Friday, January 25, 2013

Spain Unemployment figures

In a break from tradition, the Eurozone should start reporting figures of the number of people that are actually working, you know, to try and put a positive spin on what is frankly a shocking situation. So, Spain can say "Great news, 45% of our 16-24 age group are working!" And Greece, with 57% under 25 unemployed, should start reporting in Greek, or even better, in some ancient hieroglyphics so that nobody can understand. It really is a crappy situation, so many people that for 4 or 5 years simply have had little chance of work, and could now be in their mid twentied having never worked. Japan have their lost decade, well Europe could be looking at a "lost generation" C

Thursday, January 17, 2013

Carnage on the High Street

And there they went, Bang, Bang, Bang - Jessops, HMV and Blockbuster. Presumably, like the rest of us, they looked at their post-Christmas bank balance and thought, "shit, how the hell do we pay the bills this month".... Aside from my personal feelings about HMV, as I am a nerdy record collector, I was wondering whether the fact that these businesses have failed, is a sign of the economy actually working properly, in a survival of the fittest type way, where the sick and dying are left behind. Maybe their banks had been too scared to take the hit in recent years - worried about their own solvency. But now that they've all built up a bit of capital, are they more able to start taking the losses. Of course, we now want new fresh and strong businesses to come in and fill the gaps in the High Street. This is the part that remains a concern. By the way, who the hell was still renting DVD's from those 528 Blockbuster stores? Sheeeesh......

