High Speed Rail Plans Announced
Lord Adonis announced the government’s proposals for a new High Speed rail link between London and the North this morning; a £30bn project that would bring Birmingham, Manchester and Yorkshire within less than 90 minutes of the capital in a Y-shaped network, splitting at Birmingham.
There’s an interchange with Crossrail near Heathrow planned, allowing travellers easy access to the airport and nearly halving the current journey time between, say, Leeds and Canary Wharf. The other big implication for London is a wholescale rebuilding of Euston: 10 high speed platforms and 14 ‘normal’ platforms all below ground level will involve expansion west and south – which answers our question of where to find 6 spare acres – all of which would hopefully be achieved without having to open a temporary station (à la St Pancras) or long closures.
We’re so bloody excited about this we hate to mention that none of it’s set in stone yet. The London to Birmingham route won’t get the go ahead (if consultation goes well) until next year, and work won’t even start until after Crossrail’s finished. Still: meet you at the Bull Ring in 2026, eh?
FSA issues warning about new share scam
The Financial Services Authority (FSA) has issued a warning following the dramatic increase in overseas fraudsters selling shares using the names, registration numbers and addresses of FSA authorised firms and individuals.
The FSA has noticed a significant rise in this type of fraud, with crooks imitating genuine authorised firms to try and convince consumers of their legitimacy.
Recently the FSA has seen instances where an authorised firm’s website has been cloned but with a few subtle changes, such as a different phone number or false email addresses.
Should anybody receive an unsolicited call or email from a firm which they are not a customer of, the FSA is recommending that people should take the following steps:
- ask for the contact details of the person calling you;
- check the firm or individual’s status on the FSA register; and
- call the firm back on the switchboard number provided on the FSA register to make sure that the call came from the legitimate authorised firm.
Anybody who has been contacted by a suspicious firm or has any doubts should report the encounter as soon as possible by calling the FSA on 0300 500 5000 or reporting it online.
Consumers also need to be aware that firms not registered with the FSA are not covered by the Financial Services Compensation Scheme. This means that should somebody invest through an unauthorised business, it is very likely they will lose their money if the firm goes bust or disappears.
Jonathan Phelan, head of the FSA’s unauthorised business department, says:
"It is encouraging that awareness of share scams is now so high that conmen are having to come up with new tactics as it shows our strategy is working. Sadly, however, this also means there is a renewed risk to investors and a new type of scam for us to tackle.
"Our message remains the same: never deal with unauthorised firms. If somebody calls you out of the blue to promote shares, then you should be very wary of them even if they claim to be authorised by the FSA. If in doubt, make a report to the FSA; the more information we receive on a firm, the better placed we are to shut them down."
Share fraudsters, commonly known as ‘boiler rooms’, usually contact people by telephone and use high pressure sales tactics to con investors into buying non-tradable, overpriced or even non-existent shares. Boiler rooms are unauthorised, overseas-based companies with bogus UK addresses and phone lines routed abroad.
The average British household would run out of money in less than 14 days if a wage earner fell crit
- One in four Britons could access only £100 of disposable cash within a week if they lost their income due to death or a critical illness
- Nearly two thirds (63%) of British households have no critical illness cover or life insurance
- One in seven (16%) would sell their TV to get their hands on cash if they fell ill
New research from Aviva has shown that the average British household may only have enough cash to cover bills for 14 days if they or their partner fell critically ill or died. One in four (24%) of British households say they could only access £100 without further borrowing.
The research shows that without further borrowing, the average British household could get their hands on only £914 of disposable cash, less than two weeks of the average weekly household expenditure of £471. This is less than 1% of the average Aviva critical illness payout of £78,707.
Alternative arrangements
The research shows that, should the worst happen, Britons are drastically under-insured with only 37% of households covered by life insurance or critical illness cover. Should they have to raise alternative income, one in five (19%) Britons would be willing to sell their home, while a third (31%) would give up their car.
However, others say they would sell their TV (14%), the home computer (13%) or even their pet (6%) to raise cash – possibly indicating the extent to which people underestimate the financial impact of a critical illness or death. Perhaps unsurprisingly, men are less likely than women to sell their PlayStations (24% versus 16%).
Responsibility
The majority of Britons (59%) consider it their personal responsibility to cover any loss of income, should the worst happen. This is more strongly pronounced in men, where 67% see it as a personal responsibility, versus 55% of women.
However, 17% of Britons see it as the Government’s responsibility to cover any income loss due to a critical illness or death, and 9% would expect an employer to fill the gap. Individuals could expect a maximum of £95.15 a week from the Government Employment and Support allowance. A quarter (24%) of Britons say they would use their savings.
Louise Colley, head of protection for Aviva, said: "At Aviva we understand the huge impact that a critical illness or death can have on a family, both emotionally and financially. Money worries are the last thing a family would need at such a distressing time, so we would encourage everyone to take the time to consider life and critical illness cover to make sure they have adequate protection in place.
