Shocks & Stares » Italy 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 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/2011/11/fps-friday-fiver-25/ http://blogs.hillandknowlton.com/shocksandstares/2011/11/fps-friday-fiver-25/#comments Fri, 04 Nov 2011 18:07:33 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=398 Happy Friday afternoon everyone. The clocks have gone back, it’s dark outside, and the eurozone still doesn’t look any closer to salvation. Light relief does at least come however with the prospect of a good fireworks show this weekend. Before you get out the sparklers though, take a look at the Financial and Professional Services Friday Fiver below, which this week takes in a wide range of topics on everything from Bob Diamond to celebrity marriages. We hope you enjoy!

WE’RE GROWING!!! SORT OF…..Finally, some good news this week as the UK economy grew 0.5% in the third quarter of 2011. Compared to recent efforts, that’s practically a meteoric rise, and was ahead of City expectations.

But here’s the bad news though – the effect may not last for two reasons. Firstly, some of the rebound in growth is being attributed to the disruption in Q2 owing to that dress and the ensuing two week holiday that most people took to get over it. And secondly, the forecast ahead looks dire – the latest purchasing manager indices, released by our client, CIPS, nosedived this week, suggesting order books are drying up. Still, let’s enjoy a bit of growth while we can shall we?

SING SONG TO AN ATHENIAN RHAPSODY…..We’re viewing Europe’s sovereign debt issues through a musical prism this week. The debt odyssey has taken a number of twists and turns, the most unexpected of which was Greek Prime Minister George Papandreou’s call for a referendum on the latest bailout package. The brinksmanship proved a step too far and was quickly called off.

Disappointingly, the on-going crisis has meant that Italian Prime Minister Silvio Berlusconi has been forced to delay the release of his latest CD of love songs. On first inspection, readers would be forgiven for mistaking the article as an April Fool.

It’s good to see the City is keeping itself busy and Alphaville was the recipient of a cleverly penned version of Queen’s Bohemian Rhapsody set against the backdrop of recent events. Click and enjoy!

MORTGAGE DÉJÀ VU…..In 2006/07, people in America stopped paying their monthly mortgage bills. Many of them simply got up, left their houses and never came back (due to a wonderful quirk in US rules on home ownership they had very little obligation to stick around). Once enough people had walked away, banks realised that they were sitting on a pile of worthless housing stock that they couldn’t sell. Once that happened, banks who had bought mortgage loans off of other banks (neatly packaged up like a mince pie in lovable ‘CDOs’) realised they too were sitting on potentially worthless debt. Panic ensued, and we’ve been struggling to recover ever since.

Old news by now isn’t it? Probably not worth noting then that today’s FT reported that US state-backed mortgage company Freddie Mac has requested an extra $6bn from taxpayers because “homeowners were falling behind on their obligations and it could not count on mortgage insurers to reimburse the company for losses”. Or that US house “sales are down, delinquencies are rising and the pipeline of seized homes due to flood the market is growing ever larger”. Nope, not worth noting at all.

SLEB WATCH…..One for our celebrity interested readers at the request of our resident pop-culture queen, Helen Searle. Yes, in case you weren’t convinced, HuffPo’s title is eager to underline this IS an INFOGRAPHIC of the shortest celebrity marriages in homage to Kim Kardashian’s filing for divorce this week (your author this week isn’t sure who that is either). Although it could also be described as a bar chart, either way, our sleb watchers rather like it.

GOOD WEEK/BAD WEEK…..Whisper it, but it’s been a relatively good week for Barclays boss, Bob Diamond. His company’s results were better than most of its peers (though again the use of some accounting wizardry perhaps hid the true picture), and Diamond also faired rather better in media interviews than he did last time he mentioned the word ‘remorse’.

On the flip side, his banking compatriot at Lloyds, Antonio Horta-Osorio, faired far worse. No one should ever work so hard or endure such stress that they have to take a leave of absence to recover. Not ever. We hope he gets well soon.

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/08/fps-friday-fiver-15/ http://blogs.hillandknowlton.com/shocksandstares/2011/08/fps-friday-fiver-15/#comments Fri, 12 Aug 2011 13:36:06 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=239 Another week and one in which unsurprisingly, UK media attention focused primarily on the England riots (Peter Oborne’s piece today captured the wider issue rather well I believe). That’s not to say things haven’t been happening elsewhere though, particularly in the financial world.

With that in mind, here’s a round-up of the key stories from all aspects of this week. Thanks to Jonathan, Ross, new writer Claire Scott, and also our MD, Ben – his article is second up and attempts to add some perspective to events.

Zut alors…..Another week, another country but the issue, namely financial stability, remains the same. Early in the week one of the world’s best known fund managers, Bill Miller, published a response to S&P’s downgrade of US government debt. The articleA precipitate, wrong and dangerous decision ran in the FT and is well worth a read.

