JohnR’s Finance Thoughts

The minutes from April’s monetary policy committee reveal that the Bank of England’s policy makers are in favour of maintaining rates at the all time record low of half a %.

The actual vote was documented as being six to three towards maintaining the present rates and keeping them for the time being. This will be the third month consecutively that the exact same 3 people have voted to increase rates of interest. The committee has nevertheless preserved that their particular take on inflation hadn’t transformed and that rates will stay the exact same. It’s unlikely that the Bank of England will raise that interest rate until august because of the danger that inflation could increase to or exceed 5%.

Two of the committee members, Mr Dale and Mr Weale voted for a raise of 25 basis points to 0.75% and Mr Sentance voted for a raise of 50 basis points to 1%. This comes following Februarys fall within the consumer cost index to 4% was combined having a rise to five.4% of the producerprice index. Mr Posen nevertheless, voted to improve the asset purchase programme by £50bn bringing the quantitative easing to a total of £250bn

A large fine of £1.4m has been issued to Norwich and Peterborough building society after The Financial Services Authority found that the building society had not given suitable advice to 3,200 customers, which were mainly pensioners, who were sold high risk investment products.

The former provider of these investments, Keydata, was closed down by the FSA in 2009 and administrators were appointed in June 2009 at the time 30,000 UK investors were facing a loss of £450m.

Keydata provided the high risk polices to the building society which the Fsa found to be inappropriate, the fine comes after the building society recently agreed to pay compensation to its customers who brought into the investments totalling £51m. The building society apologised and said they will repay their customers back “Capital plus interest.” In all the repayment will cost Norwich and Peterborough £57m which is more than ten times its 2010 pre-tax profits.

The FSA’s acting enforcement director Tracey McDermott has said:

“N&P failed in its basic duty to provide suitable advice to its customers, despite an internal compliance report pointing out that there were problems as early as 2007,”

“Firms cannot treat customers fairly unless they pay attention to their financial circumstances and attitude to risk when they make recommendations,”

Norwich and Peterborough building society is in talks about being taken over by the Yorkshire Building Society after this incident, Norwich and Peterborough’s chief executive Matthew Bullock stepped down in March.

The Serious Fraud Office is still investigating the management of Keydata.

Today the FTSE 100 rallied almost 300 points, with the BBC claiming that investors saw shares as oversold after two weeks of continued losses.

Personally I’m not convinced – in typically contradictory manner, the BBC had already reported that market analysts were seeing a “death cross” in play, where technical fundamentals point to a large adrop in share values.

In which case, don’t be surprised if much of today’s positive share movement came not from investors, but instead, short sellers, looking to take advantage of a potential ride down for the FTSE.

Last week one of the biggest financial stories was George Osbourne’s effective dismantling of the FSA and returning full supervisory powers to the Bank of England.

The problem being, of course,as has been widely pointed out, no regulator across the world appears to have really seen the financial crisis coming, instead living in hope that while they made hay while the sun shined, that the sun would keep shining. The regulators were all fooled by complex inventment instruments, and so were the rating agencies, the sellers, and the buyers together. Only a few lone voices saw any real danger and they were ignored until too late.

The danger is that the change in regulatory structure is not simply too little too late, but that it will also cause restrictions on economic growth. If the Bank of England can now start to restrict mortgage lending, and lending to business, the resulting lack of credit in the economy can only constrain growth, and come at precisely the wrong time.

This is probably even more a salient point as Mervyn King has suggested that interest rates may have to rise sooner, rather than later. In which case, it can only create yet another additional pressure on credit in the economy. While too much credit has been proven to be a bad thing, too little credit is demonstratively counter-productive as well.

In the meantime, how effective can the Bank of England be with main regulatory powers under it’s main control, if no one in the decision-making process notices the real dangers anyway? And how likely is the Bank of England going to address existing economic imbalances, not least in the UK property market and its still extant bubble, after allowing it to develop for so long?

