This from Fleet Street Invest:

‘Welcome to the new West! Where overnight oil millionaires with Porsches and over-the-top mansions butt up against the salt-of-the earth cattle and rodeo country. It’s a place where fortunes are made in the tar sands at noon and lost on the poker tables at night.’

Phew! I don’t think we’re talking about Ilfracombe! More like Dallas, I should say. And this is indeed the promotion for a television series called The Wild Roses, described as an ‘epic clash between two families on opposite sides of Calgary’s oil boom’. Sounds good, doesn’t it?

But what concerns me today is not this riveting saga, but the story of ContentFilm (LON:CFL). This penny share company owns Fireworks International, the distributor of The Wild Roses and many other television shows. Could this be a share for these troubled times? After all, as I have said in my ‘Bounceback Report’, I am on the look out for companies that supply life’s essentials – and, let’s face it, to many people the TV is one of them!

So I went down to London to see ContentFilm’s American chief executive, John Schmidt. We met in a restaurant close to the group’s office just off Regent Street. The rain was lashing against the windows, the kitchen was suffering from a power cut and the stock market was crashing around our ears. The omens were not propitious but the sense of gathering doom was confounded by the calm demeanour of Schmidt.

Maybe this had something to do with the fact that he had recently returned from Cannes. He was there to attend the massive TV industry jamboree, MIPCOM. It’s where media journalists try to spot the stars of the small screen, senior executives discuss the great issue of the day – how the new digital communication channels will affect TV – and broadcasters tour the exhibition halls in search of programs to show on their own networks.

A business model that’s well-suited to recessionary times

Recession or no recession, broadcasters have to transmit something, and Schmidt told me that MIPCOM had been ‘business as usual.’ But still the recession is having some effect. Whether funded by advertisers or by viewers, broadcasters are worried about their revenues. That means more repeats and more factual programmes which always sell well. It also means less appetite to take a chance on expensive and unproven new drama.

All this suits ContentFilm rather well, because it has a library of two thousand hours of television programs. It has also acquired a rosta from the Canadian Broadcasting Corporation last year, including a good percentage of factual programmes. So ContentFilm has regular repeat sales of programs from its catalogue and when it acquires the rights to new content, which include both TV shows and feature films, it has a good idea of how it will sell.

There for ContentFilm has quite a low-risk business model. It does not get into the speculative business of financing new production, it knows its market and it has put its formerly troublesome DVD business into a joint venture with promising early results. So the shares should be a good investment at this time of recession. And yet the price has fallen by 80% in the last year! ContentFilm is now valued by the stock market at just £7m, and at 4p the shares trade at just two times earnings! Surely a bargain?

Why March 2009 will be critical for this share’s performance

Well, not so fast. Here’s why you always need to look a little deeper. You can’t just pile into penny shares without doing your research.

As in the plot of any good television drama, there is a catch. You see, five years ago ContentFilm issued 34.9m Convertible Preference Shares. Holders could either convert each preference share into one ordinary share, or else they can be redeemed at a price of 26p next March. With a choice between 26p or a share trading at 4p there is only one answer. The preference share holders will want their 26p back. That means that ContentFilm will have to come up with more than £9m. Such is the fate of the best laid financing plans!

This £9m liability has been hanging over the shares like a curse. But it must be resolved soon. The share price has started to edge up and I sense that some form of compromise agreement may soon be announced. The redemption date of the Convertible could be extended to give ContentFilm more time to pay, or to give the shares more time to recover to the 26p level at which convertible holders might convert into equity rather than taking the cash.

This is a battle not between rival families in Alberta, but between holders of the ordinary shares and the preference shares. The question is, will it have a happy ending – or will it be a disaster?

Source: Could This Tiny TV Stock Be A Great Recession-Busting Investment?

This from Fleet Street Daily:

I attended a most interesting lecture last night at the London School of Economics. It left me feeling that anyone who rushes back into the stock market now must be barking mad (you’ll see why in a moment).