There was a lot of this going on this week, as markets behaved in wild fashion

By Wednesday however, the bottle had stopped spinning yet again and this time it was the turn of France and its credit worthiness to come under scrutiny. With speculation about the health of some of the country’s largest banks and the ability of the nation to underwrite possible further bailouts in southern Europe giving investors sweaty palms.

Sovereign debt has become synonymous with Western governments but in today’s FT, Jamil Anderlini provides an alternative perspective arguing that the disparity between China’s official and actual debt levels deserve further scrutiny.

Putting perspective on this week…..The riots captured the UK media’s attention, and were clearly unacceptable. They raise all sorts of questions about society, as well as being highly damaging for London and the UK’s image with the Olympics round the corner. At the same time though, there are bigger and potentially more threatening global economic issues at play at the moment. While you can understand the rolling news channels’ focus on the riots, with all due respect they are a catastrophe on a much smaller scale than what is going on in Europe and the financial markets.

That’s not to downplay the riots in anyway but if things go the way they look they might (and I know of European bankers who fear the worst), and in the continued absence of any discernible leadership from Europe, frankly, a minority bent on destroying the businesses that support their communities, could, disturbingly, have far less long term impact on the wider UK population that what is happening on the continent.

The domino effect of Eurozone countries coming under immense market pressure shows no sign of slowing, market sentiment has gone haywire, and growth prospects across the West are tumbling. It’s time to wake up, smell the coffee and look beyond our own borders for signs of an even greater potential trouble.

Sound advice from Twitter given events this week

Boris rising, Dave declining…..The Blair/Brown tussle is one of negative memories from Labour’s 13 years in power. Blair admitted in his memoirs that Brown’s constant hounding for a stand down date and need for backing caused distraction and hindered progress. Jonathan Powell, Blair’s Chief of Staff, is even more damning of Brown in his recent book The New Machiavelli. If David Cameron thought his Premiership was to be without such challenges and unwanted burdens, surely he must now think again.

Boris Johnson is becoming a thorn in Cameron’s side. With speculation already rising that the future of the Conservative Party lies with either George Osborne or Johnson, it’s the latter that is fighting his corner more rigorously. This was evident this week when Johnson went against the Party line stating that budget cuts for the Met were wrong – swiftly rebuffed by Cameron yesterday when he said police budget cuts were non-negotiable.

How much of an eye does Boris have on the PM's job? (Image: ThisIsLondon.co.uk)

Johnson has also openly challenged Osborne as well – he recently called for a cut in taxes to boost economic recovery and entrepreneurship. This was delivered at a time of sensitivity for the Chancellor after the recent less than stellar GDP figures were announced and when he faced similar attacks from his nemesis, Ed Balls. Boris’ willingness to openly challenge the Party leaders must be taken seriously, even if he is not. At a time when the Government faces colossal challenges, such distractions are doubly unwelcome. It is up to Cameron to nip this in the bud and not let the future of the Party overrun the present.

It was Sarko's turn to feel the pressure of the markets this week

Good Week/Bad Week…..A tale of three men with O’s in their names this week. For Silvio Berlusconi, it was pretty much as expected – another tough week spent herding away the hounds at the door as investors continued to murmur about Italy being on the verge of downgrade/default/bailout (delete as appropriate, or not perhaps). Some relief for Silvio came on Thursday though, as the focus shifted to the hitherto tranquil setting of France, giving Mr Berlusconi’s neighbour, Nicolas Sarkozy, a rude awakening.

Sitting pretty watching all of this was our own ‘O’, George Osborne, who had a comparatively good week. Gilt yields are at rock-bottom, which the Chancellor swiftly proclaimed as proof of the UK’s position as a “safe haven” for investors, and an endorsement of his deficit reduction plans. Not everyone’s convinced though, and he also had to contend with the Bank of England downgrading growth forecasts – again. Still, compared to others, a relatively good week for George.

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/07/fps-friday-fiver-11/ http://blogs.hillandknowlton.com/shocksandstares/2011/07/fps-friday-fiver-11/#comments Fri, 15 Jul 2011 14:07:21 +0000 Edward Jones http://blogs.hillandknowlton.com/shocksandstares/?p=216 Well, an eventful week to say the least. We in the FPS team have looked beyond the obvious to find five other things that have happened this week. Enjoy.

Moody clouds hover over USA ratings

Photograph: Ryan24

This week, Moody’s threatened to revise down the USA’s AAA credit rating. Back in April, Standard and Poor’s revised to negative the outlook on USA ratings, a monumental move given that this was the first time that the USA’s outlook was revised down since Pearl Harbour. As the USA’s Congress and President continue to grapple over debt negotiations, it is looking increasingly unlikely that they will be able to come to an agreement before the 2nd August, after which the USA would literally run out of money and not be able to match its debt commitments.

