The city represents the core of the Greater Southampton region, with a population of 228,600. The city's name is sometimes abbreviated in writing to "So'ton" or "Soton", and a resident of Southampton is called a Sotonian.
Southampton is noted for being the home of the RMS Titanic, the Spitfire and more recently a number of the largest cruise liners in the world.
Subdivisions of the city include:
Bassett, Bassett Green, Bevois Valley, Bitterne, Bitterne Park, Bitterne Manor
City Centre, Chartwell Green, Chilworth, Coxford Freemantle Harefield, Highfield
Lordshill, Lordswood Mansbridge, Maybush, Midanbury, Millbrook Northam, Nursling, New Town, Ocean Village, Old Town Polygon, Portswood Redbridge, Rownhams Shirley, Sholing, St Denys, St. Mary's, Swaythling Thornhill, Townhill Park Weston, Woolston
Transport, Areas and suburbs
The Ocean Village marinaAs befits Southampton's role as a major port, the city has good transport links with the rest of the country. The M27 motorway, linking places along the south coast of England, runs just to the north of the city. The M3 motorway links the city to London and also, by linking to the A34 road at Winchester with the Midlands and North. The M271 motorway is a spur of the M27, linking it with the Western Docks and city centre.
Southampton is also well served by the rail network, which is used by both freight services to and from the docks and passenger services as part of the national rail system. The main station in the city is Southampton Central. Rail routes run east towards Portsmouth, north to Winchester, the Midlands and London, and westwards to Salisbury, Bristol and Bournemouth.
Local train services operate in the central, Southern and Eastern sections of the city, with stations at Swaythling, St Denys, Millbrook, Redbridge, Bitterne, Sholing and Woolston.
Southampton Coach Station, which is located near the West Quay Shopping Centre, was refurbished recently and the range and frequency of services offered by National Express services make use of the new facilities.
Southampton Airport Control TowerSouthampton Airport is a regional airport located in the town of Eastleigh, just north of Southampton. It hosts flights to UK and near European destinations, and is connected to the city by a frequent rail service from Southampton Airport (Parkway) railway station, and a number of bus services.
Whilst Southampton is no longer the base for any cross-channel ferries, it is the terminus for three internal ferry services, all of which operate from terminals at Town Quay. Two of these, a car ferry service and a fast catamaran passenger ferry service, provide links to East Cowes and Cowes respectively on the Isle of Wight and are operated by Red Funnel. The third ferry is the Hythe Ferry, providing a passenger service to the town of Hythe on the other side of Southampton Water.
Buses make up the majority of local public transport, with significant peak hour congestion in the city. The main bus operators are First Southampton, Uni-link and Solent Blue Line who operate the bluestar services. Other operators include Brijan Tours, Stagecoach and Wilts and Dorset. Free buses are provided by City-link and City Loop. City-link runs from town quay to Southampton Central Station and is operated by Uni-link. The Uni-link bus service was commissioned by the University of Southampton to provide access to students who are studying at the university to all parts of the city. The buses run from early in the morning to midnight meeting demands of students who wish to get to the city during the day and leisure places in the evening. There is also a door to door minibus service called Southampton Dial a Ride, for residents who cannot access public transport. This is funded by the council and operated by SCA Support Services.
There are two main termini for bus services. As the biggest operator, First uses stops around Pound Tree Road, and occupy a lot of space there. This leaves the other terminal of West Quay available for other operators. Uni-link passes West Quay in both directions, and Wilts and Dorset drop passengers off and pick them up there, terminating at a series of bus stands along the road. Certain Solent Blue Line services also do this, while others stop at Bargate and some loop round West Quay, stopping between Bargate and Pound tree Road.
Southampton used to be home to a number of ferry services to the continent, with destinations such as San Sebastian, Lisbon, Tangier and Casablanca. A ferry port was built during the 1960s. However a number of these relocated to Portsmouth and by 1996, there were no longer any car ferries operating from Southampton with the exception of services to the Isle of Wight. The land used for Southampton Ferry Port was sold off and a retail and housing development was built on the site. The Princess Alexandra Dock was converted into a non-tidal Marina. Now new car reception areas now fill the Eastern Docks where passengers, dry docks and trains used to be.
Areas and suburbs
Southampton is named the 'Green City' as it is graced with many green spaces and parks. The largest green space is the 148 hectare Southampton Common, parts of which are used to host the annual summer festivals, circuses and fun fairs. The Common includes a wildlife centre on the former site of Southampton Zoo, a swimming pool and several lakes and ponds.
As with most cities there are several council estates such as those in the Weston, Thornhill and Townhill Park districts. Overall, the city is ranked 96th most deprived out of all 354 Local Authorities in England.
Education
The city has a strong higher education sector. The University of Southampton and Southampton Solent University together have a student population of almost 40,000.
The University of Southampton - which was founded in 1862 - is one of the top 10 research-led universities in the UK, and caters for 20,000 students. It is also considered to be one of the top 200 (141th) universities in the world. It also provides a wide range of services for the business community. The university has a global reputation for leading-edge research into oceanography, cancer sciences, sound and vibration research, computer science and electronics, optoelectronics and textile conservation. It is also home to the National Oceanography Centre, Southampton, the focus of Natural Environment Research Council-funded marine research.
Southampton Solent University has 17,000students and its strengths are in the training, consultancy, research and other services undertaken for business and industry.
Over 40 per cent of school pupils in the city that responded to a survey claimed to have been the victim of bullying. More than 2,000 took part and said that verbal bullying was the most common form, although physical bullying was a close second for boys.
Culture, Media & Sport and Crime
Tudor House, SouthamptonThe city is home to the second longest medieval walls in England that are still standing, as well as a number of museums such as Tudor House, The Maritime Museum and Solent Sky, which focuses on aviation. The annual Southampton Boat Show is held in September each year, with over 600 exhibitors present. It runs for just over a week at Mayflower Park on the city's waterfront, where it has been held since 1968. The Boat Show itself is the climax of Sea City, which runs from April to September each year to celebrate Southampton's links with the sea. Southampton has a vibrant nightlife, and has been voted one of the best places to live in the UK for single people aged 18 to 30, owing to its low cost of living, wide array of bars and club and cheap transport. Women voted it second best behind London, while men rated it as seventh. Music is an important aspect of the city and there are several music venues. The city is home to R'n'B soulstar Craig David, Coldplay drummer Will Champion, and was the birthplace of comedian Benny Hill.
The Mayflower TheatreThe main theatre in the city is the 2,300 capacity Mayflower Theatre, which hosts a number of West End shows, such as Les Miserables, The Rocky Horror Show and Chitty Chitty Bang Bang. The city is home to several art galleries, including the council run gallery at the Civic Centre.
Media
Local media include the Southern Daily Echo newspaper based in Redbridge and BBC South, which has its regional headquarters in the city centre. From there the BBC broadcasts South Today, the local television news bulletin and BBC Radio Solent. The local ITV franchise is Meridian, which has its headquarters in Whiteley, around nine miles (14 km) from the city. Until recently, the station's studios were located in the Northam area of the city. Commercial radio stations include Radio Hampshire - which until 2007 was run by Southampton F.C. and known as The Saint - Power FM, Ocean FM and Original 106.
Sport
St. Mary's StadiumSouthampton is home to Southampton Football Club - nicknamed "The Saints" - who play in the Football League Championship at St Mary's Stadium. At grass roots level, the two local Sunday Leagues in the Southampton area are the City of Southampton Sunday Football League and the Southampton and District Sunday Football League. Hampshire County Cricket Club play close to the city, at the Rose Bowl in West End, after previously playing at the County Cricket Ground, near to the city centre.
The city is famous for yachting and water sports, with a number of marinas dotted around. From 1977 to 2001 the Whitbread Around the World Yacht Race, which is now known as the Volvo Ocean Race was based in Southampton.
The city also boasts the Southampton Sports Centre which is the focal point for the public's sporting and outdoor activities and includes an Alpine Centre, theme park and athletics centre which is used by professional athletes.
Southampton was named "fittest city in the UK" in 2006 by Men's Fitness magazine. The results were based on the incidence of heart disease, the amount of junk food and alcohol consumed, and the level of gym membership. In 2007, it had slipped one place behind London, but was still ranked first when it came to the parks and green spaces available for exercise and the amount of television watched by Sotonians was the lowest in the country. Speedway racing took place at Bannister Court Stadium in the pre-war era. It returned the 1940s after WW2 and the Saints operated until the stadium closed down at the end of 1963. A training track operated in the 1950s in the Hamble area. Southampton is also home to one of the most successful College American Football teams in the U.K the Southampton Stags, a joint team between Southampton Solent and Southampton University, that boasts 3 college bowl wins and access to some of the best facilities in the sport at the Wide Lane Sports Facility.
Notable people
See also: Category:People from Southampton
There have been a number of notable people who either hail from Southampton or who have lived in the city over the years. In the sphere of music, the city is the home of Coldplay drummer, Will Champion, whose father and late mother taught at the university. R&B singer Craig David was brought up on the Holy Rood estate in the city centre, and BBC Radio One DJ Scott Mills comes from the city too. In the past, the city was home to Isaac Watts, a famous hymn writer, who notably composed O God Our Help In Ages Past which is the school hymn of the King Edward VI school in the city and the peal of the Civic Centre clock tower. In other arts, Sir John Everett Millais, who now has a museum named after him in the city came from Southampton as did Benny Hill, the internationally renowned comedian, who had a milk round in nearby Eastleigh - the inspiration for his song Ernie (The Fastest Milkman In The West). SKY, & International Radio Presenter Andy Collins and naturalist TV presenter Chris Packham are natives too.
Admiral John Jellicoe, commander of the British fleet at the Battle of Jutland was a Sotonian and Argentinian dictator Juan Manuel de Rosas spent his last years in exile in the city.
Former England and Southampton F.C. footballer Matthew Le Tissier lives in the city, as he has done since the mid 1980s, and Olympic athlete Iwan Thomas lives there as did former tennis player Wally Masur.
Crime
According to government figures Southampton has a higher crime rate than the national average. In the Violence against the person category, the national average is 16.7 per 1000 population while Southampton is 38.4 per 1000 population and in the Theft from a vehicle category, the national average is 7.6 per 1000 compared to Southampton's 17.4 per 1000. Overall, for every 1,000 people in the city, 102 crimes are recorded, meaning that around 10 per cent of the population have been victims of crime in the last 12 months.
Economy
Containers being loaded at the docksThere are currently 120,305 jobs in Southampton, and 3,570 people claiming job seekers allowance, approximately 2.4 per cent of the city's population, as of March 2007. This compares with an average of 2.5 per cent for England as a whole.
As of June 2006, 74.7 per cent of the city's population are classed as economically active.
Just over a quarter of the jobs available in the city are in the health and education sector. A further 19 per cent are property and other business and the third largest sector is wholesale and retail, which accounts for 16.2 per cent. Between 1995 and 2004, the number of jobs in Southampton has increased by 18.5 per cent.
As of January 2007, the average annual salary in the city was £22,267. This was £1,700 lower than the national average and £3,800 less than the average for the South East.
