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Finances / Finanzen » uk.finance » Ten reasons why it's all going to go horribly wrong
| Ten reasons why it's all going to go horribly wrong [message #384854] |
Do, 04 Mai 2006 18:35 |
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This guy tells it straight. Perhaps that's why he didn't fit in at the
Blair Broadcasting Corporation ? .......................
Ten reasons why it's all going to go horribly wrong
By Jeff Randall (Filed: 03/05/2006)
http://www.telegraph.co.uk/money/main.jhtml?xml=3D/money/200 6/05/03/ccjeff0=
3=2Exml&menuId=3D242&sSheet=3D/money/2006/05/03/ixco ms.html
In my first year as business editor of the BBC, 2001-02, I became known
by Television Centre veterans, such as Michael Buerk and Peter Sissons,
as a harbinger of gloom. Whenever I turned up at the Ten O'Clock News
desk with a business update, it seemed always to presage a corporate
disaster.
The implosion of dot.com dreamland, the subsequent shake-out in global
stock markets, revelations of some heavy-duty corruption in America and
the atrocities of 9/11 led to a remarkable spate of famous companies
running into deep trouble, or worse.
Some of Britain's biggest businesses fell part. Cable & Wireless and
Marconi blew a fuse. Jobs were slashed at British Airways and
Rolls-Royce. Overseas, Swissair and several US airlines went bust.
One story, however, above all others seemed to attract the attention of
BBC big-wigs: the unravelling of Equitable Life.
Having been warned by director-general Greg Dyke that too few of the
BBC's programme editors and presenters were interested in business, it
was gratifying to learn that so many were concerned about poor old
Equitable and its hapless members. Then I discovered why: they were its
hapless members.
In good faith, the BBC had promoted Equitable as a supplier of pensions
and savings schemes to many of the corporation's biggest and best-paid
names. Not surprisingly, they reacted with horror every time I appeared
with yet another twist to the tale.
I recount this because throughout my early months at the BBC, I was
relentlessly negative about the outlook for British business and
investment. If ever there was a time to be a grizzling bear, that was
it, or so I thought.
Looking back, I was both right and wrong. Right about the stock market;
wrong about the economy. From a peak of 6,900 in December 2000, the
FTSE-100 index plunged to 3,200, taking millions of pension pots with
it. The UK economy, however, much as Gordon Brown had forecast it
would, appeared to defy gravity.
Five years later, it's a good time to take stock. The Footsie is back
above 6,000, two business surveys this week - from BDO Stoy Hayward and
the Chartered Institute of Purchasing and Supply - point to an
accelerating economy, and the Chancellor remains confident that his
bubbly is fizzing.
So am I now feeling optimistic? Absolutely not. The bulls, as they
always do, are painting the clouds with sunshine. I'm a seller, and
here are 10 reasons why:
1 Consumer confidence is evaporating
Having buoyed the economy during Brown's best years (now long gone),
the public is fast losing faith. Today's Nationwide Consumer Confidence
Index is at its lowest-ever, pushed down by growing worries about
employment prospects. Rising utility bills and petrol at =A31 a litre
are further eroding the feel-good factor.
2 Small investors are piling into shares
Here's a funny thing. While telling Nationwide that they feel nervous
about the future, consumers are buying equities more aggressively than
at any time this millennium. History's lesson, however, is that few can
suspend disbelief more effectively than the small investor. When
taxi-drivers start giving share tips, it's time to sell.
3 Oil bills are burning a hole in our pockets
When BP bought Amoco in 1998, the best-timed deal of the century, oil
was just $10 a barrel. Today, it's $75, more than three times the
post-war average. While it may not stay that high, there's no reason to
expect a rapid fall to the old OPEC target price of about $25. The full
impact on business and consumers has yet to kick in.
4 We're choking on personal credit
Yes, I know I bang on about this but it's the elephant in the kitchen.
The extent to which British consumers are over-borrowed threatens
economic stability. The problem will become more acute as unemployment
creeps upwards and higher household bills cut purchasing power. Watch
out for bad news from this week's bankruptcy figures.
5 House prices are detached from reality
Barely a week passes without a survey showing that the price of bricks
and mortar is still rising. For many borrowers, the roof above their
heads is sheltering chaotic personal finances. But if mass immigration
is forcing down wages, as many officials claim, the maths for
low-income families don't make sense. Repossessions, a sure sign of
distress, look set to rise even further.
6 UK public finances are out of control
In his madcap dash to fund a spending boom in health and education, the
Chancellor has abandoned fiscal discipline. To make his numbers add up,
he redefines the rules. At some stage there will have to be a painful
realignment of government finances. Meanwhile we can only mourn the
chronic waste of taxpayers' money.
7 US debt: over-borrowed, over there
On every level, America is submerged in debt. Not just a Fast Food
Nation but also a Credit Glutton. Consumers, companies, states and the
federal government are living on the kindness of strangers. China is
particularly indulgent, holding more than $250bn of US treasury bills.
Unwinding this imbalance will rock the rest of the world.
8 Pensions: we're getting older and poorer
Britain once had a pensions system of which we could be proud. As
recently as 1997, when Labour came to power, it was in good shape.
Today, it's a mess. Brown's raid on pension funds, the fact we're all
living longer, and wretched stewardship by some fund managers have
combined to wreck this form of saving. A national disgrace.
9 Assets prices: they can't all remain high
It's unnatural for every asset class to be having a party. When gold is
high, it's often because investors fear inflation. When shares are
high, it's usually a sign of low inflation. When bonds are high, you'd
expect shares to be under pressure. High energy prices hurt homeowners,
but the price of houses remain high. Something has to give.
10 Cheap money: a vanishing luxury
Across the world, a steady rise in short-term interest rates has yet to
unsettle the world's leading financial markets. Sooner or later, it
will. Iceland, yes, is in meltdown - and it's not just global warming.
Others could follow. Western economies have become cheap-money addicts.
As the drug is removed by central banks, shakes and shivers are
inevitable.
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