Shocks & Stares » debt http://blogs.hillandknowlton.com/shocksandstares H&K\'s Financial & Professional Services Team Blog Tue, 19 Mar 2013 08:00:56 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 When is a bailout not a bailout? http://blogs.hillandknowlton.com/shocksandstares/2012/06/when-is-a-bailout-not-a-bailout/ http://blogs.hillandknowlton.com/shocksandstares/2012/06/when-is-a-bailout-not-a-bailout/#comments Mon, 11 Jun 2012 16:34:16 +0000 Jonathan Henderson http://blogs.hillandknowlton.com/shocksandstares/?p=663 After several weeks of speculation, the government of Spain this weekend confirmed that money would be accepted to help support the country’s banking system.

Spain’s politicians have been at pains to point out that this is not a bailout of the kind witnessed in countries such as Greece and Ireland where outside officials will effectively be making decisions about the countries’ public finances.

Spanish minsters have clearly been briefed to communicate the distinction as the following quotes from Mr de Guindos, the economy minister, in the initial Financial Times article indicate:

  • “What is being requested is financial assistance. It has nothing to do with a rescue”
  • “The conditions will be applied to the banks, not Spanish society”

I’d argue that Spanish ministers have effectively made their point but in a situation which continues to develop at pace, and where details are easily forgotten, they may well be lumped together with those who have requested funds before as the dust begins to settle on the decision. As a collegue pointed out, it could well be seen as an exercise in putting lipstick on PIGS

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Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/12/friday-fiver-3/ http://blogs.hillandknowlton.com/shocksandstares/2011/12/friday-fiver-3/#comments Fri, 02 Dec 2011 16:43:35 +0000 Edward Jones http://blogs.hillandknowlton.com/shocksandstares/?p=453 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.

Amongst the carnage, two (possibly linked) events stood out. On Tuesday evening, the ratings agency Standard & Poor’s downgraded its investment rating on a string of high-profile banks including HSBC, Barclays and Goldman Sachs. The markets, predictably, took a grim view as the FTSE and other indices headed south yet again. It’s possible, though unproven, that regulators took a grim view as well. On Wednesday afternoon, as most of the UK’s economic journalists were huddling down for some post-Autumn statement analysis at the IFS, the Bank of England and several other central banks released a statement detailing co-ordinated action to lower the cost of borrowing in dollars for banks and other financial institutions. The markets, predictably, took a decidedly less grim view of this and promptly shot up north, yet again. Conclusions? That the global forces buffeting the global economy have become so strong that every announcement either way is now being leapt upon like a cure for cancer – stand by for next week…

Happiness is… a cigar called Hamlet

Who would believe it? Despite being in the depths of one of the worst economic cycles in recent history, the people of Britain consider themselves, for the most part, to be pretty damn happy! In a survey commissioned by David Cameron to gauge how happy the UK is, three quarters of us place ourselves at seven out of ten or higher on a scale of wellbeing.

With unemployment scaling 8% and inflation pushing 5%, you would be forgiven for thinking that the good people of Britain would be pretty miserable. But that good old stiff upper lip and Blitz spirit appears to be in abundance. People claim that their children’s well-being, personal relationships and mental well–being are the things they are most satisfied with. Which basically means that those things that money can’t buy, make us happy and we value them most.

Now isn’t that something to smile about?

Smile! Image Source Page: http://dzzle.com/videos/yogurt+advert

The ultimate compliment

This week we were reading about Warren Buffett’s latest investment, the acquisition of his local newspaper, the Omaha World-Herald Company.

Whilst reading the FT’s report on the subject, we were struck by a realisation of profound significance. Warren Buffett is the spitting image of Carl Fredricksen from Disney/Pixar’s 2009 film Up.

Carl has much in common [full plot here] with Buffett who is known for his kind nature and is a renowned philanthropist. Perhaps Disney/Pixar were paying him a compliment.

The Fiver team were dissapointed to subsequently find via Google that others have spotted the resemblance but we are still claiming this one for industry event small talk.

