And finally, returning to Japan, Takafumi Horie, the tee shirt wearing establishment upsetting, dot com entrepreneur, who is loved by the young, hated by the old, and has seen his company expand by acquisition, rather than via the good old fashioned Japanese way of sweat, toil and organic rise in sales, is unlikely to return to the company he founded. In the midst of accountancy irregularities, Mr Horie resigned from his post as chief executive of Livedoor, found himself arrested, and now his replacement, President Kozo Hiramatsu has said of his high profile whiz kid who attracts controversy like honey attracts bees: “His return to management will never be possible as long as I am president.”
Savings rise
The UK needs to save more, and business needs more investment. While there are signs that this investment is picking up, despite a rock bottom rate of interest, it remains only marginally better than anaemic. But at least, savers seemed to be returning. Legal & General said yesterday that in 2005 no less than £24bn was invested in its saving schemes, the highest figure ever.
The newly appointed chief executive, Tim Breedon said: “The growth in asset accumulation has been quite extraordinary… What’s been driving it? Investor confidence to some extent, the debate around long-term savings generally and a slight loss of confidence in housing as a store of value and future wealth.”
Meanwhile, Mr Breedon also spouted forth with his take on Lord Turner’s pension ideas yesterday. You may recall that the report proposed that the administration of the National Pensions Savings Scheme (NPSS) should cost no more than 0.3%. Yesterday, Mr Breedon, who claims that L&G could administer the scheme more cheaply than anyone said: “I don’t think anybody can run the scheme for 0.3 per cent…The 0.3 per cent has to include the costs of advice and administration - I don’t think so. ”
But after saying that in Sweden it costs 0.37% to administer the scheme he added: “I think it can be done more cheaply than we do it at the moment. If we can simplify the product and the administration, then you will get efficiencies which will bring the price down.”
Pension hope for small businesses
In his review of the pension crisis, Adair Turner proposed a compulsory 3% employer’s contribution to salaries. If it looks like a duck, ….etc, then it must be a duck, or, in this case, in effect a 3-percentage points rise in employer’s NI. Not a popular idea then. But, in an interview with the FT, Lord Turner said he favored a government subsidy for smaller businesses, in which the size of the subsidy per worker is inversely proportional to the number of employees at the firm.
House prices are 20% overvalued
Council Tax might be more popular than the old Poll tax, buts it’s keeping house prices too high, or so says the National Institute of Economic and Social Research. In its latest forecast for the UK economy, unveiled yesterday, it said: “One reason for the long-term strength in real house prices is the favorable tax treatment of owner-occupied housing, which is not addressed by recent government policy.” It says house prices are still 20% overvalued and recommends ditching Council Tax, in favour of a tax calculated at 1% of the value of the property.
GM: the crisis deepens
$19bn, that was the cash pile at GM when last we reported, back in the Autumn. How could a company with that much money possibly go bust? But that has been the talk. With its pension liabilities, the company needs to cost cut. But Union strength, and the redundancy payments it would have to make, could make this untenable. The Answer, some have speculated, its to move into Chapter 11, remove the liabilities, and return, as a lean mean, motor car making machine.
And yesterday, the company stoked more wood on that particular fire, when it announced a $4.8bn loss in its last quarter, although after excluding special items, the loss was down to $1.2bn. As for the year, total losses came in at $8.6bn.
Management,. of course like to put a postive gloss on these things. But in GM’s case, its chief finance officer, Fritz Henderson, couldn’t even manage that, saying: “There were no highlights for the fourth quarter.2
What with the costs associated with making 30,000 job cuts across factories in North America, and the bankruptcy of Delphi, it was a three month period that the company is no doubt pleased to see the back of.
But, actualy it could be even worse. The full costs related to the Delphi disaster could be even higher, and as result, the figures announced yesterday are only preliminary.
Of course, if GM was a French compnay, the government woud no doubt have found reasons to step in by now, but Georege W, when asked if he had spoken to GM boss Rick Wagoner, replied in that indefatigable way of his: “Not about their balance sheet.”
Mr Bush also implied in a recent interview, that he was not keen to bail out the company, saying: “I have been very reluctant — I’m mindful of the past where at one point in time, a predecessor of mine was faced with that same dilemma…I would hope I wouldn’t be asked to make that decision.”
Still if your approach to investing is to follow what the leaders and shakers do, then here’s some good news. Billionaire investor Kirk Kerkorian has bought himself another $262.8mn worth of shares in the company.
Sony is Back
Perhaps nothing symbolises the rise and fall in Japan’s fortunes better than Sony.
