31 March 2009

Economy in Ireland in Decline

In the last three months of 2008, the Irish economy shrank by 7.5 per cent according to official statistics.

Being widely blamed for the sharp downturn include the housing market collapse - Irish house building accounted for around 15 per cent of Irish GDP during the recent housing boom. Now, with the benefit of hindsight, analysts are saying that the level at which houses were being built - at one point the figure was quoted as being 90,000 in a year - was unsustainable. While initially it was the residential sector that was hardest hit, now the commercial property market is also being affected.

Once known as the Celtic Tiger, the Irish Republic is now suffering, some might say more than many Euro currency countries.

But optimism is still ever-present, and many are predicting a good recovery thanks in part to the Irish people who are being conscientious with their personal finances, saving what they can and buckling down in order to fight the recession.

30 March 2009

Housing Market Showing Signs of Improvement

Fresh surveys are released this week showing possibly good news on the housing market. According to the data, there has been a slowdown in the decline - landlords are buying more than they are selling and the fall in house prices has slowed for the first time since last Spring.

There seems to have been an increase in news stories hinting at 'green shoots' in the UK economy. Would it therefore be cynical to say that this is purely spin? Anyone can see that the economy is in no way showing signs of recovery yet - can't they? The unemployment figures certainly do not look like they are improving, so perhaps one should think even more carefully about such strings as mortgages and secured loans...

27 March 2009

Forex Trading and CFDs Trading - Which Way to Invest?

I don't know who read yesterday's wisdom-filled blog post, but those who did would have had some food for thought on where to place a nice investment using their ISA allowance.

Today, I want to focus on investment trading - this is a whole new ball game and can be a great way to build up on your capital. It is no news that many people are now considering how best to grow their money and provide security for the future.

Two such ways are well-known in the trading and broking world - Forex trading and CFDs trading. Both of these can give you fantastic returns, yet both also carry risks. Whereas forex trading provides access to the largest liquid market in the world, and allows the investor to move money around foreign currencies, CFDs trading requires a lot of attention from the investor. Here, you can't buy and forget - you must keep an eye on your contract to ensure you don't make a loss. CFDs - or Contracts For Difference - allows the investor to trade shares without actually owning them.

Both of these can be exciting and rewarding, but as mentioned it isn't an easy way to invest - it requires thinking caps and some background knowledge, both of which your broker can assist with but are not responsible for.

26 March 2009

Tax Year Near End, Time to Invest!

Invest? In stocks? Now? Are you mad?

Well, no.

The tax year is in its final weeks, and you have that ISA allowance sitting waiting to be invested। Yes, it seems a daunting prospect if you're not a regular investor - what about the economic crisis, will I see any returns?

There are so many options, and they include UK equity income funds which have some attractive rates at the moment, then there's the corporate bond: you can't invest in a company that is rated less than "A" so it's unlikely they will crash on you - and if you are that apprehensive, you should consider corporate bond unit trust funds, as your money goes to a group of company shares. You're likely to see some nice returns even if one or two of the companies go bust.

How about going further afield, to the USA - be careful though, as the exchange rate between the dollar and pound could go out of your favour. That said, the USA is often seen as the one who will recover first so it may be a wise move.

There are vast amounts of options - you could even go to the emerging markets, where stocks are cheap and things will pick up with the recovery of the West.

Whatever your idea, start making some moves, as tome is running out!

25 March 2009

Basics on Inflation

Inflation (and its sibling deflation) has been the headache of most world economies in recent times. It gets frequent mentions in the daily news, but what is it?

In the UK, inflation is measured in a number of ways. One is the RPI, or Retail Prices Index. The other key one is the CPI, or Consumer Prices Index. It was this latter measure, the CPI, that rose yesterday. The RPI actually fell, mainly due to falling numbers in mortgage repayments.

Monetary policy is based on the CPI. So, changes in the CPI affects the governments, Bank of England, currency markets, businesses, and you and me.

Inflation affects the value of your money. If inflation goes up, your money will buy you less. Easy as that.