Elsewhere financial markets are getting increasingly jittery as this week Ireland became the third Eurozone country to be downgraded to junk status –Ba1 – alongside Greece and Portugal. This downward pressure continues to strengthen fears that Italy and Spain will soon follow suit. One wonders if any country will escape what feels like a tidal wave of downgrades.

Bonuses back in vogue?

Photograph: Sky

We read with interest this week Sports Direct’s average £44,000 payout to staff after hitting profit targets. Out of 18,000 employees, 2,200 staff qualify for the bonus. This is on the basis of their employment being permanent over the last 12 months, irrespective of their position. According to the Times (£) the scheme is the most generous in the retail sector.

The move offers an interesting parallel to bonuses paid in the banking sector and the justification offers hope to the City: “There is nothing more powerful… in terms of  getting everyone pulling together… we wanted them [the staff] to see everyone is going to benefit” said Sports Direct’s Chief Executive Dave Forsey. One wonders if the banks presented their bonus schemes with the same clarity and distributed the fruits of their labours more equitably, they might not receive so much stick. Does this move represent a shift in other sectors towards a model whereby staff are incentivised to deliver for their employer? We are all aware of the success of the John Lewis Partnership, Sports Direct’s scheme seems a very positive sign in a sector which has struggled of late and could offer a way forward in overcoming low staff morale.

The cost of living (longer)

How much does it cost to retire in the 21st century? If you’re talking purely about the level of income people should have, then the Joseph Rowntree Foundation reckon that around £15,000 should be sufficient. If however, you’re asking how much it costs the state for you to retire, that’s a very different question. The bad news is the cost is rising as we continue to live longer lives.

The OBR released its first Fiscal Sustainability Report this week which provides long-term projections on how much the government will have to spend on welfare and healthcare by 2060. The answer, in a nutshell, is a lot more. Spending on health is going to increase from 8.2% of GDP now, to nearly 10% in 2060 and the separate cost of long-term care is going to increase as well. At the same time, the amount spent on the state pension will increase by over 2% of GDP to 7.9%. Put the whole package together, and ‘age-related spending’ increases from 24.6% of our GDP to 27.3%.

So what can be done about the rising cost? One answer is to raise the retirement age and hence lessen the number of years people receive their state pension, though this is proving deeply unpopular. Another is to prepare the population better for old-age and try to keep them healthier in it, which is no easy thing. This still isn’t enough though – which is why the OBR suggested we will need to raise an additional £22bn in tax each year from 2016 onwards to stop national debt spiralling away. Not what consumers who believe their disposable incomes are already shrinking want to hear as The Economist notes today.

Baby Boom to Boomerang

Our parents were the baby boomers- tuition fee free, riding on the crest of 80’s affluence, buying up property and reproducing. Whilst we are the boomerangers saddled with the debt of our education and the country and forced to return to the nest that our parents bought.  Returning home post Uni would once have made you a failure or at least a social embarrassment for the parents having to hide a 30 year old console loving son in their annexe.  But now 1 in 4 graduates are returning home and frankly, who can blame them?

Photograph: Paul Barton/Corbis available at Guardian.co.uk

New findings from Endsleigh show that most rental prices in the UK have increased steadily in the last two years with the average rent now standing at £688 per month, rising to almost £1,372 in London where most grads head in search of that increasingly elusive goal ‘employment.’ Demand is also increasing in the rental market as more and more first-time buyers are finding themselves frozen out of the mortgage market due to tighter lending criteria and a lack of finance.  And this would probably account for why 41% of the three million adults living with their parents returned home to save money whilst three in ten cited that they were unable to pay mortgages.

The introduction of tuition fees of up to £9,000 a year from 2012 will increase the pressure on graduates even further, with the number returning to the family home likely to rise.

Hungry for Growth

Photograph: Reuters

This week, the GE Capital (client) team were hitting the phones to secure coverage of the first ever ‘SME Capex Barometer’, a survey of 1,000 small and medium sized businesses across Europe looking at how much they plan to invest in replacing equipment ranging from plant machinery to IT hardware to photocopiers.

In the UK, 92% of SMEs are planning to spend a staggering £74.9 billion in the coming year, although businesses in Germany and France were looking to invest even more.  Reflecting the challenges involved with pulling out of recession, businesses reported missing out on over £8bn of new businesses as a result of out-dated equipment.

As John Jenkins, CEO of GE Capital put it: “Despite popular belief, the appetite for investing in growth amongst UK SMEs is actually very strong, with many businesses having reached a tipping point where putting off investment is no longer possible without compromising their ability to create revenue”.

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