Broadcaster James Max invited me for a cup of coffee and a chinwag on his Property Week podcast. We chatted about the Pensions Black Hole, how to cope with 0% interest rates, when the stock market will rise again, where to invest your money now and how to spot the green shoots of recovery. Phew!
Other guests on the show included Laurence Llewelyn Bowen, Gary Rhodes and London’s Mayor Boris Johnson. Nobody mentioned wiff waff, but you can hear what else we had to say about the price of fish here.
http://podcast.propertyweek.com/
5 things that made me go Oh Yes!
· Germany says a recession is unavoidable and countries should stop competing with ever bigger rescue packages. [Hats off to the German Finance Minister for telling things as they are.]
· HSBC plans to lend £15 billion to homeowners next year. [Good news for existing borrowers but first-time borrowers may not get a look-in.]
· Egg apologises to customers who were mis-sold Payment Protection Insurance. [The chickens have come home to roost at Egg - it has been fined £720,000 by the FSA.]
· Council of Mortgage Lenders criticises Government lending policy. [Well done Michael Coogan! Low interest rates for borrowers and high rates for savers is a recipe for disaster.]
· Two thirds of motorists would not use High Occupancy Toll lanes. [Nor would I, but I would pay to use high-speed supermarket check-out lanes.]
5 things that made me go Oh Dear!
· Sony to cut 16,000 jobs worldwide [The boffins at Sony really need to come up with something super clever to compete with the iPod.]
· The UK economy could shrink faster than expected. [What will Mr. Darling do if tax receipts come in below budget and no one wants to buy our Gilts?]
· The end is nigh for Woolworths. [Tradition accounts for zilch – even venerable retailers have to change with the times, and Woolies didn’t.]
· The credit crunch has reduced the height of the family Christmas tree by six inches. [Put the tree on a table and put a skirt around it – no one will notice the difference.]
· Gordon Brown’s claim that his master plan to recapitalise British banks has saved the world. [Crash Gordon – Saviour of the Universe.]
5 things that floated my boat this week
· The Bank of England slashed interest rates to 2% this week. [But six out of ten people think rate cuts are pointless, so let’s slash income tax next Mr. Darling.]
· Ryanair is making eyes at Aer Lingus, and British Airways wants to walk down the aisle with Qantas. [Airlines are consolidating. So, let’s hope regulators don’t stand in their way.]
· Tesco is still growing but not as quickly as Morrison. [There’s still growth in the stock market if you know where to look.]
· Oil prices slip to a three-year low. [The cynic in me tells me that utility companies won’t reduce energy prices until the summer.]
· Refuse collector Graham Hill can keep a bag of shredded bank notes he has found. [I wonder what Mr. Hill will be doing over the Christmas break?]
5 things that sank my battleship this week
· London Scottish Bank goes into administration. [The economy must really be bad if, even, doorstep lenders are in trouble.]
· US carmakers bring out their begging bowls again – this time they’re asking for $34 billion. [Good grief! Is there no end to these bail outs?]
· The Government will guarantee a two-year mortgage-interest holiday if you are made redundant. [It’s not so much a holiday as a vacation in Hell - interest, which is secured against a depreciating asset, will be compounded for 24 months.]
· Honda announced plans to withdraw from Formula 1 racing. [Bad news for petrol-heads around the world.]
· A Macau casino mogul has paid £130,000 for an Italian white truffle weighing 2 pounds. [It seems the gaming industry is not suffering from the credit crunch.]
This week, 800,000 Centrica shareholders will have to decide whether to stump up hard cash to finance the purchase of part of British Energy. And with Christmas just around corner, Centrica couldn’t have timed its £2.2 billion rights issue at a worse moment.
That’s because some 700,000 investors, who own less than 1,000 shares each, will have to decide whether to invest more money in the company, or spend the cash on Christmas presents. Shame on you, Centrica!
But as far as Centrica is concerned, it’s almost irrelevant whether we take up our rights to buy 3 new shares at £1.60 for every 8 shares we already own. It's not exactly desperate for our cash because the new shares are totally underwritten by investment bankers already.
Nevertheless, we will have to decide by 5 December what we plan to do. There are four choices.
