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Doom and boom?
Categories: Justin Urquhart's Comment
In a week we have gone from headlines highlighting the apparent demise of the UK economy on Wednesday to the announcement that we are now in a bull market for equities (on the basis that certain indices have risen by 20% from their nadir last August). So just how much sweet and sour can we take in a week? Add to that the excessive amounts of hot air produced at Davos (that must affect global warming) with cold commentators in expensive anoraks blowing steamy breath at seemingly any pontificating passer-by who has managed to get time away from doing something creative to spend a few days in the Alps. I thought that was why we had skiing?
First the headlines - both should be regarded with some scepticism. The UK growth figures are hugely unreliable and are frequently revised later as more considered data comes in, so we shouldn't take one single data set in isolation. If we look at the trend though, then the message is clearer - it is low and slow and looking anaemic - that is hardly a surprise. It is a cycle and as we work our way through the cycle there will be a slow improvement - but it takes time. Is there much the government can do? Well a lot will depend on our trading partners, especially in the Eurozone, and thus far from carping at them, as we saw from our Prime Minister last week, perhaps we should be asking what can we do constructively (other than just bailing them out) to help and not just preach. However, the government domestically can do more here to engender that key word of confidence to focus on new companies and new job creation in a more co-ordinated and "joined up" manner than we currently see.
Secondly the "bull market". With the joys of statistics and graphs we can give silly titles to all sorts of moves. The fact that we have seen rises of 20% in a few months does not mean with any certainty at all that we are going to see the same repeated again - markets don't go up in a straight line. As the enthusiasts start to come back in, so it is time to be suitably cautious and prepare for a pull back at some stage. Something tells me that this is a nice timely rise ahead of the end of the tax year. With indirect forms of QE being pumped into the Euro banks and government debt auctions being managed through, it seems as though there has been almost a collective sigh of relief.
Actually what has happened is a change of sentiment - a belief that there are some shafts of light - that the European banking system might just survive, that the US economy is growing and that despite the worries we will muddle though. So what has really changed - emotion!
Now it is wonderful to have someone to blame and especially when you can demonise a hate figure. That after all is why we have effigies of Guy Fawkes to burn, even though most people have probably forgotten what he and his would-be terrorists were apparently up to. Today we would have had effigies of Fred Goodwin for the bonfire, blaming him as the man who didn't try to blow up Parliament, but rather succeeded in blowing up (in both senses) one of the world's largest banks. As part of this blame, the populists and opportunist politicians have been calling for him to be stripped of his knighthood as an act of revenge for his stupidity and pride.
So what exactly would this achieve? Would it bring back the bank? Right a wrong? No - it would just be an act of gratuitous humiliation as effective as any effigy on a bonfire. We must recall that he has not been found guilty of any crime, nor to have been in breach of any financial rules (although that may require some closer examination), and also that this was four years ago! Has our anger been festering for all that time or are other parties just whipping up a frenzy to blame someone?
Actually I believe that awards and titles should be removed where the honour no longer fits the individual. This is not just a dig at Fred, but also to include corrupt business people who have held themselves out as responsible leaders. I would especially then include all those corrupt politicians and especially any peer with a criminal conviction. How dare they "lord" it over any of us as a peer of the realm. Hard luck - snakes and ladders and down you go to the bottom of the pile and you can leave your dead ermine behind. Oh yes and they can't argue that there is no legal precedent - our Kings of old had a very effective way of "retiring" miscreant peers - not so much corporal punishment as corporal separation.
However, let me also proffer great praise and adulation on those very hardworking peers who work long hours, have very modest and seemingly unsuitable working and resting conditions and all for a ridiculously low level of financial remuneration. I very recently had the pleasure to meet an extremely hardworking baroness and I can only say that I hope I could have her dedication and energy at her age. There is a hard working peer of the Crown who deserves far more recognition and reward for her role. It put me to shame.
And finally ... if you are a Euro-phobe, then here is the best use you could probably ever think of for the much put upon currency.
Reuters reports that an unemployed Irish artist has built a home from the shredded remains of €1.4 billion (£1.16 billion), a monument to the "madness" he says has been wrought on Ireland by the single currency, from a spectacular construction boom to a wrenching bust.
Frank Buckley built an apartment in the lobby of a Dublin office building that has lain vacant since its completion four years ago at the peak of an ill-fated construction boom. However, this one is quite different as it is using bricks of shredded Euro notes from Ireland's national mint.
"It's a reflection of the whole madness that gripped us," Buckley said of what he calls his "billion-euro home." "People were pouring billions into buildings now worth nothing," he said. "I wanted to create something from nothing."
Buckley was given a 100% mortgage at the peak of the boom to buy a €365,000 home on the far reaches of Dublin's commuter belt, despite the fact he had no steady income. He has separated from his wife who lives in the home, which has since lost at least one-third of its value.
Living in his "billion-euro home" since the start of December, Buckley is working on adding a kitchen to the living room and hall. The walls and floor are covered in Euro shredding and the house is so warm Buckley sleeps without a blanket. Pictures made from notes and coins decorate the walls, including one of a house, made from 5 cent pieces.
"There are houses in Ireland worth less than that," Buckley quips.
There you are - who says there is no proper purpose for the Euro?
Have a good week.
Justin Urquhart Stewart
Director
Seven Investment Management
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