Entitled ‘The Subprime Crisis’, it was given by Professor Robert Shiller of Yale. Shiller’s well worth hearing on this stuff. A former advisor to new US Treasury boss Tim Geithner (“He had no idea this was coming”), Shiller forewarned of both the dotcom bubble and the more recent one in housing.

The lecture kicked off with a quick recap of how we got to where we are. These were the highlights:

• Psychological factors played a huge role. Irrational exuberance (a term coined by Alan Greenspan and borrowed by Shiller for the title of his 2000 book) caused bubbles to appear all across the world . Word spread that by simply buying stocks, or a house, you can become effortlessly wealthy. You can’t.
• Genuine financial advice was only available to the wealthy. Anyone who gives you free or “affordable” advice isn’t really advising you at all. They’re trying to sell to you. Hence many subprime borrowers got in over their heads – basic questions like “Can you afford this?” “What if interest rates rise, or you lose your job?” were left unasked.
• Individuals fell victim to Groupthink. Groupthink is where it’s in the interests of individuals to subordinate what they really think to what is acceptable to the consensus. Imagine a rating agency employee in 2006 saying to his boss: “I want to downgrade this debt. I think we’re going to have another Great Depression…” Not exactly a smart career move!

We were then shown charts of stock indices, p/e ratios and volatility going all the way back to 1870. Let’s start with the volatility.

There are only three points in history where we observe extreme volatility. One is right now. The others are 1987 and 1929.

The real terms p/e ratios chart was even scarier. The big bubble run up from 1982 to 2000 appears like the Matterhorn rising out of some hillocks. This, of course, is the bubble that’s now being corrected.

In percentage terms, we’ve only ever seen such a bubble once before since 1870. Yep, you guessed it…before 1929!

Why you should remain wary of equities

Shiller told us that, in real terms, the S&P fell 80% in the 1930s. So far it is only down 54%.

This means you still have a once-in-a-lifetime opportunity to lose a lot of money very quickly. Will you take it? I for one hope you don’t…

Most of us have never been in this position at any time before throughout our lifetimes. Who alive today has first-hand experience of investing during a prolonged, worldwide, stock market and real economy Depression?

All we have to go on is the lesson from history. And that lesson says…stay out! Keep your cash as cash.

Why some will try to lure you back in…and why they might succeed

I believe we’re seeing a lot of Groupthink in the financial sector right now. Finance types make their living from stocks markets. So it’s in their interests to talk the best stock market game they feel they can get away with.

They did it during the bubble, happily perpetuating the notion that stocks generally go up so go ahead and fill your boots.

That nonsense won’t fly now. But there’s another nonsense that will – the idea that the correction thus far has left an unprecedented number of “screaming bargains” for you to put your money into. Thanks to Groupthink, many commentators are now crowding round this dangerous consensus.

Right now is not a time to speculate. It’s a time to protect your money. The best way to do that is to hang onto it.

It’s tempting to feel ‘contrarian’…to think that you could be among the financially savvy if only you’re brave enough. That’s why this consensus will enjoy some success… for a bit.

But it’s a thin line between bravery and foolhardiness. Do you wish to gamble that you’ll fall on the right side?

Another reason investors might be suckered back in early is that they worry about missing the boat. But I’m going to paraphrase a much smarter bear than my average self – Albert Edwards of SocGen. Investors needn’t worry about missing the party this time.

You can afford to be late.

Source: This Man’s Message Could Save You From Financial Ruin

More from Fleet Street Daily:

Let’s have a think about what’s going to happen after the downturn (it may seem hard to believe right now, but there will be an after the downturn). What will the world look like?

The answer will depend on what the jury decides in what is the most important trial of our times: Man versus Capitalism. The outlook for Capitalism isn’t good…

As Ambrose Evans-Pritchard writes in today’s Telegraph:

‘At this point I have given up hoping that we will draw the right conclusions from this crisis. The universal verdict is that capitalism has run amok.’

So what will the world look like after the guilty verdict is in? Let’s get ball rolling with three predictions about what the future global economy will look like:

1. The state will play a much larger role

This is pretty much nailed on already. Governments have already gone beyond being Lenders of Last Resort. Here in Britain, the government is buying into the banks directly.