When Japan seemed unstoppable, Sony dominated our aspirations for consumer electronic goods. But then as TVs, and Hif Fis increasingly began to look like commodites, and it was aplication providers such as Microsoft, and now Google, and closer to Sony’s patch, Apple with its iPod, there seemed to be a distinct switch back to US dominance.
And while Japan has struggled, so too has Sony. Until now that is.
Yesterday, the company revealed a 47% jump in quarterly profits and its best ever quarter for sales and net profit.
The Sony PSP led the way, but sales of liquid crystal displays and note book PCs also rose dramatically in the period
A year ago, Sony announced an $80bn loss for its 12 month period, but now it’s forecasting annual profits of $602bn. And as result, shares in the company surged 15% giving the company its biggest daily rise for 15 years.
It was a great day for its newish chief executive Sir Howard Stringer. Presiding over job cuts, and cost cutting, but also a dramatic return to health for Sony, he must rank alongside Charlotte Church as one of the great Welsh people of today.
This year will see the launch of the PlayStation 3. For our money, this will be the most significant video games launch ever, and as the convergence of music, TV, games, video, PC applications and mobile telephony continues, the product could spear head Sony into top spot.
Japan stutters forward
Authorites in Japan are nothing, if not conservative. Many blamed the entire Japanse economic crisis of the last ten years or so on arch conservative policies that kept the rate of interest far too high, when what was needed was a boost to the economy. And then when deflation started to bite, the Bank of Japan dropped rates to zero percent, it was too late; more was required, but when it comes to the rate of interest, you can’t do more than nothing.
Then, earlier this decade, there were signs of a recovery, but at a point when the dusty lamp which was the Japanse economy was still lingering at the bottom of a pile of junk, authorities reacted as if the inflation genie was already out and up went rates. A big mistake. Dotcoms went bust, and the land of the morning sun, returned to a status of permanent economic nightime.
Of late there have been signs of a recovery. But it’s been reliant on China. As the dragon on its doorstep slowly eases itself out of a millenium long slumber, Japan has been warming itself on the beast’s breath.
But the consumer stayed in doors.
Now at last, even that is beginning to change. In December the Japanese Consumer price index, excluding fresh food, was up 0.1%. Wow!, you might sarcastically proclaim, but then bear in mind that prices were also up 0.1% in November, and that’s the first back to back period of positive Japanese inflation since 1998. Maybe at last, the Japanse consumer economy is recovering.
But the vein of conservatism runs deep. And the not so conservative Japanese politicians are fearing that the arch conservative central bank will up rates again, and far too soon.
Vodafone boss speaks up for US interest.
While a growing chorus of Vodafone shareholders are calling for the company to sell its shares in Verizon in the US, the company’s chief executive Arun Sarin made his pennies-worth known yesterday. As the company unveiled its latest quarterly performance, he said that the Vodafone stake in Verizon has risen by around $20bn over the last two years. He said “Up until now the board has chosen to keep the asset and I have to say that is absolutely the right decision from a shareholders point of view.” But he added: “That is not to say the board won’t change its mind as it looks forward.”
“3″ to pay you to receive calls.
Here’s a tip. Buy into the new pay as go tariff from 3, announced yesterday, and every time you ring someone from the phone, make an excuse and ask them to call you back. The new tariff, dubbed “We Pay” by the company, entails a payment to you of 5p a minute in credit and 2p in text.
“3″ hails the new scheme as an example of transparency in its pricing. But its bad news if it’s always you who makes the phone call, the cost of making a call goes up by 50% to 30p a minute.
Take this idea a step or two on, and maybe we could receive money for receiving sales calls. All of a sudden, people would want to receive calls offering them double glazing, and time share; we would all become rich, either that or the sales companies would go under.
Smiths puts profits first as like for likes fall
If you can’t beat them join them, or so they say; but Smiths took the opposite approach in the Christmas period, and suffered a big drop in sales, but maybe profits, on the other hand, will be stronger.
While HMV subsidiary Waterstones discounted and discounted some more, WH Smiths was more cautious.
As the retailer’s Chief Executive Kate Swann said yesterday: ” We actively chose not to discount to profit-destroying levels.” She said that in the run up to Christmas, competitors started discounting top sellers, selling them at a loss, as a way of steering customers into the stores, and out of panic they were going to be left with too much stock.
Smiths on the other hand discounted but not to a level which was below cost price. As Ms Swann said: “It is not sensible business.”
As a result, like for likes in the seven weeks to January 21 were down 5%.
Smiths is in the midst of a five year plan to focus more on high margin products, such as stationery.