Southampton has always been strongly connected with maritime history and developments, and the docks have long been a major employer in the city. In particular, it is a primary port for cruise ships, its heyday being the first half of the 20th century, and in particular the inter-war years, when it handled almost half the passenger traffic of the UK. Today it remains home to many luxury liners, as well as being the largest freight port on the Channel coast, with several container terminals. Unlike many other ports, such as Liverpool, London, and Bristol, where industry and docks have largely moved out of the city centres leaving room for redevelopment, Southampton retains much of its inner-city industry. Part of the docks have been redeveloped, however as the Ocean Village development, a local marina and entertainment complex.
During the latter half of the 20th century, a more diverse range of industry also came to the city, including aircraft and automobile manufacture, cables, electrical-engineering products, and petrochemicals. These now sit alongside the city's traditional industries of the docks, grain milling, and tobacco processing.
Southampton University Hospitals NHS Trust is one of the city's largest employers. It provides local hospital services to half a million people in the Southampton area and specialist regional services to more than three million people across the South of England. The Trust owns and manages Southampton General Hospital, the Princess Anne Hospital and a palliative care service at Countess Mountbatten House.
Other major employers in the city include Ordnance Survey, the UK's national mapping agency, whose headquarters are in the city. The Lloyd's Register Group has announced plans to move its London marine operations to a specially developed site at the University of Southampton. The area of Swaythling is home to Ford's Southampton Assembly Plant, where the majority of their Transit models are manufactured.
West Quay Shopping CentreSouthampton's largest retail centre is the West Quay Shopping Centre. Opened in September 2000 and hosting major High Street brands it is one of the largest in the country. The centre itself was phase two of the West Quay development. The first was the West Quay Retail park, while the third phase has been planned for a number of years with the latest target of work starting being 2007. The plans include building more shops, housing, offices including the headquarters for Carnival Cruises and additional leisure facilities. A decision as to what leisure facilities is still to be decided, however Southampton has been granted a large casino licence and so can now add to its collection of casinos in the city.
Swedish low-cost home products retailer IKEA has been given permission to open a store in the city centre near to West Quay. Other major shopping areas in the city centre include The Mall Marlands, The Bargate Centre and the East Street area, which has been designated for speciality shopping, with the aim of promoting smaller retailers. Overall, Southampton is ranked 13th for shopping in the UK.
The dockyards on the River TestLike many cities in the UK, Southampton's strong economy is promoting redevelopment, and major projects are proposed, including the city's first skyscrapers on the waterfront. The three towers proposed will each stand 23 stories high and will be surrounded by smaller apartment blocks, office blocks and shops. There are also plans for a 15 storey Hotel at the Ocean Village marina, and a 21 storey hotel on the north eastern corner of the city centre, as part of a £100m development.
Another project would have been the permanent docking of the Queen Elizabeth 2 in Southampton (her home port since 1969) as a floating hotel and tourist attraction when she is retired; however, Cunard Line announced on June 18, 2007, that the ship will be sold to Dubai for those purposes.
Southampton is unique in being the only city in the UK with a geothermal power station. The station provides hot water to a city centre district heating scheme. In a recent survey of carbon emissions in major UK cities conducted by British Gas, Southampton was ranked as being one of the lowest carbon emitting cities in the United Kingdom.
According to figures from 2004, Southampton contributes around £4.2bn to the regional economy annually. The vast majority of this is from the service sector, with the remainder coming from industry in the city. This figure has almost doubled since 1995.
Geography, climate and demographics
The geography of Southampton is very much influenced by the sea and rivers. The city sits at the northern tip of the Southampton Water, a deepwater estuary, which is a ria formed at the end of the last Ice Age. Here, the rivers Test and Itchen converge. The Test - which has saltmarsh that make it ideal for Salmon fishing - runs along the Western edge of the city, while the Itchen splits Southampton in two - east and west. The city centre is located on the peninsula between the two rivers.
Much of the Waterfront has been reclaimed over the years, mainly for use as the Western Docks. Most of the land used for reclamation came from dredging of Southampton Water, to ensure that the port can continue to handle some of the largest ships in the world. The shape of the coastline gives rise to a natural phenomena in Southampton, known as the double tide. This gives the port a much longer high tide period than other ports, making the movement of large ships easier.
The city itself lies in the Hampshire Basin, which sits atop large amounts of chalk beds.
Demographics
As is the case with most large towns in the UK, Southampton has a diverse range of cultures and ethnic groups, which make up the estimated 228,600 people living within the city boundary. There is a large Polish population in the city, with estimates as high as 20,000, or 1 in every 10 of the total population. Southampton also has large Asian and Irish communities. At the 2001 Census, 92.4 per cent of the city's populace were white - including one per cent white Irish, 3.8 per cent were South Asian, 1.0 per cent Black, 1.3 per cent Chinese or other ethnic groups, and 1.5 per cent were of mixed race.
In total, there are 112,400 males within the city and 109,500 females. The 20-24 age range is the most populous, with an estimated 28,100 people falling in this age range. Next largest is the 25-29 range with 20,500 people and then 30-34 years with 17,000. By population, Southampton is the largest monocentric city in the South East England region and the second largest on the South Coast after Plymouth.
Between 1996 and 2004, the population of the city increased by 4.9 per cent - the tenth biggest increase in England. In 2005 the Government Statistics stated that Southampton was the third most densely populated city in the country after London and Portsmouth respectively. Hampshire County Council expects the city's population to grow by around a further two per cent between 2006 and 2013, adding around another 4,200 to the total number of residents.The highest increases are expected among the elderly.
History of Southampton and Government
Although Stone Age, Bronze Age and Iron Age settlements are known to have existed in the area, the first permanent settlement was established by the Romans shortly after their invasion of Britain in AD43. Known as Clausentum, it was an important trading port for the large Roman towns of Winchester and Salisbury. The Romans abandoned the settlement circa AD410, and the arrival of the Anglo-Saxons eventually saw the formation of a new settlement circa AD700 across the Itchen centred around what is now the St Mary's area. The settlement was known as Hamwic, which evolved into Hamtun and then Hampton.
The Viking King Canute the Great is supposed to have defeated the Anglo-Saxon King Ethelred the Unready here in 1014 and been crowned here, and his fabled attempt to "command" the tide to halt may have taken place in Southampton. Excavations have uncovered one of the best collections of Saxon artifacts in Europe.
Hamwic fell into decline in the 9th century, but there is evidence that by the 10th century, a new settlement, which became Medieval Southampton had already been established following the Norman Conquest in 1066. Southampton became the major port of transit between Winchester (then the capital of England) and Normandy. By the 13th century, Southampton had become a leading port, and was particularly involved in the trade of French Wine in exchange for English cloth and wool. The Wool House was built in 1417 as a warehouse for the medieval wool trade with Flanders and Italy, the building surviving today as the Maritime Museum. During the Middle Ages, shipbuilding became an increasingly important industry, which was to remain for centuries to come.
The town was sacked in 1338 by the French, including the pirate Grimaldi, who used the plunder to help found the principality of Monaco. After this attack, the city's walls - part of which dates from 1175 - were extensively added to and reinforced. A large part of the town's walls remain today. Lacking proper finance for the construction of a full defensive wall, the townsfolk reached a compromise solution, which involved joining the existing exterior walls of existing merchant houses together to form part of the defensive structure. The city walls include God's House Tower, built in 1417, the first purpose-built artillery fortification in England. Over the years it has been used as home to the city's gunner, the Town Gaol and even as storage for the Southampton Harbour Board. Today, it is open as the Museum of Archaeology. The walls were finally completed in the 15th century.
The 12th century Red Lion pub on the High Street, within the old walls, is where in 1415, immediately prior to King Henry V of England's departure from Southampton to the Battle of Agincourt, the ringleaders of the "Southampton Plot", Richard, Earl of Cambridge, Henry Scrope, 3rd Baron Scrope of Masham and Sir Thomas Grey of Heton, were tried and found guilty of high treason, before being summarily executed outside the Bargate.
The port was the original point of departure for the Pilgrim Fathers aboard the Mayflower in 1620. A memorial can be found on Town Quay. Since that time it has been the last port of call for millions of emigrants who left the Old World to start a new life in the USA, Australia, Canada, New Zealand, South Africa and other parts of the world.
The memorial to the engineers of the RMS Titanic.In 1838, the docks were rebuilt and Southampton became known as The Gateway to the Empire. As was common with most of the luxury liners of the time, in 1912 the RMS Titanic sailed from here. The city contains several memorials and museum exhibitions related to the Titanic, most of crew having come from Southampton; 549 Sotonians died in the sinking.
The city is home to Sir Edwin Lutyens' first permanent cenotaph, which was the basis for his design of the memorial in Whitehall, London, a memorial to the city's dead of World War I. When it was unveiled on 6 November 1920, it was 1800 names, later raised to 2008. The Second World War hit Southampton particularly hard because of its strategic importance as the major industrial area on the South Coast. In particular, the Supermarine Spitfire fighter aircraft was invented and manufactured in Southampton, a result of 1930s experimentation in the city. Bombing in two days in September 1940 killed 130 workers at the Woolston aircraft factory. There were many aircraft companies based around Hamble, to the east of the city, from the 1930s to 1950s, including Folland Aviation, now part of British Aerospace, which built the Hawk and Harrier. BOAC had a flying boat base in the docks serving British colonial possessions in Africa and Asia in the 1930s and 1940s. It closed in 1950 when land based aircraft became dominant. Nearby, Calshot Spit was a base for the military flying boat services.
Pockets of Georgian architecture survived the war, but much of the city was levelled. The accuracy of the locally-based Ordnance Survey's maps did not go unrecognised by the Luftwaffe: the German bomber pilots used them to bomb Southampton. One notable building to survive the bombings was Southampton's oldest, St. Michaels Church. Thought to have been commenced in 1070, the building has been added to many times over the centuries but its central tower dates from Norman times. The spire was an important navigation aid for the German pilots and consequently they were ordered to avoid bombing it.
Southampton became a county corporate in 1447. It was one of the boroughs reformed by the Municipal Corporations Act 1835. The town became a county borough under the Local Government Act 1888, being expanded by the addition of several parishes in 1894, 1920, 1925 and 1967. Southampton was awarded city status in 1964 by Letters Patent. The boundaries have been largely unchanged since then, despite the loss of county borough status in 1974, and subsequent regaining of unitary authority status in 1996.
Government
Civic Centre, SouthamptonSouthampton used to be a County Borough within the county of Hampshire, which in the past was known as the County of Southampton or Southamptonshire. This was officially changed to Hampshire in 1959 although the county had been commonly known as Hampshire or Hantscire for centuries. Southampton became a non-metropolitan district in 1974. However, the city became independent administratively from that county as it was made into a unitary authority in a local government re-organisation on 1 April 1997 - a result of the 1992 Local Government Act. The district remains part of the Hampshire ceremonial county.
Southampton City Council consists of 48 councillors elected by thirds. After the 2007 local council elections on 3 May 2007 the Council is split with 18 seats each to the Labour and the Conservative Party, each having gained two, and 12 to the Liberal Democrats. The Conservatives took control in May 2007, after a Liberal Democrat resigned from her group to become an independent and voted for the Conservative leader Alec Samuels. During the budget setting meeting on 20th February 2008, a no confidence motion was passed and Labour and the Liberal Democrats formed a coalition.
