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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In the UK is financial advice useful?

I read a recent article by Chris Dillow in Investors Chronicle, which looked at the merits of financial advice. It could be counter-productive according to some studies. However, when financial advice comes into its own is when it assesses the risk profile of clients. Dillow also says, perhaps tongue-in-cheek, that rather worry about financial planning, people should really look at if they want a bigger house or car.
In the Money Marketing publication Adviser Business the managing director of Worldwide Financial Planning, Peter McGahan, says that in terms of investment business the firm is attracting business from clients, who are basically unhappy with banks.
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Clients will be bruised by the disappearance of bank stocks.

British independent financial advisers (IFAs) will meet plenty of clients, who will have been bruised by the virtual disappearance of UK bank stocks. For instance, the roll call covers Northern Rock, Bradford & Bingley, Alliance and Leicester and Halifax while the share prices of Royal Bank of Scotland, Lloyds and Barclays have taken a right battering. In retrospect, Alliance and Leicester did well to be taken out by Spanish bank Banco Santander, which is treated virtually as a UK bank by the British government.
So what can IFAs recommend to clients to make up the income gap because the UK banks were briliant dividend players? There are articles in the financial press extolling corporate bond funds while IFA David Kauders has always recommended to clients that first they should be debt-free and then they can invest in UK and US government bonds. So in the overwhelming amount of cases clients should be advised to get started on reducing their mortgages.
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I remember years ago reading conservative advice from Foreign and Colonial Investment Trust that investors should have a financial cushion of a year's money before investing in their company. It sounds like genteel advice from a bygone era but one we are probably returning to.

Mark Dampier abandons political neutrality.

The research chief of Hargreaves Lansdown, Mark Dampier, has abandoned political
neutrality in an article for moneymarketing.co.uk. He says that it was always better to stick to political neutrality but has to own up to the belief that the government has "systematically wrecked our economy over the last ten years". The charge sheet includes the introduction of taxes on pensions and the weakened regulation of the banks. Dampier says the public sector has to be cut back.
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I suppose the Gordon Brown economic miracle has been put to bed. We don't get any
slogans about "boom and bust".

UK bank stocks do not look too good.

You don't get the sense that the British government is not working too hard to avoid the complete nationalisation of some UK banks. There has been talk of a "bad bank" to take on the toxic assets housed by these institutions but at around forty pence the private shareholders of Royal Bank of Scotland (RBS) look like they are flying the white flag. The share price would be healthier if it could unload a few assets into the bad bank and if it could do it now.
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So if the British government took full control of RBS the next day there would be calls for the sale of the U.S banking interests due to local fears of unfair competition. It would be impossible to get a good price for these American assets, which cost an absolute fortune to build up, because it would be a forced sale.
The current management of RBS might feel it is a good idea to sell off the international interests but retreating to a tough UK banking market dominated by the behemoth Lloyds does not sound a good idea. RBS has just sold a small stake in a Chinese bank but the original purchase must have been based on some kind of game plan, which was not completely wrong.
I suppose a UK taxpayer rescue and foreign assets do not compute.

Where are the British banks going?

There has been chatter in the UK about the creation of a "toxic bank" to house the ghastly assets not wanted by the British banks. One potential result would be to see the Royal Bank of Scotland (RBS) halve in size. It would be in the strange position of having no assets left from its ABN Amro acquisition but would still be paying for it.
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I suppose British premier Gordon Brown looks at the electoral calendar and has decided he has not got enough time for the banks to gouge out the profits from UK consumers and corporates while it slowly writes off the problematic items on its balance sheet. The prime minister wants the British banks to lend again but they have instituted very conservative lending standards in the residential property sector and they don't seem to have any desire to lower them.
The UK economy is very dependent on the housing sector. House prices have fallen badly but there has not been any sign of real capitulation selling. For instance, the buy-to-let sector has held up well given the implosion of the main lender
Bradford and Bingley. If vendors start accepting the offers being actually made then
it will at least get the transaction numbers moving.
Hopefully, the toxic bank will not have to take lots of mortgage loans but unfortunately it will be full of acronym rubbish such as SIVs, CDOs as well as a load of corporate loans.

I am thinking about investing in premium bonds.

One of the main problems about investing in UK premium bonds is that punters don't often win. This makes them a poor hedge against inflation. Now, the odds over winning a prize have sharply got worse over the year. However, if there is deflation then premium bonds won't suffer as much from inflation as in the past. Over the last few years I have spent money on them and overall premium bonds have been disappointing performers. However, they could be a short-term punt over
2009 and with the government guarantee of getting your money back, that is a pretty powerful incentive in these times of troubled banks. Don't expect to win.
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In actual fact I don't expect real deflation in terms of actual falling prices. Inflation indices are artificial constructs and the ones we have don't measure city or regional differences. For instance, if petrol prices go down, they are still expensive (mainly comprising taxes in Great Britain). Fares are going up above inflation and council taxes will also increase over inflation.
If the retail price index did go down, would the modest state pension be modified downwards as well? Of course not but there could be pay cuts in the private sector as
exemplified by JCB.