It won’t stop there, either. Economies are shrinking and people are losing jobs. Governments will do whatever they can to minimise the damage, including giving people jobs directly. It would be political suicide not to.

2. Capital will be allocated less efficiently

For investors, this is the biggy. The prevailing “wisdom” has it that bankers are reckless mercenaries who throw money at ludicrously risky propositions in the hope of receiving a fat bonus before the whole thing blows up in their employer’s face.

While there may be an element of truth in that, let’s not get carried away. Banks exist to make money, and, by and large, it’s in their interests to lend where the return will be highest — while keeping risk to an acceptable level, of course. But that ‘acceptable level’ is now being redefined.

We will see tighter regulation of financial institutions. We could also see governments morph into reluctant banks managers as they attempt to keep the system on its feet. If this happens, expect lending decisions to be taking for political motives rather than profit motives. That is to say, the most profitable businesses — the ones that would deliver the most economic growth — will not necessarily be the ones that are funded.

Businesses that ten years ago would have had no problem getting a loan — and, crucially, that would have used that loan to fund profitable enterprises — will find it harder to get funds. As such, they will find it harder to grow, and shareholders will suffer.

To cut a long story short — the world of the future will be a harder place to make money.

3. Protectionism will end dollar hegemony

To be honest, there’s loads of culprits I could choose when I’m playing the Who Will Knife The Dollar game. But I’ve got this sneaking suspicion — call it a hunch — that protectionism will be the catalyst. Let me explain.

Whoever wins the US Presidential election, America is in big trouble. It will be hard to resist calls to whack up tariff barriers, and protect domestic jobs from foreign competition. A weakening dollar may help US exports a bit… but the US is in a bind.

If the dollar falls too much, foreign dollar holders (eg China and the oil-rich Gulf nations) will start dumping it. The US does well out of being the world’s reserve currency. Such a move would threaten that.

So what will the US do? It could pursue a strong dollar policy (I’m not sure how, but we’ll gloss over that here!). But that would hit exporters, and hit jobs. So, in response, some bright spark will start banging the drum for protectionism.

In desperation, the US government will reach for the lifeline. Foreigners who sell goods to Americans will suddenly find their access to the world’s biggest consumer market has been severely curtailed. Bad for them… but bad for America, too.

You see, those foreign dollar holders can see the currency’s fundamentals are weak. They’re sitting on all this money whose value is in the hands of a monetary authority (the Fed) and a government whose sole concern right now is fighting the downturn. The Fed has slashed rates, and there’s a strong chance the printing presses will soon go into overdrive.

So why are foreign dollar holders playing ball? Because, as things stand, it’s still in their interests to do so. Why would they want to antagonise a nation they do so much business with? Why would they impoverish their best customers?

But throw protectionism into the equation, and the incentives change. This is particularly true in the case of goods exporters like China. Overnight, the US market is less important to them.
Now, will this be enough to tip the balance? Will it reduce their incentive to co-operate enough so that they take their ball back and stop playing? Hard to say… but I think we’re going to find out.

One thing at a time… we need to get there first

Those are my three predictions for today. But many moons will pass through the night sky before this whole thing turns around. For now, we must do two things. We must prepare, and we must protect.

Source: Man Vs Capitalism – The World After The Downturn…

The recruitment sector of the stock market is going though one of its seemingly inevitable cyclical slumps. But one company that is performing better than most is Hexagon Human Capital (LON:HHC). And right now, it’s on a dirt-cheap rating.

I was interested to speak to Hexagon’s chief executive Jonathan Wright recently. Jonathan has already had one successful career in this industry, as managing director of the Alexander Mann Group. There, he was for six years number two to Dragon’s Den panellist James Caan. During that time Alexander Mann’s profit grew from £0.1m to £5.4m, before eventually being sold to private equity group Advent International for £25m.