There are three members of parliament for the city: Rt Hon John Denham (Labour) for Southampton Itchen, the constituency for the east of the city, Dr Alan Whitehead (Labour) for Southampton Test which covers the west of the city, and Sandra Gidley (Liberal Democrat) for Romsey, which includes a northern portion of the city. The Boundary Commission for England has created the new constituency of Romsey and Southampton North, by enlarging the current Romsey one. The new boundaries encompass the unitary authority wards of Bassett and Swaythling. It will be in place in time for the 2009 or 2010 General Election.
Southampton's police service is provided by Hampshire Constabulary, its fire service by Hampshire Fire and Rescue Service and the ambulance service by the South Central Ambulance Service. Police stations within the city boundaries can be found in Portswood, Bitterne, and Shirley, as well as at the Civic Centre in the city centre. Fire stations are located in St Mary's, Sholing and Redbridge.
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Business 2day
The week according to TEN
Unemployment in the euro zone remained at a record rate of 10% for a fifth month in a row.
The National Housing Federation warned that homeowners in England who bought at the peak may face four more years of negative equity.
RBS announced 400 job losses at its Direct Line subsidiary.
Ryanair announced that it is ceasing services from Belfast City Airport.
The UK economy grew slightly faster than initially thought in the second quarter, expanding by 1.2 per cent rather than the 1.1 per cent first estimated.
The Treasury is setting an example by planning to cut staff numbers by about one-quarter.
More than 500 users a day are downloading the free version of istethoscope, which experts say has already saved lives.
Leadership tip of the week:
How to make better judgements: We make better decisions when we listen to others rather than relying on our own judgement. In a study that could help anyone from new couples to the leaders of the Coalition, researchers proved that pooling wisdom with a partner reliably produces better results. A team funded by the Wellcome Trust asked pairs of volunteers to pinpoint when a very faint image appeared on a screen; if they disagreed, they talked it through. The results showed joint decisions were indeed better than ones made by the stronger individual. But a second test demonstrated the destructive effect an incompetent partner can have.
Social Media
Last week in the city according to TEN
* China formally became the world’s second-largest economy during the second quarter, supplanting Japan.
* The first half of 2010 saw a slight recovery in average private company values from their historic low point at the end of 2009.
* Campbell Soup Company is preparing a £1.5bn break-up bid for United Biscuits, the British group behind Jaffa Cakes.
* The Policy Exchange think tank, warned that interest rates may rise to 8pc within two years. 300 of Woolworths' 807 retail units remain vacant following the collapse of the company in 2008.
* Only five FTSE 100 companies have a female chief executive.
Leadership tip of the week:
Quote of the week:
3Cs to recover from a mistake: While most people accept that mistakes are inevitable, no one likes to make them. The good news is that even large errors don't have to be career-enders if they are handled well. Next time you make a blunder, follow these three steps to recover gracefully: (1) Confess. Trying to hide a mistake or downplay its importance can be fatal to your career. Be candid and transparent about the mistake, take responsibility for your part in it, and don't be defensive. (2) Change. Mistakes are important learning opportunities. Explain to your boss and other interested parties what you will do differently going forward. (3) Circulate. Don't let your errors keep you from ever taking risks again. Once the mistake is behind you, get out there and focus on the future.
Last week in the city - according to 10
The BoE expects the economy to grow by about 2.5% in 2011, down from 3.4%.
A poll found that UK consumers are among the gloomiest in the world, with 34% believing the economy is in ‘a very bad’ shape.
Skype now has 560 million users worldwide, and generated £406m in sales in the first half of the year.
BT received more than 100 applications for each of its apprenticeships this year, more than applied for places at Oxford University.
Creativity - Innovation Matters - August 2010
Entrepreneurs have nothing to fear but fear of failure
I have heard this before, but in this case I hold up my hands and say that I used creative swiping and stole the title from Sir Richard Branson. You really should read his interesting article on the subject by clicking here.
Branson makes a very interesting point about fear of failure, but how can innovation actually fail? It is quite simple, the only way is to DO NOTHING.
Innovation is all about getting things done (or trying in the case of Virgin) and learning from the result whether it is success or failure. This way you can a) try again or b) use your acquired knowledge in some other way. The route forward may not necessarily be a straight line but you will move forward and potentially gain competitive advantage.
Thomas Edison is reported to have made over 2000 attempts at creating the first light bulb. His view of this was that he found 2000 ways not to make a light bulb. Imagine that there was no patent and a competitor had no knowledge of what Edison had done. Even if Edison was on attempt 1999 he was still 1999 steps ahead of his competitor, none of which he would have made without failing!!
In the words of Sir Richard Branson "If you can identify and learn from your mistakes, you have a much greater chance of bouncing back from them - and succeeding the next time" but first of course you must actually do something or you are guaranteed to fail.
The UK's economy grew at a faster-than-expected pace of 1.1% in the April to June period, official figures show.
Apple announced a massive 78% surge in second quarter profits to $3.25bn – boosted by the sale of 3.27 million iPads and 3.47 million Macs and 8.4 million iPhones.
Microsoft reported profits of $4.52bn for the same period. Lending to businesses and households fell in May according to the CBI.
Citigroup reported that it might quit Britain if the government imposes further taxes on banks.
The volcanic ash cloud, which closed airspace for 18 days, knocked 24% of Ryanair’s first quarter results.
It was announced that long-suffering Equitable Life policyholders may receive less than £500 each in compensation.
App of the week
Text speak may have had its day, following the launch of a free iPhone app that enables users to speak the words they wish to send in a text or email – the Dragon Dictation voice recognition system is said to be fast, easy to use and remarkably accurate.
How to resolve conflict at work:
Differences of opinion between colleagues can be useful and even productive. But when clashes turn ugly, conflict can be harmful to working relationships. Here are three tips for handling the next disagreement you have with a colleague: (1) Identify common ground. Point out what you both agree on at the beginning of the conversation. This may be a shared goal or a set of operating rules. (2) Hear your colleague out. Allow your colleague to share his opinion and explain his point of view. Don't disagree with individual points he makes; listen to the whole story. (3) Propose a solution. Use the information you gathered in the conversation to offer a resolution. This should incorporate his perspective and be different from what you originally thought.
Leadership tip of the week: Quote of the week:
If your lost property has 'vanished into thin air' or have ever 'refused to budge an inch' or have been 'tongue-tied', a 'tower of strength', 'hoodwinked' or 'in a pickle' you are quoting Shakespeare
Moneyweek's Week
The best-kept secret in economics…
The housing market is topping out…
Your biggest advantage over fund managers…
From David Stevenson, across the river from the City
Welcome back to your weekend edition of Money Morning.
This is where we highlight some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we’ve published in the past week.
● Typical! After the stock market got a real dose of the miseries last Friday, this week it was all change again. By midday yesterday, the FTSE 100 had recovered by some 4%.
This was something of a surprise, for several reasons. For one, there were some jitters over the outcome of Europe's banking stress tests, which are supposed to show how sound, or otherwise, the continent's lenders really are. By the time you get this email, they'll have been released - my colleague John Stepek will be giving his views on what they really mean for investors in Monday's Money Morning.
Second, US Fed boss Ben Bernanke was his usual cagey self in his six-month Congress testimony. The markets usually get quite excited when Bernanke talks to Congress, but there wasn't too much to see this time around. Meanwhile home sales in the US fell by 5% in June, while the stock of unsold houses hit its highest level in ten months. Hardly promising.
Add up the sum total of the above, and there's been plenty for investors to worry about, or so you might think. But with several American companies coming up with 'better than expected' results and statements - here's my take on that - investors decided to ignore the bad news and put their happy faces on.
● Meanwhile, back in Britain, the housing market looks like it's topping out again. Home loan approvals - a key gauge of future prices - dropped by 4.6% in June, according to the British Bankers Association.
This week, our editor-in-chief, Merryn Somerset Webb, was talking to a TV crew for a documentary about the property crash (she was also on Panorama this week by the way - if you missed it, you can check it out here).
They asked her why the government hadn't done anything to prevent the bubble from building in the first place. Well, of course the answer is that it's not in the government's interest to do so - you can read Merryn's take and comment on it, on our blog, here: Why the government can't stop house prices falling.
● With markets this volatile, what does an ordinary investor do? In Wednesday's Money Morning, John tried to spell it out: How to cope with the market's mood swings.
"Ignore the noise, and look at what's cheap." Long-term, large blue chips are a 'win-win' investment, he says. "If the economy recovers from here, then "that'll be good news for big companies along with the others. Profits and sales will go up.
● Talking of experts… one of the nice things about writing this Saturday round-up is that I get a good excuse to read, from cover to cover, all our newsletters. I don't always agree with their take on things, but there's lots of thought-provoking stuff you won't find anywhere else.
Like this from Bengt Saelensminde, editor of The Right Side email - "The secret weapon to beat the City Professionals".
"As private investors, we have one massive advantage over fund managers", says Bengt. "And it's so counter intuitive, you'll probably think it's not an advantage at all; in fact you may think I've lost my marbles... but here goes: we're allowed to make bad investments".
"Let me explain how you can use this to your advantage. It's a benefit that isn't available to most professional investors. Fund managers have to justify their every investment decision. Clients and colleagues question their every move. They wear the same suits, they read the same papers and they make the same conservative investments - and the same mediocre returns. The last thing a fund manager will do is make an 'off the wall' investment that could leave him with egg on his face. Yet it's the 'off-the-wall' investments that can make fortunes".
I like his thinking. What's more, Bengt's advice is completely free. If you'd like to receive The Right Side every day, simply sign up here.
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● Speaking of off-the-wall investments, Tom Bulford in the Penny Sleuth email was talking about how to profit from golf this week. Not in Britain or the US, but in Asia. Why Asia? Because while golf has lost its elitist reputation in the UK to a great extent, it's still very much an aspirational sport in Asia.
"Many years ago I was on a flight to Hong Kong. Due to a typhoon, the flight was diverted to Taipei. We were obliged to stay overnight before being taken back to the airport the following morning. At first light, the bus passed a golf course. To my amazement, even then, the course was packed with golfers, desperate for their fix of this maddening and challenging game. In the 1970s there were fewer that 50 courses in the whole of Asia. Now there are over 6,000. In Asia, golf is booming.
"So there's plenty of money in the golf business. One firm that's recognised the possibilities and invested heavily in Asian sport is the French media giant Lagardere. But a penny share company that has its eyes on Asian golf is AIM-quoted Parallel Media Group (PAA).
"What Parallel does is to negotiate a deal with a host golf club, put up a prize fund, probably pay a few stars an appearance fee, find sponsors and then set about selling tickets, concessions and attracting corporate hosts. Done well, and with a little bit of luck with the weather and the quality of the field, this can be a real money spinner".
● What's the best-kept secret in modern finance? Tim Price, writer of The Price Report, reckons he has the answer. "I want to tell you about a small cabal of investors and economists who have a remarkable record of calling the top of the market before a major crash. Many consider this group to be a bunch of lunatics - a fringe element.
"But I think they're probably the best-kept secret in finance - and right now, they're telling us exactly who's to blame for the crash. And how we can protect our wealth for the rough years that lie ahead".