Once a month, the Office for National Statistics (or ONS) collects 120,000 of services and products from a range of retailers around the UK. Then it must check that its indices provide an accurate picture of the price fluctuations around the country. This is repeated every month with the same retailers and the same products.

24 March 2009

China Calls for IMF Reform

The Governor of the People's Bank of China called for the IMF to increase the use and attention to SDR - Special Drawing Rights. SDRs were created in 1969 by the IMF as a support system - or reserve asset - for the world's currencies. It is not a currency but rather a backup system for IMF members. They can use it as a potential claim on those currencies that are freely usable by IMF members.

The Governor criticised the dollar and its current status as the only reserve currency of the world. According to him, the US currency's price is has become too high for users and for those that issue reserve currencies.

The relationship between the US and China is very important but the trade deficit has increased massively in recent years and the war of words between the nations has continued to rage.

The reliance on SDRs has lessened since they were created in 1969, and with the floating exchange rate system which came into play for the major currencies after the collapse of the Bretton Woods system.

The managing director of the IMF himself has said that the constant reliance on fiscal stimulus will not help to fix the world crisis, and that countries need to repair their banking systems before increasing funding.

But at the G20 summit in April, nations are planning to increase funding by a hefty amount, which goes against both the IMF head and the Chinese argument.

23 March 2009

Bonus Paid by Taxpayer?

It is clear that he has very strong views on the matter. On the Tonight Show with Jay Leno last week, President Obama explained in very simple terms the case of AIG. He explained that the company had been on the verge of tumbling like a pack of cards, and that if government aid had not been injected, the whole financial system would have been brought down. That the company then handed out large bonuses to staff caused not just shock but pure amazement to the President. He has already ordered the Treasury to investigate means to get the money back.

The argument has escalated as the White House makes moves to implement a tax plan that will reclaim the money handed out at AIG and other leading companies that have accepted billions of dollars' worth of taxpayers money./

Wall Street has reacted furiously, and has warned that if staff are forced to enter a money exchange with the government, there may be largescale walkouts, and that this would only cause an even bigger disaster. Some have argued that it is not fair to effectively 'punish' staff.

This argument will no doubt continue for some time as the drama unfolds...

20 March 2009

More Money Injected into US Economy

The UK's done it, now the USA have joined the money printing game. In an apparently shock move, the US Federal Reserve has announced a plan to buy $1.2 trillion of government debt.

The decision had its effect on the currency markets as the US dollar fell against all major currencies - 4.2 per cent against the Euro, and 3.9 per cent against the British Pound. This ended the dollar's recent rally - it had risen by more than 2 per cent against major currencies this year. On Standard & Poor's 500, there was an increase of 1.6 per cent.

The Fed has said that they are determined to do whatever it takes to beat recession, but many are asking themselves - why was this really necessary? Deflation is no longer as large a threat as it was, and the Fed have themselves conceded this. Market watchers have commented on the USA's big buck moves while emerging economies in places such as Eastern Europe are beginning to bear the brunt of recession.

It will certainly be on the G20 agenda as there have already been disagreements amongst world finance ministers on how to deal with the global crisis.

19 March 2009

FSA in New Tough Approach

Lord Turner, chairman of the FSA, has published his review of the UK's financial regulation system - otherwise known as the "regulatory response to the global banking crisis".

In the report, Lord Turner critised the UK government for its "light touch" on banks, allowing the reckless and risky method of making profits which led to so many disastrous near-collapse of banking giants.

Banks have been in the habit of mortgage lending by relying on money markets and not on retail deposits - growth has been rapid but it is based on rocky ground...and many have been accused of not enough regard for the economy as a whole.

Things are set to change, and there will be a clamp down on the entire system - bonuses are to be reassessed as well.

It's a free market, but not as free as it was. The party is over, the drinks have run out and Britain is waking up from a raging hangover. Hopefully this will be the start of a stronger future for the country's economy.

