On the eve of the Budget, allegedly one designed for "growth", George Osborne has been hit by the unwelcome news that CPI inflation has risen to 4.4% in February and RPI has risen to 5.5%.
This of course, as I have noted before on this site, is not unexpected given that VAT was raised to 20% in January.
As such this inflation is an own goal scored by Osborne.
Tuesday, March 22, 2011
Monday, March 21, 2011
The Budget and The £8BN "Windfall"
The ITEM club has estimated that public sector net borrowing will be around £140.2BN for 2010-11, £8.3BN less than the £148.5BN deficit forecast by the Office for Budget Responsibility (OBR).
Some sections of the media have foolishly referred to this as a "windfall", which the Chancellor can use to oil tomorrow's budget with.
This is of course nonsense, the Chancellor does not suddenly have access to an extra £8BN with which to "play":
1 This is merely a downward estimation of the level of increased debt that we are being saddled with each year.
2 The UK's total debt stands at £4.8 Trillion.
3 Our insane venture into Libya will put further holes in our country's finances.
Some sections of the media have foolishly referred to this as a "windfall", which the Chancellor can use to oil tomorrow's budget with.
This is of course nonsense, the Chancellor does not suddenly have access to an extra £8BN with which to "play":
1 This is merely a downward estimation of the level of increased debt that we are being saddled with each year.
2 The UK's total debt stands at £4.8 Trillion.
3 Our insane venture into Libya will put further holes in our country's finances.
Friday, March 18, 2011
The "People's" Bank
Congratulations to the Royal Bank of Scotland (RBS), the 83% taxpayer owned bank, for once again proving that they are the "people's" bank.
Not only do they reward their CEO, Stephen Hester, with a "low" (his words, not mine) package of £7.7M but they also rewarded their top five non-board executives with £21M in total last year.
However, that is not an end to their largess, they also paid £375M to 323 key staff.
Proving that, so long as you are considered by RBS to be "key", that RBS is indeed the "people's" bank!
Not only do they reward their CEO, Stephen Hester, with a "low" (his words, not mine) package of £7.7M but they also rewarded their top five non-board executives with £21M in total last year.
However, that is not an end to their largess, they also paid £375M to 323 key staff.
Proving that, so long as you are considered by RBS to be "key", that RBS is indeed the "people's" bank!
Thursday, March 17, 2011
Hester Puts The Boot In
Stephen Hester, CEO of RBS, whilst defending his "low" (his words not mine) £7.7M pay package to the Public Accounts Committee took the opportunity to divert attention and put the boot into the Bank of England.
Hester criticised the Bank of England's assessment of the value of taxpayer support for the UK's banks in 2009 (£100BN).
The Telegraph quotes his response to a question about the accuracy of the figure:
"No, I do not accept the Bank of England [figure]...
...The figures from research that we have seen, which I think will be published in the coming weeks, comes up with a dramatically smaller figure...".
£7.7M may well be "low" in the world of international banking. However, most people are not top flight international bankers and will not agree with his assessment.
Hester criticised the Bank of England's assessment of the value of taxpayer support for the UK's banks in 2009 (£100BN).
The Telegraph quotes his response to a question about the accuracy of the figure:
"No, I do not accept the Bank of England [figure]...
...The figures from research that we have seen, which I think will be published in the coming weeks, comes up with a dramatically smaller figure...".
£7.7M may well be "low" in the world of international banking. However, most people are not top flight international bankers and will not agree with his assessment.
Wednesday, March 16, 2011
Don't Panic! III - The Japanese Ministry of Reconstruction
As I have noted, the ongoing media hype over the possible damage done to the Japanese and world economy is overdone and simply wrong.
Once the situation on the ground has stabilised the Japanese will pump billions into rebuilding the infrastructure, which in itself will give the moribund construction industry a much needed boost.
Chief Cabinet secretary Yukio Edano has already announced that Japan will establish a Ministry of Reconstruction.
It is estimated that Japan will take around five years to reconstruct the shattered infrastructure, a level of reconstruction not seen since the end of World war II.
Preliminary estimates, which will be revised, put the cost of reconstruction at around $180BN.