So who on earth can he be talking about? The answer… is the Austrian school of economists. Now this may sound at best rather arcane, and at worst, very dull. But let me assure you, if you're interested in knowing more about what's gone wrong with the global economy over the last three decades - and how everything could yet get much worse, it's fascinating stuff.
"A stock market bubble, tends to have three features: one of them is fundamental (a new technology, say, like the internet); one of them is financial (a surge in the availability of money and credit, for example); and a key one is psychological - we all believe we can get effortlessly rich, and traditional valuation measures then get thrown out of the window. The 1990s stock market bubble represented all three.
"Why do I cite the Austrian warnings issued before the Millennium Crash? Because nothing has changed. In monetary terms, what has changed has got worse. An unsustainable problem has become doubly unsustainable. Debt, leverage, deficits, the ballooning of central bank balance sheets...If these were urgent problems back in 1999 and 2000, they are multiple times worse now."
Here at MoneyWeek, we're firm believers in Austrian thinking. I'll not give you the rest of Tim's piece here - that wouldn't be fair to his subscribers - but there's one clear conclusion which you won't be remotely surprised to hear: keep buying gold.
● Just before I go, one final word for those of you who want to keep your financial life nice and simple. If you just want to leave your cash in the bank, but are worried about your buying power being devastated by inflation, then take a look at our free email, MoneyWeek Saver. This week Ruth Jackson has been looking at the best savings rates around. And she reckons she's found a "sneaky way" to beat inflation. Just click here to read the piece: The sneaky way to beat inflation today.
MONEY MORNING™ is the free daily email service brought to you by MoneyWeek. For a 3-week FREE trial of the MoneyWeek magazine & website, click here now:
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How to handle disruptions - Tips from Ten
In today's world of financial crises, currency fluctuations, and terrorist threats, coping with the unexpected isn't just a good leadership skill, it's critical. Here are three ways you can improve your response to, and minimise the impact of, inevitable disruptions:
(1) Have a back-up plan. You may not always be able to rehearse Plan B, but you should have alternative approaches that can help get you out of a bind. In the absence of actual plans, mental flexibility can help you respond more quickly.
(2) Speed up communication. Information needs to move through your company quickly and efficiently. Find ways you can collect and disseminate data in short cycles.
(3) Instill values. Values help people know the right thing to do without being told or waiting for permission. They also bind a company together when surprises happen and therefore can help companies recover more quickly.
Last week in the city: - according to TEN
Fitness First is being lined up for a £2 billion listing that would trigger a giant windfall for its private equity backers.
Ocado is seeking to raise £400m in a stock market flotation.
Apple announced that it sold its 3M iPads, just 80 days after its introduction in the US.
Before its 50% slide, BP accounted for 7% of the overall FTSE index and accounted for £1 in every £7 of blue-chip payouts.
The Unite trade union is to postpone a strike ballot of British Airways cabin crew after receiving a peace offer from the airline, BAE Systems, Britain's biggest defence company, is set to cut hundreds of jobs in its UK vehicles business in the coming weeks.
TwitPic Uploader is the must have app for all Twitter users. There’s no greater instant gratification than snapping a photo and sharing it with the world.
How to motivate your board of directors:
When serving on a board of directors is voluntary, sometimes members can lose focus or doubt that their participation is essential. At your next board meeting, try these three tips for reinvigorating and encouraging board members to devote more time and energy to growing your company: (1) Pose provocative questions. Spend a significant part of each board meeting wrestling with critical issues and asking your board to think through the toughest challenges facing your company. (2) Share the stage. Minimise time spent listening to prepared presentations. Be sure one or two members don’t dominate the conversation. (3) Spend time one-on-one. Find out about members' individual interests and how they might translate to helping your company in a unique way - for example, by coaching an executive or attending a critical in-house meeting.
The Money Week that was
* A hard lesson from BP - never catch a falling knife…
* Watch out for the death cross...
* Profiting from obscure Asian soft drinks...
Welcome back to your weekend edition of Money Morning.
This is where we highlight some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we’ve published in the past week.
● What a week. The emergency Budget took up all the headlines, and most of the column inches on this side of the Atlantic. We were broadly happy with it. But of course, it's easy for George Osborne to stand up there and talk about huge cuts. Now they need to be pushed through.
As Tim Price put it in his Price Report newsletter: "to the extent that it imposed a degree of fiscal prudence where under Labour we had flatulence, this was 'Mission Accomplished'. We will now have to wait and see whether the savagery of the cuts to the public sector is greeted with continental-style social disunity."
● Of course, the neo-Keynesians, who think the answer to everything is to print more money, didn't like the Budget. As I noted in Wednesday's Money Morning, we'll never have a definitive answer about who's right, because these stances are often based more on personal politics than anything else - which just shows that economics really is a poor excuse for a science.
I've seen the case made that the Depression in the 1930s was caused by too much government interference, rather than too little. And I'm sure we'll see the same arguments rage over the "Great Recession" of the early 2000s in the future.
Our sympathies are with the austerity camp - although we don't think taking either path could save us from a double-dip. My colleague Merryn Somerset Webb explains in an excellent blog on the VAT hike: VAT rise won't create a Japan-style slump - but the banks might. "One of the things that most worries the 'must-have-more-stimulus' crowd about the Budget is the rise in VAT from January. It will, they say, tip the economy over the edge. Next thing we know, we'll be back in recession.
"The critics point to Japan as an example of how the nightmare of rising consumption taxes unfolds. There, in 1997, the tax rose from a mere 3% to 5%. The economy subsequently shrank in four of the next five quarters.
"I say subsequently rather than consequently for the simple reason that there is little evidence the two were particularly connected. As Graham Turner of GFC Economics points out, the Japanese economy had been slowing for some time before the tax actually rose. And the country's financial crisis was already "palpably intensifying", with a number of finance companies having just failed or being publicly on the verge of failure.
"At the same time, a big land auction in Tokyo had just failed (falling land and property prices were at the core of the Japanese financial collapse, just as they have been in ours). Worst of all, one of Japan's big insurers had just defaulted - the first to do so.
"All this 'arguably had a far greater impact on consumer confidence than the hike in consumption tax.' The UK may well end up back in recession. But if it does, I don't think it will be the rise in VAT that puts us there. Just as it was in Japan, it will be the next leg of the banking crisis."
● So that was the Budget. But while Britain's eyes were focused on Mr Osborne, the nation's broad mood of cautious optimism (no doubt helped by England's football win) was at odds with the rest of the world.
China got the week off to a good start with its revaluation of the yuan. However, investors rapidly realised that a tiny relaxation in the dollar peg wasn't going to cure all the world's ills.
Indeed, as Merryn blogged, China has plenty of its own problems. In fact, the renminbi might even be massively overvalued, rather than undervalued, as everyone assumes. "Let's not forget that while it has been pegged to the dollar it has nonetheless already appreciated massively against the euro and the pound this year. And in trade-weighted terms it has risen 13% or so since the peg was first loosened back in 2005."
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● Meanwhile, investors are starting to worry about the impact of all this austerity. Government stimulus is the only thing that's kept much of the global economy afloat. Now that it's being pulled away, everything is starting to look rather bleak.
But at the same time, governments can't just keep spending indefinitely. European governments in particular have run out of ammo. The cost of insuring against a Greek default hit another high this week, apparently for no specific reason other than that it was a 'risk-off' week. And in the US, the pulling of support for the housing market there has absolutely hammered home sales: The US housing horror story is about to get even worse.
● Another worrying sign comes from the technical analysis side of things. I know a lot of you are sceptical about charting. I don't blame you. But it's worth paying attention. Certainly all the best investors and fund managers I know consult charts as at least part of their analysis.
In any case, what's got the chartists worrying now is the rather grimly-named 'death cross'. You can see for yourself and read all about it in my colleague David Stevenson's blog. But in short, it suggests the FTSE 100 could be heading for another big downturn. You might be inclined to blame that on BP's horrible performance. But a 'death cross' is forming in the copper chart too, which suggests it's about more than just oil.
● Getting away from charts and back to fundamentals - one investment cliché that's also pretty good advice is to "buy what you know." Our Asia expert Cris Sholto Heaton agrees wholeheartedly. Of course, Cris being Cris, what he knows includes a whole range of things that most of us rarely encounter - such as obscure Asian soft drinks.
And in the latest edition of his Asia Investor newsletter, I reckon he's come out with the most exciting share tip he's recommended yet. "In its home market, this company has the same kind of profile you might associate with Coca-Cola or Pepsi." The big news is that it's starting to expand - but the market hasn't noticed yet.
Now I'm quite wary about the stock markets in general at the moment. I certainly don't think the recession is done with the West, and I suspect China is heading for harder times than anyone imagines too.
But if you're offered the chance to buy the next potential Asian multinational, you take it. Because what matters isn't what the market or the economy might do next month or next year. It's where we'll be in ten, maybe 20 years' time. And by then, however you cut it, Asia's populations as a whole are almost certain to be healthier, wealthier and consuming a lot more than they are now.
I'll be sending you an email with more on Asia Investor later today - look out for it, it's already created quite a buzz among Money Morning readers.
● Another investment cliché that's worth listening to is - "Never catch a falling knife." I'm talking, of course, about BP. Earlier this month, I thought it was worth a gamble at around 350p. Merryn disagreed with me, and I have to take my hat off to her, she was absolutely right: Why buying BP now is incredibly risky. The oil major had another shocker of a week this week, and even plunged below 300p at one point.
Well, it's certainly another useful reminder as to the importance of setting a stop-loss when you're gambling. David will have an update on what it all means in Monday's Money Morning.
Until next week,
John Stepek
Editor, MoneyWeek
New Business Editor of the Year, BSME Awards 2009
PS. If you're interested in any of the newsletters mentioned above, you should take a look at the deal Toby Bray, MoneyWeek's publisher, has put together. I sent you an email about it yesterday. But if you missed it, the bottom line is that you can get MoneyWeek's top newsletters plus the magazine - for life. It's a great offer, probably the best we've done. But it has to end on Thursday at midnight. So take some time to look at the offer and see if it's for you - it's a massive deal and there may not be another chance to get on board.
Until next week,
John Stepek
Editor, MoneyWeek
New Business Editor of the Year, BSME Awards 2009
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The week according to TEN
The Government announced that the FSA would be dismantled with many of its duties transferred to the BoE.
BP scrapped its dividend and agreed to put $20bn into a fund to pay compensation claims.
Morgan Stanley warned that taxpayers should brace themselves for up to £10bn worth of tax increases in the emergency budget.
Nationwide said that UK consumers confidence was at its lowest for a year. Spanish banks borrowed €86bn from the ECB.
News Corp made an indicative £12.3bn, or 700p a share, bid for the 61% of BSkyB it doesn’t already own.
How to increase sales through cold calling: In this era of social media and web-based marketing tools, it's easy to assume the cold call is dead. But especially in the B2B market, it is still a very popular - and effective - way to make sales. Here are three ways to convert a phone call into a sale:
(1) Find a direct line. Calling the direct number for the person you are trying to reach doubles your chances of getting him on the phone.
(2) Utilise online resources. Use sites such as LinkedIn to get more information about your targets or to make contact.
(3) Know the difference between persistence and annoyance. Annoying someone will not make him buy what you're selling. Be professional when reaching out: personalise each message, alternate between voicemail and email so you don't inundate, and add value or provide more information each time you call.
