Sunday 28 October 2007

28 October - Business Round Up

Another quite exciting week in the business news; indeed the past 6 months have seen a huge jump in the importance of business news as the credit crunch and general economic situation grabs peoples' attention for the first time in years; probably since the end of the dotcom boom.

I have added a couple of international stories this week for some variety too.

Here are 10 stories that you should read this weekend:

Buy Gold - Even the Observer is getting on the bandwagon. Of course when everyone else jumps on board it is probably time to get off....

US Inflation worries
- From the NY Times, the issues of the housing market fall have led to the spectre of inflation being somewhat hidden in the US. However, prices have risen.

..and yet US interest rates might fall - When read with the story above we can see how truly difficult the problems are for the world's largest economy. Also what happens in the US may happen here in a few months?

UK ducks Climate Targets - As reported earlier in the week, John Hutton and the Labour Government are going to try and get out of the 20% renewables by 2020 target. Of course as Nick Drew has said before, they could never hit these. Never again can we put any faith in so called green initiatives; they are so much hot air...

Supermarkets attacked on land banks - The UK Supermarkets have a large amount of retail land held onto for 'anti-competitive' reasons. This is one area where I side with the regulators and say the land should be sold for wider economic benefits if the supermarkets are not going to develop it.

Resolution battle - A company started just 5 years ago, Resolution plc, that looks after so called Zombie Pension funds is the centre of a bid battle between Pearl and Standard life. The Chairman and founder, Colin Cowdrey stands to make £150 million; and he deserves it too for creating business magic and a whole new sector in the pension market.

C&W pensions - And whilst we are on this topic, here is another large company that is seeking to offload its pensions issues to a 3rd party. This is a long-term story that will run and run.

Northern Rock - GMAC is revealed as a bidder with JC Flowers; the firm most likely to rescue the bank of England and the UK Government....I mean Norther Rock, oops.

Asian Market bubble - From the Hong Kong Standard comes the news that the HK market ended up at over 30,000 for the first time ever. Still going strong, but putting even more pressure on the HK dollar peg with the US$.

Comment of the week - John Waples in the telegraph has an excellence piece on the false market in Northern Rock shares and says trading should be suspended.


James Higham said...

Of course when everyone else jumps on board it is probably time to get off.

It's the currency of the future all right - 2012 to be precise.

Anonymous said...

Colin Cowdrey?

CityUnslicker said...

JH - Well maybe before then at this rate..

CityUnslicker said...

Anon - oops, getting my cricket and business confused!

Anonymous said...

Interesting story in that Times piece about commercial property too. I think I mentioned this before. There seems to be a lot of peculiar things happening in the commercial property market over the last few years - huge office being built in places where there is no market. Presumably taking advantage of low interest rates to build assets with appreciating asset (notional, but illiquid) values on the books.

The gold price increase I expected, as I posted before. It is rising fast against the $ and now the £ is being dragged down by the $.

Anonymous said...

I'm too worried about my pension to even consider buying gold - or is that the answer?

Anonymous said...

"I'm too worried about my pension to even consider buying gold - or is that the answer?"

The problem we have here Ella is that the US has decided to reflate its way out of its debt problems. By lowering interest rates it dumps more cash into the system. In fact it has been doing this since about 2001, which is why the pound (which for many years was stuck at $1.50 = £1.00) has now risen to > $2.00. More $ in the system means that each dollar is worth less (unless the US has become massively more productive over the last 5 years as Alan Greenspan claims - which it hasn't, it was just a lie to cover up the inflationary policy). So now we have the $ falling against many commodities including oil and gold and many currencies at a rate consistent with hyperinflation. The Fed can only continue with this policy - it makes no sense to cut by 0.5% and hyperinflate the economy unless you are going to do it properly - and that means saving millions of homeowners from repossession by taking the interest rates down to 1% again, just as they were when the sub-prime market opened. This would send inflation stratospheric and gold in $ terms would go through the roof - except that the US government (and many other governments) would probably start dumping massive amounts of gold to force prices down again to cover up the hyperinflation, as they did in the late 60s. Investment funds might also be forced to dump gold to get the cash they need during the credit crunch. Which means the gold price will likely continue to shoot up - but might also come down with a bump.

Of course the UK is not in quite the same position as the US, but the UK cannot sustain its position much longer. Its balance of trade is very poor and with exports to the US cut off due to the rapidly declining dollar things are only going to get worse. The £ is therefore likely to be dragged down towards the dollar and the government will then have to choose between allowing rampant hyperinflation or high interest rates and large scale repossessions. Given we have a Labour government I would expect it to plump for the former. But hyperinflation is very bad news for those people living off savings and investments as you are. Investing in Gold may not be the answer for the reasons I have described. But you can't go wrong with a house in the country with a nice big garden - you can always dig up the roses and plant potatoes instead!

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