"The majority of British people see it as their responsibility to cover any loss of income in the case of them not being able to work due to a critical illness or death; but most simply don’t have enough money to see them through this period. It is worrying how little money Britons would be able to access without further borrowing, and how big the shortfall could be when we consider how much a critical illness or bereavement could actually cost.
"Currently, 31% of households rely on a sole breadwinner. Britons, especially those with dependants, should consider how they would cope should the worst happen. With the average Aviva critical illness payout currently standing at £78,707, and premiums for life and critical illness cover costing roughly the same as a Friday night takeaway for two, it’s vital that people have cover in place, just in case."
Northern Rock bucks the trend with increased savings rates as safety net disappears
Andrew Hagger of Moneynet.co.uk comments on the latest fixed rate savings products from Northern Rock.
Following the recent announcement that the 100% state guarantee on Northern Rock savings balances would end on May 24th, it was interesting to see the bank increasing rates on its one and two year fixed rate bonds yesterday.
Whilst existing variable rate savers are still fully protected until 24th May and existing fixed rate accounts until maturity, any new accounts do not come with this added level of comfort.
The one year bond now offers the fourth highest rate in its field following a hefty 0.40% increase from 2.75% to 3.15% yesterday and is now just a whisker away from Post Office at 3.30% in top spot. The two year bond which is not quite as competitive also saw a sizeable increase from 3.20% to 3.50%, although still some way short of market leader ICICI bank UK at 4.25%
With the removal of the savings guarantee for new deposits, these substantial rate increases from Northern Rock have come at a time when a number of short term fixed rates have been cut or withdrawn completely.
With new fixed rate deposits no longer eligible for the luxury of a 100% guarantee, the bank now has to compete on a level playing field and will need to offer decent rates if it is to retain and grow its savings business.
It will be interesting to see whether these rate increases will be sufficient to entice customers to remain loyal to Northern Rock with the lesser safety net of £50,000 courtesy of the FSCS, in line with the rest of the savings market.
Remortgage activity begins to recover
- Fixed / Tracker split for John Charcol clients stabilizes at 20/80% over last three months
- Remortgage percentage rises to over 50%
The main stories from the John Charcol Index for the first two months of 2010 are the beginning of a revival in the remortgage market and the stabilization of fixed rate take up, but at the very low level of around 20%. The John Charcol Index revealed that the market share taken by remortgages (including product transfers) increased for the third month running and the dramatic fall in the take up of fixed rates since the middle of last year has come to an end.
The remortgage market returns
"Purchases took only 47.3% of mortgages sold by John Charcol in February, down from a peak of 58.5% in November. The February figure is the lowest market share taken by purchases since April of last year and provides evidence that activity in the remortgage market has bottomed out. After the normal seasonal lull in December John Charcol placed significantly more business in January and February, adding to the other evidence that the downturn in mortgage approvals and lending reported by the Bank of England and the Council of Mortgage Lenders for January will be reversed when the February figures are released," comments Ray Boulger of John Charcol.
"Both purchase and remortgage activity has increased this year, but remortgages have increased more. However, detailed analysis of the figures shows that all of the increase in remortgage activity over the last two months is due to a particularly sharp increase in Buy to Let remortgages. Therefore, although mortgage rates have been steadily improving over the last few months, and in the residential market there are now even decent rates available up to 85% LTV – which makes remortgaging worthwhile for many more people – it is too early to be confident of an ongoing increase in remortgage activity. Nevertheless there are good reasons to think that the decline in remortgage activity has reached its nadir for the following reasons:
- More competition and a modest reduction in some funding costs for lenders resulting in lower rates for both new fixed and tracker mortgages.
- Several building societies increasing their SVRs, which also focused attention on the fact that many SVRs are over 5%.
- A significant improvement in the rates and choice available to borrowers with only 15% or 20% equity in their property.
- The bounce in property prices since the low nadir early last year, increasing some borrowers’ equity sufficiently to make remortgaging worthwhile.
Most, and maybe all, of these factors are likely to continue to influence the market in 2010.
"Whilst the 80/20 split between variable and fixed may seem dramatic, trackers have certainly offered the better value since the middle of last year, although a caveat now is that the political risk, particularly of a hung parliament, can’t be ignored. It is also worth noting that due to the market reassessing the future path of interest rates the gap between fixed and tracker pricing has narrowed recently. If this trend continues fixed rates may well come more into the reckoning in the not too distant future," concludes Ray Boulger.
The John Charcol Mortgage Index is published monthly, tracking three important statistics, based on mortgage business written by John Charcol. The index is a leading indicator of trends being based on mortgage applications submitted to lenders, whereas figures reported by the Council of Mortgage Lenders (CML) and the Bank of England (BofE) are based on completions, which typically take place 2-3 months after the mortgage application is submitted.
