The great interest rate rip off part 1

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BBC NEWS | Business | Profits jump at British Gas firm

 

Energy firm Centrica has reported a sharp jump in half-year profits as its British Gas unit returned to profit. Centrica made operating profits of £1.25bn in the six months to 30 June, up from £692m a year ago.

British Gas's residential business made profits of £533m during the period, compared with a £143m loss in 2006.

Profits were helped by higher profit margins stemming from lower wholesale gas costs. The firm made two price cuts for consumers earlier this year.

British gas said the price cuts had helped to recruit 46,000 new customers in the second quarter of the year, raising total customer numbers to 15.8 million.

 

And we can all probably look forward to rising electricity and gas prices this winter as demand rises again. Which obviously mean problems for the inflation figures. Having said that we might not be able to afford to heat our homes after having a 21% increase on our mortgage costs so demand might not be so great as we all sit in the cold.

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BBC NEWS | Business | ECB set to hold euro rates at 4%

 

The European Central Bank (ECB) is expected to keep eurozone interest rates on hold at 4% following its latest meeting. The decision comes as stock markets fluctuate wildly amid fears that problems in the US mortgage sector will seep into the eurozone's economy.

However, analysts expect that the ECB will raise interest rates in September.

This month's meeting is being conducted by telephone and no news conference is planned to explain the latest decision.

 

Why explain anything there not elected nor are they accountable to the people, so the people can like it or lump it.

 

Again another central bank with no idea what so ever about what's happening in the global economy.

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BBC NEWS | Business | Markets uneasy despite US rally

 

Global stock markets remain highly volatile despite a late rally on Wall Street which saw shares close ahead. Trading was unpredictable on Wednesday as concerns over the impact of the housing slump on credit markets and rising oil prices exercised markets.

Financial problems at a US mortgage lender and losses at two funds owned by Australian Bank Macquarie had earlier triggered a sell-off across Asia.

 

Stocks and shares in the short term is all about bluff, can you get the other idiots to sell there shares after you sell yours to get the price lower and then you buy them back, hopefully the others follow the share price goes up and you make a profit.

 

Alternative you buy a load of shares hoping others will follow and the share price goes up, you then sell and take the profit.

 

Nothing has actually been produced but you've made money on a balance sheet and aren't you clever....

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Markets in grip of sub-prime confusion - Telegraph

 

Global markets endured another wild ride yesterday as jitters over the credit markets refused to die down and companies worldwide began to feel the repercussions of the sub-prime lending crisis.

Rumours swirled around trading floors of companies poised to collapse, creating a climate of fear that official denials did little to ease.

Assurances from policymakers such as US Treasury Secretary Henry Paulson that problems stemming from the sub-prime crisis could be contained were looking ever more empty yesterday after Bear Stearns, the manager of two hedge funds that collapsed last month, blocked investors from pulling money out of a third fund.

The Bear Stearns Asset-Backed Securities Fund had less than 0.5pc of its $900m (£443m) of assets in securities linked to sub-prime loans, the company said, but panicked customers still wanted to withdraw funds.

 

As I said it's a short-term game of bluff, can you con the next guy.

 

If these people where doing this on a street corner they'd be sent to jail, because they do it on the stock market floor it's seen as perfectly legal.

 

But these people over the short term create nothing but money out of thin air, it's just a con trick.

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Soaring output prices fuel inflation fears - Telegraph

 

Inflation fears have resurfaced after factory gate prices rose in July at the fastest rate in 15 years.

Manufacturers shrugged off a strong pound and rising interest rates to push output prices to their highest level since records began in 1992.

The news will heighten concerns at the Bank of England that manufacturers are fuelling inflation by passing on higher costs to their customers.

The Bank is largely expected to leave rates unchanged today at 5¾pc, but economists forecast that rates will rise to at least 6pc by the end of the year.

The closely watched purchasing managers' index showed manufacturing activity surged unexpectedly to a three-year high in July.

