December 9, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

Gordon Brown and the Bank of England governor Mervyn King, seem to be blaming each other for the UK’s economic ills. First Mr King said it was all down to tax hikes, and that the UK is struggling because we are all paying too much tax. Then yesterday, the UK’s Prime Minister-in-waiting told a select committee of MPs that interest rises were to blame. He said, “If interest rates rise four times, it’s bound to have an effect on consumer demand and bound to have an effect on the housing market. I don’t think anyone would doubt that four interest rate rises were bound to be the major factor.”

Mr Brown said that he was sure that Mr King, on reflection, would agree with him.

For much of last year and the beginning of this, the Bank of England insisted that the rise in consumer borrowing was not something to be feared, that it was not behind the erstwhile consumer boom. Borrowers, it was argued, were putting their money into assets.

That has always seemed to be a fairly optimistic belief. Many people who topped up their mortgages spent the proceeds on a jolly in the Costa Del Sol, or some other short term gain, and that high level of borrowing did fuel consumer spending. Surely that is the single biggest reason why consumers have since slowed down.

Remember Nigel Lawson missed the Lawson boom, even though it was happening right under his nose. The Bank of England and Gordon Brown seem to want to blame all problems on anything but the high level of consumer indebtedness.

December 9, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

It would appear that there’s been some washing of dirty linen going on in public. In fact they all seem to be at it. Richard Branson and the board at Virgin Mobile, Gordon Brown and Mervyn King, have been displaying their dirty Y fronts for all to see.

First of all there was Sir Richard. Speaking on Radio 4’s Today programme he said that another £25mn from NTL, and Virgin Mobile would do the deal. The famous balloonist come media mogul in waiting owns 72% of Virgin Mobile, and said he would be very surprised if the deal wasn’t done.

But then yesterday, the Virgin Mobile board said, “The Board did not consider any other price, nor did it solicit any other price.” Earlier this week, the company said the NTL offer “materially undervalued” the company.

It would seem that a split in opinion among shareholders is being aired in the full view of the public.

December 9, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

The problem with Buy-to-Let at the moment is that even the property bulls expect only tiny rises in house prices for the next few years. So buying property as an investment really is a long-term game, still who wants to work until they are in their late ’60s? Many property investors see their property portfolio as their pension.

But this week, the Buy-to-Let market has been dealt a double blow.

First the chancellor did his U-turn. When advisors and analysts whooped up the benefits of being able to include a second home or investment property in the Self Invested Personal Pensions (SIPPs), many feared that a new bubble would be created. As some believe the property market is a bubble in waiting anyway, this was the last thing we needed.

Then in his pre budget speech, our Gordon said words to the effect, “I’ll turn if I want to. The man is for turning.” And promptly put a tax on direct property investments included in a SIPP, although they are still free of capital gains tax.

Then yesterday, the Portman Building society dealt the second blow. It’s scrapping Buy to Let mortgages for flats less than a year old.

Portman director Matthew Wyles said, “We have over-lent in some cases. And we don’t want to do more. We are jumping out of this market before there is any chance of the Portman losing money. We would rather be prudential and pull out rather than not getting the risks right.”

It’s not so much that the Portman’s decision is a crushing blow, it is quite a small player, but for Buy To Let investors what this move represents could be most worrying.

Although First Time Buyers have been moving back of late, their total numbers are still well below the levels seen a few years ago. So, with FTP’s effectively out of the equation, the market needs Buy to Let investors, otherwise, where will the beginning of each property chain come from?

December 9, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

On the 29 November gold broke though the $500 an ounce barrier and hit an 18-year high. Some heralded the return of gold as a barometer of economic conditions, others said the rising price of gold was down to the herd mentality of investors, and that it would all end in tears, as the inevitable crash followed.

One thing is for sure, those who bought into gold ten days ago aren’t crying. The yellow metal has surged another 25 dollars since then, as of this morning it was trading at just a whisker short of $525.

Is it a bubble waiting to burst? Is it a symptom of inflationary pressures? Is gold simply acting as it always has: a safe refuge from the ravages of inflation?

It would seem that there are two other explanations for the surging price of gold. Firstly, its the US trade deficit. Normally a big trade deficit ultimately leads to a collapse in the relevant currency, but in the US this has not happened, largely because its creditors can’t afford to let it happen. The dollar is the main constituent of most country’s foreign reserves, and a collapse in the greenback would hit just about everyone, so a gradual move into gold, therefore, makes eminent sense.

If this hypothesis is correct gold could just keep on rising. Its all time high is $873 an ounce, a level hit in January 1980.

The second theory is that gold is rising so fast because of its application to industry. In particular its unique properties make it ideal for IT components. The only snag with this theory is that silver and platinum have been rising too, although not to the same extent as gold.

Did you know: if you were to put all the gold ever found into a single cube and compact it, the cube would measures a mere 20 metres down each side?