The real problem for many people is not regulatory supervision either, as unfortunately consumer-orientated needs are still being driven by smaller, daresay ineffective agencies. For example, the FSA will now become just Consumer Direct, an organisation that for all intents and purposes is simply a conduit for complaints, rather than a body that can truly address them in the first place. And then there are the other consumer bodies, weak and little effective, such as the Office of Fair Trading which has continued to give the green light to unscrupulous lenders, while the Ministry of Justice continues to licence debt claims management companies which have taken money from consumers for years, and yet never delivered a return for them.

There is a serious problem with regulation and supervision of the financial services industry being disjointed. While dismantling the FSA may seem like an initially helpful move, evidence suggests the real reform is required at the point where consumers meet service providers, and as yet, this area still remains disjointed and exposes consumers to unnecessary exploitation.

It has been a while since I last posted due to the length of time required to set up the offices.

Finding suitable offices has proven to be a surprisingly difficult endeavour, with quite a number on the market, but few actually properly suitable because of their existing design, not least in older buildings.

However, it looks like we’re finally moving A1 Personal Loans into office space at Beechwood.

There are still a couple of issues to address first before we’re properly operational, though.

The first is that we still haven’t cleared a full list of representatives to send our leads through. We are still waiting for Central Trust to address some technical support queries to allow us to sort leads automatically for personal loans on our A1 loans website.

We’re also trying to get the business phone system sorted out so that we can automatically direct leads for different products to different phone lines automatically. There are plenty of phone systems available for office maintenance, but it requires bringing a number of third party providers together, not least BT and their inept support department.

However, it looks as though we’ll be setting up our broadband through a dedicated provider instead, and use a leased line internet connection to ensure we have plenty of spare capacity bandwidth. While it’s proving an expensive option, we need to ensure plenty of redundancy is built into the service due to much of it being sorted automatically either via the internet or the phone line, so it remains an essential trunk of the business.

Office furniture is not so much of a problem. Because of the financial crisis there is actually a lot of inventory available at present for second hand, and we’ve been able to pick up quite a bit of office equipment like this. However, all electronics are being bought new, not least the business computer system, as the last thing we’ll need is any of the main computers crashing and taking down our data or other essential operations.

Staffing is not a problem, either, as I’m bringing on board local contacts and freelance agents I’ve been working with for some time.

So all in all, it looks as though the office is almost ready. The pieces of the jigsaw are all in place, it’s just waiting now to bring them together.

It’s that time of year again – when the deadline for last year’s ISA’s allowance comes up and is gone forever.

To be part of this year’s allowance, the transaction will need to be completed by 6 April 2010.

However, due to the Easter Bank Holiday, savers and investors only have until Saturday 3 April to do this.

Therefore if you haven’t already put your ISA money away, you have only days to get the situation addressed.

According to CityWire, the following are the best ISA’s currently on the market:

Leeds Building Society ISA – five-year fixed rate paying 4.6%
Nationwide Building Society ISA – five year fixed paying 4.25%
Saga at 3.9%
Coventry Building Society – one-year fixed rate at 3.25%
Santander Flexible ISA – 3.2%
Barclays Golden ISA – 3.10%.
Cheltenham & Gloucester – two year fix at 3.5%
Post Office – one-year fixed-rate at 3%

Well, it looks as though I’m finally moving ISP from Zen back to BT broadband, as I just called Zen for a MAC code.

It’s a shame, really, as Zen has a far better reputation for service and support than BT, but the problem of wireless interference is a constant and annoying problem.

Plus BT are offering mobile broadband with their new broadband packages, and free BT openzone minutes, which will be very useful for business travel.

The caveat is that the pricing on the BT website is quite misleading, as those shown only apply to certain exchanges (apparently) plus they include 24-month pricing, which can take as much as 25%-30% off the 12-month price (so Option 3 is £45+VAT over 24 months, or £30+VAT over 12 months).

Still, at least I know from experience that the BT router supplied is far less susceptible to wireless intereference.

Which is very important, because if I couldn’t get decent business broadband, I’d have to consider more serious broadband connection packages, such as a leased line or custom business SDSL, both of which are priced higher than normal mass-market broadband packages.

