Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Tuesday, September 16, 2014

The True Costs of Independence

As the consequences of a "yes" vote finally dawn, Britain’s banks have been laying plans lest there be a run on the banks' ATMs in Scotland on Friday after a "Yes" vote.

As such they have, according to the Independent, been moving millions of banknotes to Scotland.
Sources at major banks said they had been issuing clear instructions to their Scottish branches to reassure customers there was no reason to panic.

Aside from bank runs, and losses of corporate headquarters another cost (that has yet to be openly factored in/discussed) is the rebranding of Britain. The loss of the Union Jack will be more than just the flag flying above public buildings, but also its removal from all products currently sporting the image.

Add into that the duplication of bureaucracy and paperwork caused by a divorce of a 300 year old marriage, and you have some very large costs indeed.

I wonder if people really have woken up to the costs of this divorce?

Monday, September 15, 2014

Phones 4u In Administration

Phones 4u has gone into administration, after EE decided not to renew its contract (which has until September 2015 to run) with Phones 4u.

Vodafone also recently terminated its contract with the firm, as had O2 some months ago.

Phones 4u employs 5,596 staff across 550 stores in the UK. The company has a turnover of £1BN and made a profit of over £100M.

Sadly, even though the business in itself is successful, without network operators it cannot exist.

Why have the network operators pulled the plug?

Money, they are facing reduced profits as result of caps on roaming charges etc; as such they are seeking to eliminate the middle man.

Two days ago John Caudwell, the founder of Phones 4U, saw the writing on the wall, and launched a scathing attack on Vodafone.

Mr Caudwell, who sold Phones 4u for £1.46BN, is quoted by the Telegraph:
I believe they really acted very, very ruthlessly. I get the feeling it came as a shock to the whole organisation of Phones 4u and potentially gave them no time to try and find a solution. 
I feel desperately worried for the future of Phones 4u. It’s in a really, really grim place. 
As far I can see it’s a well operated business that in a fair world has every right to exist. But we don’t live in a fair world, we live in a world where you make what you can for yourself and it’s a bit dog eat dog. I think that’s what’s happening here.

There’s a lot of ruthlessness being applied and if the public actually felt strongly enough they know what they could do, they could vote with their feet and move their business to other networks.

I don’t believe it can be rescued without one of the networks coming back to the table. Unless the government steps in we’ll be witnessing what was a phenomenal business destroyed by very ruthless behaviour. 

It seems a shame that a business I spent 20 years of my life growing looks like it could come to such a sticky end.

I fully respect Vodafone’s right to act whichever way they want to for their own best commercial interests, which is fully in line with free enterprise and trying to maximise their shareholder value. 

But I don’t think I could have ever behaved like that in Vodafone’s place. Business should have a bit of a heart. It isn’t just the bottom line at all costs.” 
Whilst Mr Caudwell may well be right in his sentiments about business having a "bit of a heart", I wonder if he applied those sentiments 100% when he sold Phones 4u?

Friday, September 12, 2014

Will Ye No Come Back Again?



Royal Bank of Scotland, Lloyds Banking Group, TSB, Clydesdale, Tesco Bank and Aegon will all leave Scotland if it votes for independence.

The economic costs of such a move cannot be dismissed by Salmond as merely the "removal of a brass plaque". The fact that Salmond does not want to discuss this issue indicates that he has not factored in the costs, or does not want to admit that he has factored in the costs of independence.

Don't do it Scotland, you will regret it!

Thursday, September 11, 2014

RBS To Leave Independent Scotland

In the event that Scotland votes "Yes", it has emerged that RBS (without any sense of irony) and Lloyds will leave Scotland and decamp to England setting up their HQ's in London.

With a week to go until the vote, markets are reacting to the daily poll results (they rise when "No" leads, and fall when "Yes" is in the ascendancy). As I have noted before traders are doing very nicely out of the politically induced volatility, let us trust that none of them have foresight of the polls before they are published!

Tuesday, September 09, 2014

Diamonds Are Forever - Well Done Petra

The Telegraph reports that Petra Diamonds has said that it has recovered an "exceptional" 232 carat white diamond at its Cullinan mine in South Africa.

Petra said that it expected the diamond (which has no measurable nitrogen impurities) will be sold in the second quarter of its current fiscal year ending June 30 2015. 
 
Well done!

Monday, September 08, 2014

Traders Love Volatility

Unsurprisingly, since the publication of a poll that shows that Scotland is sitting on a knife-edge over independence, the pound has fallen.

The Telegraph reports that Sterling suffered its biggest intra-day loss in over a year, sliding to $1.6150 against the dollar, its lowest point since November. This follows last week’s decline of 0.7% as support for the “Yes” campaign continued to rise.

Kit Juckes, head of foreign exchange research at Societe Generale, said:
If the ‘Yes’ vote wins, I wouldn’t be surprised to see a 3pc to 5pc fall in sterling.
So what?

A fall in the value of Sterling will be good for exports, and good for England (in the event Scotland leaves the Union).

That being said, there are ten days left before the poll; during this time the FX traders will be making some serious money playing around with the value of Sterling, as newspaper headlines become ever more shrill wrt "saving the Union".

Traders love volatility!

Friday, September 05, 2014

Nosferatu The Banker

Taking a hint from Nosferatu, Barclays has taken an interest in its customers' blood. Specifically the veins that carry the blood.

Barclays is launching a finger scanner for corporate clients, as it steps up use of biometric recognition technology to combat banking fraud.

Barclays has teamed up with Hitachi to develop a biometric reader that scans a finger and identifies unique vein patterns to access accounts, instead of using a password or PIN.

Ashok Vaswani, chief executive of Barclays personal and corporate banking, is quoted by Reuters:
"Biometrics is the way to go in the future. We have no doubt about that, we are committed to it.