10 ways to create raving fans for your business
Recommendations are best - work as a trusted source for quality recommendations.
Under promise and always over deliver - wow you clients and go the extra mile by over delivering every time. Add value to your offering.
Build relationships - you need to keep in touch with your network so that they know what you are doing, what's new, what's coming up but also, find out what's going on in their world.
Always follow up - Meet, like, follow up! Always follow up. You've sat next to 10 people for at least one hour over lunch and heard their 'elevator pitches'. There must be something you can talk about to make your own contact with them remarkable and memorable.
Do what you say you will - don't under deliver. If you say that you'll put someone in contact with the best electrician that you know, please do it. If something has been promised to you, you then look forward to receiving it.
Get testimonials - your customers are your biggest fans especially if you've done a great job. Apply the testimonials regularly to your marketing material and website. Keep it fresh!
Provide masses of additional value - what more could you do for your existing clients? You are getting to know their business, bit by bit, they like what you do, what more could you pull 'out of the bag' to help them?
Treat all of your clients like VIP's - because they are VIP's and they will keep working with you if you love them, care for them, add value and go the extra mile.
Say "thank you" - if someone refers you to another business then please say "thank you". It means a great deal and they will remember you for saying thank you.
Provide a very proactive service - this will enable you to gain more business from existing clients, it adds value to your offering and it's so helpful. You will be remembered for being helpful.
Oh! One more thing - "Is there anything else I can help you with?" usually produces a "yes, actually there is".
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Wall Street hit its lowest level this year following disappointing employment data indicating that just 41,000 private sector jobs where created in May.
BP looks set to set aside sufficient cash to meet all legitimate claims, which analysts say could range from $5bn to $40bn.
American regulators are planning to investigate Apple’s business practices to see if it is harming the developing market for software that runs on mobile phones and the iPad.
Sir Terry Leahy announced his retirement from Tesco after 14 years at the top. Philip Clark, his successor, is only the sixth boss in the company’s 80-year history.
How to change careers within your existing company: Making a lateral move inside an organisation can be challenging. If leaders see you as an "IT person" it can be hard to convince them you are a "marketing person." Here are three ways to combat pigeonholing and convince your bosses that you're ready for a new challenge:
(1) Make it a win-win. Position your proposal in terms of the value it will bring the company. For example, explain that you have under-utilised skills or capacity that could be used in a different division or for an important task.
(2) Cover your current position. Offer to train your successor or to continue to do the job part-time.
(3) Think of others. Focusing on what you stand to gain will get you nowhere. Emphasise the learning and development opportunities the move will create, such as for the junior person who can take on some of your previous responsibilities.
The Money Week week
BP – good value or value trap?
...Profit from peckish Asians
... One way to incentivise the England squad
From John Stepek, across the river from the City
Welcome back to your weekend edition of Money Morning.
This is where we highlight some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we’ve published in the past week.
● The week began with stock markets plunging. Fears of a double-dip recession reared their heads again as US payrolls data for last month proved very disappointing (The recovery is fizzling out – and there's worse to come). By the end of the week, a jump in Chinese exports had brought some cheer back to the markets, before a fall in US retail sales dented hopes again.
However, BP remained the big story. It's a miserable situation for all involved, not least the families of the 11 people who died in the accident, the environment, and anyone whose livelihood has been destroyed by the spill.
But that's all rather being forgotten amid the blame-throwing going on. The British media is getting increasingly fed up with the flak being tossed our way by the US government and Barack Obama. It wasn't long before unfavourable comparisons with America's attitude towards the 1984 Bhopal disaster, where a leak at a US-owned factory caused the deaths of at least 15,000 people in India, were being bandied about. And as our own Tim Price wrote in his Price Report newsletter, "God help Obama if Exxon Mobil is involved in another high profile public disaster – anywhere."
The political mud-slinging will no doubt continue. But what about the investment case? Well, almost all of our writers have had a crack at giving their views on BP since the spill – my colleague David Stevenson pretty much summed them up last week.
I'll throw in my tuppence here. As the share price tanked this week, I asked our editor-in-chief Merryn Somerset Webb whether she reckoned it was time to buy. I felt BP had probably hit bottom – she was less sure. She blogged on both our views here.
But her main point, which I agree with, is that even if BP is a buy down here, it's certainly not the stock it once was. The funds that hold BP do so for the dividend yield, and the promise of safe exposure to global demand for energy. Now it's very much a short-term punt on whether or not the share will rebound once all the bad news on the spill has come out – I reckon you can probably forget about a dividend being paid, at least for a couple of quarters.
● Shareholders in BP obviously aren't too happy about this mess. But Stephen Bland tells readers of his newsletter, The Dividend Letter, that there's really only one big reason to be angry at BP, and it's nothing to do with the oil spill.
"What really irks me about BP is the stupendous sum they have wasted over the years in share buybacks, which they claim to be a form of return to shareholders. I don't know about you, but I ain't seen none of that money. But we would have if they had increased the dividends instead.
"The figures are absolutely staggering – and scandalous. For the years from 2000 to 2008 they spent in total over $51 billion, yes billion, on buying their own shares. A cash spill that would have paid for a hell of a lot of oil spills. In 2009 they spent nothing, though I suspect that owes more to the credit crunch than a change of heart about this foul practice that so shafts the private shareholder in favour of their institutional mates."
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● Getting back to those weak US retail sales – the truth, says Cris Sholto Heaton in his Asia Investor newsletter, is that the best days of the US consumer are in the past. "The US consumer defined the last few decades. And the Asian consumer will define the next. That's why you're already reading about which handbag is most popular in Beijing. And how bottled tea has become a craze among young Vietnamese."
But as Cris points out, lots of people already know this. That's why "I want to get away from the familiar stories you know about Asia's middle class: The car sales. The luxury shopping malls. The new television set in every home."
I've worked with Cris for a while. If there's one thing that makes him a good analyst, it's his nigh-on obsessive attention to detail (you'll already know all about this if you read his free email, MoneyWeek Asia). He's studied what really happens when a society starts being driven by consumerism, rather than simply jumping on the tedious and simplistic "look how many BMWs rich Chinese people are buying" bandwagon.
And that's led him to look into the market for something rather ordinary – snacks. "If you're buying a quick snack on-the-go in Britain, you might grab a chocolate bar from a supermarket or convenience store. But in most parts of emerging Asia, you're more likely to buy a steamed bun or fried tofu from a street vendor."
But this is changing. As consumers get wealthier and modern retail chains more widespread, they are consuming more shop-bought "processed, packaged snacks". And this is an important trend for investors to buy into. Why?
"Because when you begin selling more packaged, prepared food, you also sell more branding. While one street stall may be better than its neighbours, they are all selling more-or-less the same product at the same price. Their pricing power is very limited.
"But a company that can build a brand around its product is the only producer of that product. And so it can earn margins far in excess of an unbranded commodity snack. And that means that they profit much more from growing wealth and millions of people's willingness to spend a few pence more on the branded product."
It makes sense to me. And Cris reckons he's found the perfect stock to play the sector. You can find out more about Asia Investor and Cris's investment rationale here.
● One of the dangers of being a small investor is boiler rooms. These scam merchants are particularly fond of cold-calling penny share investors. That's because they assume they'll be easy targets – adventurous, and with a bit of spare cash. But one made the mistake of calling our penny share expert Tom Bulford the other day. Says Tom:
"I had a call from a girl called Melanie claiming to be from a wine merchant in Mayfair. It went something like this:
"Melanie: "Hello Mr Bulford, I am Melanie and I am offering you the chance to make tax-free gains by investing in vintage wines…"
"Me: "I am not interested."
"Melanie: "But you have not even listened to what I have to say."
"Me: "Go away."
"Melanie: "Is that because you have never thought of investing in wine?"
"Me: Words to the effect of "get lost".
"Melanie: "But…"
"Sound of phone slamming."
Now, as far as I'm concerned, that's pretty much a textbook way to deal with these people – just hang up right away. And that's what the Financial Services Authority (FSA) told Tom when he called them to report the scam.
They also suggested the Telephone Preference Service. It's a free service that allows you to opt out of receiving unsolicited sales or marketing calls – just register your phone number. You can find all the details on www.tpsonline.org.uk.
"But," says Tom, "the main thing to remember is this. Never ever agree to part with your money on the basis of a telephone conversation. Just put the phone down straight away. Or, if you find you are being drawn into a conversation, be as rude as you like and then slam down the receiver. And report these sharks to the FSA. The phone number is 0845 602 2185. Alternatively, you can file a report on http://www.fsa.gov.uk/Pages/Doing/Regulated/Law/Alerts/form.shtml."
● And I suppose I can't really finish off this weekend round-up without at least nodding to the World Cup.
One reader replied to Merryn's blog on BP: "No idea whether BP is a buy at these levels but if the England football players' wealth managers have invested their millions in high dividend UK oil majors, then Rooney and co have every incentive to counter Obama's nasty populism and humiliate the USA on Saturday."
It's one way to incentivise the team I suppose. If it works, we can only hope that the rest of their money has been shovelled into euros – the pain of that loss might give them a fighting chance if they get far enough to play Spain...
Until next week,
John Stepek
Editor, MoneyWeek
New Business Editor of the Year, BSME Awards 2009
MONEY MORNING™ is the free daily email service brought to you by MoneyWeek. For a 3-week FREE trial of the MoneyWeek magazine & website, just call 0207 633 3780 and one of our Customer Service representatives will take your order for you. Please quote reference number EMYK L502 to get your special discount and free issues.
Money Morning
....Don't buy BP until it hits 420p
... Small cap stocks on the rebound
...Gold v Property, Round II
From David Stevenson, across the river from the City
Welcome back to your weekend edition of Money Morning.
This is where we highlight some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we’ve published in the past week.
● 'Shortened' Bank Holiday weeks can often be a bit quieter – unless you've been wrestling with the joys of half term, that is.
In the markets, it was much the same this week. There wasn't too much to see on the company results front. But share prices were still bouncing around and there's been plenty of other stuff going on.
For example, a couple of Britain's biggest names, BP (LSE: BP/) and Prudential (LSE: PRU) have been very much in the news. We talked about them both in Thursday's Money Morning, so I'll not repeat all the details here.
Since then, BP hasn't been prepared to commit to maintaining its dividend. The oil giant's shares have bounced a bit on hopes it might succeed this time in plugging its Gulf of Mexico leak. But with the longer-term payout still under threat, I'd like to see the price back down at around 420p before buying.
After all, BP is still surrounded by risks, as we explained last week. Yet for many oil companies, in particular at the smaller end of the scale, the risks are of a very different kind. In a nutshell, the oil 'minnows' worry about not finding any of the stuff. But the flipside is that if a minnow hits the jackpot, its investors can really coin it. So it's well worth having a look at this week's cover story in the magazine:
"Nothing kick starts a share price like a major oil find", says author Tom Bulford. "Last August investors in Gulf Keystone Petroleum (AIM: GKP) saw the value of their shares soar by 592% in just 20 days. Last month, investors in Rockhopper Exploration (Aim: RKH) had the same thrill ride, as the share price raced from 37p to 220p in less than a week. Each had struck black gold – Gulf Keystone in Kurdistan, Rockhopper close to the Falkland Islands".
