UK quantative easing is coming our way!!

The United Kingdom government is going to carry out quantative easing to get out of the economic predicament we are in. Gold reached $820 an ounce in August and now it
stands at $1,000. British premier Gordon Brown insisted that we sold at $250 an ounce. I wonder if the two issues are linked? Sterling is not supported by masses of currency reserves unlike the China or Taiwan. Although these countries must be wondering how long will they buy U.S Treasury bonds.
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So we are probably in a bit of sticky situation. British savers have been abandoned (hopefully this will change) and they should keep to mainstream institutions. There was a rush to the Post Office agent Bank of Ireland and now there is a rush back. I suppose everyone needs some certainty.
The shenanigans at Anglo Irish Bank don't look good. I think the Irish would like to have some quantative easing but the good bankers at the Frankfurt-based ECB have proved several steps behind in this current economic crisis. Perhaps, the Bank of England held interest rates too high but have certainly gone for it in a big way. Say the UK central bank buys a few corporate bonds and some gilts, it probably would provide limited help to the housing market, which needs private individuals buying residential properties from other private individuals. To help these transactions Sir James Crosby proposed a reasonable plan involving mortgage securities. This plan has been studiously ignored by the Gordon Brown administration.

Should IFAs recommend buying baked beans and other provisions?

I wonder whether independent financial advisers (IFAs) should be recommending to their clients the purchase of baked beans and other provisions? In his article in the Sunday Times, William Kay makes some solid financial recommendations such as beware of gilts because historically the British government has managed to get out of its obligations. Kay says we should store extra food because of possible shortages. If these took place, they would happen very quickly. We should also have some gold stored in a safe place.
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I have been trying to persuade members of my family of the need to stockpile certain items. This is maybe not to cope with a crisis but with perhaps more mundane issues. Recently my parents were hit by a wave of power strikes.
Last autumn we were close to financial disaster with the possible closure of Royal Bank of Scotland (RBS) and Halifax (HBOS). If ATMs temporarily closed, would people have enough cash to survive for a couple of weeks? What potential problems are we looking at? I think the favourites are the Middle East and North Korea.

I might have to see an independent financial adviser.

I try (and probably fail) to write a blog aimed at independent financial advisers (IFAs) and obviously I am not one. I like reading the publication MoneyMarketing, which I think is excellent. So quite a few blogs relate to articles from the publication. I really like Brian Tora and Mark Dampier. Then, today I suddenly realised that I am going to have to see an IFA to get some investment ideas. For instance, what do you invest in at the moment? UK equities, even with dividends reinvested, have posted a loss over the past decade. This coincides with Gordon Brown's stewardship of the economy.
Do I invest in yet another pension? Would a modest investment bar me from means-tested benefits when I retire in 15 years time? Will pensioners get any benefits then?
If a company like Rio Tinto can see its share price fall from £70 to just under £20 and get imbroiled in a mighty row over Chinese investment (worrying the Australian government), then it looks like individual equities are out.
Investment funds are supposed to be safer with their diversification but suffer from their poor investment choices and high costs. For instance, UK investment funds were
unable to avoid the disintegration of the British banking sector.
What about buy-to-let, which seemed to answer pension needs at the time? If the UK residential property market is going to tank further in 2009, why buy a loss? Distressed buy-to-let investors would see me as a gullible buyer and would probably not lower the price. However, a real asset might be a long-term winner especially with the pound collapsing.
If I see an IFA, I will let you know how I got on.
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Standard Life coughs up £100m over pension sterling fund.

The venerable Scottish insurer Standard Life is going to cough up £100m following the tanking of its pension sterling fund. This was not the performance desired by independent financial advisers (IFAs), who pointed to the mention of "cash" in some brochures. Hargreaves Lansdown said simply that it wanted the money back for its clients.

It reminds me when a Fidelity Income fund was found to have invested in nil yielding tech stocks. There was a bit of a furore. The current investment conditions have really hit investment trusts and unit trusts. UK funds have been especially hit by the implosion of the British banking sector. Star fund managers have seen their reputations tarnished. The industry is trying to push corporate bond funds for investors looking for income. They represent quite a bet on future default levels to get the attractive yield.
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Good corporate bonds paying 7 pct to 9 pct might be retired by companies, if they can refinance for less. Bond managers will be having another look at the issue documentation for the paper.

FSA boss Turner fails to read from government script.

The Daily Telegraph has cited comments by Lord Turner, chairman of the Financial Services Authority (FSA), which warn of possible stagflation. This could happen if the decline of sterling continued. I thought the drop in the pound was to help a renaissance in the economy. However, this happens rarely and food import prices should be shooting up soon. Discussing possible stagflation is definitely not in the government script. It would be a way of inflating away our debts but I think the pensioners in Spain would come back to Blighty to exact some terrible revenge on Gordon Brown et al.
Liam Halligan, former Channel Four economist correspondent, has been warning in the Sunday Telegraph, that we are not going to suffer deflation but increased inflation. He is pretty critical of the British government's policies to put it
mildly.
Back to the FSA, it does not seem to be resolving the spat between Standard Life and independent financial advisers (IFAs) over whether its pension sterling fund is a cash fund or not. Hargreaves Lansdown has asked the Scottish institution on behalf of its clients for the money to be returned. The pension sterling fund has taken a hit investing in mortgage-backed securities rather than cash as illustrated in some brochures.
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I hope I have not been giving investment advice!!

I have been reading that the Financial Services Authority (FSA) has been maintaining a dignified silence that it was warned by Singer and Friedlander that its Icelandic buyers were not fit and proper. The FSA seems content to go after the small
fry.
Talking about small fry, I hope I have not been giving investment advice, since the FSA would come down hard on a poor blogger but lets the big fish go free. With the banking meltdown, something has gone very badly wrong at the FSA.
Talking about Iceland, bankruptcy does not look a pretty sight. I know they parked the foreign debts out of sight and out of mind but inflation and unemployment have been shooting up. I suppose the Borough of Barnet still wants its money back. Maybe Barnet could convert its debts into future
cod catches.
Although HM Government deigned not to rescue the local authorities with Icelandic deposits it probably had no choice but to repay depositors of Icebank to protect the integrity of the British banking system. The Labour administration could have done more to minimise the collapse of the Icelandic invaders by clipping their heels. I suppose hindsight is a great thing and probably it is the "mania of crowds" thing. If we allow Royal Bank of Scotland (RBS) to hit the rocks, then we were not going to be clued up in terms of preventing councils depositing council tax revenues in Iceland. Under the FSA rules I suppose the councils were considered professional investors, big and nasty enough to look after themselves. I suppose nobody is going to walk the plank about this mess.
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