You can't let these guys create a breach in the dam. You've got to constantly stay ahead of the game.
Let us trust that the criminals don't resort to chopping people's fingers off in order to try to "breach the dam"!

Thursday, September 04, 2014

FTSE Hits Level Last Seen In 2000

The Telegraph reports that FTSE 100 jumped as much as 1% to 6898.62, on Wednesday, the highest level since the dotcom bubble burst at the start of 2000.

As I have noted many times before money is made out of volatility, never assume that momentum (in whatever direction) is the new norm.

Wednesday, September 03, 2014

ONS Revises 2012 Statistics

As loyal readers know, I am not a fan of the ONS and have noted many times that the statistics published by the ONS are out of date and inaccurate.

However, even by ONS standards their latest revision of figures takes the biscuit.

The ONS has revised upwards the GDP figures for 2012 (yes, 2012!) by quite a significant margin.


This again shows that for governments and businesses to rely in any way on the statistics provided by the ONS is foolhardy indeed, and will inevitably lead to costly errors of policy and strategy.


Tuesday, September 02, 2014

The Greed and Stupidity of Our Financial Institutions

As I have noted many times before, Britain's financial service industry has hardly covered itself in glory during the past few decades.

Sadly there is now another example of greed and stupidity that is coming to light.

According to the Telegraph middle-aged home owners are being denied cheaper mortgage deals because lenders claim that customers would be unable to afford the lower repayments after they retire. As a result, borrowers in their 40s and 50s are being trapped in loans with higher interest rates, leaving them on course for unnecessarily large bills in old age.

To add insult to injury, banks also refuse to cut borrowers' loan terms so that debt can be repaid sooner.

Mayur Vadhia, 49, was told by Halifax, Britain's biggest mortgage lender, that he did not qualify for a cheaper deal because he had no proof of his retirement income. Yet his existing loan with the bank was scheduled to last past retirement age at a higher rate.

Now that's just stupid!

It also seems that lenders are incorrectly applying new affordability criteria, which are designed for new borrowers.

Not only are the financial institutions stupid, they are greedy and incompetent as well!
 

Monday, September 01, 2014

The Joy of Volatility

The Telegraph notes that the level of margin debt that traders are using to buy shares in the stock market reached the highest levels on record, according the latest data from the New York stock exchange.

US traders borrowed $460bn from banks and financial institutions to back shares, and once cash and credit balances held in margin accounts of $278bn is subtracted this left net margin debt of $182bn in July

Traders are now more exposed to a fall in share prices than at the height of the dot-com bubble at the turn of the century, and just before the financial crisis during the 2007 peak.

The Telegraph's article goes on to almost push for a collapse in the market. However, even if the media gets its way (disasters do make great headlines), the world will survive and move on. Markets have crashed many times before, and they will continue to do so.

Money is made from volatility.

Friday, August 29, 2014

Pussy Galore - Free Cat With Every Mortgage


Emulating UK financial institutions that offer stuffed toys/meerkats etc as gimmicks, if you buy their products, Sberbank a Russian bank is giving free cats to people who take out a mortgage.

Sberbank is offering customers a choice of 10 cats, which will be delivered to their home.

However, homeowners are only allowed to keep the cat for two hours. They must also sign an agreement promising they will not harm the cat.

Brilliant!

Thursday, August 28, 2014

60% Market Crash? Keep Calm and Carry On!

Abigail Doolittle, founder of Peak Theories Research, has said the Federal Reserve's reluctance to raise interest rates from record lows could spark a market correction to rival the slump seen in 2007, during the global recession.

She told CNBC
"Unfortunately, I think it could come on a crash similar to what happened in 2007.

You can see that the entire bull market trend over the past five years has started to reverse. 
When you see that kind of gyration around the trend, typically it suggests you're going to see some severe volatility. As scary as it is, I think that we could see possibly a 50% or 60% correction - an equal and opposite reaction to all these unusual policy moves." 
Maybe so, maybe not.

However, markets go up and markets go down. The world has survived previous crashes and will do so again, because the only way that people make money out of markets is for there to be volatility (both upwards and downwards).

Wednesday, August 27, 2014

IMF's Lagarde Under Formal Police Investigation



As yet though, she is insisting that she won't resign as head of the IMF.

RBS Fined £15M

The Royal Bank of Scotland has received yet another fine, this time it has been fined £14.5M by the Financial Conduct Authority (FCA) for failing to ensure that advice given to mortgage customers was suitable.

The FCA said that the fine for RBS and the NatWest reflected "serious failings" in their advised mortgage sales business. The firms failed to ensure that advice given to customers was suitable, according to the FCA. Two reviews of sales from 2012 found that in over half the cases the suitability of the advice was not clear from the file or call recording.

Customers were not advised properly over the affordability of mortgages, or the appropriate term of products being offered. Others were given poor advice when looking to consolidate their debts.
Tracey McDermott, director of enforcement and financial crime at the FCA is quoted by the Telegraph:
Taking out a mortgage is one of the most important financial decisions we can make. Poor advice could cost someone their home so it’s vital that the advice process is fit for purpose. 

Both firms failed to ensure that their customers were getting the best advice for them.

We made our concerns clear to the firms in November 2011 but it was almost a year later before the firms started to take proper steps to put things right. 

Where we raise concerns with firms we expect them to take effective action to resolve them without delay. This simply failed to happen in this case.”
The FSA initially drew the firms’ attention to issues in their mortgage advice process in November 2011. However, no effective attempts to remedy the problems were made until the end of September 2012.
 
The fine is of course paltry in terms of a bank the size of RBS, therefore one has to question whether it is in the slightest way effective in "managing" the future behaviour of banks.