RubBiSh

I love this……in an ironic, scratching head, you couldn’t script it kind of way.

 

The story……

 

RBS (you remember them right……you own 80% of them!) were called to Government to answer questions to the Treasury Committee over claims that the bank deliberately killed off very viable firms by requesting immediate repayment of loans as well as making money out of small and medium sized businesses that were in financial distress.

 

Senior RBS directors gave evidence to the committee to confirm that this was not the case. Story over then……or is it?

 

There is a twist in the tale as good as any Agatha Christie……it has since transpired that the evidence given was factually incorrect, manipulated to support RBS and made a mockery of the investigation.

 

And RBS’s response to this? “An honest mistake had been made”.  

 

Given the track record of the banking sector over the last 10 years, the word ‘honest’ is comical.

 

It seems that the banks have not learnt one lesson to me. These so called 'errors' won't be stamped out until a few very senior bankers are imprisoned for considerable lengths of time. Then and only then will the greed of banks be curtailed and a culture of transparency and honesty be instilled.

 

Just a thought.

Economic Clouds

It’s fair to state that life in the economic-pension-investment-politics fast lane might not be rock n roll for some……but there is never a dull moment.

 

I have spent quite some time over the last few weeks with economists listening to their opinions on where global economies are positioned and what future direction is likely (see……it’s rock n roll really). And when I have trolled through my pages of notes, it is a fair conclusion that the UK economy has held up pretty well when compared to recession threatened areas like Japan and the Euro Zone.

 

Why?

 

We are a consumer driven economy, where 2/3rds of our GDP is based on consumers spending. If we spend, the economy looks good. If we don’t, then we head for recession pretty quickly. The key to spending is low interest rates (more money in our pockets)……and the base rate has been at its lowest ever level in the UK for over 5 years now. Why do you think the Bank of England has delayed putting up interest rates for so long!

 

But there is only so far consumer spending can take us……and sooner or later we will be affected by the ‘global’ slowdown. Japan, as the third largest buyer of goods and services in the world, going into recession does not bring positive connotations to the UK. Add to this the Euro Zone ……barely keeping out of recession and they are the buyers of 40% of everything we make in the UK. It’s concerning.

 

It is not all doom and gloom though. The Japanese government has made a commitment to the tune of $3 trillion to inject into the economy. The Euro Zone is also poised to take similar Quantitative Easing measures……if only Germany would stop blocking such action.

 

So as you can see, it’s never dull. I’ll let you decide if its rock n roll though!

 

 

£1.7 Billion Worth of Spin

I am sick with disgust at the idiots at Westminster who think we are even bigger idiots than them.

 

Let’s start at the beginning…….

 

The European Union budget is partly financed on the basis of the gross national income figures of its members. The more income a country makes, the more it must pay into the budget. The EU commission calculated that Britain had actually performed better than it had originally reported and as a consequence was presented with a demand for £1.7 billion to be paid on 1 December 2014.

 

Ever keen to jump on some political goodwill and very conscious that UKIP’s anti-Euro policies are gaining momentum, David Cameron parked his floppy side parting and roared to the world whilst thumping his chest…..“the UK will not be paying this amount on 1 December 2014 or be held to ransom by Europe”. And off to Europe he went to defend our corner.

 

The result?

 

A reduction in the amount to £850 million and a delay in the date that it must be paid (towards the end of 2015).

 

David Cameron and George Osborne proclaimed to anyone who would listen that the UK had been defended and we fought our corner for the people.

 

All good then I hear you cry……unfortunately not.

 

1.     The reduction was not negotiated – we have simply used a credit we are entitled to in 2016 and have brought it forward.

 

2.     The date was negotiated to ensure that this money did not have to be found until after the General Election.

 

That’s hardly putting your balls on the line for the UK is it Mr Cameron? However, from all the spin you would have thought he had been to war and saved our land. For me, this is typical UK politics……lots of publicity to mask the real issue. And here it is:

 

In 2008 we paid £2.7 billion to the European Union budget. In 2013, this figure was £11.3 billion.

 

Which leaves me thinking……what exactly are the benefits of being in the EU and what do we get for our £11.3 billion?

 

It’s a frightening thought.

