Archive for July 2009

Loan Shark or Low-Credit Relief?

July 31, 2009

Moral debate alert!!  It appears that there is something afoot in the world of doorstop lending…..

Provident Financial, the leading company for doorstop loans in the UK and Ireland, announced a rise in profits this week.  Up by 3.5 per cent for the first half of 2009, they have raked in around £53 million.  Now, charities are in uproar saying that Provident is causing people already in financial difficulty to fall yet further into poverty.  Why?  Because Provident charges an APR rate of around 545 per cent – and figures have shown that the amount of money owed to Provident from borrower debts is in the hundreds of millions. 

Provident’s personal and homeowner loans are indeed aimed at cash-strapped borrowers who need emergency funds.  But is it fair to say that they are tricked into the loan?  Charities may argue that poorer families are the worst hit and are the main customer of such loans, but does that mean that said customers are less able to make a decision?  Provident may argue that as a company, they are not being irresponsible (they did change their policy to make it more conservative and stricter around 2 years ago).  The reasoning for the higher rates has been explained as being due to higher labour costs (presumably labour means the Provident representative who visits borrower homes on a regular basis to collect money) and also due to higher default rate than regular loans.

Whichever argument is right, the figures show that there is a link between unemployment rising and the amount of customers going to Provident – customer numbers have risen by 5.3 per cent to 2.1 million in the UK and Ireland at the same time that profits have risen for the lender.

People are more desperate for money today and companies like Provident are providing a relief that could end in further debt….but whether the borrowers are duped into a loan trap is and will remain a heated topic.

IG Group in Healthy Profits

July 29, 2009

It is the hot new way to invest and is raking in the customers each month – financial spread betting.  The market leader for spread betting, forex trading and CFD platforms, IG Group, have reported healthy profits despite the recession.  Indeed, profits were up 30% to GBP 126 million. 

So why is this trade fashion so huge?  Spread betting firms report 2,000 new customers each month.  In fact, spread betting is attractive to investors and savers who are after a new way to make money.  Low interest rates, no commission – and it is cheap to get cracking.

Spread betting is also extremely exciting to those who have an appetite for a thrill – as markets rise and fall, profits can be large….and so can losses.  Make sure you take out a stop loss!

Futures traders are under a bit of negative attention in the USA, where regulatory watchdogs are trying to prove that Futures trading on the energy market has a direct effect on oil price spikes and dips.  In the UK, the FSA says there is no evidence to suggest speculation on the markets has a negative effect on the price of a barrel of oil and are not taking action. 

Consumer Debts Stretch Britain

July 27, 2009

Consumer debts mainly stemming from credit cards is set to sweep Europe, worried experts are saying.  While the USA is already well within a tough situation with consumer defaults weighing down heavily on banks, the UK is forecast for a similar situation as Europe’s heaviest credit card borrowers.  Around 7 per cent of the $2.5 billion debts are expected to be lost, say analysts.  Hold on to your hats, the storm is not over yet!

Indeed, the argument is still very much out as to the what, which, when and why of the recession.  What consumer debts will do to the overall picture is hard to say.  the leverage of British consumers has been on the rise for at least 10 years but in the last 9 months alone it has been running at around 170 per cent – that is a record high.  (NB: leverage here refers to the amount consumers owe as a propotion of income).

Emerging Market Stock Funds Healthier than Ever

July 24, 2009

Improving sentiment in the state of the US export market is having a great effect on emerging markets.  Investors are pouring into the emerging market, and last week saw the best figures since mid June.

Nations such as China, Peru and Sri Lanka saw some of the best results in funds while the BRIC nations are showing growing signs of strength thanks to the slow recovery of established economies.

Emerging market equity funds drew around £1.6 billion last week alone and since the start of the year investors have been flowing around £20 billion into emerging market stock funds.

Goldman Sachs to pay staff $770,000

July 15, 2009

It sounds like a story from at least a year ago, but indeed it is from today, the 15th July 2009.

Investment bank Goldman Sachs are poised to pay their staff $770,000 after healthy earnings were recorded for the second quarter.  Yesterday, the Wall Street bank released earnings of $3.44 billion for the second quarter  on revenues of $13.76 billion – more than most analysts had expected.

The healthy profits were down to good revenue growth in commodities and currencies business, fixed income and large underwriting fees from capital raisings.

QE to be given the Boot

July 14, 2009

The Bank of England has confirmed rumours/fears/speculation that it is to introduce an exit strategy to QE.

The news hasn’t exactly left markets jumping for joy but at least they now have a clearer picture of what exactly is going on and how to set up their own strategies.

The Bank said that “things are moving in the right direction” but that it would take months for the policy to take effect.

There seems to be an increase in fears over what happens next – latest inflation figures due for release today are set to show more falls and the next jobless numbers are set to rise.  Unions are complaining that the current speculation to public spending cuts is affecting them directly.  10 per cent cuts in public spending would mean 200,000 further job cuts, they say.

Certainly worth keeping up to date with the currency markets to see how the British pound is being affected by these stories…

Property Investment – Long or Short Term?

July 13, 2009

I was reading the paper on my way to work and came across an interesting piece about a successful property investor.  It got me thinking because he was saying that for a sound investment, it is best to be in it for the long run.  But what about the recession, surely that is having an effect?

Of course it does, and where the investor was concerned, it was the unemployment figures and general consumer confidence that is a concern, as the housing market is still waiting to really hit the bottom.

Over the last years, during the boom, a growing number of TV shows were selling us how easy it is to become a property ladder.  It seemed that anyone could get involved and be a success – just find an idyllic run-down place either in the UK  or France, Italy, Spain…..spend some time doing it up and sell it at a profit.  We were given advice on how to go about it..it seemed a doddle.  The idea was short-term wins, quick and easy bucks.

Yet it is possible that as an investor, the way to get results is to sit tight and long.  According to the investor in the article, this recession is better than the last, because this time at least interest rates are low.  Back then, rates were high and there had been a lot of overdevelopment.  This time, he says, while leverage has been low on the ground, at least it is on the return for “good property at the right price”.