December 9, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

You know what it’s like. It might only take less than an hour or so to travel from say London to Paris, but once you have queued up at check in and waited an age in departures, half the day has gone.

Budget air travel can be so cheap now that its tempting to think it’s possible to commute by plane, except that is for the check in time.

Ryanair could change all that. According to the Independent, it’s introducing a five to six week trial testing an internet check in option for four routes, including Dublin to Cork, a UK and a European route.

The Internet check in will apply to passengers with hand luggage only.

It does seem a little curious that with the price of oil up there in the stratosphere, and talk that environmental fears could ultimately lead to a collapse in air travel, the cost of travelling in Europe is so low. The parking and cost of travel to the airport and airport taxes often appear to be the most expensive element of short haul air travel these days.

In November Ryanair enjoyed an extraordinary 25% rise in the number of its passengers, Extraordinary, that is, until you consider that EasyJet too, has had a bumper year in terms of passenger numbers, with a 19% jump in the year to November.

Although, EU competition authorities have put a stop to local authorities subsidising flights from Ryanair, we understand that ultimately budget airlines expect flights to be subsidised by advertising from businesses in the region the flight services.

And maybe, short haul air travel could be a little like razors, and games consoles, subsidised in price in order to encourage the purchase of complementary products.

December 8, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

The latest round of reports on UK manufacturing is complete, and the conclusions; the sector appears to be going down hill again.

Just a few months ago, all the reports seemed to be suggesting that our beleaguered manufacturing sector was in recovery mode. But now, all has changed.

The CBI Industrial Trends Survey, released at the end of last month, recorded a score of minus 25, the same as the October reading, and indicative of a sector which is struggling to even make it to first gear.

Ian McCafferty, CBI Chief Economic Adviser, said, “Manufacturers have faced an extremely challenging year and the latest figures show no overall improvement over the last month. Robust demand internationally has lifted the export figures, but this has been offset by a deterioration in domestic orders which is of real concern.

“Over the past month, producers have benefited a little as the cost of oil has slipped back, but manufacturers’ profit margins remain under pressure, with more firms expecting to cut prices than raise them in the months ahead.”

Then yesterday, the ONS released the official statistics relating to manufacturing, and in the 3 months to October, recorded a contraction in the sector of -0.3%. It was the first negative reading since June.

Meanwhile, even CIPS, which has been consistently reporting more bullish findings than the rest, had bad news recently. Although at 51, the CIPS Purchasing Managers Index is still above the critical 50 no change mark, the month saw a fall on October.

December 8, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

Virgin Mobile has turned down an £835mn offer from cable company NTL. It’s not that the company doesn’t want to do a deal, its just that it believed the NTL offer “materially undervalues” the virtual mobile phone network company, and as a result the board unanimously rejected the offer. Sir Richard Branson controls 72% of Virgin Mobile.

NTL, whose merger with Telewest is still going through the regulatory process, has big ambitions. Since it defaulted on a multi billion debt in 2002 and handed over control to creditors, the company is emerging as a genuine rival to BSkyB. With the merger with Telewest it will boast 5mn cable subscribers, including 2.5mn broadband and 3.3mn pay TV subscribers.

And the Virgin mobile phone network with 4.15 million subscribers, especially as we move to TV and video services over mobile phones, will enhance the service nicely.

While the deal will mean loss of control of Virgin Mobile for Sir Richard, it’s been reported that the UK’s most famous entrepreneur will have a 14% stake in the merged company, making him the single biggest shareholder, and catapulting him into media mogul bracket.

Shares in Virgin Mobile have leapt 10% this week, and it seems likely a deal will be agreed.

Virgin is what’s known as a virtual network company, it does not own the infrastructure, instead it piggybacks on the T-Mobile network. It’s been reported that T-Mobile is supportive of the NTL offer.

Meanwhile, as Virgin and NTL engage in arm wrestling over the final price, BSkyB has said that it has no plans to move into mobile telephony. It recently agreed to buy the ISP, Easynet.

As for the third player in what is fast emerging as a three horse race for new generation TV, BT has announced content deals with the BBC, Paramount and Warner Music. The BT TV package will combine Freeview with video on demand over its broadband network.

BT has no plans as far as we know of re-entering the mobile phone market as a network provider after its sale of 02. But with its new phone, which will offer conventional mobile phone access provided by a network supplier, with VoIP when in range of a Wi Max wireless broadband link, it may not need to anyway.

December 8, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

There’s a problem with riding a high horse: it hurts if you fall. And when it comes to the world’s poor, the UK, with Gordon and his chum Tony taking the lead, has taken the morale high ground. In fairness to Mr Brown, he does have a genuine desire to play a role in reducing global poverty, in fact he has often described that as his overriding personal ambition for his contribution to world politics.

But while the UK sits on its high horse, and attempts to set the morale standards for the rest to follow, it has suddenly become embroiled in controversy.