The index jumped to 55.7 from 54.7 in June. A reading above 50 shows that the sector is expanding, while a reading below shows it is contracting.

 

It's purely guesseconomics when it comes over what to do with interest rates, there is no scientific basis for what the BoE do, just guess work, they might as well sit round a roulette table and spin the wheel.

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Telegraph Blogs : Business : Tales from the high street : July 2007

 

Forget the plunging Dow or the falling FTSE. Don’t bother fretting about whether the woes in the sub-prime market in the US could develop into a full blown credit crunch – if you really want evidence of the impending recession just look at the sales updates from Moss Bros.

Sales of suits and ties are booming, according to Moss Bros, which allows us financial journalists to claim that nervous workers are smartening up in order to impress their bosses. Petrified about job security we are all donning ties and doing up that top button – or so the theory goes.

Fashion and the economy have long been linked. Legend has it that George Taylor, economist at the Wharton School of Business, was the first invent the hemline index in the 1920s. Taylor claimed in the good times women raised their skirts to show off the silk stockings they could now afford to buy.

 

Using a woman's hemline to predict economic activity seems just as scientific as the current methods.....

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British Gas makes almost £3 million a day - Times Online

 

British Gas faces a customer backlash after it emerged today that the UK’s biggest gas and electricity supplier made a profit of nearly £3 million a day in the first half of the year.

The group, which has suffered from a wave of complaints over customer service, swung £533 million back into the black over the six months to June 30, against a £143 million loss last year.

Parent company Centrica insisted the “exceptional” performance was a one-off.

But watchdogs are certain to complain that the results show how British Gas and its rivals have not acted quickly enough to pass lower gas and electricity prices onto customers.

 

Yep it was a one off you just got lucky!!!!

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Credit markets leave banks saddled with £250bn of debt - Times Online

 

Leading investment banks on both sides of the Atlantic are saddled with almost $500 billion (£246 billion) in agreed leveraged loans that they are unable to parcel out to other investors.

New figures from Dealogic reveal that in Europe the banks are struggling to clear a backlog of $208 billion worth of leveraged loans that they would normally have sold on through syndication.

In the United States, the figures also show that investment banks are stuck with $269 billion of agreed loans that they are unable to syndicate.

News of the glut of debt on the banks’ balance sheets comes as the shake-out in credit markets produced new casualties as global markets were racked by further volatility.

 

Greed, greed, greed, greed.

 

This does rise the very real question is there the money to cover all of these debts????

 

Once more this raises the question of lax supervision by the central banks, they are the ones seeing all the data and have failed to act. The blame doesn't solely rest with the central banks, however they should have acted a long time ago to prevent a potential nightmare scenario of large debts and high interest rates.

 

If companies have high debt and the cost of borrowing goes up guess who gets to foot the bill??? The consumer with higher prices to pay for the companies borrowings and then we get to be even more lucky as we get higher interest rates as well.

 

Using interest rates when you've created a debt driven economy is idiotic and just proves how one dimensional the thought processes are at central banks.

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FT.com / World - UK banks defiant on mortgage fees

 

Some of the UK’s biggest banks are pushing ahead with higher mortgage exit fees in spite of a crackdown by the City regulator.

Barclays and Alliance & Leicester are among the banks that will continue to charge borrowers as much as £295 for repaying their mortgage early.

The Financial Services Authority, which started investigating the fees at the start of this year, had given lenders until midnight on Tuesday to explain how they planned to impose the fees on new customers.

HBOS, the UK’s largest mortgage lender, Northern Rock and Cheltenham & Gloucester told the FSA that they had decided to scrap the fee altogether for both new and existing customers.

Mortgage brokers believe that the banks that have kept higher fees could come under pressure to cut them over the next few weeks, as they would not have anticipated that other lenders would eliminate the charge completely.

Banks that have retained higher fees justify it by saying that the fee is set from the outset and reflects the administrative costs of closing the mortgage.

