seats and lucrative after dinner engagements. The same boat?…it isn’t even the same ocean!

Tony Blair has just bought a near £6m pile in the country. I’d like to know where an ex PM earning about £200k a year gets the cash to do that? It’s 30 times his income and he’s too old to get most traditional mortgages. If his wife is earning about £500k a year, it’s still 8 times their joint incomes.

No doubt Gordon Brown will get the same type of country pile once he departs Downing Street and hits the lecture circuit for a while…which he no doubt will. He has been hailed as the global architect of the financial system rescue plan and has in the process made Bernanke and Paulson look like a pair of clowns…with big shoes and big mouths that fit each other beautifully. What good the bailout plan does remains to be seen…but there are plenty in the city who think this type of intervention does far more harm than good.

But make no mistake, the PM and the MPs will be sitting pretty after all this is over. Sure, some of their investments are suffering in the same way ours are, but they have implicit tax payer guarantees on their pensions at a time when everyone else is looking at their private pension pot with incredulity.

Flash Gordon….more like Harry Enfield’s character from the last boom….loadsmoney!

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The next stage of the credit crisis

October 13th, 2008 by admin | 0 Comments | Filed in Daily News

If you think the credit crisis is solely linked to the financial sector, you are probably wrong. Sure, the financial sector is the start of it, but consider what will happen to the economy when credit lines that companies have depended on for many years get pulled as the company has to meet payrolls in a declining economic environment. The factory doors will shut and people will get laid off.

Take a small town where there is one major employer which provides 500 jobs. Should that employer go to the wall, there is an effect in the local economy hitting local businesses, retailers, accountants, lawyers and other sections of the local economy. Eventually, if the jobs aren’t replaced, the local community will disintegrate and disperse and schools, doctors and government offices will close. In addition to that, the treasury will receive less tax revenue and the state will have to pay Unemployment and other benefits to the workers until they find new work. This can’t be allowed to happen…but the cure will be worse than the disease.

Obviously, this is bad and the government, on top of bailing out banks, could very shortly be bailing out companies as well. Phew, you think…that’s OK then. Well, not really, because the government doesn’t have the money to cover the payrolls for all these companies whose bank is suddenly unwilling to lend to them in the way that it has lent for years. The answer will be to borrow money or just print it. Once that happens, we all suffer as the currency loses it purchasing power and inflation starts to go up. Yes, inflation will fall initially as the global economy slows and oil price drops filter through. Commodity prices will come down as well…but eventually, the effect of all that extra currency will filter through to the purchasing power of the currency at home. It HAS to be this way.

The bailouts will be paid for…by us all…with inflation….and a de facto robbery of people who hold British pounds.

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Savings Accounts

October 5th, 2008 by admin | 0 Comments | Filed in Money Management, Saving, UK Bank Accounts, savings accounts

If you have money to spare out of your wages after paying your bills, consider saving some as a cushion for unexpected bills, like repairs to your house or car.

Savings accounts come in lots of packages. The main ones are:

· Bank and building society accounts
· National Savings and Investments
· Credit union accounts
· Individual Savings Accounts (ISAs)
· Christmas club and hamper accounts

Money in a savings account generally earns a higher rate of interest than excess cash in a current account.
Points to watch

Savings accounts are a good way of earning interest on any small cash surplus in the short term – say up to five years.

Also consider inflation may eat in to the buying power of your savings.

If you want longer-term savings, then look at alternative investments like a pension or unit trust. The best way to do this is to talk to an independent financial advisor.
Also beware of some potential pitfalls to savings accounts:

Regulation and compensation
The Financial Services Authority (FSA) regulates banks, building societies and credit unions. This means your money is safer if the account provider collapses because the FSA operates a compensation scheme for savers with less than £35,000 on deposit with any single lender.

Risks
Christmas clubs set up by companies or individuals do not pay interest on your savings and are not protected with a compensation scheme if they fail. Savers in these schemes are often limited to spending their money with the shop or hamper running the savings account.

Tax
Income tax is deducted at source on savings at 20% – but some accounts, like ISAs and National Savings are tax-free. If you pay tax at a higher rate (40%) you may have to complete a tax return and pay additional income tax.

Penalties
Some savings accounts may offer a higher rate of interest than others, but to get this rate you may have to tie up a minimum amount of cash in your investment or pay a fee if you take your money out.
Despite these points, savings accounts are low risk investments, provided you steer away from unregulated providers who can go bust and leave you with no way to claim any money back.

Opening an account
Don’t forget many savings accounts offer better rates if you deposit money by post or over the internet.
Many money comparison web sites show the current best deals to make shopping around easier.

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