Probably not. First off, new Asian buyers and a “whole pile of Johnny-come-lately types” are fuelling current demand. A six-litre bottle of Château Pétrus 1982 recently sold for a record £60,000 at auction in Hong Kong, a city where wine imports rose by more than 40% in the first eight months of the year.

Meanwhile, in Christie’s spring 2009 global sales, Asian and Chinese buyers accounted for 61% of the total sale value, compared to 7% in 2005. “With demand coming almost entirely from Asian buyers, and with that demand so heavily biased towards one particular producer, it would be wrong to start heralding the return of a bull market”, say the people over at the Vintage wine fund.

Asia is beginning to resemble Japan in the late 1980s, when cash-flush companies and property developers splurged on trophy works by artists such as Van Gogh.

But there’s another reason why wine just isn’t such a great investment.

Read the rest of the story on MoneyWeek.com.

Now Vincent, 36, has just put a geothermal heat pump under his Sussex home, while Dimbleby, 37, is starting a snail farm “with limited success” from his garden in Hackney, London. “You have to clean them and put them in a net with lettuce for a month, which is difficult when someone’s just thrown some crack over your wall.”

Healthy living hasn’t always been a priority for the pair. As busy City executives, a typical lunch involved going to a vending machine and finding “the least horrible thing to eat”, says Dimbleby, whose father is broadcaster David Dimbleby. Vincent would regularly dine on bizarre pre-packaged creations, such as a “scotch-egg-type thing with sausage meat, hollowed out and stuffed with coleslaw”. It’s a diet that will have you falling asleep at your desk, he says – not to mention a recipe for a bad sex life.

But they have one thing to thank their bad lunches for: it’s where they got the idea that fast food doesn’t have to be bad food. For six months in 2003, the two began devising a menu with chef Allegra McEvedy. They had a vision of a fast-food joint where hot, healthy meals would slide down the chutes – such as Moroccan meatballs, rather than cheese­burgers.

Having worked with White & McKay owner Vivien Imerman, Vincent convinced Imerman and his brother-in-law, property magnate Robert Tchenguiz, to invest £650,000. We gave away half the equity, says Vincent – “not very good”. But it’s understandable, says Dimbleby: “we were two guys who’d never run a restaurant looking for money”.

Scouting for locations, “it was very tempting to go for a property that was ‘off pitch’ (ie, cheaper to rent). But you actually have to get a property that is right in the thick of the competition,” says Vincent. “The only way to test this model is to be next to Starbucks, Pret a Manger and McDonald’s.”

So the first Leon was opened on London’s Carnaby Street in July 2004. But early sales figures came in at just £8,000 a week – £6,000 short of breaking even. So “we got a pen and ran a line through the menu. There was just too much there” – it was confusing customers, says Dimbleby.

The cutbacks worked. Within a year, sales had picked up to £18,000 a week, and they opened a second outlet in Ludgate circus. Soon after, Leon hit the £1m annual turnover mark. Today, it has eight outlets, turning over sales of £8m and in September the pair are opening a branch in Bristol, their first outside London. This is “the first milestone” in delivering 30-35 outlets by 2010.

In an era where people are browbeaten about their lifestyles on every side, the Leon founders prefer to let their actions do the talking. “We’ve never preached,” says Vincent. “You know, you either tell people you’re funny, or you make them laugh. We want to act in a way that represents the good life, not tell them about it.”

Source: The McDonald’s Route to the Good Life

After the various eurozone finance ministers gather for the traditional ‘family photo shoot’, “there will be some speeches, the cutting of a 10th birthday cake and then a closing concert”, says Raphael Anspach, a spokesperson for the ECB, rather enthusiastically. Sounds fun.

But before the string section pipes up, we recommend that the organisers have a think about sticking a cork in the trombones.  The second ten years are going to be a lot less triumphant than the first ten…

When the euro fell to 90 cents to the US dollar in the early 2000s, it was derided as a ‘toilet currency’ by nationalistic curmudgeons and currency traders alike. One single currency, it was thought, couldn’t possibly represent a jumble of nations on different economic cycles, not to mention a cacophony of countries with wildly divergent industrial bases and monetary needs.