Nigeria is a poor country; one in five children does not live to the age of five, and in the past it was a classic example of an Africa country ran by corrupt dictators who squandered aid. And when developed countries argue against providing aid, Nigeria’s example from days gone by supports their case.

But that was then - now Nigeria is a democracy. And goes the argument: it should not be made to pay for past mistakes, that the West was partly at fault for irresponsible lending, that much of the debt relates to crippling interest charges, and that by reclaiming this money, million of Nigerians are being condemned to extreme poverty.

The Paris Club, which is made of 18 of the wealthiest countries in the world is making Nigeria repay $12.4bn in aid. Which, according to Jubilee Debt Cancellation Charity, is more than the total level of debt relief the G7 agreed to provide to the world’s poor over 10 years, when they met at Gleneagles during the summer. For its part, the UK, which is Nigeria’s biggest creditor, is receiving approximately $3bn, and it’s just not fair, argue many.

Trisha Rogers, Jubilee’s director, said: “It is obscene for G7 countries to take billions of dollars from one of the poorest countries on earth. In particular this means the UK will take from Nigeria almost exactly twice as much as it is giving in aid to the whole of Africa in 2005.”

A letter to the Guardian, signed by the heads of nine leading development charities said, “More than 80 million Nigerians live on less than $1 a day and one in five children do not reach their fifth birthday. Seven billion dollars could have a huge impact on reducing this crippling poverty - it should not go to wealthy countries. If the commitment of the UK to Africa is to retain any credibility, the government must refuse to take this money.”

And Reverend David Ugolor of Jubilee Nigeria said, “This money should be helping the 80m Nigerians who live in extreme poverty, not subsidising rich countries like the UK. If they take this money, they will be denying our people access to education, healthcare and water.

We call on the UK and other rich governments not to take the money. If they do, we will hold them responsible for condemning many of our poor to continued suffering and death.”

There is another side to the argument. Firstly, Nigeria is being let off $18bn. Secondly, the proceeds will come from the profits generated by the high price of oil - Nigeria is rich in oil reserves. Finally, and perhaps this it the key point, the symbolism is very important. The deal shows Africa can be trusted, and while the worlds wealthiest countries dither and argue over further aid and debt relief, the Nigerian repayment will offer huge credibility to the argument that aid is not a waste of money - it’s not a case of throwing good money after bad. Africa, in this new age, can be trusted to take its responsibility seriously.

According to Gordon Brown, “The key issue is that Nigeria has substantial oil revenues this year. Nigeria wished to write off its debts … it did a deal with the Paris Club that it would have some of them written off if it agreed to pay some of them.” He added, “Nigeria is not one of the Heavily-Indebted Poor Countries (HIPC) and has lots of potential wealth.”

Nigeria gets debt cancellation - but at what price? - Jubilee Debt Campaign -

December 7, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

Stamps are going up again. First class stamps are jumping tuppence to 32p, and second class up 1p to 22p. In January the market for letter delivery is opening up, and after 350 years the Royal Mail is losing its monopoly. With a £4bn pension black hole, the organisation is in trouble, and last week its chairman Allan Leighton warned that without more flexibility from the regulator it could go bust.

In fact he put it a little more strongly than that. He said, “Reality and regulators is an oxymoron.”

The management due of Leighton, and its chief executive Adam Crozier are arguing that the Royal mail is paying for mistakes made in the past. In 2000 it was losing £1mn a day, but in the last six months, made a £159mn profit.

Ex FA chief said, “No one should regard today’s proposals as anything other than tough.”

December 7, 2005 | posted by Michael Baxter in Uncategorized | comments (0) |

A row has broken out between SMMT, the trade association representing motor manufacturers, and Friends of the Earth. The environmental pressure group has called for a big rise in tax on 4×4 vehicles, and SMMT doesn’t like it. The Motor car industry is suffering at present, maybe it’s in recession, and the last thing it wants is for Friends of the Earth to be on its case, especially says SMMT, when it dismisses nuclear power so readily.

SMMT chief executive Christopher Macgowan commented, “Nuclear power may or may not be the way forward in terms of energy policy. However, to adopt a ‘no thanks’ policy with its echoes from the cold war era, while berating drivers of 4×4 and SUV vehicles, is quite wrong. A full and informed debate on all efforts to cut CO2 across all industries would best serve the environment in the medium and long term.

“According to the BBC, Friends of the Earth and Green Party members are today targeting 4×4 drivers in Norwich, handing out ‘parking tickets’ in a protest over air quality.

“Yet, once again, protestors are ignoring the facts. As well as average CO2 reductions of around 15 per cent in six years, a modern 4×4 diesel emits just seven per cent of the particulate emissions of a 15 year old saloon. Similarly on air quality NOx emissions, standards for the latest Euro 4 petrol 4×4s are six times as tight as those for a Euro 2 saloon, some of which are as little as five years old.

“Will Friends of the Earth and Green Party members be ticketing drivers of older, more polluting saloons, estates and small cars?”