18 March 2009

Bank of England Boss Warns EU

Mervyn King, Governor of the Bank of England, has spoken over the apparent lack of unification from world leaders on how to deal with the global recession.

Speaking from Mansion House, King warned that being too cautious would cause the recession to last much longer than necessary and could lead to further disaster.

Recently, Germany and France have said that they do not believe they should inject more cash for now, and that they have done enough.

There are some who may think that King is being rather risky to so openly criticise other countries who have in fact so far retained more stability in the economic downturn,

In contrast, the UK's financial sector has come under widespread criticism over its instability and what many see as very risky and unnecessary decisions in recent times. It is no secret that the British Pound has taken a beating thanks to the lack of confidence in the UK market, reaching near parity with the Euro.

17 March 2009

Loan Insurance Mis-selling Claims

Are you one of the 2 million unemployed of Britain? Have you bought cover on your insurance and thought that now you have lost your job, you are at least covered on your repayments?

Over 800 people a week are now complaining that their Personal Protection Insurance (PPI) was nothing but a scam, and that they were mis-sold their policy.

Insurers and lenders are claiming that there is no wrongdoing from their side, and that they have never mis-sold loan insurance.

But the cases are being looked into by the Financial Ombudsman Service (FOS) although many cases are being upheld, which means that lenders must pay compensation to customers.

The FSA has stepped in and is banning all selling of single-premium PPIs and the selling of loan insurance at the same time as the loan.

There is cynicism over the case, as some are saying that the number of complaints is so high only thanks to media attention and watchdog campaigns. Either way, if you are one of the many unemployed, you may be less than impressed to find that you are not covered...

16 March 2009

Clashes Ahead of G20

Germany's relative strength in current times has meant that other countries are being seen to rely on this. While the economy there has been predicted to shrink 2.3 per cent this year, it is the speed at which it is likely to recover that is giving it status as a beacon. According to EU watchdogs, Angela Merkel's stance on tax cuts and emergency spending has amounted to 3.3 per cent of GDP.

While Barack Obama's administration believe that more cash injection will boost the global economy - which is set to shrink for the first time since World War II - Germany and France will argue that now is not the time to spend more money.

Speaking ahead of forthcoming G20 summit meetings to commence on 2nd April, Merkel has said that it is now key to introduce and set a regulatory system which will prevent this kind of "economic catastrophe" from being repeated. She called for more "transparency of financial markets" during the speech, which was seen as a direct attack of Obama's administration. Obama's response was to try and compromise: more stimulus yet also more regulatory reforms.

So what has Germany done so far in its fight against the recession? Since late last year, it has implemented 100 billion euros to boost liquidity for companies, and a further 82 billion in other measures, including a money exchange of sorts, by offering vehicle owners premium for new, energy-efficient vehicles if they scrap old ones.

So far, Obama's administration has passed funding, last month seeing $787 billion put into place to boost the US economy. That, so far, is more than all European Union countries who have put forward around 400 billion euros.

13 March 2009

Madoff Close to Sentence

Bernie Madoff is facing the rest of his life in prison - 150 years is the sentence currently being predicted, due to be given in June.

Mr Madoff, who was a prominant figure on Wall Street for over 30 years, managed to steal momey from countless victims, including private investors and charities. The total estimated figure stands at $50bn.

Yesterday, he attended his hearing, and pleaded guilty to all eleven charges surrounding the case. Many of his victims came to watch, and clapped as the handcuffs were put on Mr Madoff.

The money exchange of victims' funds took place via a scheme whereby new investors were paid by existing investors in a hedge fund.

12 March 2009

British Pound Not Aiding UK Trade

UK trade deficit is increased as exports fall sharply. Latest figures show that the country's exports to non-EU countries are down by nearly 16 per cent. Many had hoped that the British Pound's weak status would help countries to buy UK goods but this is clearly not the case.

The same situation is being felt worldwide, and the IMF are being called upon to increase aid to those countries who had hitherto been not just the bread and butter but also the main importers of British goods. In the USA, the Treasury is also calling for more aid injections to poorer nations.