"If you're happy to take the risk involved – and do be aware that it's risky, so don't invest money you can't afford to lose – if you back the right minnow today, you could land tomorrow's oil major."
If you're already a subscriber to the magazine, here's the link: Hunting for oil in the world's six most promising frontiers. If you're not, you can still see the story by taking up our offer of a 3-week free trial.
● Tom has been a very busy bee recently. He's also been scouring round for turnaround stocks for his free Penny Sleuth email. This does exactly what is says on the tin, aiming to find penny shares that could soon be worth much more.
"Three men have been bending my ear recently", he says. These are "Wayne Money of Eruma (LSE:ERU), Barrie Whip of Crimson Tide (LSE: TIDE) and Miles Hunt of Empresaria (LSE: EMR). All have interesting stories to tell. All have had a tough time during the recession but I get the sense they're turning things around and are poised to deliver some good news."
If you haven't heard of any of these stocks, you're in similar company. Until reading Tom's piece, I hadn't either. Empresaria is a recruitment agency, Crimson Tide does software and Eruma is in, of all things, counter-terrorism. But if Tom believes they're worth looking at, that's enough for me. Here's the link to his piece about them: Three turnaround penny shares to watch.
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Forecasts are not a reliable indicator of future results. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Please seek independent financial advice if necessary. MoneyWeek Ltd. Customer Services: 0207 633 3780.
● Tom also reckons that investors are missing out on big opportunities in biotech. In this week's magazine sector column, James McKeigue agrees. Or to be more exact, he believes there's money to be made from "genetically modified organisms".
"Global food demand is set to keep growing strongly", says James. "The UN predicts that demand for food will increase by 50% by 2030. Rising living standards in developing countries, especially in Asia, are also a key factor. So agriculture has to use all the resources at its disposal more efficiently. That means investing in so-called "Frankenfoods" could prove very profitable".
And as he explains, (GM foods: an unexpected European growth story), he's just found a cheap, 'pure play' in the sector that's well placed to cash in on all this long-term growth.
● In fact, there's a bit of a 'big numbers' theme here. Dr Mike Tubbs, who writes the Research Investments newsletter has been pondering how mankind will be able to cope with the fallout from millions more vehicles on the roads.
"Take China's pollution problems for a start. There are already four million private cars clogging the streets of Beijing. Each day 2,000 new drivers become part of the capital's grim crawl of traffic. The city is choked with smog. And all the new coal-fired power stations are making their pollution problems much worse".
"But then traffic is also increasing rapidly in Mexico City, Bangkok and Shanghai. Worldwide, transport is responsible for 14% of the carbon dioxide emitted each year, according to the MIT Technology Review. And with vehicle ownership in developing countries growing at 30% a year, cutting fuel emissions will be a major priority for governments for decades to come. It's the same story with power. Most developed economies are far too dependent on dirty energy sources – whether it be coal, oil or natural gas".
"How are governments cutting down on emissions? By introducing tougher regulation on transport and power generation. They know that building massive solar and wind farms won't be enough. And nuclear stations take a long time to bring into service. We have to cut down on the emissions we are generating at the moment".
The good news for the planet is that Dr Mike has found, if not the complete answer, at least a metals-related stock that will do very well out of cutting emissions. Here's where you can find out more about Research Investments.
● Talking of metals, we couldn't let this edition of the round-up pass without another mention of Dominic Frisby's piece last week. For those that missed it, here it is: In real money, British house prices are down by 70%.
To recap, he was talking about the link between gold and UK house prices. Now clearly, for MoneyWeek and its devotees, these topics are very close to the heart. No prizes for guessing what specialist subjects we'd select if we went onto Mastermind.
But the response from readers has been absolutely unprecedented. It's now well into three figures. And it's great to see so many of you getting involved in the conversation. What's more, there were very widely differing views, ranging between those who think it's a top-notch article to those who think Mr F has taken leave of his senses!
Anyway, on Monday Dominic published a follow-up, to "address one or two concerns" called "Why I still prefer gold to houses".
In fact, the title rather speaks for itself. But it's worth repeating the conclusion:
"These are incredibly frustrating times. A whole generation has been alienated by the absurdly out-of-reach property prices in this country. Many, having rightly identified that property was in a bubble, either stayed out or got out, only for the long-overdue correction never to fully materialise. Meanwhile, they see the purchasing power of their money evaporate, and it seems they'll never be able to buy anything unless they cripple themselves with debt".
"This is all an unfortunate consequence of the modern fiat system of money and credit. It causes 'malinvestment', it creates rampant asset price inflation, booms, bubbles and, eventually, busts. In response to all this there isn't much we can do other than move our wealth into stronger foreign currencies or an asset, such as gold, that a government can't debase."
"And there might be another opportunity to do that in the next few months. There's a lot of turbulence dead ahead in global markets. Gold may well sell off in the carnage. If it does, and we get our usual summer low, take advantage".
Amen to that! But replies to 'Gold and Houses Round II' are still coming in, so if you haven't had your say yet and would like to, feel free to do so.
● Before I go, just one more thing.
Last Saturday we sent out a very special invitation. This gave Money Morning readers the first chance to get hold of a groundbreaking 'hidden seam' investment report. The response has been incredible so far…and here's why…
My colleague and MoneyWeek contributor Cris Sholto Heaton has unearthed a 'hidden seam' of companies in Asia. He believes these have more potential than any other type of shares anywhere in the world. And you can still get in on the action. On Tuesday afternoon the first issue of his new Asia Investor newsletter, including the identity of his latest 'hidden seam' tip goes out live. To get in on this you have to put your name down by midnight Sunday – at the latest. Find out how here.
Until next week,
David Stevenson
Associate editor, MoneyWeek
MONEY MORNING™ is the free daily email service brought to you by MoneyWeek. For a 3-week FREE trial of the MoneyWeek magazine & website. To place your order over the phone, just call 0207 633 3780 and one of our Customer Service representatives will take your order for you. Please quote reference number EMYK L502 to get your special discount and free issues
Last week in the city - according to 10
The euro continued to slide as fears about the region’s banking system persisted. Marks and Spencer revealed a near 5% increase in profits to £632m.
Apple launched the iPad in Britain. More than £6bn was wiped from the market value of BP after the oil giant’s latest failure to control its oil spill in the Gulf of Mexico provoked mounting anger in the US. The OECD urged the Bank of England to tackle rising inflation by lifting its interest rate to 3.5% by the end of 2011 – well above the current 0.5%.
App od the week
PressReader: 1,500+ full content newspapers and magazines available for iPhone, iPad and iPod Touch! The application is FREE along with your first 7 current day issues!
Leadership tip of the week: How to speak from a podium:
The podium can be an intimidating place. Even seasoned public speakers feel anxious when standing in front of a microphone. Here are four tips for making your next speech from the podium hum with confidence:
(1) Keep your feet planted and stand up straight. This will convey poise and strength, even if that's not what you're feeling.
(2) Don't memorise. Unless the speech is very short, the anxiety of trying to remember your lines will only make your task harder.
(3) Find a place for your hands. Put your hands in one place — for example, on the sides of the podium — and then forget about them. You will bring them up naturally to gesture as long as they have a place to return to.
(4) Practice, practice, practice. Rehearse as many times as you can, in an environment as close to the real experience as possible.
Quote of the week:
"Respect your efforts, respect yourself. Self-respect leads to self-discipline. When you have both firmly under your belt, that's real power." Clint Eastwood who is 80 years
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IT Update from Geeks-on-Wheels
Apple iPad – Friday 28th May is the first day UK buyers will be able to buy Apple’s new iPad tablet PC. The units will be sold through Apple stores, Apple’s website and authorised resellers. For prices expect to pay around £429 for the 16GB, £499 for the 32GB and £599 for the 64GB Wi-Fi only models. If you want the iPad with Wi-Fi and 3G then expect to pay £529 for the 16GB, £599 for 32GB and £699 for the 64GB model. Mobile operators, including O2, will also be supplying the units with data plan deals.
What is DuckDuckGo? – It’s another search engine (https://duckduckgo.com/ ) but with a major difference, and one that is upsetting a lot of web analysts. DuckDuckGo provides encrypted searches, utilising SSL (Geek language = Secure Socket Layer). This means any searches you make, along with the result pages, cannot be intercepted by a third party. Though good news for privacy-conscious surfers the web analytics industry is not happy. As far we know this is the first search engine using SSL as a default. Having tested DuckDuckGo it is quick and provides ad-free results.
Microsoft SkyDrive – If you’ve not heard of it before don’t be surprised. SkyDrive is Microsoft’s new online storage service providing up to 25GB of online storage. To use it you’ll need a Windows Live ID (sign up here if you do not have one - https://signup.live.com/). Once you have logged into your Windows Live ID account click the ‘More’ link at the top of your homepage and select ‘SkyDrive’ from the menu. By default you have four folders (My Documents, Favourites, Shared Favourites and Public). You can create additional folders using the ‘Create folder’ button. To upload files click the ‘Add files’ button and add up to five at a time – which is a bit of pain. To add loads of files at once try compressing multiple files into a compressed file.
How to Create A Compressed File (s) in Windows 7 – Place the files you want to compress into the same folder. Select all the files (a shortcut is press the ctrl button and the letter a), right click and select ‘Send to’ and ‘Compress (zipped) folder’ from the pop-up menu. That’s it, no need to download any third party software and simple to use – we like that.
More Windows 7 Keyboard Shortcuts
To use these you will need to hold down the Windows key (that’s usually the one on the bottom row of your keyboard, on the left hand side between the ctrl and Alt keys).
Windows – Open the Start menu
Windows + L - Locks your PC
Windows + F – Advance Search
Windows + D – Minimise all open Windows
Windows + E – Displays Windows Explorer
Windows + T – Cycles through all programs on your taskbar
Windows + U – Opens the Ease of Access Centre
Windows + Tab – Applies the Windows Aero Flip 3D effect
Commercial Wi-Fi For Your Business – Do you run a business, (pub, restaurant, café, club, vehicle showroom etc) community or charity and want to give your customers free wireless broadband? It makes sense and will certainly attract more customers to your premises. If yes then take a look at Freerunner (http://www.freerunr.com). Freerunner not only put Wi-Fi hotspots in big brand locations, but in schools, community centres and outside of city centres with the help of regional development funding. Freerunner provide their services in England, Wales, Scotland and Northern Ireland.
Award Winning Geeks
Geeks-on-Wheels Europe won the PC Retail Awards 2010 ‘Service and Support’ category. Our IT support services really are second to none for consumers and businesses.
We support home and small business customers across the South East of England.
http://www.geeks-on-wheels.com/
The Money Week that was
Germany terrifies the global markets...
Why you must watch your inbox this afternoon...
Are we heading back to the 1980s?
From John Stepek, across the river from the City
Welcome back to your weekend edition of Money Morning.
This is where we highlight some of the best bits from our free emails, newsletters, blog and MoneyWeek magazine that we’ve published in the past week.
● This week, it's been all about the euro again. Just as Greece was successfully rolling over the dodgy debts that caused all the trouble in the first place, Germany decided to ban "naked" short-selling without any warning whatsoever. As one wag put it, it's a surprise to see the Germans ban naked anything – and the financial markets were certainly rattled by the decision.