1. Take up the rights issue: This will ensure that the portion of the company you already own remains unchanged because your new shareholding will increase in proportion with the increase in the number of shares.
2. Sell all of your rights: If you need cash, then this option is worth considering because the right to buy 3 new shares for every 8 you own has a value. You can sell these “nil-paid rights” for 56p a pop (correct as at 3/12/2008) on the open market and use the money as you wish.
3. Sell some of your rights: You may want to do this if don’t have quite enough cash to take up your rights in full. So, for every three nil-paid rights you sell, you should raise enough money to exercise one of your other rights. This is known as “tail swallowing.”
4. The last option is to Do nothing: If you choose to sit on your hands, then the rights will be sold for you, and the proceeds of the sale will be paid to you. However, you won’t be able to decide on the selling price.
As for me, I’m taking up my rights in full. Unlike some companies, such as banks that have been forced into issuing more shares to stay in business, Centrica is issuing shares to buy an asset. The timing of the rights issue may not be great. But then, there is never a right time to buy shares – just at, what you consider to be, the right price.
5 things that made me go Whoopee!
• VAT cut from 17.5% to 15%. [Now my Bounty bar will cost 39p instead of 40p.]
• Credit card companies agree to help struggling customers with their bills. [With an average APR of 17%, they can afford to.]
• A High Court has told the taxman to repay cigarette maker BAT £1.2 billion. [Remember, the taxman makes mistakes too.]
• Computer scientists have developed software to improve your looks. [Can it make me look like Bruce Lee? Can it? Can it?]
• London Councils withdraw plans for a ban on plastic bags. [Thank goodness! - I simply refuse take a drag bag to the supermarket.]
5 things that made me go Doh!
• The US Federal Reserve is to pump another $800 billion into beleaguered markets. [Good grief! How much more toxic debt can the Fed afford to buy?]
• The senseless terror attacks in Mumbai. [Victory attained by violence is tantamount to a defeat, for it is momentary. ~Mahatma Gandhi]
• Woolworths, which opened in 1909 and has 815 outlets, has gone bust. [It’s old, it was bold and it now it will fold.]
• Negotiations to get The Beatles music onto iTunes has stalled. [It’s been a long and winding road, and we’re still not there yet. Tell me why!]
• Mobile phone giant Nokia will stop selling handsets in Japan. [It has taken Nokia years to realise you can’t bring coals to Newcastle.]
5 things that brightened my weekExecutives at Barclays won’t be getting a bonus this year. [
Oh, I do hope they haven’t blown last year’s multi-million pound trouser-bulger already.]
Woolworth may be sold for £1. [
So, does the buyer get to pick and mix the outlets it want.]
Oil dips below $50 a barrel for the first time in three years. [
Don’t get too excited because the Government could slap on extra fuel duty when forecourt prices drop.]
Unearthing this year’s must-have Christmas presents thanks to my
podcast guests Brian Roberts and Laura Starkey. [
Why on earth would non-equestrians ever want to buy riding crops and stirrups?]
The first organ grown in a laboratory has been transplanted into a woman’s throat. [
The next challenge is to grow common sense to transplant into some of our politician’s brains.]
5 things that darkened my weekQuarterly profits at plumbers’ merchant Wolseley plunge and 2,300 jobs will go. [
But why is it still so difficult to get a plumber when you need one?]
US car makers tried taking their begging bowls to Washington. [
Is there no end to this nonsense?]
Japan slides into recession [
Was Japan ever out of recession?]
The Treasury Select Committee will name and shame banks that won’t lend money. [
Do banks have a responsibility to society or to their shareholders?]
Low-income families may turn to doorstep lenders to pay for Christmas. [
Christmas as an event is not discretionary, but overspending the Christmas budget is.]
5 things that made me smile this week
· More rate cuts are on the cards. [The base rate has never been below 2% since the Bank of England received its Royal Charter in 1694, but there’s a first time for everything.]
· Speculation the Government may cut taxes. [Stop dithering. Do it now and do it big before it’s too late.]
· The Competition Commission will ban the selling of PPIs when people take out loans. [Well done CC, but what will lenders do in response?]
