by The Investor
on February 21, 2009
A quick thought on this week’s money news
Another action-packed week, with fears about banks continuing, manufacturers slashing jobs as if cutting grass, and house repossessions in the UK soaring.
No wonder stock markets fell. The UK FTSE 100 dropped 3.32% to close at 3,889, flirting again with the last year’s lows.
The thorn is whether we’re looking at Armageddon, or Growth, Interrupted.
As Behaviour Gap wrote this week, surprises go both ways.
If things do get better in the underlying credit markets – if banks do (or can) regain their appetite for risk, and if currently shunned bonds and other financial assets regain some semblance of fair value – then a virtuous circle will kick in very quickly as balance sheets strengthen and stocks recover.
You don’t need to believe we’ll see a return to the go-go credit years for this scenario to play out. Corporate bonds are apparently pricing in worse defaults than the Great Depression, so arguably just avoiding that dire outcome offers plenty of upside.
Will we avoid it? As governments spend money as only people who own the printing presses can, that’s the several trillion dollar question.
In the meantime, I’m still trickling money into the markets.
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by The Investor
on February 19, 2009
Image by: Mangpages
It’s been so long since we’ve had an economic downturn that people have forgotten recessions are about being fired, losing your home, and companies going under.
The mainstream press is instead treating the recession more like a seasonal change in fashion.
In a strange echo of the frivolous attitude that stoked up the debt bubble in the first place, much of the media seems to see the recession as a new ‘story’, just as they’d salute skirts going back above the knee or the return of cashmere.
Over the past few months I’ve noticed:
- Articles in glossy magazines explaining how to throw a thrifty Christmas party, with top tips such as forgoing a party bag for each guest, and plumping for free-range turkey instead of a goose for that special retro touch
- Fashion writers talking of a new austere mood on the catwalks, which supposedly means that a £5,000 jacket with a few less shiny buttons is in touch with the times
- Photos of well-groomed kids tumbling out of Range Rovers in remote corners of the country in articles extolling the joys of a stay-at-home holiday
- Countless jokey references to the credit crunch and resultant penury throughout the lifestyle sections of newspapers and magazines
I don’t want to sound too mean-spirited about this; lifestyle journalists have mortgages to pay, too, and I’ve nothing against a bit of fun to brighten up dark times.
But what worries me is that for the average person in the street, these silly articles constitute their main information diet for dealing with the recession!
Wake-up call to the world: The recession is not a lifestyle choice.
[continue reading…]
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by The Investor
on February 16, 2009
A quick update on Zopa, the UK-based peer-to-peer lender that has been proving its worth for both lenders and borrowers during the credit crunch.
As I wrote last month, interest rates had been rising for Zopa lenders, but the spike up in bad debt that I feared might have occurred due to the credit crunch hasn’t materialized so far.
Higher rates are good news for Zopa lenders, and that news has spread: Zopa is cropping up in the press more often and on money-minded bulletin boards. As a result, more people have joined Zopa.
The bad news for lenders is Zopa is a market governed by supply and demand. The influx of new money has brought rates down, and I’ve had to reduce the rate on my main offer to 8% to stay competitive.
[continue reading…]
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by The Investor
on February 14, 2009
Every week I read a huge number of personal finance and investing articles. I thought you might enjoy a weekly shortcut to the best.
First, a quick thought on this week’s money news
UK banking bosses past and present were hauled over the coals by MPs this week. Nothing we didn’t know came to light, though some people got over-excited by bankers’ use of the word ‘sorry’.
Shame the bankers didn’t say sorry a couple of years ago, in a sentence like, “Sorry, you really can’t afford that over-priced home.”
[continue reading…]
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