Tuesday, January 15, 2013

Exchange rate news Jan 2013

Here's the latest exchange rate news from our friends at The Foremost Currency Group... Sterling vs. Euro; Pound/Euro rates have not been faring well so far in 2013. We have seen the rate drop steadily to the lowest since spring last year. In today’s Euro report we will look at what has caused the fall, and what may be in store for Pound/Euro rates in the coming months. Despite the UK government resisting pumping more money into the economy via its QE program at its latest MPC meeting last week, the pound weakened significantly, hitting its lowest levels for nearly 9 months. Any news that could have helped sterling was over shadowed when the president of the ECB Mario Draghi in a TV interview said he was confident the Euro economy as a whole should slowly recover throughout 2013. This news really gave the Euro a boost, giving the single currency some strength and making it more expensive to purchase. He did not however remove the possibility of further interest rate cuts in the future from the table. The decline in the rate continued on Friday, when we saw further woes for the pound with much weaker than expected industrial production and manufacturing data being released, as well as a GDP estimate coming in below forecast of a positive 0.1 coming at negative 0.3%, indicating a contraction of the UK economy in the fourth quarter. If the figure is confirmed by official data later this month, it will mean that the economy returned to growth for only a single quarter. It would also mean the economy saw zero growth for the whole of 2012. With most data being released from the UK below forecast it further outlines the threat of the UK losing its prized triple A rating and if Chancellor George Osborne continues to fall short of his targets, a downgrade could very much be on the cards which will hinder investors’ appetite for buying sterling as it indicates the UK could go into a triple dip recession. For those looking to buy Euros, serious consideration should be given to fixing your rate now. Even if the funds are not needed for some time, you can lock in today’s rates for up to 2 years, and only lodge a 10% margin of the total amount you want to convert. This will protect you against a further decline in the rate. For those selling Euros, it’s the best it’s been in some time. Despite the outlook for the euro looking better, the euro economy as a whole is still walking a very fine tightrope. Greece for example has reported the highest level of unemployment ever recorded in the EU taking over Spain as the highest with a rate of 26.8%. This means we could easily see the rates swing back in the other direction if we see any bad data from any of the euro countries and especially any further indications of a rate cut. So things remain very uncertain, however you can have some control over the markets by knowing the options available to you, in order to make an informed decision on when to fix a rate and which type of contract to take. Take the time for a free consultation with us to discuss your requirements today. To put these movements into perspective, in just the last week a property purchase of 200,000 Euros would have a difference of around £3500. This outlines the importance of staying in close contact with your account manager ensuring you are aware of the latest rate movements and news on the markets. If you have not already done so, follow the link to open a no obligations trading facility today. Sterling vs. US Dollar; Last week saw some big movements for the GBP/USD cross. Early on we saw sterling fall to its lowest levels for a month to $1.5995 before a 1.1% gain towards the end of week saw cable push back towards $1.62. The gains came despite a relatively poor week in terms of data releases from the UK, so what caused the spike in rates? In this week’s report we will take a closer look at to what caused this unexpected rise. The Bank of England (BoE) and their policymakers met last week to discuss UK interest rates and their stimulus package. They met on Thursday and as expected kept interest rates on hold and decided against adding to the existing Quantitative Easing Programme (QE) and as a result there was little movement between the currency pair. One thing that would have been on the agenda in regards to stimulus would have been the poor retail sales data that was released at the start of last week. Figures released from the British Retail Consortium showed that Christmas sales barely increased for retailers and will once again fuel speculation that the UK economy may have contracted for the final quarter of 2012. All eyes were on the initial UK GDP estimate released on Friday afternoon, it had been predicted for the economy to grow by 0.1% but the actual figures showed a contraction forecast of -0.3%. As the data was released sterling fell just over half a point from $1.6160 to 1.6095. With Manufacturing and Industrial Production figures for November released on Friday morning also came in well below forecast, the UK is facing the possibility of a triple-dip recession. (Recession is two consecutive quarters of economic contraction) The focus will now turn to the 25th Jan when the official GDP figures are released, if the report shows the UK economy has contracted again questions will be raised as to how the BoE will attempt to solve the crisis. Some analysts are predicting we could see a further £50 billion of QE in the first half of 2013 and if the BoE opt to go down this road again it is likely we could see sterling lose ground against a number of currencies. (Under QE the bank creates money and uses it to purchase government bonds to try and stimulate the UK economy.) Despite the poor data and uncertainty surrounding the UK we did see a big spike for cable on Thursday. As mentioned in the Euro report, Mario Draghi did an excellent job in talking up the euro, increasing investor appetite for riskier currencies. This led to investors pulling out of the safe-haven dollar and heading back to the single currency, weakening the dollar which in turn pushed rates towards $1.6170. So what next for the GBP/USD cross? This recent surge may only be temporary. Over the last couple of weeks we have seen a steady decline for the pound against the dollar, the package put together by President Obama to avoid the U.S falling over Fiscal Cliff seems to have done its job and lent some much needed support to the greenback. With the UK coming under threat from losing it prized triple-A credit rating (which means investors could lose confidence in the pound) and safe haven flows into the UK easing as the euro-zone stabilises the potential for the pound to weaken against the dollar will continue to grow. To put last week’s movements into perspective, if you were looking at purchasing $200,000 it would have cost you nearly £1400 more at the start of the week compared to Thursdays high. It also highlights just how important it is to get the timing right on your currency transfer and to stay in touch with your account manager at Foremost Currency Group. If you haven’t done so already use the link below to open a free, no-obligation trading facility. Weekly Economic Data that may affect exchange rates Monday – Data is mostly from Europe today, including German Wholesale prices in addition to Italian and EU wide Industrial Production. In the USA we have speeches by key FED members. Tuesday – UK data today comprises of House Prices, Inflation numbers and Retail Sales. We also have inflation data from Germany and Italy. There is also EU wide Trade Balance figure released at 10am. Over in the states there are also a raft of inflation figures & Retail Sales numbers. Wednesday – There is nothing of note from the UK today. In Europe we have EU wide inflation numbers. The rest of today’s data is from the states: Consumer Price Index, Industrial Production and Housing Market data. Thursday – Unusually for a Thursday, there are no UK releases today. The ECB gives its monthly report, and there are also some EU construction numbers. The USA has jobless numbers, and further afield we see inflation figures from New Zealand. Friday – We end the week with UK Retail Sales, Italian Industrial Orders, and a US Consumer Sentiment survey.

Monday, January 14, 2013

Bank of mum and dad

Heard about a UK scheme today through Barclays - the "Family Springboard" mortgage - whereby instead of parents having to give their offspring 10% of the cost of a house as a deposit, they can deposit it with Barclays and have it back, after 3 years, with a bit of interest on top. This is good for those parent's that maybe can't afford to actually give up the money, or even if they have more than one kid, so they could maybe use the same 10% more than once in order to help the kids on the property ladder. What I'm not so sure about, is whether they see this as an indication of :- 1. Property prices having risen over 3 years so that there is sufficient equity in the property - particularly for the buyer if they may want to move and take a deposit with them - this may not be so easy if mum and dad have had their funds back. 2. Or maybe Barclays are happy to see that if the kids have paid the mortgage for 3 years, then they will be a decent risk of keeping up the payments. It's an interesing one, and may soon be copied across the market I reckon.