 

Pace of Pensions

Another week, another pensions reform announcement……the pace of change feels relentless currently. One thing is for sure……pensions really are looking sexy at the moment. To be fair, they always did but too many judged their beauty by how they looked rather than getting to know their personality. Beauty is more than skin deep.

 

For once, the detail of the recent announcements wasn’t important (even to pension geeks like me). Instead, what was significant was the packaging of the announcement and the reactions it provoked. Putting the subject of saving for retirement on the front page of newspapers and at the front of TV news stories can only do good.

 

This really isn’t about whether pensions are a good thing or not……it is about encouraging people to save for retirement. We have more than one generation that simply isn’t saving for their retirement and it is a slow burning time bomb unless it is addressed.

 

Positive news about the freedom and flexibility of pensions will help to change attitudes. But this is not a ‘one and done’ exercise, there must be a concentrated effort from W1 to change the culture of the non-saving under 40s.

 

Let’s hope this continues to be at the forefront of General Election campaigns to defuse the ticking time bomb.

 

It’s a start.

Co-Op Tatt

It’s been a strange old year for Co-Op Bank.

 

Firstly, there was a £1.5bn black hole discovered in its finances……then there was the drugs scandal involving former chairman Paul Flowers……all resulting in the ‘ethical’ bank ending up in the control of a hedge fund as a consequence.

 

All of which undermined the core of Co-Op Bank’s identity…..it stated its USP was the ‘ethical alternative’. When you are owned by a hedge fund which has a primary aim of making as much money as possible, ‘ethical’ and ‘co-operative’ seem a distant memory.

 

Now that the dust has settled (kind of), Co-Op Bank is hoping that a TV ad will start the process of restoring its tarnished reputation.

 

How is it doing this I hear you ask. By showing a man getting a tattoo on his back with the words ‘values’ and ‘ethics’. What followed was a public outcry that it was promoting tattoos. Fear not said Co-Op Bank……it was a fake tattoo.

 

So what is the message? Fake values? Fake ethics?

 

Perhaps whoever was responsible for the millions that have been spent on the rebranding and public messages might have wanted to check the definition of the words ‘ethics’ and ‘values’ before sending mixed messages.

 

Just a thought

Every Fiddle Helps

The Tesco accounts scandal continues to roll on……the snowball grows……the plot thickens. Given the lies and deceit, you would be forgiven for thinking that this was the banking sector we were talking about not groceries. Bugger……forgot Tesco is also a bank. Oh well.

 

The story basically goes that Britain’s biggest retailer has a £250 million shortfall in its profits. The black hole was found in its commercial income……from income being booked from deals with suppliers very early (too early) and at the same time delaying the cost of the deals (too late). And that ladies and gentlemen is how you create a £250 million hole.

 

Tesco’s reduced profits will impact on its share price and the level of dividend to be distributed to investors……this effects the value of ISA’s, Pensions,……and so on. In effect, Tesco’s share price has been a lie.

 

To be fair to Tesco, they have brought in an external accountant to verify the accounts and sacked 8 company executives. Swift and merciless. But as we have seen with the banking sector, if employee pay is linked to profit……risks will be taken and lies will result.

 

All very sad. All very avoidable.

No Longer Wronger Wonga

The word detest is a mightily powerful word……to dislike intensely. But that is the only word I can think of towards any company that constructs its business model around praying on the vulnerable.

 

With this in mind, it’s very fair for me to state that I dislike the payday lender Wonga and all that it stands for. Oh sod it, let’s go for it……I despise them.

 

I wrote about this back in April http://stevesmithlive.blogspot.co.uk/2014/04/wronga.html but that was before the announcement last week that it is writing off £220 million of debts for 330,000 customers after putting in place new affordability checks.

 

Let’s put that another way……it is writing off £220 million of debts for those people that should never have had the loan in the first place as there wasn’t sufficient financial resources to repay it (which is the perfect scenario for Wonga).

 

Let’s be crystal clear here……Wonga didn’t reset it’s moral compass and find a conscience in the Autumn air……the regulator did what it was meant to do and shamed Wonga into the action.

 

Hats off to the Financial Conduct Authority for doing its job.

 

Let’s hope similar companies find some worthy principles sharply.