Jonathan set up Hexagon in 2004, partly to run his own show. He also saw the opportunity to combine a head-hunting agency working at the high end of the executive market with an interim management business. The latter is the temporary employment of consultants to execute change programmes or undertake specific short-term projects.

‘The lower end of the food chain,’ Wright told me, ‘is under margin pressure.’ Employers are not prepared to pay big commissions just to bring in junior staff. But when it comes to finding senior executives who could make a real difference to the business – and indeed to the share price – the cost of finding those people is less important.

Building through acquisitions

Wright has built the business through acquisitions. Hexagon has so far bought seven agencies – Archer Mathieson, BIE Interim Executive, Akamai, Euromedica, Oxygen Executive Search, Roberts & Corr and, just last week, the Winchester Group.

This shopping spree has achieved one of Wright’s aims, a broad spread of business to counter the ‘pitching and rolling’ of any one sector. It has made Hexagon the UK leader in interim executive management, ahead of Odgers.

It has also given Hexagon a presence in the overseas markets. Euromedica, an executive search company specialising in the life sciences and healthcare market, has offices in Benelux, France, Switzerland, Scandinavia and India. And Akamai, a business bought from Hat Pin for just £1 in April has an operation in Dubai.

When I spoke to Wright he had just returned from a trip to the Emirates. He was surprised to find that, contrary to the glossy picture of spectacular new buildings there, the basic infrastructure is still quite backward and that the sovereign wealth fund management businesses and Arab owned investment companies are tiny, with just one hundred or so staff. So while these outfits are keen to have some support and assistance from westerners, the size of the market for a company like Hexagon is still quite small.

Little exposure to the problems in the City

The other overseas office is now in Atlanta, by courtesy of the Winchester acquisition. This deal was done in response to the demands of Hexagon’s multinational company clients, who expect a search firm to be able to tap the vast market of American talent as well as just that of Europe. Hexagon’s business is well diversified with its largest sector, pharmaceuticals and life sciences, accounting for about 12% of its business. It has little exposure to the City market where it is fair to say that the number of candidates outstrips the number of vacancies at present.
The business also benefits from the relative stability of the interim executive placement market. Hexagon has about fifteen hundred forty and fifty-something executives on its books. Of these, about two hundred are working on assignments today.

Hexagon’s clients, which include twenty-five of the FTSE 100 companies, will pay up to £1000 per day for their services. Wright believes that today’s testing business climate could persuade even more large companies of the need to implement change programs. It’s a niche that could reward Hexagon in the longer term. Sometimes these interim executives are offered full-time positions by the companies for whom they work, netting Hexagon another chunky fee, and contributing towards the fee income earned by each of its sixty-one professionals.

On average these professionals booked a net fee income of £430,000 each last year, a figure so remarkably high that it is little wonder that Hexagon is a comfortably profitable business with a good cash flow to boot. In the year to March, Hexagon made a profit before goodwill amortisation and tax of £4.4m. This year broker Equity Development is forecasting a figure of £6m, sufficient to generate earnings per share of 25p. That puts the shares on a very low PE ratio of four, a rating that looks even more attractive after Hexagon confirmed that the business was on track at last week’s AGM.

But the AGM revealed something else of interest. That Hexagon has aborted a ‘major transformational deal’, writing off costs of £0.7m. ‘During recent months,’ it said, ‘in response to the dramatically altered market sentiment and associated valuation metrics, the Group’s acquisition model has been modified.

That sounds to me like a sensible way to proceed just now. But until Wright is able to get the acquisition mill rolling again the shares will probably remain out of favour.

Source: A Niche That Could Help This Cheap Penny Share Grow

John Ketteley is trying to get into prisons. He thinks there’s money in it. And what he told me made me think about a possible opportunity in the future.

OK, let me explain. Ketteley is not some arch villain on a crime spree. He is in fact the Executive Chairman and 13% shareholder of the building products group, Eleco (LON:ELCO). He reckons that the government’s increasing requirement to lock people up – which I somehow doubt will be reduced by the recession – will provide some work for his group.