Clearly the ban was a political move to distract German voters from the fact that they are paying to save Greece, as I noted in Money Morning last week. As if to confirm it, the German parliament passed the Greek bailout package with a comfortable majority on Friday.
But it panicked traders, who wondered what the Germans knew that everyone else didn't, and where the next regulatory blow might come from. Political risk is now one of the biggest worries for investors everywhere, as we point out in this week's MoneyWeek cover story: The rally's over - so what's spooked the markets?
● The fall-out has left most of the world's major stock markets well into 'correction' territory for the year – down 10% or more. And China is in a fully-fledged bear market. One man who's been preparing his readers for this is Tim Price. Tim, who writes The Price Report newsletter, is a respected City analyst and regularly writes for MoneyWeek.
Let me just say, I get lots of emails and analyst reports sent to me everyday – literally hundreds in a typical week. Tim is one of the very few people on my 'priority' list. I always make time to read his stuff. He's put together a report on the three investments you need to buy before this correction turns into a fully-fledged crash. It'll be winging its way to your inbox this afternoon – don't miss it.
● Ironically, while the world's stock markets tanked on fears about its longevity, the euro bounced back strongly against the dollar this week. It's a good reason to make sure you always use a stop-loss when spread betting – as my colleague Tim Bennett pointed out earlier this week.
However, we can't see the rebound lasting. We're not optimistic about the future of the euro, at least, not in its current form. Indeed, Merryn Somerset Webb, our editor-in-chief, suggested that Greece's best way out now is to both default on its debt, and ditch the single currency. Why? Well, the population is going to face a lower standard of living whatever happens. However you add it up, "running Greece costs more than Greece currently charges its taxpayers."
So why not just go for the nuclear option and be done with it? By abandoning the euro as well as its debts, Greece would "dispose of the worst of its debt burden and get its monetary flexibility (along with any growth this might encourage) back at the same time. And it will at least own the process, getting out before either Germany forces it out or leaves itself. The rest of Europe might not be keen (their banks may find coping with the fallout tricky) but I can't imagine the Greeks are in any mood to care."
EXPOSED! The City secret that could make the sub-prime collapse look like a tea party!
A maverick ex-City banker has broken rank to reveal how 'dirty' CP Debt could make the sub-prime collapse look like a tea party...
It’s about to blow up and potentially wipe BILLIONS off the FTSE and the Dow...
Yet one simple move, when triggered, could set you up for a 40%-50% gain in a matter of weeks, maybe even days...
Find out more right here.
Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Please seek independent financial advice if necessary. MoneyWeek Ltd. Customer Services: 0207 633 3780.
● Meanwhile, back in Blighty, the pound didn't get much of a helping hand from the latest batch of promises from Cameron, Clegg & co. All the speculation over capital gains tax (CGT) isn't doing much for their popularity with investors. You can read Merryn's take on it here: Capital gains tax hike was inevitable – but it must be done fairly.
My main problem with messing around with CGT is the fact that, in terms of government money-spinners, it's small change. Last year it raised less than £3bn. That's less than the tax on beer alone. Even in 2008/09, the peak of the last ten years, it only raised £7.9bn. Compare that to VAT, at £67bn last year. So CGT – a tax on the 'rich' – is mainly going up for political reasons. It's largely to try to compensate for the fact that we can only sort our finances out by hiking VAT – a tax on everyone.
● I'm already heartily sick of one aspect of the 'new politics' – the whole '80s revival that it's inspired. The '80s were bad enough the first time round – I'd rather be spared the reruns.
But Paul Hill thinks investors should brace themselves for the return of something far worse than mullets and day-glo legwarmers – he means riots. In the latest edition of his Precision Guided Investments newsletter, he takes a trip down memory lane…
"As a kid I grew up in Walsall. And every morning I would catch a bus across Birmingham that went right through some of the toughest neighbourhoods in the UK. Normally this wasn't a problem. But after Margaret Thatcher came to power in 1979, she dished out some economic medicine that sparked serious rioting across the city.
"I remember on several occasions, the bus driver having to tell the passengers that the doors were locked and the bus would not be stopping as it travelled through Handsworth and Lozells – where passing traffic was being used as target practise for bricks and even petrol-bombs.
"Why am I telling you this? Because I am convinced that the savage cuts about to be introduced by the Lib-Con coalition will be met with the same furious backlash we saw in 1979. For two years now, most people have been insulated from the full effects of this recession by colossal government borrowing and near zero interest rates.
"Now those comforts will be stripped from them. And anger will ferment as months of unemployment stretch out ahead of Britain's 2.5 million unemployed. We've already seen Athens over-run by angry public sector workers. I fear that could be a taster of what is to come in this country."
● It's a grim prospect. But Paul's not just looking at potential social trends for the sake of depressing his readers. He's hoping to profit from them. You should have got a note from him on Thursday detailing how he's been using what he calls Barack Obama's personal government "tip sheet" to pick up on hot sectors before the rest of the world cottons on. If you missed it, you can access the report here.
● Enough gloom and doom. For all that the world's finances don't look too healthy, the march of technology continues at a blinding pace. This week, Craig Venter and Hamilton Smith, two American biologists who were the first scientists to sequence the DNA of a living organism, created the world's first artificial life.
We'll have more about on the topic in the next issue of MoneyWeek. But while the investment implications of artificial life are probably some way off in the future, there are plenty of other innovations we can make money from.
Tom Bulford for example, told readers of his free Penny Sleuth email all about the 'imop' this week. As Tom says, it's not a cleaning app for your iPhone – in fact it's "a smart little electrical component that could cut your electricity bill by up to 25%." The company behind the imop, Advanced Power Components (APC) "is on the recovery trail" after a tough recession. I don't have time to go into the science of this gadget, but you can read Tom's full piece here: This penny share could slash the UK's energy usage.
● What else before I go? A reader, commenting on a Money Morning last week, suggested we're a bit hard on Europe: "What makes you so sure you're the ones who "get it"? Reading MoneyWeek on the subject, you'd think that the entire continent is made up of half-wits and 3-year olds. There are phenomenal brains on the other side of the argument, at the ECB, at the IMF et al, who I'll wager have a deeper understanding of the crisis than do MoneyWeek… and who yet don't see Europe and the euro's demise as a foregone conclusion."
Let me quickly answer that. We don't have an ideological bias against Europe. We just don't think the single currency is practical in its current form. The cards are stacked against it. And while I'm sure there are plenty of smart people at the European Central Bank, they're hardly neutral on the topic. Jean-Claude Trichet can't turn around tomorrow and say: "Ah well, the euro's a waste of time – back to the drawing board…".
But if you want to see a couple of proper intellectual heavyweights debate the issue, check out this video. It shows Nobel economist Joseph Stiglitz squaring up to everyone's favourite 'evil' speculator, Hugh Hendry on Newsnight in February, over whether Greece's debt problems are an issue or not. With hindsight, you'd have been better off putting your money on Hendry. And Merryn's just been interviewing him for next week's magazine, so you can find out his latest thoughts next Friday (and if you're not yet a subscriber, what are you waiting for? The first three issue are free, after all… click here to subscribe).
● That's it for this week. I'll be back on Monday. But don't forget to keep an eye out for Tim Price's report later today!
Paul Hill's newsletter, Precision Guided Investments
Tom Bulford's newsletter, Red Hot Penny Shares
If you have any other comments, please feel free to email me at editor@moneyweek.com.
Until next week,
John Stepek
Editor, MoneyWeek
New Business Editor of the Year, BSME Awards 2009
MONEY MORNING™ is the free daily email service brought to you by MoneyWeek. For a 3-week FREE trial of the MoneyWeek magazine & website,
Place your order over the phone, just call 0207 633 3780 and one of our Customer Service representatives will take your order for you. Please quote reference number EMYK L502 to get your special discount and free issues.
British Internet usuage explodes!
UK web users are spending 65% more time online than three years ago. The average web user spends 22 hours and 15 minutes on the net each month, according to the UK Online Measurement company (UKOM).
10 things you didn’t know last week - according to 10
The EU Commission provided an emergency loan facility of €260bn for trouble euro zone economics. $3.7bn was wiped off of stocks worldwide and the euro hits its lowest levels against the dollar in for years.
Markets gave a cautious welcome to the new UK coalition government: bond prices rose although sterling weakened.
RBS announced a further 2600 job cuts bringing the total to 22,600 since the start of the financial crisis.
Toyota the world's biggest carmaker announced a return to profitability, despite spending billions on recalling faulty cars.
The new chancellor set 22 June as the date for his first budget, with cuts and potential tax rises on the agenda.
The UK jobless total rose by 53,000 to 2.51 million during the three months to March.
Leadership tip of the week:
Quote of the week:
How to avoid the classic strategy mistakes: With the recovery under way, many companies are starting to feel less defensive and more strategic. As you gear up for what's next, be careful to avoid these common strategy mistakes that have hindered many a company in good times and bad: (1) Keeping under-performing businesses. Most companies have businesses that they should not be in. Put these under-performers out of their misery so you can focus on more promising prospects. (2) Pushing growth. More promising prospects, however, may not mean new businesses. Rather than focusing on expansion and growth, think about how you can shore up your existing business and strengthen your position. (3) Cutting back on cost-cutting. When things improve, many companies start thinking less about the economy and some even raise prices. Don't stop being frugal just because it's no longer necessary to survive. Simplicity is an asset in any market.
Money Morning
2 September, 2010
Why you should ignore the market's mood swings
Recommended article: Join the rush for rare earth metals
Yesterday's close: FTSE 100 up 2.7% to 5,366... Gold down 0.25% to $1,244.30/oz... £/$ - 1.5455
Investors can be forgiven for feeling a tad confused.
A couple of days ago, the world was ending. Economic news from the US was grim. We were mere inches away from the entire Western world turning Japanese.
Yet now it seems that everything's hunky-dory again. Manufacturing data released yesterday was less awful than expected in the US. And the same went for China's manufacturing sector.
Cue a massive rebound in the markets. Stocks leaped. 'Safe havens' such as Treasuries, the dollar, the yen and the Swiss franc, all sold off.
You can see why my colleague Dominic Frisby calls these 'traders' markets'. That's a polite way of saying that only gamblers need apply. But you don't have to bail-out of stocks altogether. You just need to focus on what's important…
What was behind yesterday's market rally?
So what was behind the massive rally in the markets yesterday?
Let's start with China's manufacturing boost. The purchasing managers' index rose from 51.2 in July to 51.7 last month. A similar index from HSBC also rose, from 49.4 to 51.9. On these sorts of indices, a number below 50 indicates that a sector is shrinking – above 50, and it is growing.
August is seasonally a good month for the index. But investors were relieved all the same. They've been worried that Chinese officials would tighten too hard and derail the global economy.
Perhaps they were worrying too much. As my colleague Cris Sholto Heaton pointed out recently in his free MoneyWeek Asia email, there's no doubt that activity in China has slowed this year. But equally, the government is unlikely to keep blithely tightening policy if it thinks it'll drive the economy into a slump.
That's not to say that China doesn't have any problems – it has plenty, from its bad-debt laden banking system to its over-dependence on infrastructure spending. But these are basically the same problems it had before the credit crunch. China may well face an economic crisis of some sort in the future, but unlike the Western world, it's not currently trying to dig itself out of a deep hole.