In the meantime, I can only hope the move to BT goes smoothly, and that I don’t end up getting caught up in their cold automated support process – as BT customer service is not renown for being good.

The more I read about the impact of the financial crisis in the UK, the more it feels that the UK is doomed economically, and that the best option now while you have cash in Great British Sterling is to cash out and move aborad to somewhere more financially sound – ie, not threatened with collapse by the weight of its own debt.

That may seem somewhat alarmist, but despite the claims of “green shoots” earlier in the year, we have not seen any signs that the economy is returning to normal. In fact, anything but, and that at best we’re moving into a “lost decade” similar as to what happened to Japan.

Britain’s debt to GDP is spiralling out of control, and even measures to reduce costs being mooted by Labour and the Conservatives are plain in their limitations – we are in far too much of a hole to be able to dig us out even within the next Parliament. It’s going to take a full decade to even begin to expect to bring British debt to normality, and during this period, there is no reason to presume the economy will fare any better.

Repossessions continue to be high, insolvencies are expected to increase, and consumer debt is growing through credit cards and loans at a time when paying are supposedly paying off debt. Unemployment continues to increase in leaps and bounds (forget that’s its slowing – double dip, people), and rather than help employers hire, the government is actually going to tax companies more for employing people.

In the meantime, ratings agencies expect at least a further 15% fall in house prices in the UK, and at a time when the market is limping forward, the FSA wants to bring in tougher rules on mortgages, while at the same time demanding banks hoard more cash.

And that’s before we even get into the threats of deflation and unknown consequences of “Quantitive Easing”.

The result of all these pieces in play can hardly be good for Britain – worsening debt, worsening access to credit, worsening consumer spending, falling asset prices, etc. The strategies in play may be different to Japan in the 90′s, but the state of play is looking increasingly like it.

The problem, of course, is that while matters are exacerbated in the UK, these are afflictions across the world economy. So where is safe?

The answer is relative – the financial crisis is firmly rooted in the US and Europe, and while other areas have been impacted, their fundamantals have been far less knocked by comparison.

Asia remains strong and a bulwark so far against global financial collapse. While no doubt asset bubbles there are growing, they still don;t have the problem of being so invested in complex debt instruments that have so far crippled US and European banks.

In the meantime, now seems to be the moment to batten down the hatches or move on – economic power is clearly heading East, and to developing nations, and for those who remain, only the prophets of doom are left to comfort us.

I don’t normally write about technical issues. Though I can use computer technology, it all goes over my head and I don’t have a clue how it all works.

I’ve come across an interesting problem while setting up my home office, though – wireless interference.

I was originally with BT as my ISP for broadband, but after previous problems with the company I decided quality of service was more important than price, so I moved to Zen Internet.

They sold me a Thomson TG784 router with the package, and all seemed to be running fine.

Until I bought a nice cordless phone, a Panasonic KX for the home office.

Both work very well and as required most of the time, but the problem is that whenever anybody rings, the broadband cuts out.

The result is quite annoying, especially as I keep getting sales calls from loan companies using autodiallers – which disconnects the internet every time, even when I pick up the phone on the first ring.

I’ve contacted Zen about the problem, but they haven’t been much help at all. And I wouldn’t expect much from Panasonic as the phone does exactly what is expected from it.

I was beginning to think I needed a different business broadband service. After all, there is a myriad of types to choose from – ADSL, SDSL, bonded broadband and even leased lines. And don’t forget the satellite option!

Apparently, though, wireless interference is not all that uncommon.

The frustration is that if wireless interference is such a problem, then why is more effort not made by manufacturers to minimise the risk of it happening in

the first place?

This is especially when there appears to be quite a push to make much of home networking wireless.

It looks as though I will now have to look at changing my router to one that runs on a different frequency. which is obviously going to be cheaper than

having to get a new type of broadband installed.

It is still a pain, though. Still, I do not think I am the only one who has never got frustrated over a computer issue!