The hidden weaknesses of the euro countries

How things have changed. The euro is up 60% against the US dollar since George Bush first came to power, as both Gulf states and Asian countries have begun ditching the greenback for safer stores of value. And the euro’s share of global foreign currency reserves rose from 18% back in 1999 to more than 25% by 2007. But that doesn’t necessarily mean that the fundamental position of the euro is any better than it was eight years ago. Investors may have fled the US dollar, and watched the eurozone grow relatively fast against its lagging American counterpart, but they’ve ignored the hidden weaknesses on this side of the Atlantic.

This year’s first-quarter GDP growth across the eurozone flipped up a good 0.7%, but that figure was skewed upwards by the rollicking performance of the German economy. German GDP growth climbed 1.5% on the back of a roaring manufacturing base oiled by booming exports. In contrast, Italy only managed expansion of 0.4% and Spain 0.3%, while in Portugal, growth actually fell by 0.2%.

Meanwhile, inflation is on the rise, led by a good 4.6% in Spain and 5% in Ireland. Both are well outside the ECB’s 2% target. The spectre of stagflation – a stagnant economy plus rising inflation – is rearing its ugly head. Indeed, “stagflation is a situation that we experienced some years ago, it could return,” said Spain’s Economy Minister Pedro Solbes earlier this month.

Why a strong euro is disastrous for Ireland

And that’s not the only problem. A strong euro might be good news for Germany, given the strength of its economy, but for Ireland, whose main export destinations are the UK and the US, it’s disastrous. Ireland has begun to lose its competitive advantage against other destinations for multinational companies, says Professor Rodney Thom, head of the School of Economics at University College Dublin, as it becomes more expensive to export pricey euro-denominated goods and services abroad.

“I never saw any advantages to us joining the euro”, says Professor Thom. “The last thing we needed was low interest rates when the economy was overheating”, and now that the currency has risen against sterling and the US dollar, “we’re losing our competitive edge. Ireland is on a limb”, he says, because it has given up one of the most significant economic levers open to any country – the ability to set its own interest rates.

In the 1990’s, when sterling depreciated 5% against the deutschmark, “the Irish central bank did something very clever”, he says. It let the Irish punt depreciate half way between the two currencies “to keep a balance. Now we can’t do that. The euro has given us a headache that we didn’t need.”

So there are plenty of things for Europe’s finance ministers to think about when they’re quaffing their champagne and gobbling their cake this Monday.

Source: It’s the ECB Birthday Party, but not Everyone gets Cake 

Banks all over the world have spent much of the few years bingeing on cheap money, but Iceland’s taken the whole thing to quite an extreme. Its big players – the likes of Landsbanki and Kaupthing – have been on an extraordinary borrowing spree, sucking in vast quantities of cash to fund lending and acquisitions across Europe and the UK. The result? This tiny country – home to a mere 300,000 people – has somehow created a financial system nine times the size of its GDP.

And a nasty hangover.

Iceland’s economy is in a lot of trouble

Now the cheap credit that fueled the binge has all but disappeared the banks – and the economy – are in trouble. The stock market has tanked, inflation has soared and the Icelandic Krona has fallen 26% against the euro this year. House prices, which had doubled since 2001, are now falling.

According to the Icelandic Central Bank, the economy will contract by 2.5% next year and 1.5% in 2010. “We are still likely to see a fairly sharp slowdown in the Icelandic economy in the coming quarters and the most likely scenario is for negative GDP growth in Iceland in 2008 and 2009”, says Lars Christensen, chief analyst at Danske Bank.

Lucky then that the alka seltzer is on its way.

On Friday, the Nordic central banks extended an emergency loan facility worth €1.5 billion to their island neighbour designed to shore up the krona, give the central bank some credibility as the lender of the last resort to the banks (which have been under huge speculative pressure from many of the world’s big hedge funds) and begin getting the economy out of its sorry mess. “In times of uncertainty and turmoil the central banks have a responsibility to cooperate to attain their overall objectives,” said Swedish Riksbank governor Stefan Ingves. “The swap agreement is aimed at supporting (Iceland) in its task of safeguarding macroeconomic and financial stability.”

Could this spell EU membership for Icelanders?

It’s certainly served to calm nerves – the krona rallied sharply on Friday – but the whole business has also raised a pretty uncomfortable question for the Icelanders. Can they really go it alone in the global market place or should they begin to think the unthinkable and join the euro?

With fishing accounting for over 40% of exports, Iceland has long had reason to very firmly oppose membership of the EU, and by extension the euro in the past. Just ask any fisherman up and down the west coast of Ireland what he thinks of the EU, and the opening of Irish waters to big Spanish tankers. Magnify his fury by 10, and you’ll get a good idea of what Icelanders, a traditionally independent lot, think of the EU.