· George Osborne speaks out against Britain’s plan to borrow to get out of jail. [Finally, someone is prepared to speak up against the ludicrous idea that you can borrow so you can live beyond your means.]
· Alien worlds have been discovered in outer space. [I hope they have any money to lend planet Earth.]
5 things that made me frown this week
· Lenders can use a law dating back to 1925 to evict homeowners who fall two months in arrears without going to court. [Which Government minister took his eye off the ball then?]
· The Government plans to scrap council housing for life to cut waiting lists. [Wouldn’t building more affordable housing be easier?]
· The number of people out of work rose to 1.8 million in October. [When will politicians learn they can’t promise people full employment?]
· BT to shed 10,000 jobs. [GlaxoSmithKline, Virgin Media, Taylor Wimpey, RBS and Yell have already announced redundancies – who will axe jobs next?]
· One in five children shop online behind their parents’ backs. [What kind of society are we living in if you can’t even trust your own children?]
5 things that cheered me up this week
• Barack Obama becomes the 44th US President. It’s a vote for change. And boy, do we need it!
• Skipton takes over beleaguered Scarborough building society. Take note Mr. Darling, this is how consolidation is supposed to work in the banking industry.
• The audacious 1.5% cut in interest rates by the Bank of England. So, the MPC can act decisively if it needs to.
• Being sandwiched between mortgage titans Ray Boulger and Tim Wilson on this week’s Money Talk podcast.
• I found a £5 note on the pavement this week. Can you beat that?
5 things that disappointed me this week
• Three-month LIBOR dips below 4.5%, but it’s still 1.5% higher than the BoE base rate of 3%. Come on you bankers – give us homeowners a break!
• Gordon Brown has snatched £17,000 from every worker’s pension pot due to his decision to axe tax relief in 1997. Thanks Gordon. And by the way, what did you do with our money?
• A 26% jump in the number of firms going bust. Sadly things are going to get worse next year.
• There will be a global recession next year according to the IMF, and the UK could shrink the most in the Group of Seven nations. Didn’t Mr Brown tell us we were the best placed to weather the downturn?
• A packet of cigarettes could cost £76.41 in 2058. Give up now before you need to take out a mortgage just to light up.
It seems that everywhere you look the news is bad. Last week, the Ministry of Justice reported that 400 mortgage repossession claims have been processed through the courts daily. The suggestion is that over 100,000 people could lose their homes.
Elsewhere, the British Chamber of Commerce reckons that unemployment in the UK will rise to more than 2 million for the first time since 1997.
Meanwhile, the former chief economist of the International Monetary Fund, Kenneth Rogoff, has put the cat amongst the pigeons by predicting the collapse of a major American bank within months. He stopped short of revealing the vulnerable bank, but most pundits have good a idea as to which one he is referring to.
But here’s the question: Can we really talk ourselves into a recession?
The simple answer is no.
Whether an economy expands or contracts is governed by the underlying economic health of the nation. And because it is nigh on impossible to control economic growth at a uniform rate, such things as production, consumer spending and household income will necessarily fluctuate over time. It’s called an economic cycle. And no amount of well-intentioned flannelling by politicians can prevent an economy from sliding into recession when growth stalls.
Of course it can be argued that we could try to spend ourselves out of a recession given that two-thirds of the economy relies on consumer spending. But doing so is tantamount to believing that we can fly if we flap our arms hard enough. A quite preposterous idea!
What we are witnessing is an economic downturn that was inevitable following a decade of strong growth. For some people, it will be the first economic slump they have ever experienced. For others it is just another economic slowdown. But the surest way of surviving the recession, any recession, is to hunker down, reduce spending, and pay down debt that we have accumulated.
Some people believe the recession could be long and drawn out, and they may well be right. But it will feel a lot longer and more drawn out the more debt you carry.
Welcome to my blog page, in which I will share with you my personal thoughts about anything and everything that takes my fancy.
If you are after anodyne comments then you won’t find them here. This is a no-hold-barred blog page, where we word-wrestle on topics that include the rights and wrongs of short-selling, the ups and downs of the property market, and the ins and outs of what I talk with studio guests about when the microphones are switched off.
Let’s not forget the good and bad of millionaire footballers, the light and dark of green products........
Edited at 2008-07-24 07:25:12