Thursday, January 3, 2013

Great Spanish Crash - BBC Documentary

If you didn't catch this programme over the Christmas break it can still be found in various places online and is well worth a look. A couple of things that stood out for me were :- 1. The Valencia Opera House, that is a huge white elephant of a building - striking and beautiful, but cost an absolute fortune of borrowed money. The autonomous regional governments were borrowing money from the local Caja's, with Politicians that were in office, and also on the Boards of the banks, in clear conflicts of interest. These guys were all mates, backhanders and favours going on left, right and centre, enabling them to embark on huge vanity projects that could never be paid for. 2. The Castellon airport, built at a cost of €150m so far, which was started without the commitment of any airlines or routes, and then the chumps in charge didn't build the airport wide enough. Never mind, I'm sure there were enough brown envelopes being passed around, between people that are now away in semi-retirement dodging the flak back home. Unbelievable. The most touching however, are the human stories, people that haven't worked for years, with no unemployment benefits. Don't get me wrong, there is poverty in loads of countries, and some very poor areas in the UK, but I'm not sure if there's many places where the people have been royally fucked over by so many people in positions of power....

What will 2013 bring ?

So, the year begins with more arrests in the Jimmy Savile investigation, with Jim Davidson being the latest to "strenuously deny" any wrongdoing. I don't have a list in my head of potential dodgy characters from the 70's and 80's, but if I did, I think Jim Davidson would be on it. I don't think there's every been much doubt that he's a pretty nasty piece of work, sexist and racist etc. Wait 'til they start arresting football managers, then we'll really see some sparks fly. But, what about the economy, both here and abroad? It still feels like there's a load of shit to still get out of the system, and when we lending return to more reasonable levels - ie enough to allow people to move up the ladder again, and for some of those first timers to climb on the first rung. We managed to get a UK mortgage last year, having been out of the market for some 8 years or so, and it wasn't at all plain sailing, and we have pretty good income and clear credit with not much in the way of loans and cc's. Feels like a long time until we go away - Portugal again for the first break of the year - we enjoyed in last year and the people seemed to have a sunnier disposition than the Spanish, despite arguably being in a more dire situation. In the meantime, apropos of nothing, I've decided I want to grow a maze in the garden, seems like a satisfying thing to do, might even post some pictures of the progress....

State of the Spanish Mortgage Market

This is a matter at the frontline of the Spanish crisis as it was the housing boom that turned to bust which affected her construction sector and her banks severely and then rippled out into the rest of her economy. Unfortunately the Spanish system of deferring many of the problems from this for her banks means that the effects are on-going as in the end they catch-up and we see more signs of this in her latest mortgage numbers. The average amount of mortgages in September presents an annual fall of 8.0% and amounted to 109,503 euros The value of mortgages on urban property is 3.631 million euros, representing an annual decline of 35.7%. In homes, borrowed capital exceeds 2,170 million euros, 37.1% less So we see that if mortgages are any guide house prices in Spain are still falling and on a year on year basis are falling at a substantial rate. Also we see that in volume or quantity terms we are still seeing very large year on year falls in mortgage lending. Indeed we can see the scale of the problem by looking at mortgage lending for dwellings over the past few Septembers in reverse order from 2012 going back to 2007. 2.17 billion Euros; 3.45 billion Euros; 6.35 billion Euros; 7.37 billion Euros; 8.9 billion Euros and 15.4 billion Euros Whilst the 15.4 billion lending figure in September 2007 was a product of the boom and accordingly in itself cannot be used as a benchmark we see that we have veered to the other extreme now. Compared to the same month in September 2007 we see that mortgage lending for dwellings in September 2012 was 14% of the total then. So it would appear that for all the claims of the opposite the Spanish mortgage and banking system looks to be still in trouble and is getting worse. If we look for more evidence of this we see that the savings banks or cajas appear to have retrenched even further and the emphasis is mine. Banks are the institutions that granted greater number of mortgage loans during September (77.2% of total). Savings banks granted 9.1% and Other financial institutions 13.7% So they are providing a smaller percentage of a much smaller amount. Not much sign of health there! Also their existing loan book must be increasingly underwater. We do not get a breakdown by sub-sectors but we did learn from the Bank of Spain a week ago that provisioning against doubtful loans reached 182.2 billion Euros in September which is up from August’s 178.6 billion. So far in 2012 bank loan books have shrunk by just under 4% whilst doubtful loans have risen by just under 27%. As you read that I suspect that it is not only my imagination which is thinking that the situation at the cajas is probably much worse than that. Something to recall when the bailout of the Spanish banks is announced and claimed to be a smaller amount than expected. A “surprise” will then be along sooner or later with the former more likely than the latter. Also in an era of supposed ZIRP (Zero Interest Rate Policy) I did wonder about this in the mortgage statistics. In the case of housing, the average interest rate is 4.12%, the lowest since June 2011 Borrowers will welcome any fall but 4.12% seems a long way from ZIRP and the 0.75% borrowing rate that Spanish banks can get at the ECB does it not? Another hidden subsidy…