Some lenders that have cut fees are quickly finding ways to recoup the charges. Abbey, for example, has abolished its £225 exit fee but has introduced a “mortgage account fee” for the same amount.

 

We giveth and then take away...

 

If we can't charge you here will just charge you somewhere else, just keep moving the goalposts....

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http://www.ft.com/cms/s/3c7ac228-4054-11dc-9d0c-0000779fd2ac.html

 

The price of farmland is rising at its fastest rate since 1977 amid a surge of demand from City bankers and other professionals looking for a more pastoral lifestyle.

So-called “lifestyle buyers” made up 28.8 per cent of rural land purchases in the first half of the year, according to figures from Knight Frank, the estate agents. This is a 50 per cent jump on a year ago.

With London house prices rocketing in the past two years, home owners have been able to take out more equity to buy land in the countryside.

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BBC NEWS | Business | UK interest rates stay at 5.75%

 

The Bank of England's interest rate setters have kept the cost of borrowing on hold at 5.75%. The news will come as a relief to people with variable rate mortgages, who have had to cope with five rate rises in the past year.

The Monetary Policy Committee (MPC) had been widely expected to keep rates on hold this month, as it waits to see the impact of the rises so far.

But many economists still predict that rates will go up to 6% later this year.

The rate-setters remain concerned about the rate of inflation.

The Consumer Prices Index fell back to 2.4% last month, but that is still above the government's 2% target.

 

So they hold rates as they really have no idea what's happening in the global economy. That's taking the situation by the scruff of the neck you know!!

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BBC NEWS | Business | House prices rise again in July

 

House prices went up by 0.7% across the UK last month, according to the latest survey from the Halifax bank. The Halifax said July was the fourth month in a row to show a house price increase lower than 1%, indicating that the market was slowing down.

The latest rise pushed up the annual rate of house price inflation from 10.7% to 11.2%, the bank said.

 

I'd be more interested to see a regional breakdown of the figures and just what houses are increasing in value. Are all houses increasing, or is it just exec type houses that's going up and skewing the data.

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BBC NEWS | Business | Timeline: Lord Black on trial

 

Timeline: Lord Black on trial

 

June 2003 - Agrees to an internal investigation into payments to himself and other Hollinger directors.

November 2003 - Investigation is completed. Lord Black resigns as chief executive of Hollinger International.

January 2004 - Hollinger International sues him for return of $200m (£99m) in alleged unauthorised payments and sacks him as chairman. He counter-sues for defamation.

The Barclay Brothers agree a $466.5m deal with Lord Black to buy his controlling stake of Hollinger Inc, Hollinger International's parent firm.

February 2004 - US court injunction blocks Lord Black from selling his stake.

May 2004 - Hollinger International accuses Lord Black and its former president David Radler of fraud, now claiming they stole more $1.2bn.

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FT.com / Markets / UK - FTSE rises as base rate unchanged

 

London equities moved higher on Thursday morning lifted by a late rally overnight on Wall Street and strong interim numbers from Barclays.

The FTSE 100 ended the morning session 0.6 per cent higher at 6,287.9, a rise of 37 points. Mid-cap asset management stocks helped the FTSE 250 recover 27.1 points to 11,216, a gain of 0.25 per cent.

As expected the Bank of England’s Monetary Policy Committee kept rates on hold at 5.75 per cent, reassuring jittery investors unnerved by credit market volatility in recent weeks.

 

Again looking for the quick short term profit. The fundamental problems of the markets remain, oil price and the cost of debt but the charade of the stockmarket continues.

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http://www.dailymail.co.uk/pages/dmstandard/frame.html?in_bottom=http://www.thisismoney.co.uk/mortgages/house-prices/article.html?in_article_id=422966&in_page_id=57&ct=5

 

'Sound economic fundamentals, high levels of employment and a shortage in the number of properties available for sale, particularly in London and the South East, will, however, continue to support house prices.'

The robust rise in prices in July according to Halifax contrasts with fellow lender Nationwide's index, which reported a 0.1% increase in July, as did property information provider Hometrack's index.