But with the economy destabilising and the currency all over the place, support is now growing for the idea. A poll published in April by the Icelandic daily Fréttabladid showed that 68% of Icelanders would be willing to open membership negotiations with the EU, against 55% in February. Membership of the EU would mean that the Icelandic central banks would lose the power to set interest rates. But that may well be a perfectly fair price to pay for a more stable currency. “There is growing evidence that the Krona is a source of shocks, rather than a shock absorber” says one professor of economics at Reykjavik University. “The krona is increasing the volatility of the economy.” This is in part because the majority of durable goods, for example cars and washing machines, are imported into Iceland.

So given that the currency has been taking a kicking, Icelanders are now paying much more for the much needed goods they import. Inflation rose to an annualised rate of 11.8% in April, the highest level since September 1990. And over the past three months, consumer prices have risen 6.4%. That’s equivalent to an annual inflation rate of 28%.

Joining the Euro would mean offering up a decent chunk of sovereignty at the the EU’s altar. But then, given that interest rates in Iceland are running at 15.5% and that in the Eurozone they remain at 4%, it might also offer the suffering Icelanders the hair of the dog they really need right now.

Turning to the wider markets…

On the continent, the German Dax Index increased 69.39 points or 1% to 7225.94. In Paris, the CAC-40 Index closed 64.06 points, or 1.26%, higher at 5142.1.

Wall Street’s Dow Jones Industrial Average was up 1% yesterday to 13,027, as investors wagered that the US economy would avid falling into recession.

Shares of energy companies, including Exxon Mobil, were given a boost by near record high prices for crude oil. The broader S&P 500 Index gained 1.16points to end at 1,426, while the Nasday was down 12.76 points, or 0.5%, at 2,516.

Japan’s benchmark Nikkei closed 0.3% lower overnight, to finish the day at 14,224. In Hong Kong, The Hang Seng Index went up 123.37 points to 25742.23.33.

In London, Brent crude contract for June rose 58 cents to $125.57 while Spot gold hit a high of $913.35 an ounce, its highest since April 23.

Meanwhile on the Forex markets, sterling fell 0.4% to $1.9477 against the dollar and eased 0.1$ to £0.7964 against the euro.

Source: Why Iceland Is Suffering a Nasty Financial Hangover

Tech Stocks Weigh on Wall Street

In London, the FTSE 100 added 57 points to end the day at 5,717, just below an intraday high of 5,735. Persimmon was by far the day’s biggest gainer, adding over 7% as the housebuilding sector rallied. For a full market report, see: London market close (http://www.moneyweek.com/file/44391/london-close-footsie-gets-second-wind.html)

Across the Atlantic, the Paris CAC-40 added 42 points to end the day at 4,719. And in Frankfurt, the DAX-30 closed 88 points higher, at 6,578.

On Wall Street, stocks fell for a second consecutive day as the technology sector weighed following disappointing results from Oracle and Google. The Dow Jones fell 120 points to end the day at 12,302. The broader S&P 500 was down 15 points, at 1,325. And the tech-heavy Nasdaq slumped 43 points to close at 2,280.

In Asia, stocks rose today led by property and commodity plays. The Japanese Nikkei was 215 points higher, at 12,820. And in Hong Kong, the Hang Seng was 621 points higher, at 23,285.

Pound tumbles on bearish housing data

Crude oil had fallen back to $106.60 this morning and Brent spot was down by over a dollar, at $104.28.

Spot gold tracked oil lower this morning, falling to $942.60 from $951.80 in New York late last night. Platinum, meanwhile, jumped to $2,030 on speculative buying. And silver had fallen to $18.25.

Turning to forex, the pound was broadly lower this morning as weak consumer and housing data (see below) pointed to an economic slowdown. Sterling fell to 1.9953 against the dollar and hit an all-time low against the euro before edging up to 1.2663. The dollar was last trading at 0.6345 against the euro and 100.26 against the Japanese yen.

And in London this morning, Nationwide announced that UK house prices suffered their fifth month-on-month fall in a row in February, and their slowest year-on-year growth in over a decade. The price of the average home had risen 1.1% to £179,110 from February 2007. Nationwide chief economist Fionnuala Earley pointed to a ‘clear change in sentiment’ as to expectations of future price increases.

