On the 29th March 2008 the WWF are asking all of us to turn of all essential power for 1 hour, across the world.
This is to highlight several facts. I will be supporting it along with the rest of my Family.
I urge you to support it as well. WWF
There is a further news story here >>
Richard Smith
The Finance Zone 0845 226 9106
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So this week the Bank of England produced it’s Inflation Report . It does not make for good reading, or does it.
It is clear that there are some mixed signals, with Fuel, Food and other Basics all rising above inflation, with Fuel increasing substantially year on year. Not a good sign as it affects all we purchase or use in some way. We are likely to see more increases in Council Tax which is not news for all us, especially if we see cuts in services at the same time.
I am not convinced that the Bank of England are really up to the job of managing a very complex set of economic circumstances and the new global economy, then again who would be. IMHO certainly not our Mr Darling, who seems to be lurching from indecision to undecidedness. (is that a word).
I have been saying for a while we need to proceed with caution in all that we do, in particular in relation to investments.
House prices are likely to flatten, something I have been saying for months, are they likely to fall, I do not think so. More a levelling out.
What is clear:-
The world has changed, todays news is that the FTSE 100 has been supported because of, wait for it….. because the South African Electricity producer has explained it is unlikely to meet full demand for power later on on this year, and that means that some precious metals (Gold and Platinum) are likely to increase in price as production may fall. This caused some of the Mining Company shares to spike upwards and that meant the FTSE 100 index of leading UK shares had a better day.
The very thought of a Company share price increasing on speculation that they may have less of it to sell really ‘blew my mind’, but hey thats the world we are in.
What can you do:
Back to basics – manage debt (clear the most expensive first) make you have sufficient on short term cash deposits, just in case. Look at your existing plans, to make sure that they are cost effective, remortgage if appropriate. Ensure your Wills are up to date all the boring and oft ignored. Review – Amend – Change and make that forward plan.
Richard Smith
The Finance Zone 0845 227 9106 >>
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The article below was first published elsewhere on the inernet, however I felt it was really worthy of being reproduced here. Orignally writen by Roger Nightingale.
Economists’ forecasts reflect, not the future, but the past. As a rule, those dabbling in the dismal science wait until something has happened before they say it is going to. As a result, their predictions are predictable ? psychologically fascinating, but operationally valueless.
The point was elegantly illustrated during the course of 2007. At the start of the year, even though the US’s sub-prime woes had begun, the consensus nevertheless supposed that GDP growth would be in line with, if not in excess of, that in 2006. By mid-summer, there was some anxiety about banks’ balance sheets ? but not enough to cause the great and the good to project sub-par economics progress.
By autumn, the banking situation had deteriorated, but there was only a grudging willingness to scale back projections: real activity was expected to stay satisfactorily strong. Not until year-end, not until equity markets were in freefall, was the outlook widely acknowledged to be poor.
It wasn’t just investment banks that adopted the backward-looking technique. So too did central banks and the IMF ? the variation between them being, not one of principle , but of responsiveness . The Fed was quick to adjust its outlook to historical reality, the investment banks a little slower, the IMF much slower, the ECB glacial.
So what is the forecast of how the forecasts will pan out during 2008? Remarkably similar to that in the last cycle. Then, it was Greenspan who, absolutely late in recognising the problem, was relatively early in doing so. He saw that the cyclical downturn had proceeded steeply during 2000, presumed it would continue in 2001, and concluded that extraordinary interest rate cuts were necessary to prevent recession. Today, it is Bernanke who makes the same analysis.
Are his counterparts elsewhere in the world convinced? No. Comfortably ensconced in their ivory towers, cushioned by public sector job security and defined-benefits pensions excesses, most are economically blind! It’ll take several more months of gazing at the rear view mirror before they appreciate what they’ve already driven past. Perhaps only when unemployment, a lagging indicator, has turned up will they take note. Then, though, there’ll be a reaction. GDP forecasts will be slashed; interest rates likewise. Will the developed world avoid recession? Some countries will, but many won’t.
The UK is not well placed. Last time round, during 2001 and 2002, the country performed much better than its G7 counterparts. That wasn’t because of the prescience of the BoE, nor because of the insight of the Treasury. It was instead because financial services were booming ? and London, taking market share from Europe, Asia and America, was at its epicentre. Might the phenomenon recur in 2008 and 2009? No. More likely, the sector will subside and the economy with it.
The outlook would be less awful if the country enjoyed a fiscal surplus. But the spendthrift Treasury, wasting revenues during the years of plenty, looks likely to starve in the coming famine. To get things back on an even keel, public spending (as a percentage of GDP) needs to be reduced substantially.
Will Brown and Darling dare do so with only a couple of years to go before the next general election?
No. They’ll stick to the old game plan: fudge and stealth. Will it work? Not a chance!
Meanwhile, the louche BoE will cut interest rates sufficiently to cause a loss of confidence in sterling, but insufficiently to revive activity. GDP will stagnate, unemployment rise and house prices fall. It’s a sad prospect for the Brown. How he must regret not calling an election last autumn! Even if he’d lost then, his reputation would have been intact. And the Cameron, a pyrrhic victor, would soon have lost his.
The markets, meanwhile, are difficult to call in the near term. Though they constitute excellent value on most actuarial considerations, the immediate future may be driven by other considerations. Might there be a second SocGen in the system, for instance? There could be a third and fourth! Will political tensions around the world boil over into protectionism? Maybe! The good news is that Bernanke is at the helm of the Fed, and there’ll soon be a grown-up in the White House. That being the case, it’s only a matter of time before equities revive.
So there you have it.
Richard Smith
08452269106
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