 

It appears the South East again is driving up the figures, luckily the whole county gets to pay for it with higher interest rates!!! One problem area and everyone pays for it. As I've stated before is this the reason for the poor economic development of other regions as they are continually sacrificed to keep inflation under control in the South East?

 

And the data completely contradicts another mortgage lenders figures.

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Barclays hit by credit crunch on deal profits - Times Online

 

Barclays Bank forecast today that the lack of appetite for leveraged debt could reverse in less than three month despite reporting a 26 per cent decline in profit from private equity deals.

The bank, currently battling with Royal Bank of Scotland (RBS) to acquire Holland's ABN Amro, said net investment income in the six months to June 30, 2007 fell from £277 million last year to £206 million due to lower gains from both private equity and structured finance deals.

The Times revealed today that Barclays Capital, Barclays' investment banking arm, is currently saddled with $16.2 billion (£7.9 billion) of agreed loans that it has been unable to syndicate out to other financial institutions due to concerns about the heath of the current credit market.

Barclays Capital was one of three banks who underwrote £9 billion worth of debt which formed part of Kohlberg Kravis Roberts' winning bid for Alliance Boots. All three are now shouldering the debt after being unable to parcel it out, and therefore spread the risk, to other lenders.

 

Lend, lend, lend that's been the banking system mantra whilst the central bank has sat by and idly watched.

 

And the central banks get trusted with managing the economy!!!!

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Banks pull the rug on £4.5bn M&B pub sale - Times Online

 

Mitchells & Butlers (M&B) has been forced to pull a £4.5 billion property deal with Robert Tchenguiz, the property tycoon stalking J Sainsbury, after Royal Bank of Scotland (RBS) and Citigroup changed their lending terms following a downturn in the global debt market.

It is understood that last week RBS and Citigroup altered the conditions on lending £4.2 billion to M&B and Mr Tchenguiz for their property joint venture after becoming concerned about tightening credit markets. Shares in the pub group fell by 4.1 per cent, or 31p, to 717p in early trading.

The Times revealed today that both UK and US banks are holding nearly $500 billion (£246.3 billion) worth of debt they have been unable to syndicate out to other lenders.

 

Have the banks got the money to cover this £246.3bn????

 

Have the central banks allowed the situation to get completely out of hand? No one really knows the answer which is quite frightening when you sit and think about it.

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Rotten Apples: $900 Million a Bushel

 

Over the long run, investors have judged stocks to be worth about 20 times earnings, on the high side…and about five times earnings on the low. This implies an earnings yield between 5% on the low side, and 20% on the high side. People have traditionally wanted yields (or, implied yields…investors don't normally receive 100% of a company's earnings in dividends) from stocks higher than what they would get from bonds or from current accounts. Why? Because stocks are inherently risky. Most people nowadays would say that they are inherently "volatile," but that's not the same thing.

Volatility is a type of risk. Stock prices go up and down, depending on what mood the voters are in. Sometimes they are fearful and won't pay more than 5 to 10 times earnings. Sometimes, they are greedy and hopeful…willing to pay 20 times - and more - for a stock (because they think it will go up). This movement in prices makes stocks unreliable. If you need to pay your child's college tuition and the stock market has just corrected 30%…it is small comfort to know that in 5…10…or 20 years stock prices might be back to where you got in. In the past, investors demanded a little extra compensation from stocks to make up for this inconvenience and uncertainty.

But then, after a period in which stocks have been stable and rising, the voters forget about the premium. They begin to think that stocks have been under-priced in the past, because past generations of investors weren't very smart. They run up stocks to the point where bond yields are actually higher than earnings yields…that is, to the point where the premium for volatility has disappeared. Then, in Mr. Market's own sweet way, stock prices suddenly go down…and investors wish they hadn't been so bullish.

There is also risk of another sort - real risk. The real risk is not a feature of the voting machine; it is the harsh judgment of the weighing machine. Sometimes stocks go up. Sometimes they go down. Sometimes they go away.