Whilst the shorters currently have the "upper hand", the medium and long term prospects for the markets are favourable. Do not panic, and do not get suckered in by the media hyperbole of crashing markets and nuclear "meltdowns".
Once the situation on the ground has stabilised the Japanese will pump billions into rebuilding the infrastructure, which in itself will give the moribund construction industry a much needed boost.
Chief Cabinet secretary Yukio Edano has already announced that Japan will establish a Ministry of Reconstruction.
It is estimated that Japan will take around five years to reconstruct the shattered infrastructure, a level of reconstruction not seen since the end of World war II.
Preliminary estimates, which will be revised, put the cost of reconstruction at around $180BN.
Whilst the shorters currently have the "upper hand", the medium and long term prospects for the markets are favourable. Do not panic, and do not get suckered in by the media hyperbole of crashing markets and nuclear "meltdowns".
Tuesday, March 15, 2011
Don't Panic! II
Yesterday I noted the following wrt the crisis in Japan:
"Whilst in the short term there will be a negative impact on the economy.. the medium term prospects are far rosier."
Unsurprisingly, as the situation on the ground in Japan continues to develop (especially wrt the nuclear reactor), there has been a downturn in the markets. The Nikkei shed 1000 points, and the FTSE is currently down by approximately 3%.
As long as the current situation remains volatile and unclear there will be some significant fluctuations in the markets as investors take fright, and shorters make a killing.
However, once the situation has stabilised I stand by the point that I made yesterday that the "..medium term prospects are far rosier..":
"The stimulation package announced by the central bank, and general economic boost provided by capital refurbishment projects will in fact do the Japanese economy (and world economy) a power of good."
Do not panic, and do not get suckered in by the media hyperbole of crashing markets and nuclear "meltdowns".
"Whilst in the short term there will be a negative impact on the economy.. the medium term prospects are far rosier."
Unsurprisingly, as the situation on the ground in Japan continues to develop (especially wrt the nuclear reactor), there has been a downturn in the markets. The Nikkei shed 1000 points, and the FTSE is currently down by approximately 3%.
As long as the current situation remains volatile and unclear there will be some significant fluctuations in the markets as investors take fright, and shorters make a killing.
However, once the situation has stabilised I stand by the point that I made yesterday that the "..medium term prospects are far rosier..":
"The stimulation package announced by the central bank, and general economic boost provided by capital refurbishment projects will in fact do the Japanese economy (and world economy) a power of good."
Do not panic, and do not get suckered in by the media hyperbole of crashing markets and nuclear "meltdowns".
Monday, March 14, 2011
Don't Panic!
Aside from focusing on the loss of human life and humanitarian issues relating to the ongoing crisis in Japan, many media organisations are also hyping the potential economic downside of this disaster.
Whilst in the short term there will be a negative impact on the economy, the medium term prospects are far rosier. The stimulation package announced by the central bank, and general economic boost provided by capital refurbishment projects will in fact do the Japanese economy (and world economy) a power of good.
Whilst in the short term there will be a negative impact on the economy, the medium term prospects are far rosier. The stimulation package announced by the central bank, and general economic boost provided by capital refurbishment projects will in fact do the Japanese economy (and world economy) a power of good.
Friday, March 11, 2011
Thursday, March 10, 2011
Bust
Lord Hutton's proposals that public sector workers should be stripped of their final salary pensions and have schemes linked to average earnings, while paying more and working longer have unsurprisingly touched a raw nerve with the unions.
The GMB have warned of co-ordinated strike action.
Bringing the country to a halt will achieve nothing. Like it or not the country is broke (we have a debt of £4.8 Trillion), we cannot continue to pay ourselves salaries with money that we do not have.
These reforms have been needed for many years, it is only to be hoped that they are enacted and that they are not too late.
The GMB have warned of co-ordinated strike action.
Bringing the country to a halt will achieve nothing. Like it or not the country is broke (we have a debt of £4.8 Trillion), we cannot continue to pay ourselves salaries with money that we do not have.
These reforms have been needed for many years, it is only to be hoped that they are enacted and that they are not too late.
Wednesday, March 09, 2011
Tchenguiz Brothers Arrested
The FT reports that Vincent and Robert Tchenguiz, the high profile property entrepreneurs, have been arrested as part of an investigation into the collapse of Kaupthing, the Icelandic investment bank.
