Before we dive in, let’s have a quick refresher.

The Rock owes the Bank of England rather a lot of money (£27 billion). They’ve also got the European Commission on their back. It’s bad form, in a private market such as banking, to have one player who’s backed by a government. It’s just not cricket.

All of which goes to explain the following extract from the Rock’s website:

As you may be aware, one of our primary business objectives is to repay the Bank of England loan, as quickly as possible. We aim to achieve this over the next three to four years, through the creation of a smaller, more focused, financially viable mortgage and savings bank, which will ultimately be returned to the private sector.

Today we see another mini milestone on the road to the Rock becoming “a smaller, more focused” operation.

A lot of Rock mortgage customers are coming to the end of fixed rate deals. Ordinarily, lenders are keen to retain business, and it’s often easier for borrowers to remortgage with the same bank. But, of course, the Rock is in the process of creating “a smaller, more focused, financially viable mortgage and savings bank”.

So a metaphorical gangplank has been erected between the Rock and the good ship Lloyds TSB. Rock customers coming off fixed deals will be able to switch to Lloyds. If they don’t like that, they can try and find a deal they like in the wider market. Or they can stay with the Rock, but at much higher rates.

Our research director Theo Casey explains the deal with the aid of a handy six-point plan:

1. Northern Rock customers will receive Lloyds’ pamphlets and brochures on various mortgage deals.
2. Customer chooses the one they like and calls the Rock.
3. The Rock tells customer how much it’ll cost.
4. Customer says yes.
5. Lloyds TSB checks customer credit, gives thumbs up or thumbs down, and sends off the contract.
6. Customer signs contract. Bang!

“Can you believe it?” he asks. “The Government’s five-year-plan to halve Northern Rock’s mortgage book is spoon-feeding up to 180,000 customers to Lloyds!”

All well and good for Lloyds. But where does it leave Northern Rock, a bank which we’re all underwriting through our taxes?

Not in a happy place, I’m sorry to say. It all comes down to Point 5. Lloyds (quite reasonably) has the power to prevent bad business coming onto its mortgage book. It seems fairly obvious that it will.

So there’s a very realistic prospect that “our bank” will end up losing our best customers, while retaining the bad.

Add in the fact that the European Commission wants the Rock to speed up the process. That means there’s a great likelihood that too much profitable business will be lost before the Rock’s management can create a “financially viable” institution. Which in turn decreases the likelihood of the Rock ever being returned to the private sector.

We’ve been sold a dummy. The Government knocked up a plan that I’m convinced, in the fullness of time, will prove to be totally unworkable.

But by then this shower won’t be around to take the flak, will they?

And this week’s award for least surprising news goes to…

The Bank of England’s Monetary Policy Committee. It left rates on hold at 5% this lunchtime.

While the last two decisions generated a bit of interest, in a will-they-won’t-they sort of a way, this one was a foregone conclusion. Even I didn’t mention it yesterday, and I love this sort of thing.

Now we’ve got a whole new month to watch the next round of the Data Fight — that interminable process by which we see obscure reports competing for column inches and the attentions of policymakers.

One day we’ll see headlines of the “Oh My God, We’re Having A Recession!” variety, while the next we’ll see “Blimey! Inflation!”

What’s a Bank of England to do? For today, nothing, which was probably sensible.

Next month? Well, they’re gonna wait and see which kind of bad data comes out on top in Round June.

The story behind the story of the commodities boom

“We’re in a population bubble,” writes a reader. “If we wait for Mother Nature to reduce our population she will not do so very kindly. Better that we reduce our numbers ourselves.”

Garry White completely agrees. “Population,” he once told me, “Is the elephant in the room. It’s driving the markets, it’s the reason for the food crisis — yet politicians are scared to talk about it.”

For Garry, population growth is the ‘story-behind-the-story’ when it comes to explaining the boom in commodities. It’s not just that there are more people. It’s also the fact that many of them are richer, and therefore consume more.

Unlike many commentators, Garry doesn’t believe we’ll see a catastrophe in food… at least not imminently.

However, he does believe there’ll be a squeeze on one particular commodity — and it’s the most vital commodity of all…

“A pay-off bigger than we ever imagined!”

Manraaj Singh came bouncing into this morning’s meeting. He stood at the head of the table, a gleam in his eye, and waited for a hush to descend. Then, with a twirl of his moustache, he announced his big news.

“My copper play,” he said, “is on the verge of a huge pay-off. This is the Big One!”

It’s no wonder he’s pleased! Manraaj’s play is up 110% since recommendation. (Past performance is not a reliable indicator of future results).