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Perma-Bulls and Dead Cats

 

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I think he's been lucky…just like the Dow Jones Industrial Average.

 

After touching a new all-time high on July 19th, the Dow skidded 800 points in just seven trading days. Global stock market also tumbled, erasing about $1.5 trillion of shareholder wealth in the process. $1.5 trillion seems like a lot of money, but the selloff was really nothing more than a financial sprained ankle. (A plain-vanilla 20% correction would erase about $6 trillion of shareholder wealth).

Almost immediately after the Dow managed a brief 200-point bounce, the CNBC perma-bulls resumed their shrill cheerleading. "The selloff is over!" one commentator squealed delightedly. But, of course, it wasn't.

Our colleagues over at the 5-Minute Forecast were not so easily duped. Right around noon yesterday, as the Dow was flirting with a 100-point gain, the 5-Minute gang declared, "Sure, the market had a fun Monday. But until we see what tightening credit can do to the leveraged buyout binge…and until the bean-counters fumble their way through the mortgage-backed derivatives maze…any 'rebound' is just the sound of dead felines bouncing."

The Dow tumbled during the

 

The game of chance...

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Apple shares fall on production-cut rumour

 

APPLE SHARES LOST seven per cent of their value yesterday after rumours started to pop up that the entertainment gear maker was planning to cut production of its iPhoney and eyePod. According to Forbes, Citigroup analyst Richard Gardner said that nobody should be surprised that Apple is cutting back production. The company often needs to clear inventory ahead of new product launches, which he expects in the next two months. However such comments did confirm in people's minds that a cut back in production was expected.

 

I wonder how much shares could lose on hard fact if 7% can be wiped off due to a rumour!!!!

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Vulnerable Britannia? - Forbes.com

 

LONDON - London is quickly approaching New York as the financial capital of the world, but could its strength be its undoing? Could it unduly expose the British economy to the credit crunch that threatens to engulf global markets?

 

According to a study published by the think tank Oxford Economics, the credit contraction could take a big bite out of the U.K. economy–possibly even more than it could from the U.S.

 

If the growth of the financial sector, which currently accounts for 8.0% of British Gross Domestic Product, halves, as it could well do in the current environment, this would shave 0.4% off national economic growth, the report said. In the U.S. where growth in the financial sector has been slower, a halving of growth would reduce GDP by just 0.2%.

 

“The impact would likely be significant in the U.S. and especially the U.K., given the importance of the financial sector in these countries’ economies,” said Adam Slater, the author of the report.

 

We can all be safe in the knowledge none of this will be the BoE fault, it's not like they sat by printed all this money and didn't wonder where it was going.

 

Rather than rising the cost of borrowing surely it would be better to get the money paid back, at least this would reduce the amount of new money needed to be printed.

 

Sorry that's just being naive interest rates are just so much better at controlling the economy!!!

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BBC NEWS | UK | Anti-terror chief 'misled' public

 

There were "serious weaknesses" in the Metropolitan Police's handling of information after the shooting of Jean Charles de Menezes, a report has found. Assistant Commissioner Andy Hayman "misled" the public, the Independent Police Complaints Commission ruled.

The IPCC has examined statements issued by police after the 27-year-old was mistakenly shot dead by officers at Stockwell Tube station on 22 July 2005.

A complaint against Met Commissioner Sir Ian Blair was not substantiated.

'Inconsistent statements'

Mr Menezes was shot dead after police launched a massive manhunt for four suspects following a series of attempted bombings across London's transport network.

The Brazilian was mistaken for a suicide bomber. The Metropolitan Police is facing charges over the shooting under health and safety laws.

Mr Hayman - the UK's most senior counter terrorist-officer - was accused of failing to tell the commissioner at the first opportunity of his suspicions that an innocent man had been killed.

 

Everyone tries to cover there own backs, sometimes they get away with it other times they don't.

 

Trust is hard to build but easy to destroy.