Carl Fredricksen from Pixar smash Up (Pic: Bloomberg News via The Telegraph)

Warren Buffett (Picture: Disney/Pixar)

Good Week/Bad Week…..

Leaping up the charts this week, it’s tall, thin and very clever economist, Robert Chote, head of the Office for Budget Responsibility. As we noted above, the OBR released decidedly grim numbers on the future of the UK economy on Tuesday, so you might not think Mr Chote would be a particularly happy bunny. He picks up our award however, because as one media commentator put it, Mr Chote is now effectively chief policy officer for the UK economy – based on his numbers, the Chancellor (and probably the Bank of England) have to react.

Hurtling down the charts sadly is former Italian footballer, Damiano Tommasi. The follically-blessed former Roma man came up with a novel solution to Italy’s debt problems this week when he called on his fellow footballers to use their sizeable wage packets to buy Italian bonds at a discounted rate – hence saving the government from having to agree to interest rates of over 7% every time they were looking to top-up the cash register. Sadly, the idea bombed, seemingly never to return.

So there you have it. Thanks to Clare Coffey, Jonathan Henderson and Dave Chambers for their contributions.

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/10/fps-friday-fiver-24/ http://blogs.hillandknowlton.com/shocksandstares/2011/10/fps-friday-fiver-24/#comments Fri, 28 Oct 2011 17:50:07 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=391 Hello All! We’re a little late this week, though happily the ever entertaining Matt Muir provided yet another great Web Curios which has probably kept H&K blog readers’ attentions for most of the afternoon. However, we’re still committed to bringing you a round-up of this week’s news from the world of financial and professional services (and yet again it’s been a week not to miss). It’s a little shorter this week, but we hope you enjoy it as always. Thanks to Ed Jones and Jonny H as always.

WE HAVE A DEAL – JUST…..It went down to the wire, involved a very well received slap-up meal, and what most leaders likely found an annoying intervention from the British PM. However, we have a deal on the eurozone which should see it stabilise for at least a few weeks.

The medicine is nothing if not severe though – a 50% writedown on Greek debt held by private institutions (i.e. banks) and £100bn which needs to be found in order to recapitalise banks and prevent them from falling into the abyss (sound familiar from about 3 years ago?).

Will it work in the long or even short term? The jury is definitely out on that one but already things are looking a wee bit wobbly

THE RICH GET RICHER…THEN RELATIVELY LESS WELL-OFF…THEN RICHER AGAIN…..The info-graphic below from the New York Times captured our attention this week. It tracks the financial fortunes of US citizens dating back as far as the First World War and the original web version can be found here.

Wealth across the years (Image: New York Times)

The figures are relatively self-explanatory but they highlight how the relative prosperity of each segment of society has evolved over time. The Top Fifth of earners have done particularly well of late and in 2007 the top 1% of earners controlled 23.5% of all wealth. If you’ve been following the remarks of Warren Buffett of late you’ll know that the issue of distribution of wealth is a source of some debate in the US at present and only time will tell whether the 21st century will follow a similar pattern. Today’s figures from Income Data Services only fuelled the fire as well.

WHEN IS AN EMPTY TENT NOT AN EMPTY TENT…..On Monday, the Daily Telegraph (and others) shone an infrared camera on tents at the Occupy London site outside St Paul’s. Their results appeared to show that most of the tents were empty during the night, implying that these were the most fairweather of protestors.

It dealt a severe blow to the credibility of the movement, but not it seems the story may not have been entirely accurate. As The Guardian and others reported later in the week, the technology used to hunt for tent-dwelling heat-producing humans wasn’t entirely equipped for the job at hand. There seems to be little doubt that some protesters are sleeping at home, but probably far fewer than some media outlets tried to claim initially.

TESTING THE WATERS OF IMPARTIALITY…..Andrew Marr wrote in last weekend’s Sunday Times about the Queen on the eve of her diamond jubilee. One thing he noted in particular was that while the Monarch retained a thoroughly impartial stance on political matters, she did still enjoy quizzing ministers on matters of policy.