Enforcement officers from the Serious Fraud Office and the City of London police made the arrests in the early hours of this morning. It is reported that a raid has also been carried out on the offices of Rotch Property, the investment vehicle that controls the brothers' property portfolio.
Additionally eight residential addresses in London were searched (seven men were arrested), and two residential properties in Reykjavik were searched (two men were arrested).
Robert Tchenguiz lost £1BN in one day when the UK subsidiary of Kaupthing collapsed.
Enforcement officers from the Serious Fraud Office and the City of London police made the arrests in the early hours of this morning. It is reported that a raid has also been carried out on the offices of Rotch Property, the investment vehicle that controls the brothers' property portfolio.
Additionally eight residential addresses in London were searched (seven men were arrested), and two residential properties in Reykjavik were searched (two men were arrested).
Robert Tchenguiz lost £1BN in one day when the UK subsidiary of Kaupthing collapsed.
Tuesday, March 08, 2011
Moody's Downgrade Greece
Moody's have downgraded Greece's credit rating from B1 from Ba1. This has caused a spike in yields on the country's bonds and will of course add to pressure on the Euro, as the risk of Greek default grows.
Add in the fact that the Irish economy is on the verge of collapse and that the ECB (for reasons that are unclear to any sane person) have raised interest rates, and it is clear that the Euro's days are looking increasingly numbered.
Add in the fact that the Irish economy is on the verge of collapse and that the ECB (for reasons that are unclear to any sane person) have raised interest rates, and it is clear that the Euro's days are looking increasingly numbered.
Monday, March 07, 2011
FSA Dithers and Delays
The publication of the long awaited whitewash report by the FSA into RBS, originally intended to be published this March, has been delayed until at least April.
Unsurprisingly no one is happy with this delay, as it clearly makes the report look like even more of a whitewash and the FSA all but complicit in that whitewash.
The Sunday Telegraph adds weight to the increasing clamour for the FSA to come clean about this whitewash, by reporting that many current and former RBS managers have not been contacted by the FSA as part of its "investigation", despite their intimate knowledge of how the bank had been run.
Why would that be?
Does the FSA not know how to conduct an investigation, or was it trying to "investigate lite"?
Even more damning is the the Sunday Telegraph's assertion that Sir Fred "The Shred" Goodwin was only interviewed once by FSA officials, and even then only on broad issues and not the specifics of the bank's failure.
It seems that the FSA did not have "proper processes", according to one former senior Treasury adviser interviewed by the Telegraph.
The beleaguered and failed regulatory body, the FSA, has managed through further ineptitude to dig itself (as if that could be possible) deeper into the mire.
Having steadfastly refused to publish its report into RBS (the report that exonerated the directors and company of any wrongdoing), it then agreed (under intense pressure) to publish a heavily redacted version of the report.
Good enough?
Not really:
1 The report will be heavily redacted.
2 It won't be published until at least April.
The FSA really doesn't get it, and is demonstrating why it has become an irrelevancy.
Impressed so far?
I'm not!
However, this litany of incompetence does not not end here. The FSA exoneration of the RBS board may in fact be nonsense, and that the investigation nothing more than an incompetent whitewash.
For why?
WikiLeaks have published a cable that summaries a meeting between Sir Philip Hampton, the new chairman of RBS, and 3 US politicians.
During the meeting Sir Philip allegedly noted that he thought that the previous RBS had failed to live up to their "fiduciary duties", and did not conduct adequate due diligence before buying part of ABN Amro in 2007.
That hardly fits in with the FSA whitewash that exonerates the previous board.
Could someone please tell me why the FSA is still in existence?
Unsurprisingly no one is happy with this delay, as it clearly makes the report look like even more of a whitewash and the FSA all but complicit in that whitewash.
The Sunday Telegraph adds weight to the increasing clamour for the FSA to come clean about this whitewash, by reporting that many current and former RBS managers have not been contacted by the FSA as part of its "investigation", despite their intimate knowledge of how the bank had been run.
Why would that be?
Does the FSA not know how to conduct an investigation, or was it trying to "investigate lite"?
