Confidence in the European banking world has been a little shaky of late. The “Club Tropicana” countries of Portugal, Italy, Greece and Spain have been living the high life in recent years and it turns out that the party has been largely fuelled by loans from European banks. These banks are positively awash with exposure to southern European debt (private and sovereign) and the major European powers, it seems, will do almost anything to keep the party going for fear of what happens when the music stops.
Despite the reassuring words of Wham, the drinks at these parties very rarely turn out to be free (although rumour has it, Greece really did get in with just a smile!). The only real question is who ends up with the tab?
The latest effort to restore confidence was at best a compromise. Bank stress tests that are too weak reassure no one. But stress tests that are failed by everyone are hardly reassuring! In this sense, last weeks tests were probably pitched about right. Only seven of 91 banks tested missed the cut and none of them was a big name. So far so good.
The truth is that the stress tests were just not very stressful and as a result do not tell us too much about how they all will cope if the wind really does start to blow
The result is an extension for now, but we still feel that this represents a denial and postponement not a solution. A double dip recession remains a distinct possibility.
We are therefore adding some sun cream to our earlier sticking plaster metaphor as there is a real danger that unwary investors could get burned. Factor 50 on standby!
Are you on the road to financial freedom, but doing it the hard way? What does the latest budget mean for your tax bill? Find out at our seminar tonight at The Gherkin.
What are the implications of today’s budget for high net worth individuals in the City? We are hosting a series of tax seminars to help you mitigate tax. The first one is next Wednesday 30th at The Gherkin.
Tension is rising in the interbank credit market and PIIGS bonds
LIBOR rates are now at new multi-month highs. Fearful of counter-party risk, European banks are refraining from lending to one another, hoarding cash with the ECB. Moreover, the PIIGS bonds are struggling. The Italian10-year bond yield, for example, have surged all the way back to the pre-bailout levels.A similar outlook is noted for the Spanish long-term bondyields.
The outcome of the General Election here in the UK was widely expected to have major ramifications for the UK markets. In reality, it was completely overshadowed, for the time being at least, by the widening sovereign debt problems in southern Europe. The Greek debt crisis has served to highlight a number of burning issues that just won’t go away.
The issues:
1. There is the question of “Moral Hazard”. If governments know that there will always be a bailout, where is the incentive to behave responsibly?
2. Will the indebted countries take their medicine? The so called PIGS (Portugal, Italy, Greece & Spain) need to tighten fiscal policy significantly; with interest-rate cuts and devaluation ruled out by euro membership, that implies wage cuts and massive unemployment.
3. Will Germany be able to pass the legislation to permit such bailouts? For how long will their responsible populace be prepared to write a blank cheque?
4. Are the bailouts affordable anyway? All the AAA-rated nations in Europe already have public debt-to-GDP ratios of 70%-80%. So we cannot be confident that countries will be able to raise the amount required.
Is it just a giant sticking plaster?
The most recent €750bn initiative by the EU and IMF to provide loans or guarantees to individual Eurozone governments is in reality just a ‘giant sticking plaster’ rather than a solution to the sovereign debt crisis. It may provide some comfort to the lenders that there is some guarantee from France and Germany behind their IOUs however bad debt just doesn’t disappear. Most of the PIGS cannot afford to service their debt let alone pay it back. Europe’s leaders have merely passed the debt along to a broader audience. Now, the ghost of Greek, Portuguese, and Spanish debt haunts the whole continent.
What all of this really serves to do is highlight the yawn engulfing competitiveness between northern and southern Europe and the problems and contradictions within the Eurozone that were easy to ignore during the boom times. Greece and the others have been “keeping up with the Jones’s” and the problem is that they have become used to the lifestyle.
These problems are being reflected throughout European stock markets and on the Euro, and we expect to see this continue through the summer.
What image should an IFA portray? What should a good website look like? What are blogs and tweets all about?
As a company, we spent a long time debating these issues and changing our minds along the way. Deciding what your brand is, and stands for, is the most important decision. We saw far too many companies with just their proprietor’s names or regal sounding names. We opted for Fish Financial - ”contemporary without (hopefully) being too frivolous”.
www.fishfin.co.uk Clearly a website is the no.1 marketing tool these days (apart from us as individuals) but I don’t believe for an IFA that a website will ever be a ‘sales fulfilment’ tool to capture new clients who trawl the net. An IFA business is built on trust. It is essential to have the site as a credibility reinforcer because the first thing every person in the universe now does, after an initial contact, is click through from an email or look up the site having received a business card.
Fresh is a good word (in an industry with a dull reputation) that should refer to the name, brand and website. We decided to take out all the generic and technical product/industry information (stuff that you can find anywhere on the net). We have built a site around client case studies and testimonials that we hope potential clients can relate to.
We have taken on board some good advice from www.abusinessinnovation.com and www.topleftdesign.com and embarked on the new world of blogging and tweeting and I believe that is an important conduit – we are novices in this field but I do feel these are important and do provide colour and personality for any of us. In to the brave new world…
No, not July 4th! But when is it? When do we reach our Financial Independence Day?
There are lots of variable factors that combine to mean that for each of us, this date will be different – but shouldn’t we all be planning for this day, and isn’t this what financial planning is all about?
Yes, we have to have confidence in the investment portfolios and strategies that we put together; without these, no financial plan can be realised. My point is that true financial planning starts much further back:
How much money do I need to do the things I want to do in life?
When will I have enough money to do the things I want to do in life?
What do I have to do differently now to achieve the lifestyle I want?
If we don’t know the answers to these fundamental questions, what use is it knowing that company A charges 0.2% a year less than B?
If you have not already done so, sit down and work out when your Financial Independence Day will arrive. Better still, sit down with a qualified financial adviser who will ask those three big questions with you and help you to find the answers. Then, and only then, can you make fully informed decisions on how and where to invest your money.
I have never quite got the hang of Rap Music. I have tried a number of times but, just when I think I am enjoying it, I realise that it is just the bit that has been sampled from an earlier track that I am enjoying and the rest of it is just an irritating noise!
Source: Flickr- Karin Elizabeth
For many IFA’s I get the feeling that “Wrap” is just the same. Just when they are getting to think that it has the answers, they realise that the bit they understand is the “product” or tax wrapper not the rest.
To clearly articulate how we actively manage our client portfolios, we’ve created the below investment presentation. The slides outline how our structured process helps our clients to meet their investment objectives.
Welcome to our new website and blog. We’ve been working hard to create a website that is user friendly and adequately represents the services we provide to our clients and professional partners. We decided we wanted to build a site that reflects the Fish Financial brand, is innovative and a little quirky – unlike most financial services websites – but still carries a serious and professional message. We’re really happy with the final result and we hope you like it as much as we do.
Our blog is designed to keep you up to date with our latest thinking on investments, pensions and lifestyle planning. Not only will we write about how you can grow and protect your wealth, but we’ll also share ideas on how to spend it.
The Fish Financial Blog sent to you
