Archive for December, 2011

A sign of the times

Cast your mind back to the autumn of 2008 when the world’s financial system appeared to be on the brink. Financial stocks tumbled. The Goldman Sachs share price for example went from $235 in October 2007 to $53 by November 2008.

Markets have moved on and this week JP Morgan tapped up investors for $1.25 billion by issuing bonds. The bank managed to issue this corporate debt at an interest rate of 5.4% over 30 years making it the lowest coupon achieved by a US bank since Dealogic started monitoring the market in 1995.  

Compare the JP Morgan rate to government debt and you’ll see how the financial crisis has evolved. Investors might still be worried about the financial system and many of the businesses within it, but they are more worried about states.

It is a sign of the times that Italy is currently paying over 6% to borrow, highlighting the shift from companies to state, a theme which 2011 will no doubt be remembered for.

FPS’ Friday Fiver – prediction edition

As Christmas party season reaches its messy peak, no doubt many of you are rubbing bleary eyes today and wondering why you had that last glass of Prosecco.  We’ll keep the Friday Fiver soothing this week and I can guarantee that there are no flashing images below.  

In a slight detour from our usual news review we’ll dust down our crystal balls and gaze at the year ahead. We have handpicked a series of largely unrelated predictions for your reading pleasure.

 Economic

Anemic, uncertain and indebted are the buzz words for the economic outlook, particularly in the Western world. It’s not a pretty picture as Nouriel Roubini outlines in the Guardian.  

Upcoming policy decisions both in Europe and the US are likely to have a significant bearing on the year ahead. In his 2012 outlook, Morgan Stanley economist Joachim Fels states:

Policy make or break: We expect upcoming policy decisions in the US and Europe to hold the key to the global growth outlook. With a recession in Europe, anaemic growth in the US and a further dimming of emerging market economies’ growth prospects as our base case, we see global growth falling below its long-term average. 

[More detailed article here]

 

 

[Work to do on the production lines]

Political

The biggest foreseeable political event of next year is likely to be the US election but given the social upheaval we have seen both at home and abroad in 2011, who knows what is in store.

In the States, Obama will be defending his position against an as yet undecided Republican candidate. Mitt Romney, Ron Paul and Newt Gingrich are all still in contention.

[Newt Gingrich – A face of 2012?]

A quick scan of the betting odds, suggests that Obama is still the favourite but much could happen between now and polling day.

Olympic

It’s hard to talk about 2012 without mentioning the London Olympics. Looking back at the 2008 medal table, China came out on top with Great Britain in fourth spot. Will we beat 47 medals in 2012?

Clive Woodward is of the view that hosting the Games should act as an additional incentive to our athletes and our medal count is likely to increase next year. Michael Johnson, a man who knows a thing or two about Olympic competition, is of the view that athletes may relax too much whilst at home. It didn’t seem to do him any harm in Atlanta however…  

Apocalyptic

Depending on your interpretation of the Mayan calendar our days may also be numbered. According to the calendar we have just over a year as the world may end on December 21st 2012. We had better get busy in that case…

 On that cheery note, I ask you to consider the importance of your New Year’s resolutions and bid you a Merry Christmas and a Happy New Year.

Friday Fiver

posted by Edward Jones

For this week’s festive fill of Friday fun from the FPS team, sorry, I’ll stop with the Fs now. This week’s 5r below…

UK goes alone over Europe

Picture: BBC

It looks like the Prime Minister, David Cameron, has bowed to domestic pressure at the expense of international, or at least European influence. The history of Europe and the Conservative party looms large over his decision, but it does appear to represent an element of weakness in his leadership which wasn’t there before. The PM’s detractors are getting increasingly confident, backbench MPs were particularly vocal in PMQs this week, and one commentator even questioned what the odds might be on all party leaders being in present position by the time of the next election; at the moment it feels like an appealing bet. At least Cameron can take heart in Labour’s travails which it seems, according to the latest opinion polls, are getting worse.   

Christmas on the High Street

Every year it seems to get later. Logically you’d think that the busiest day on the high street would be mid-December, to allow time to wrap gifts and because people are keen to avoid the last minute dash.

Guess the road...

In reality, the busiest shopping periods over the past few years have been shifting towards the 22nd, 23rd or even 24th Dec as our client Visa showed last year, with 23 December being the peak. Christmas arouses the best of our consumerism, but even that has finally been dampened by high inflation and low or no wage growth. Why is this? Firstly, there’s the economic situation. Secondly, is the knock on effect of this dampening – retailers have to work extra hard to get us into shops. Discounting is the most effective way to do this but this presents a problem – discount too soon and your margins shrink. With big stock bills and rent to pay, its hard to afford that for long. So begins a game of poker between retailer and customer – the retailer always blinks first, it’s just a question of when.

It can’t be! Some good news…

In a rebuff to Dr Doom, the UK’s export market is apparently staging a come back. According to ONS statistics published today the value of UK’s exports have hit a record high and we’ve been importing less, meaning a narrowing trade deficit. Chemicals, medical products, and telecoms equipment performed particularly strongly in what will be seen as a boost to the Government, UKTI and the Department for Business who are banging the drum on this increasingly loudly. In last week’s Autumn statement the Government allocated £10 million to help mid-size British businesses export and £35 million to double, from 25,000 to 50,000, the number of SMEs that UKTI supports each year.  Analysts have cautiously welcomed the news, but the Government will be delighted.

There’s an app for that

You may have noticed, but the Fiver team are rather fond of the FT. On Tuesday everybody’s favourite pink paper launched an app for Android, which will replace the slightly clunky web browser version. We’ll await the Apple version with anticipation. If anyone has got round to downloading the new app, we’d be interested to hear what you think.

Osborne and Balls get in the Festive spirit

George Osborne and Ed Balls

Enough said.

Friday Fiver

posted by Edward Jones

It’s been a big ol’ week in the land of FPS, what with the Autumn Statement, Public Sector strikes, another round of downgrades for Europe’s banks and the beginning of Yuletide. Here’s our take on the week that was.

The Autumn Statement

After declaring the Pre-Budget Report dead, the Government this week delivered their Pre-Budget Report Autumn Statement. It was depressing news, but we all knew it was going to be and it looks set to continue for the foreseeable future. The headlines are lower growth, increased borrowing, a squeezed public sector and more measures to help small businesses, a 0.088% increase in the bank levy and a promise to further reduce corporation tax.

Picture: Reuters UK

What really caught our eye(s) however, were the measures to help mid-size businesses; a theme championed by John Cridland at the CBI, the forgotten army of mid-size businesses have suddenly been remembered. In an attempt to create the UK equivalent of Germany’s Mittelstand, tucked away on page 64 of the Autumn Statement are a host of measures to help mid-size firms achieve their potential and export more proactively. After all, where else is growth going to come from?  

Going down, down, down…..

There’s been so much grim news on the economic front this week that it’s a little hard to pick out the ‘highlights’. To recap quickly – China’s domestic consumption appears to be slowing, as does its manufacturing production; the UK is going to grow very little in 2011, and even less in 2012; Italy continues to have to pay a fortune to borrow money; business confidence that the eurozone will survive is ebbing away; and several stars of The Only Way is Essex are about to be booted off.

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