In ones and twos, the Massai arrive at the company’s Arusha office on flash new mopeds, their tartan ponchos slung over their shoulders. They have the latest cell phones glued to their ears. One for business, another for the wife, and as Tanzanite One’s then chief executive Ian Harbottle, explained to me when I visited the site, “another for the mistress.”

Inside though, the 50 or so locals had other things on their mind, as they awaited their turn to show off the blue tanzanite gems they’d found on their own digs. When ready, they’d watch the jeweller meticulously cast his loupe over their tanzanite, before weighing them for quality. After a wait of an hour or so, they could walk out with as much as $2,000-$3,000. Not bad for two or three weeks’ work.

Tanzanite has been good to Arusha. And Arusha, nestled under the icy glaze of Mount Kilimanjaro, has returned the favour for Tanzanite One, which earlier this month, reported a doubling in profits for 2007.

But it’s not just gemstone production that’s booming in Africa…

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Tanzanite One has proved itself adept at mining one of them. The world’s largest producer of the blue-hued gemstone, it saw full year profits more than double in 2007. Net income rose 267% to $6.6m, or 8.58 cents a share, from $1.8m, or 2.3 cents a year earlier, on the back of a 38% rise in production. Demand for the rare blue gem has also increased, partly down to Tanzanite One’s canny positioning of the gem as a ‘birthstone’. A man is meant to give it to his wife on the birth of their first baby, a marketing tool which echoes De Beers’ successful campaign to associate diamonds with getting engaged.

Prices for gemstones are doing well, says Scott Finlay, an analyst with London-based Canaccord Adams “and historically, have appreciated when the US dollar has weakened. So getting into gemstone producers right now is a good strategy,” he says citing Tanzanite One and Gemfields, an emerald miner, as two examples.

We certainly like Tanzanite One, and have done for a while. But bounty lies elsewhere in Africa too, and the City here in London is wide awake to the possibilities it’s thrown up. Last year saw the launch by Fidelity of the Emerging Europe, Middle East and Africa fund, which invests in South Africa, Morocco and Egypt, followed not long after by the New Star Heart of Africa Fund. Cru Investent Management recently launched their own Africa fund. And the timing is no coincidence.

Frontier markets could prove resilient

Frontier markets, the sort of economies that hitherto would have scared off all but the boldest or most reckless investors, could prove to be quite resilient to a US recession. That’s down to the low correlation they have historically shown with developed markets.

Over the past seven years, frontier markets such as Kenya’s and Tanzania’s have had a low correlation with that of the MSCI World index, which represents equities in developed economies. It stood at 0.4, against 0.8 for emerging markets (a correlation of one would mean the two markets move in lockstep).

So as the Dow Jones and US dollar continue to tick down, it might not be a bad idea to start buying some tanzanite, or Tanzanite One at least. And Africa, for that matter.

Do bear in mind however, that frontier markets aren’t called frontier for nothing – only invest money that you can afford to lose, or at least see subjected to fairly volatile movements. If you’re looking for a fund, all require sizeable initial investments, but New Star’s Heart of Africa fund, can be bought through a fund supermarket such as Hargreaves Lansdown, which enables you to invest less than the minimum investment of £12,500 which applies if you go direct to the fund manager.

The U.S. is in recession. There’s simply no pretending otherwise – unless of course you are the chairman of the Fed, or one of the many fund managers with your future mortgaged to the US stock market.

So what makes it so obvious? The employment numbers. The U.S. lost 63,000 jobs last month, the biggest drop since the start of the Iraq war over five years ago, and the latest in an increasingly gloomy trend. The private sector has now shed an average of 47,000 jobs every month over the past three, with no pick up in sight.

“The 63,000 decline in US non-farm payrolls in February is the clearest and most reliable indication yet that the economy is now in recession”, said Paul Ashworth of Capital Economics. And if you thought that was bad, the decline of 101,000 in private sector payrolls last month, compared to a modest 26,000 drop in January “screams recession”.

The debate, says Ashworth, is “essentially over”…

No jobs, no salaries, no mortgages

So what next? Nothing good. People are losing jobs. And when they have no salary going into their bank accounts every month they can’t pay for anything, including their mortgages. So rising unemployment suggests more pain for the mortgage markets and by extension for all the banks. Expect the banks to keep getting kicked about in the markets.

All this is making us – and finally everyone else – nervous. On Friday, it was the turn of Larry Summers, the former US Treasury secretary to up the stakes. Not only is the economy “currently in recession”, he said but probably seeing the “most serious combination of macroeconomic and financial stresses that the US has faced in a generation.”