There are some who believe that if both imports and exports were to fall over a year period, then the trade deficit weighing on the UK would shrink. But surely it will be some months before the situation betters itself - because key markets are just not showing demand, on a global scale.

11 March 2009

Citigroup Announcement Affects US Dollar

Citigroup's announcement that their first quarter results show healthy profit have caused ripples through the market. The FTSE, Dow Jones and Nasdaq all rocketed and the company's shares increased.

The news also had an affect on the currency exchange market - the US dollar was weakened as a result. In the last half a year, it has been a stalwart of strength against most major currencies, and will probably regain this strength fairly soon.

But do the Americans want this? Surely a weaker currency might aid the US, allowing local demand to increase and foreign investment too? Right now, while it is cheap for Americans to travel and buy foreign mergers, it is suffering. Nobody's spending money and certainly not traveling. Nobody wants to buy US branches, and exports are suffering. McDonald's and Burger King have said international sales are down.

A period of weakness might be healthy, but it isn't going to happen until confidence - or at least some confidence - is restored in the financial sector and the economy as a whole. Until then, US companies face some hard knocks as quarterly results are announced.

10 March 2009

The Pound's Low Against Euro

The pound is having an uphill struggle to shake off its weak status. On Tuesday, it fell to its lowest point against the euro in over a month. The housing market's continued slump and the latest gloomy surveys - showing poor UK retail sales - has had a continued negative effect on the currency.

The sterling's poor status is not aided by the world's view of the UK economy and in particular the banking sector. The latter has taken another blow thanks to the government's decision to up its stakes in Lloyd's.

On Monday, the pound fell by over 2 per cent against the dollar and the euro, which was its sharpest daily fall in a month.

Investors are increasingly looking to safer ground as the UK suffers. The Bank's decision to begin quantitative easing is also receiving mixed reactions.

09 March 2009

Debt Management Websites Shut Down

The Office of Fair Trading (OFT) has decided to take drastic action against 27 websites which have, according to them, been deliberately misleading consumers. The websites, which have not been named, have been accused of using names which sound very similar to independent, free debt management advice agencies.

As unemployment figures increase, more people are dealing with money issues and are therefore seeking debt advice. What they should look out for, say the OFT, is that the website they are considering carries a consumer credit license and act in accordance with the OFT's guidelines.

Any consumers unsure can visit the OFT website for information. Another way of finding out about a service is to have a look at the Terms and Conditions. Note though that websites are perfectly within their rights to charge for advice services.

06 March 2009

Deflation's Latest Enemy - £150bn For UK

The Bank of England has finally been given the go-ahead to begin quantitative easing - a process whereby new money is injected into the country in an attempt to artificially start growth for the economy.

The move coincided with the latest interest rate cut which has now taken the rate to 0.5 per cent - once again, the lowest ever level.

While the Bank hopes that quantitative easing will quick-start the economy from its relative standstill, some are concerned that the move is not necessary, especially given the rate of inflation is still above target.

Europe's central bank have not ruled out quantitative easing but are no way near implementing the move just yet।

What does this latest action mean for the future of Britain's currency?

05 March 2009

Nationwide Set to Charge for Overseas Card Use

Nationwide customers are facing a new way to pay abroad. From May onwards, the building society are planning fees to credit and debit card holders when they spend money outside of Europe. The fee will be charged on overseas transaction - 0.84 per cent of the value of each transaction to be precise. The fee is also set to be increased to 1 per cent by July.

So far, Nationwide has been proud of its 'no fee' policy - indeed only last year, a divisional director was quoted as saying that other banks charge 'costly and unnecessary' fees which they themselves steer clear of. Till now that is...

Consumer watchdogs have reacted with disappointment at the decision, and have even accused the building society of selling out and joining the bandwagon.

Foreign exchange is already an area which requires a bit of shopping around for holidaymakers, and now it seems it is worth having a closer look at ways to spend money abroad as well.