The prison building programme, along with the planned construction of schools, nursing homes and ‘key worker accommodation’ is a natural target for the type of products in which Eleco specialises, products that make it easy to construct modular buildings using elements produced off-site. Principal amongst these are pre-cast concrete panels used for walls, rooms, barriers and sports stadium terracing produced by subsidiary Bell & Webster, which has just opened a new facility at Haveringham.

Work for the public sector should provide some defence against the slowdown of house building that affects 14% of Eleco’s turnover. Eleco has various subsidiaries including one called Gang-Nail systems that I seem to remember from my distant days as a building analyst used to be owned by Redland. The building products industry does not go in for fancy names and another Eleco subsidiary is called International Truss Systems – nothing surgical, just roof trusses supplied to the South African market.

The roof, as Ketteley pointed out, is the last part of the building to be completed. In other words it is the last part to be paid for, and Eleco has had a couple of ‘run-ins’ with its customers. But while the financial crisis is inevitably causing a few difficulties, Eleco is far better placed than most, partly because of its products, partly because it has read the cycle cleverly, but also because it has that one thing that we would all like right now – cash.

A recession-proof profit-stream

Aside from pre-cast concrete, roofing and cladding, timber frame and timber engineering systems, Eleco also owns companies involved in software for the building industry. There are different types of software. There is software used in architectural design, software used in cost estimating, software that maps and monitors the execution of a project, and software that essentially keeps a daily diary of the work on-site, something that can come in useful in the event of a dispute involving the client and contractors. Software contributes just over 10% of operating profits. But it should prove reasonably recession proof, especially as much of the turnover is outside the UK.

An interesting new service (that can be seen on the www.e-sign.com web-site) is made possible by visualisation software. This is used by building designers, as well as by Birmingham Council which used it to visualise the impact of shadows caused by new buildings. A new web-site, called Grand Designs, will be launched in October and this will enable the self-builder to design and visualise his own house.

Another interesting service allows you to download a photo of a room of your house and then edit in a choice of floors, thus allowing you to see what they would look like in your own home. This is already is use in Germany, where 80% of those that use the service go on to buy the flooring product.

So Eleco’s products appeal to modern designers and modern building techniques, and allow builders to meet the ever more stringent building regulations.

With a balance sheet like this, here’s one to watch

This is one of Eleco’s strengths, but perhaps the greatest at this point is the balance sheet. A former banker, Ketteley rescued Eleco in 1997 when it had a market capitalisation of £3m but borrowings of £7m. As he told me, ‘we don’t want to be in that position again.’

Today Eleco has a market cap of £46m and net cash of £6m as well as a £14m facility from Lloyds, arranged last year. This puts it in a great position to make acquisitions, but it also means that at a time when, for instance, the Olympics site is reviewing the credit worthiness of its suppliers, it can take business from others.

Broker Collins Stewart has raised its profit forecast for the year to June 2009 by £0.3m to and now forecasts earnings per share of 11.7p. The P/E ratio is little over six and the yield is over 4%.

Eleco is much better placed than most building products suppliers at this difficult stage of the cycle. That puts it on my list of shares that I’m not quite ready to buy yet… but which is certainly on my radar.

Source: The Attraction of Prisons

According to Dan Denning in The Daily Reckoning Australia, the ban could actually make the crisis worse. That’s because investors could be reluctant to take up long positions in stocks when they cannot hedge their risks with short plays.

If confidence is not restored quickly, the next logical step for regulators would be to close the markets altogether…

This from Dan:

The US$700 billion Paulson plan is barely three days hold. Yet you already get the sense that it is failing in one essential objective: restoring investor confidence in the global financial system. This week, as shocking as it is to say it, could be even more momentous (and destructive) than last week.

Keep this one point in mind, we have moved beyond debates about asset valuations and whether this is a liquidity crisis or solvency crisis. This is now a test of whether ordinary investors and savers believe the financial system is on the verge of a collapse.

That’s it, plain and simple. It’s tempting to think we’ve averted the crisis and are now beyond it. Most of the time, investors ride the ups and downs in the market and go about their normal business.