Not only that, but Manraaj tells me he’s looking at ANOTHER great copper investment in a different part of the world. .

And this one sounds like it could be even better. Because it not only offers exposure to copper, but also to another mineral — one of the most versatile minerals in the world!

Find out what you need to do right now to get in on the ground floor of Manraaj’s latest emerging market investment.

Until tomorrow

Ben Traynor

Source: Lloyds TSB To Grab Northern Rock’s Best Customers

Bill Gates, of Microsoft and ‘world’s richest man’ fame snapped up 3% of the high-street retailer Carpetright (LSE: CPR) through his Cascade Investment fund. The move has given shares in the FTSE 250 stalwart a boost.

Gates’ £15m investment comes at a time of great turbulence for the group. So, why has the Microsoft maestro opted for a stock that has (carpet) bombed in the last year?

Having fallen 28% since June 2007 the carpet and floorings retailer disappointed the City in April. A so-so trading statement suggested that profits for the year would be ‘in-line with expectations’ but that the trading environment is deteriorating.

Group-wide sales increased by 5.6% and Carpetright widened their net, boasting 675 stores, but the three months to April saw sales growth of only 0.6%… raising the spectre of a profit warning to an already panicky investor base. Niche broker Pali International suggested the shares look overvalued and according to Retail bulletin, it was one of the most shorted stocks in the bearish sector with as much as 22% of the stock ‘on loan’ to traders driving down the price.

Investors are also quizzical of where exactly the company is going. Lord Harris had to scrap plans for an £800 million buyout in December as a result of the credit crunch. He wanted to take the business private to speed up expansion in the UK and abroad, thus escaping the constant scrutiny of the press, “Every six weeks I have to think about what I’m saying to the City in six weeks’ time” said Harris.

Perhaps Gates’ foray into the world of carpet will facilitate the move? Or Bill could be taking advice from his old pal Warren Buffett whose Berkshire Hathaway owns Shaw Industries, the world’s largest carpet maker. They may not be as flashy as you’re average oil explorer but way-ahead in terms of consistency… Bill could be onto something. Take a look at the firm’s prospective revenue stream:

2006: £451.4m 2007: £475.9m 2008: £514.8m* 2009: £527.1m* 2010: £550.0m*

* Analysts’ Estimates

Exciting, it ain’t… but it’s not difficult to see what’s caught Mr Gates’ eye here. As retail goes, Carpetright operates in a fairly defensive, counter-cyclical part of the sector.

The allure of boring stocks

American fund manager Allan Roth made a career out of boredom. His ‘Dare to be Dull’ mantra is the foundation of his firm Wealth Logic. He says that if you are having fun investing, and if you find it exciting, you are probably doing, or are about to do, something wrong. In his world, investing should be as dull as receiving interest payments from the bank… only more lucrative!

Now it’s not a panacea, in fact following this belief would have prevented you from getting into the uber-exciting energy and mining stocks that have yielded triple digit returns over the past few years. However, it also would have saved you from buying investment banks with their mysterious, clever-sounding structured investment vehicles that have turned out to be very costly duds.

So what other dreary deals can we find on the UK market?

Paypoint (LSE: PAY)

Another member of the steady incline club, Paypoint’s revenue and earnings charts look very appetising, much more interesting than the business model anyway… Paypoint operates thousands of chip & pin terminals and ATMs around the country. Their latest set of figures showed strong growth in sales and profits thanks to a 22% jump in transactions.

“We expect further growth in revenues in the UK by increasing market share in bill and general payments, mobile top-ups, ATMs and from Post Office closures,” it said. The group is also to install 1,500 terminals in Romania this year, adding that current trading is in line with growth expectations.

Lloyds TSB (LSE: LLOY)

As investment strategies go, sitting on your hands seems to be working for Lloyds TSB. The credit crunch has been the bane of the banking sector, but Lloyds’ business has been left relatively unscathed. They’ve not had to boost capital via a rights issue, and they’re not going to either according to Sanlam’s Kokkie Kooyman.

In his view Lloyds will escape the crunch, due to a lack of exposure in mortgage-backed assets and structured products, hence limited related losses. Described as a safe haven, Lloyds revealed a fair set of figures and Collins Stewart promptly upped their target price for the high-yielder to 609p.

Speaking of boring, my colleague Ben Traynor has just informed me about a recent Fleet Street Letter tip that specialises in a unique arm of the retail market. Like Carpetright, they have managed to dodge much of the fallout of the credit crunch and look good value at today’s prices. Check out his free pack today…

Theo CaseySource: Bill Gates Buys Stake In Carpetright