Julian Knight: Will politicians be able to avert credit crunch part two?
The world's governments that bailed us out in part one now need bailing out themselves
Sunday 07 August 2011
Welcome to credit crunch part deux, well, maybe. Global markets are in freefall, Italy is a mess, the Germans are taking their time, and the US is divided between a president who, by the day, is turning into a sub-Jimmy Carter and complete headcases on the Republican side. Meanwhile, in the UK, our leadership is sunning itself on holiday. The world governments, the heroes of part one, thanks in part to Gordon, the dashing lead, are now the victims of part two. In part one the governments bailed out the banks, but who can bail out the governments in part two?
The answer is only that the strong must help the weak, and ridiculous political constructs such as the 17-member eurozone need to be radically overhauled. If this is the start of another Lehman-style crunch then the political plates are going to have to move incredibly swiftly, and I'm not sure the political class in Europe and the US is up to that. In effect, the current turmoil on the markets reflects their collective lack of faith in the people at the top of governments and institutions around the globe. In the same way that if a chief executive is seen as not up to the job then the share price in his or her firm will shatter.
However, in all this doom and gloom I can't help but look at the firms trading at very low levels of price to earnings, with major stocks of cash, and slimmed down after the recession – and think that here is a buying opportunity writ large. But only if the politicians and regulators show themselves up to the tasks at hand over the coming days and weeks. If they aren't, then those same company balance sheets will be laid waste by a collapse in confidence in the wider economy. Again, as in part one of the credit crunch, this is going to be a very close-run thing.
Let's have action, not words
If I see one more report telling us that we are heading for an impoverished old age I think I'm going to scream, or do something equally manic – like buy Italian government debt. Last week we had the National Association of Pension Funds report led by the former head of the Treasury Select Committee, Lord Mcfall, and the Department for Work and Pensions' latest figures on longevity, both of which told us ... yes, you guessed it. I really have had enough of every man and his dog telling me that we are in a collective mess, and I would far rather move on to the action phase.
The Government's plans for a higher, flat-rate, citizen's pension, twinned with the scrapping of means-tested benefits, is a sensible first step. The state pension is the base from which employers, pension providers and individuals have to build; get it right and the rest has a chance. But, increasingly, it seems there are concerns about the affordability of a citizen's pension in the Treasury, and, at a time of austerity, can we really be seen to be, in effect, boosting most people's basic state pension?
Of course it's the Treasury's job to question the need to spend, but I'd say this is clearly a case where we can't afford not to. If there was any worth to the reports of last week it is that really we have to act now – and decisively – over this issue.
New dawn for sunset industry
A "sunset industry" is a phrase coined by City types to describe an industry which is being expunged slowly by the march of technology and changes in wider society. In the 1950s you'd say Lancashire cotton was a sunset industry, in the 1980s coal would have matched the profile. Now, sunset industries, according to one fund manager I met last week, include terrestrial television and newspapers (we can't be that much of a sunset industry, though, as he still paid for lunch).
But another sunset industry – rather appropriately – is package travel firms. The collapse last week of Brighton-based Holidays 4 UK – at the height of the holiday season when cash should be flowing in by the bucket-and-spade load – highlights the acute decline of this industry. And meanwhile, Thomas Cook's chief resigned amid a collapse in profits.
Fortunately, Holidays 4 UK is Atol protected, which means holidaymakers will be flown home. But in previous collapses Atol protection has not been enough, because of a little-known loophole. Basically, people who have booked with a package company through a travel agent have found that because their agent has bought flight and hotel from different sources, rather than just one Atol-protected firm, they don't have the level of protection they hoped for. Last year, during the collapse of Goldtrail, for instance, many customers were shocked to find that their flight had fallen through but their hotel was paid for, or vice versa.
The Government would like to see Atol protection extended to these type of arrangements but we are still waiting for action. And the fact that the package-travel industry is a sunset industry makes this imperative.
Independent Partners: See how much you could save by switching credit cards. Compare now
Mountain goats miraculously survive avalanche in the Alps
Skyfall's Ben Whishaw confirmed for Freddie Mercury film
A cautionary tale for ambitious would-be authors
- 1 Gurdwaras-turned-food banks: Sikh temples are catering for rise in Britain’s hungry
- 2 TK Maxx and discount stores: If it looks too good to be true, it probably is
- 3 Teenage girl convicted of robbery after taking pre-crime selfie wielding knife
- 4 Government delays EU immigration report because it is too positive
- 5 'I'm experiencing austerity as well', says Princess Michael of Kent
- < Previous
- Next >
iJobs Money & Business
£75000 - £85000 per annum + attractive benefits: Pro-Recruitment Group: Senior...
£70000 - £80000 per annum + Commission Package: Harrington Starr: Due to winni...
£60000 per annum: Harrington Starr: Support Analyst (Back Office, CRM, Sharepo...
£65000 - £80000 per annum + Excellent Bonus, Package : Harrington Starr: Busin...
Day In a Page
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000