With cheerleaders like this it should be no surprise that the yield on 3-month US treasury bills has collapsed to just 1.3%. That’s the lowest since august 2004, and suggests a rock bottom level of confidence in the economy (low yields reflect an assumption of falling interest rates). Meanwhile, banks are getting increasingly cautious about who they lend money to and when they do lend they are charging more for it than they have in some time: sterling three-month libor, the rate at which banks lend to one another, is rising. On Monday, it stood at around 5.78%, up from 5.4% in January.

How long will all this last? Ethan Harris, Chief Economist at Lehman Brothers, has a rather gloomy forecast. He predicts growth rates of -0.5% and -1% for the first and second quarters of 2008. The classic definition of a recession is two concurrent quarters of negative growth. “The economy is likely to experience an extended period of very weak growth, a rising unemployment rate and significant further Fed rate cuts,” he added. “This is a bigger, but more gradual, shock to the economy than either the 1990 or 2001 recession.”

So with the economy dominating the news, we can now be clear on two things that not too long ago seemed rather impossible…

Two impossible things…

The first, is that as the faltering economy kicks Iraq off the front pages, Hillary Clinton is a shoo-in as the next U.S. president.

Blue collar voters along the depressed economic rust belt, the United State’s manufacturing heartland running from New York and Pennsylvania to Ohio, have suffered more than any other workers in the U.S.. Their labour intensive jobs have been outsourced overseas, and they blame free trade and the wicked agreements that accompany it, namely NAFTA, for their woes. Clinton has pushed for a complete renegotiation of the treaty. Barack Obama has been sketchy on his own plans. And because they’re swing states (both Ohio and West Virginia went to Bush back in 2004) they should tip Clinton’s way as unemployed and nervous workers back her ahead of Obama, a war hero with little economic experience.

The second thing is that the decoupling theory has been completely debunked. As the US slows, so slows the world. Chinese exports of steel products fell a massive 29% year on year in February. Why? Because much of the steel once headed to the U.S. housing sector – which has collapsed. Exports to the U.S. dropped from $19.2bn in January to £15.5 billion, as plumbers and plasterers all over the country laid down their tools. Chinese jobs are already going too. Expect them to keep doing so as the US consumer stops spending, and exports to the U.S., which currently stand at 21% of total exports, start dropping.

Investors – and central bankers – should prepare for things to get a lot worse.

Turning to the wider markets…

Bovis weighs on housebuilding sector

In London, weaker metals prices weighed on mining stocks yesterday whilst housebuilders fell in sympathy with Bovis Homes, which warned that volumes would fall steeply this year unless the Bank of England cut interest rates. The FTSE 100 ended the day 70 points lower, at 5,629, and the broader indices were also lower. For a full market report, see: London market close

Elsewhere in Europe, the Paris CAC-40 lost 51 points to end the day at 4,566. And in Frankfurt, the DAX-30 closed 65 points lower, at 6,448.

Across the Atlantic, the Dow Jones fell 153 points to end the day at 11,740. The tech-rich Nasdaq closed 31 points lower, at 2,181. And the broader S&P 500 fell 16 points to end the day at 1,267.

In Asia, stocks rallied near the end of the session as bargain-hunters stepped in. The Japanese Nikkei gained 126 points to end the day at 12,658. And the Hang Seng had risen 290 points to 22,995 in Hong Kong.

Oil tops $108 a barrel

Crude oil futures were trading below yesterday’s record high of $108.21 this morning, at $107.75. And in London, Brent spot was at $104.64.

Spot gold had fallen to $973.70 from $974.10 and silver had risen to $19.83 this morning. Meanwhile, platinum rallied 4% to $2,060 from $1,926 – its lowest level in four weeks – as speculators stepped in.

Turning to the currency markets, sterling had fallen back from a three-month high of 2.0220 against the dollar and was last trading at 2.0139, as the latest RICS data (see below) increased expectations of rate cuts. Sterling was also trading at 1.3064 against the euro. And the dollar was at 0.6484 against the euro and 102.04 against the Japanese yen.

RICS: housing slump worst since 1990

And in London this morning, the Royal Institution of Chartered Surveyors’ latest survey revealed that the UK housing market has slumped to levels not seen since just before the last recession which began in 1990. The number of estate agents and surveyors reporting falling prices exceeded those reporting gains by 64.1%, the biggest difference since June 1990.