Even more damning is the the Sunday Telegraph's assertion that Sir Fred "The Shred" Goodwin was only interviewed once by FSA officials, and even then only on broad issues and not the specifics of the bank's failure.
It seems that the FSA did not have "proper processes", according to one former senior Treasury adviser interviewed by the Telegraph.
The beleaguered and failed regulatory body, the FSA, has managed through further ineptitude to dig itself (as if that could be possible) deeper into the mire.
Having steadfastly refused to publish its report into RBS (the report that exonerated the directors and company of any wrongdoing), it then agreed (under intense pressure) to publish a heavily redacted version of the report.
Good enough?
Not really:
1 The report will be heavily redacted.
2 It won't be published until at least April.
The FSA really doesn't get it, and is demonstrating why it has become an irrelevancy.
Impressed so far?
I'm not!
However, this litany of incompetence does not not end here. The FSA exoneration of the RBS board may in fact be nonsense, and that the investigation nothing more than an incompetent whitewash.
For why?
WikiLeaks have published a cable that summaries a meeting between Sir Philip Hampton, the new chairman of RBS, and 3 US politicians.
During the meeting Sir Philip allegedly noted that he thought that the previous RBS had failed to live up to their "fiduciary duties", and did not conduct adequate due diligence before buying part of ABN Amro in 2007.
That hardly fits in with the FSA whitewash that exonerates the previous board.
Could someone please tell me why the FSA is still in existence?
Friday, March 04, 2011
Don't Believe The Hype
Political spin doctors are hyping the story that the state pension will rise dramatically in the next budget.
Where, I wonder, will this money come from during a time of austerity and cuts?
Don't fall for the hype, and only believe it when you see the money going into the bank accounts of the elderly.
Where, I wonder, will this money come from during a time of austerity and cuts?
Don't fall for the hype, and only believe it when you see the money going into the bank accounts of the elderly.
Wednesday, March 02, 2011
Sony Experience Ratner's Moment
Sony, who one would have thought paid vast sums to its media "professionals" to avoid brand damaging publicity, has managed to emulate Gerald Ratner's infamous "we sell crap" comment by being associated with a pop group under its management that wore Nazi style uniforms in an MTV broadcast.
Unsurprisingly, the Simon Wiesenthal Center in Los Angeles had voiced its "shock and dismay" at the appearance of the six-member J-Pop band Kishidan.
Brands are hard to build, but very easy to destroy.
Unsurprisingly, the Simon Wiesenthal Center in Los Angeles had voiced its "shock and dismay" at the appearance of the six-member J-Pop band Kishidan.
Brands are hard to build, but very easy to destroy.
Tuesday, March 01, 2011
UBS Shoot Themselves In The Foot
UBS claim that supermarkets have been increasing their prices by 6%-6.5%, despite the fact that commodity price inflation indicates that rises should only be around 3%3%-3.5%.
The Telegraph quotes Paul Donovan, a UBS economist:
"That suggests there may be margin expansion in the supermarket sector… Prices are rising in excess of justifiable cost increases."
However, UBS then go to shoot themselves in the foot by noting that only 20%-25% of the price reflects the "commodity input".
A British Retail Consortium spokesman put the boot into the UBS report, by noting:
"There is no question that in the UK, customers pay less for their food than is the case in most other European countries. Food prices have not risen at anything like the same rate as commodity prices. It is clear that supermarkets are shielding customers from the full impact."
It would seem that UBS have tried to use the report to garner themselves some headlines. Unfortunately for UBS, the headlines that they have garnered are not particularly favourable to them.
The Telegraph quotes Paul Donovan, a UBS economist:
"That suggests there may be margin expansion in the supermarket sector… Prices are rising in excess of justifiable cost increases."
However, UBS then go to shoot themselves in the foot by noting that only 20%-25% of the price reflects the "commodity input".
A British Retail Consortium spokesman put the boot into the UBS report, by noting:
"There is no question that in the UK, customers pay less for their food than is the case in most other European countries. Food prices have not risen at anything like the same rate as commodity prices. It is clear that supermarkets are shielding customers from the full impact."
It would seem that UBS have tried to use the report to garner themselves some headlines. Unfortunately for UBS, the headlines that they have garnered are not particularly favourable to them.
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