The US is still in poor shape
The US, on the other hand, is. The big fear this week – and it hasn't really gone away, despite the rebound – is that the Fed can't do much more to help the economy out. And even if he wants to pump more money into the system, Ben Bernanke is facing resistance from his more wary colleagues on the Fed's interest-rate setting Open Market Committee.
So the news that the US manufacturing sector did better than expected in August provided some welcome respite. The PMI rose from 55.5 in July to 56.3 last month. Most analysts had expected a fall.
But for all that, there was also rather a lot of miserable news out yesterday. For one thing, US car sales fell by more than had been expected. Indeed, it was the worst August for car sales in 28 years.
Of course, the year-on-year figures were bound to be bad. This time last year, the US government and many others around the world were paying people to scrap their perfectly serviceable old cars and buy new ones. But sales were still below expectations, coming in at an annual rate of 11.5m, compared to 14.2m last year.
"Cash-for-clunkers" schemes were the kind of nonsense idea that only governments can really get away with – to boost consumption by prematurely destroying existing goods so that people have to replace them.
It was only ever going to be a short-term sugar rush. Because if you replaced your car last year, you don't need to buy a new one this year. (Unless of course someone offers you even more money to trash that one and swap it for a new one). So arguably, you'd expect car sales to be generally weaker in the coming months.
But perhaps of more concern was a survey suggesting that US private-sector employment fell for the first time this year in August. 10,000 jobs were lost, according to ADP Employer Services. Manufacturing and construction were the hardest-hit industries.
How to invest in times like these
Investors were happy to ignore this data – for now. Following the August slump in stock markets, people were no doubt looking for reasons to buy in. So how do you invest for times like these? My advice hasn't changed since Tuesday's Money Morning: Let the market have its mood swings. For example, the all-important monthly non-farm payrolls data comes out tomorrow. The forecast is for a 41,000 or so rise in private sector jobs in August. Depending on whether that beats or misses, and by how much, we could see another surge or fall in the market.
So if you want to be able to sleep at night through all the ups and downs still to come, we'd stick with the stocks of big, solid companies that will at least pay you a decent dividend income as you hold on to them. My colleague David Stevenson had more to say on the importance of dividends in Money Morning on Friday.
Got a comment on this article? Leave a comment on the MoneyWeek website, here.
Until tomorrow,
John Stepek
Editor, MoneyWeek New Business Editor of the Year, BSME Awards 2009
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The FTSE 100 made its biggest gain in almost two months yesterday as markets were fuelled by merger rumours. The index climbed 2.7% to close at 5,366.
Miners were among the best performing stocks. Kazakhmys rose 6.9%, Xstrata and Rio Tinto both added 6.1% and Antofagasta gained 6%. But the only faller of the day was Randgold Resources, which shed 1.2%
Banks were also strong. Barclays rose 4.3%, Lloyds rose 2.9%, RBS added 2.7% and HSBC was 1.3% higher.
Top climber was TUI Travel, which gained 7.5% after rumours that its parent company intends to buy the shares it doesn't already own.
In Europe yesterday, the Paris CAC 40 rose 103 points to 3,623; and the German Xetra Dax was 158 points higher at 6,083.
In the US, the Dow Jones Industrial Average added 2.5% to 10,269; the S&P 500 and the Nasdaq Composite both gained 3% to close at 1,080 and 2,176 respectively.
Overnight in Asia, Japan's Nikkei 225 rose 1.5% to 9,062, and the broader Topix index was 1% higher at 819. In China, the Shanghai Composite gained 1.1% to 2,652, and the CSI 300 was up 1.2% to 2,917.
Brent spot was trading at $75.49 early today, and in New York, crude oil was at $73.85. Spot gold was trading at $1,248 an ounce, silver was at $19.45 and platinum was at $1,539.
In the forex markets this morning, sterling was trading against the US dollar at 1.54 and against the euro at 1.2022. The dollar was trading at 0.7809 against the euro and 84.16 against the Japanese yen.
And in the UK, house prices have fallen for the second month in a row, according to the Nationwide Building Society's House Price Index. August saw a fall of 0.9% compared to July, which itself saw a 0.5% fall. Year on year, prices are up 3.9%.
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The past is not a reliable indicator of future performance. Shares are by their nature are speculative and can be volatile and you should never invest more than you can safely afford to lose. Information in Money Morning is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision. Money Morning is an unregulated product published by MoneyWeek Ltd. MoneyWeek is authorised and regulated by the Financial Services Authority. http://www.fsa.gov.uk/register/home.do FSA number: 509798.
1 September, 2010
Don't bet against sterling
Recommended article: Seven reasons to buy into South Korea
Yesterday's close: FTSE 100 up 0.5% to 5,225... Gold up 0.85% to $1,247.45/oz... £/$ - 1.5348
"The British pound's biggest rally in 14 months is in jeopardy as Prime Minister David Cameron's budget cuts begin to curb economic growth." So read a headline on Bloomberg last week.
Let's ignore the annoying assumptions behind this remark for a moment. (I would argue that Cameron's cuts will lay the foundations for economic growth, not curb it.) We'll focus on the main thrust of the story, which is that sterling is set to fall.
In a Bloomberg survey of strategists, the sterling bears outnumber the bulls by well over two to one.
Guess what? I think they've got it wrong…
Forecasters are extremely pessimistic on the pound
According to data compiled by Bloomberg, foreign-exchange forecasters are the most pessimistic on the pound since May 2009. Back then, credit rating agency Standard & Poor's had said that Britain was at risk of losing its AAA credit rating.
Sounds pretty grim, eh? But actually, when you look back, of the 21 trading days in May 2009, the pound rose against the dollar for 16 of them. It began the month at $1.48 and ended the month at $1.64. It then traded in a range between around $1.60 and $1.70 for six months or so, until fears over a hung parliament sent it heading back towards the $1.43 area.
So let's hope, for the sake of their yachts, that these foreign-exchange forecasters didn't put their money where their mouths were. Or, if they did, let's hope they had their stops in tight. If they're as pessimistic now as they were then, then the pound is due a pretty strong rally.
One of the bears, Ian Stannard at BNP Paribas, says: "Sterling is extremely vulnerable and is likely to start moving lower." His team believe it could fall as low as $1.32. But barring a stock market crash or a stand-off between the government and the public sector, I just don't see this happening.
Why sterling isn't as weak as many people think
Why not? Well, if you look at the last 20 years, sterling has only fallen below $1.43 four times. Once was during the sterling crisis of 1992-93. Then there was the slump following the dotcom crash in 2000-01.
The other two instances came during the credit crisis crash of 2008-09, and then again in May of this year, when it wasn't clear who was in charge of the country. In other words, we've only seen such lows at major extremes. And even then, there is extremely strong, long-term support just below $1.40. Indeed, we haven't been down there since 1985, when the UK had rampant unemployment and Margaret Thatcher was still fighting the miners' unions.
Now, such a confrontation is not beyond the realms of possibility for this government, as the public sector starts to get laid off in the coming months. And such lay-offs could be more painful if the inflationary impact of £200bn of quantitative easing finally reaches the man on the street. But, even in this extreme environment, I would still expect $1.38 to hold.
I should stress I am not wildly bullish about the pound, either. We still have too much debt in our system and many other problems to do with the excess spending of the last ten years to work through. But given the policies of the current government, I just don't see disaster lurking around the corner any more.
We have had an extremely sharp rally in the pound since May, as it became clear that the coalition government was by no means going to be a disaster. It rose from $1.43 to $1.60, where it hit a wall. The current correction (the pound is at $1.54 as I write) is perfectly normal. It is not, in my view, the beginning of a major leg down.
We could slip back to $1.50 or so quite easily. But much further, I would say is unlikely, barring, as I say, a stock market crash or a major confrontation with the unions. Sticking my neck out and making a prediction, I would expect sterling to trade in a range over the next year or two, with a cap at about $1.75 and a bottom around $1.47.
The pound has problems - but fewer than many other currencies
As I say, the pound has problems, but so do many of the alternatives. The dollar is undermined by the fiscally insane policy-makers currently in charge. The yen is wildly overbought. The euro survived the spring but the structural problems have not gone away. Another crisis lurks, as sure as eggs are eggs. I do like the commodity currencies, (the Canadian dollar, the Aussie dollar and the Norwegian krona), but they too have their problems, with the Aussie dollar looking particularly vulnerable.
Of course, as you probably already know, the only currency that I have any real faith in is gold. I've just put together a new report on the subject for MoneyWeek. As well as my thoughts on gold bullion and gold stocks, with details on how to buy both, there are some exciting microcap junior explorer tips. There's also a detailed report on how to trade silver, gold's badly behaved little sister. You should have received details about this over the weekend, but if you missed it, you can find out more here.
Got a comment on this article? Leave a comment on the MoneyWeek website, here.
Until tomorrow,
Dominic Frisby
The Gold Profit Plan is a regulated product issued by MoneyWeek Ltd. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Please seek independent financial advice if necessary. MoneyWeek Ltd. 0207 633 3780.
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The FTSE 100 rose again yesterday, closing up 0.5% at 5,225.
Miners saw some good performances. Leading the sector up were Fresnillo, which gained 3.2%, and Rio Tinto, which added 2.4%. Vedanta, Anglo American and BHP Billiton rose between 2.1% and 1.9%.
Banks were also in demand. RBS climbed 2.5%, Lloyds added 1.3%, Standard Chartered gained 0.8% and HSBC rose 0.5%. But Barclays failed to make any headway, losing 1.1%.
Highest climber of the day was chip-maker Arm Holdings, which gained 8.6%, while the biggest faller was Intercontinental Hotels, down 3%.
In Europe, theParis CAC 40 rose three points to 3,490; and the German Xetra Dax was 13 points higher at 5,925.
In the US, the Dow Jones Industrial Average rose 0.1% to 10,014; the S&P 500 added one point to 1,049; and the Nasdaq Composite was 0.3% lower at 2,114.
Overnight in Asia, Japan's Nikkei 225 added 1.2% to 8,927 and the broader Topix index gained 0.8% to 811. In China, the Shanghai Composite was 0.6% lower at 2,622 and the CSI 300 slipped 0.7% to 2,884.
Brent spot was trading at $74.78 early today, and in New York, crude oil was at $72.09. Spot gold was trading at $1,250 an ounce, silver was at $19.39 and platinum was at $1,524.
In the forex markets this morning, sterling was trading against the US dollar at 1.5406 and against the euro at 1.21. The dollar was trading at 0.7857 against the euro and 84.14 against the Japanese yen.
And in the UK, fund manager Hargreaves Lansdown reported an 18% rise in pre-tax profits to £86.3m for the year to 30 June. The company is to raise its dividend by 18% to 11.88p per share.
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Past performance and forecasts are not reliable indicators of future performance. Shares are by their nature are speculative and can be volatile. Your capital is at risk so you should never invest more than you can safely afford to lose. Information in Money Morning is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision. Money Morning is an unregulated product published by MoneyWeek Ltd. MoneyWeek is authorised and regulated by the Financial Services Authority. http://www.fsa.gov.uk/register/home.do FSA number: 509798.
Welcome back to your weekend edition of Money Morning. 
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