The three statistics tracked each month, based on the number of cases submitted rather than the mortgage amount, are the percentage split:
- Between Fixed rates, Capped rates and Tracker/Discount rates
- Between Purchases, remortgages and product transfers
- Of First Time Buyers compared to all Purchasers
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Technological innovation offers exciting opportunities a decade on from technology bubble
- Mobile internet boom favours investment in components suppliers and network developers
- Corporate IT spend is expected to return to growth in 2010 and beyond
A decade after the technology bubble burst, the convergence of a number of trends is expected to drive growth throughout 2010 and beyond for the previously unloved sector, according to Fidelity International.
Dmitry Solomakhin, portfolio manager at Fidelity International, believes the technology sector is at the start of a number of product cycles from which investors can benefit. The key opportunities are:
- Mobile data – the continuing development of smart phones and mobile internet devices and the resulting expansion and upgrades of networks;
- Recovery in IT corporate spend – the need for corporations to refresh their IT systems and, longer term, the move to ‘Cloud’ technology.
He says: "We have a number of very exciting product cycles ahead of us that have either just started or are likely to start in the next year or so. That means some companies will see very good top line growth combined with very good earnings growth.
"A lot of technology company executives have been through the dot.com boom and bust and are being are being quite disciplined in the current downturn, which is quite different from 10 years ago. Balance sheets across the sector are generally in very good shape and valuations are still quite attractive relative to the long term history of the sector and relative to the market. All of these factors combined make me optimistic over the next year or so."
Mobile data
The launch of the iPhone revolutionised the way people use their mobile phones, with the demand for mobile data growing. Solomakhin believes the winners from this trend will be the companies that supply components for smart phones and those involved in the expansion of networks to cope with growing demand for the technology. A company he favours is NAND flash memory maker SanDisk which he believes is well positioned to benefit from the trend.
He says: "We are seeing increased penetration of smart phone devices. If someone wants to buy a new mobile phone now, chances are they will buy a new smart phone. We are only in the second year of what I think will be a very powerful multi-year trend.
"We are also seeing a strong trend towards video on the internet. If you look at the internet right now, video is only a very small proportion of total internet traffic but it is growing very rapidly. That means we are going to see investment into these technologies; there will be investment into networks, because the networks need to be capable of supporting this traffic growth, and we are going to see investment into consumer devices such as smart phones."
Corporate spend
Solomakhin is also expecting increased IT spend by corporations into 2010 and beyond, although this is dependant on economic conditions continuing to improve. He says: "What we are seeing right now is that corporates are increasingly interested in so called ‘Cloud’ technology whereby a firm’s computing resources are moved to centralised data centres.
"The technology has improved dramatically and in the past 12 months we have seen some of the more sophisticated customers such as financial institutions getting heavily involved in pilot projects. The introduction of this technology will take time; it will be gradual but very powerful and this will be beneficial for companies such as virtualisation software developer Citrix Systems.
"In the meantime, for the next 12-24 months, most corporates will have to refresh their PCs because the current average age of a corporate desktop is approaching four years which is beyond typical standard warranty timeframe.
"Also, most corporates are still running Windows XP which is now eight years old. There is a huge incentive to migrate to Windows 7 which was recently released and has so far had very positive feedback. This should provide corporates with further incentives to refresh their PC installed base. Considering these two things together, I think the second half of 2010 looks good."
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Disappointing manufacturing figures renew ‘double dip’ whispers
The UK economy, it seems, can’t catch a break. Data released this morning has shown a sharp fall in output for UK manufacturing.
Figures revealed a 0.9% drop in production in January, against expectations of a 0.3% rise. It also marks a stark difference from December’s data, which showed a surprise 0.9% expansion in the sector, supporting UK economic growth in the final quarter of last year. Today’s figure marks the steepest fall since August 2009 and will renew concerns that the UK economy could dip back into negative growth.
Duncan Higgins, senior analyst at Caxton FX commented, "As with UK retail sales, the icy weather in January has clearly dented production. Though even with this as an excuse, the data is clearly hugely disappointing, falling more than a percent short of expectations. Of real concern now is the prospect of economic contraction, with the industrial sector also producing a negative figure for the month."
"Following hot on the heels of yesterday’s weak trade balance figure, the prospects for the UK recovery are not particularly uplifting at present. It is hard now to envisage the Bank of England not resurfacing the possibility of additional stimulus measures in order to prevent the economy recovery from derailing," continued Higgins.
In response, sterling has hit its weakest level against the euro since December 1st 2009. The pound is also losing further ground to the US dollar, down a further cent in trading today with the price now below 1.49.
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AIG advisory coup for UBS and Goldman
Investment banks win senior bookrunner roles in $20bn Hong Kong listing of AIG’s Asian life insurance operations
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Equities 2010: Which stocks will rock?
The outlook for equity markets in 2010 is as muddled as ever after a year that only can be described as enigmatic. Equities had one of the best runs ever off of the March 2009 low, but it sure didn’t feel bullish or that we were in the midst of a recovery. Once there were [...]
Equities 2010: Which stocks will rock? originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”
FTSE hits 6-week closing high
LONDON (Reuters) – The top share index hit a six-week closing high on Tuesday and rose for a third straight session, led by banks with HSBC firmer after the previous session’s post results sell-off.
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