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Bear Stearns funds enter bankruptcy - Independent Online Edition > Business News

 

Two Bear Stearns hedge funds filed for bankruptcy protection, while investors in a third fund managed by the Wall Street bank were barred from withdrawing their money amid concerns that the credit crisis is spreading to other parts of the economy.

The bankruptcy filings headlined a raft of horrendous news for the $1.5 trillion (£740bn) global hedge fund industry and fanned fears of a profound global market correction that could reverberate into sectors far beyond America's sub-prime mortgage market, where the problems began. For the second time in a week, the FTSE 100 index suffered a major one-day fall, shedding 110 points, or 1.7 per cent of its value. Last week, the benchmark index had its biggest one-day drop in four years.

Yesterday's rout was set off by fresh concerns about the US credit market. Sowood Capital Management, which manages some of Harvard University's endowment, informed investors that it had lost about half of the $3bn that they had invested with the firm due to wrong bets on risky loans in America. Macquarie Bank, the Australian investment bank, told investors in two of its hedge funds that they were likely to lose a quarter of their cash. Shares in Man Group were hammered after it revealed poor weekly performance, too.

More pain is on the horizon, fund managers said. That is because most investment funds provide a monthly performance update to major investors. Industry insiders expect the numbers for July to be particularly poor. Jeff Meyer, chief executive of Gartmore, a London firm that manages more than £25bn, said: "The June marks were okay, the July marks are going to be worse. So in the first two weeks of August... you're going to see more of this stuff then. You're going to see more underperformance."

 

Ships rats sinking leaving spring to mind.

 

It's just such a good job the central banks have been on top of things and stopped mass debt getting out of hand with their trusty sword of interest rates.

 

Will the panic buttons get hit or will people hold their nerve!!!

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Relief as Bank holds interest rates - Independent Online Edition > Business News

 

Interest rates were kept on hold today as the Bank of England gave borrowers some welcome breathing space after a recent run of increases.

The decision by the Bank's Monetary Policy Committee (MPC) to leave rates at 5.75% was widely expected, following last month's quarter-point hike.

But economists have warned that rates could go up again soon, possibly hitting 6% by the autumn.

Homeowners have faced five rises since last August, which together have added around £80 a month on average to the typical £100,000 mortgage.

Concerns have been raised that the increases in the cost of borrowing have left many debt-laden consumers over-stretched financially.

The Consumer Credit Counselling Service said it has seen a rise in the number of calls to its helplines and insolvency figures out tomorrow are forecast to show that the level of bankruptcies has risen in recent months.

Businesses joined borrowers in welcoming the Bank's decision.

The CBI business lobby group said the MPC was right to freeze rates in order to assess the impact of the recent rises.

Doug Godden, the CBI's head of economic analysis, said: "There are signs that high street sales are slowing, while household finances have come under severe strain, so a further rate rise would have risked overkill.

 

Not that they might have all ready overkilled the situation as they have no real idea what a 21% increase in the cost of borrowing will have on the economy.

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Homeowners cannot rest easy yet | Special report | Guardian Unlimited Business

 

Today's announcement by the Bank of England that it has left interest rates steady at 5.75% surprised no one in the City.Most had felt that the monetary policy committee would not go for a back-to-back rate hike given the additional uncertainty from the growing turmoil in financial markets related to the sub-prime mortgage meltdown in the United States.

However, that does not mean that homeowners, who have suffered five rate rises in the past year, can rest easy yet.

A majority of pundits see rates rising again, to 6%, in the coming few months as the MPC seeks to stamp down definitively on inflation.

The economic data, on the whole, still look pretty strong. There are signs that the housing market may be peaking, but mortgage approvals remain robust in spite of interest rates now being at their highest for six years.

Yesterday's CIPS/NTC survey showed the manufacturing sector in rude health and putting up its prices at the fastest pace since the survey began in 1992. If tomorrow's similar survey on the much larger services sector turns out to be strong as well, many hawks on the MPC will be arguing for another rise.