The same doesn’t quite seem to apply to the other supposedly impartial institution at the top of the British power tree, the Bank of England. In another sign that it is becoming increasingly bold with its statements, the Bank’s director of Financial Stability, Andrew Haldane, gave a bold speech on Monday about the dangers as he saw of the 21st century banking system. His comments received the support of prominent commentators, not least for his conclusion that:

“The words bank and bankrupt have common etymological roots dating from the 13th century. In the 13th century it was bankers bankrupting banks. In the 21st century bankers are still bankrupting banks. But it is no longer just banks. This tells us that the risks from banking have been widely spread socially. But the returns to bankers have been narrowly kept privately”

GOOD WEEK/BAD WEEK…..Silvio Berlusconi is pretty much a no-contest winner for the bad week slot this week, finely topped off by some more lurid accusations on Thursday evening.

Good week though goes to our favourite interviewee of the past year, Noel Gallagher, who gave this gem to Shortlist at the back end of last week. Still got it Noel, still got it.

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All that glitters http://blogs.hillandknowlton.com/shocksandstares/2011/10/all-that-glitters/ http://blogs.hillandknowlton.com/shocksandstares/2011/10/all-that-glitters/#comments Thu, 13 Oct 2011 13:50:21 +0000 Jonathan Henderson http://blogs.hillandknowlton.com/shocksandstares/?p=344 Debt, money printing, market volatility, political instability and behavioural economics – these are just a small selection of the interrelated factors currently determining the seemingly meteoric rise of the price of gold 

The extent to which current valuations are fair, sustainable or sensible is a source of some debate and I’d encourage anyone with an interest in the subject to have a listen to a short podcast just posted on The Motley Fool website.

The conversation [which can be found here] with David Kuo and the effervescent Merryn Somerset Webb is well worth a twenty minute investment of your attention.

[graph courtesy of MoneyWeek]

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Man Utd’s IPO: A paradox to fans’ ambitions http://blogs.hillandknowlton.com/shocksandstares/2011/08/man-utd%e2%80%99s-ipo-a-paradox-to-fans%e2%80%99-ambitions/ http://blogs.hillandknowlton.com/shocksandstares/2011/08/man-utd%e2%80%99s-ipo-a-paradox-to-fans%e2%80%99-ambitions/#comments Thu, 18 Aug 2011 16:49:56 +0000 Edward Jones http://blogs.hillandknowlton.com/shocksandstares/?p=249

Man Utd’s application to list on the Singapore Stock Exchange and make available 30% of the club to Asian investors is a paradox to efforts from fans and parliament alike to see local supporters have a greater say in the direction of their football club.

It is also confirmation of the global reach of those few clubs at the pinnacle of world football and serves as a reminder to the debts they’re carrying, the dizzying sums they spend and despite all this, the sheer force of their brands.

At its heart, the IPO is a symbol for the increasing monetisation of football. The beautiful game has become a beautiful business, or as is more often the case, a burden, on wealthy individuals willing to take the ultimate gamble.

The joke used to be that Man United have more fans in London than they do in Manchester, it now seems they have more fans in the Far-East than they do in the UK. The FT on Wednesday suggested of Man United’s 333m global fan base, 190m come from Asia. That an audience in the Far-East is predicted to have the potential to impose a higher valuation of a football club in Manchester is both testament to the Red Devils’ Asian appeal and the emerging power of the Asian economy, particularly in contrast to Europe.

The Culture, Media and Sport Commons Select Committee’s recent report into football governance called on the FA to look at means of giving properly constituted supporters trusts, or consortia which include supporters trusts, an opportunity to make a successful matching bid for a club that has gone into administration. Admittedly, Man United is not in this position, in spite of its mega debts, but whilst the ambitions of the Government, and I suspect most fans would be to have a greater say in the running of their club, the current crop of football owners have other ideas.

The float in Singapore seems to make business sense for the owners, which is increasingly what football decisions are coming down to. It will no doubt be accompanied by major marketing efforts to tap into United’s growing Asian fan base.

It does seem a shame however that the Red Knights and those on the terraces in the gold and green scarves will not get a more direct opportunity to buy a stake in their club and that this will serve as the model for football ownership in the immediate future.

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