But this is not most of the time. The action in the money markets last week made it clear that investors have lost nearly all confidence in the share market and in the regulators of the financial system. They are moving to cash.

If the Paulson plan fails to restore confidence, the next logical move by governments is to close markets altogether. Think about it. First, the regulators ban short selling. This squeezes the bears to cover and sends markets soaring, at least for a bit. But if it doesn’t work, the only real intervention left is to close the market altogether and take a bit of a holiday.

But for now, we’ll have to see how markets reaction. The first indications are: with indecisions. The ASX delayed its opening this morning so that ASIC could clarify its new policy on short selling to market participants. That policy changed twice over the weekend. First, ASIC joined the U.K. and the U.S. in banning naked short selling.

It didn’t stop there. Whereas the U.S. has banned short selling of any kind on financial stocks to halt the collapse in share prices, ASIC put a blanket ban on shorting of all Aussie shares, full stop. The regulator was apparently concerned that leaving open the resource shares to shorting by global hedge funds was not prudent.

The policy goal is obvious: halt falling share prices by shooting the bears in the head. The intended consequence was achieved in London on Friday, where shares were up 9%. But look out for the unintended consequences.

It’s not just bears who short sell. Hedge funds, by definition, hedge long positions by going short to cover their exposure. Remove their ability to hedge and you invalidate the logic of the trade. In other words, if hedge funds can’t go short, they might not go long either.

The result? After a huge short-covering rally, we suspect some stocks will go no bid. After all, who’s going to want to go long in this environment (especially if you can’t hedge your risk)? Markets are only markets when traders and investors are willing take up opposite views of what’s going on. This is what makes markets, the willingness to take the other side of the trade.

By eliminating short seling, the regulators insure a short-covering rally in the short term. But in the long term? They’ve actually made the market even riskier. You have one remaining choice: long only, or out of the market altogether.

We reckon a lot of people will chose to liquidate their longs and get into cash, rather than being long only at a time like this. The irony then, is that the ban on short selling may actually instigate the market meltdown it’s designed to prevent. Perverse, but perhaps true.

Institutional investors do have the alternative of hedging their longs in the options markets. Look for increased volume on put options. But this trade is rather obvious too, and the premiums on put options would be steep at this point. Again, the sensible (as well as panicked) position is the same: it is better to be out of the markets than in them.

Frankly we’re not sure what would reverse this sentiment. But it’s not our job to engineer sentiment, only to read it. Right now, confidence is on a knife’s edge. And by banning short selling, quite unintentionally, Aussie regulators may have done precisely the thing to kick off a week of full-scale liquidation in global share markets.

Source: Short Selling Ban May Kick Off Market Liquidation

This from Fleet Street Daily:

Monday was one of the best chances traders had to make money in quite a while. And, once the markets realise the Fannie/Freddie bail-out is not the magic bullet they hoped, it could be a while yet before we see another rally like yesterday’s.

So, [due to a technical problem at the Stock Exchange] much of London missed out on the worldwide equities field day. The big question, though, is whether the Fannie/Freddie news, and the rally that followed it, mark a turning point for the financial crisis.

I suspect not. I suspect traders and investors were so desperate for a psychological boost, they latched onto something everyone knew was going to happen anyway. Probably most knew the rally was phony. But they also reckoned (rightly, as it turned out) that the market as a whole would react favourably to the news from the US — despite the fact that it was wholly anticipated.

If enough people buy stocks because they expect a rally, it becomes a self-fulfilling prophecy. Markets are always driven by sentiment. That is especially true in these volatile times.

Profit Hunter’s Manraaj Singh agrees. As he wrote to his subscribers yesterday:

“We have seen markets rally at every suggestion of a government bail-out of the US financial sector throughout this crisis. Just think back to March when the Fed provided $29 billion of financing for JP Morgan’s bail-out of Bear Stearns.”

Manraaj reckons the roots of the crisis persist:

“The latest bail-out has given markets a big psychological boost. But it still doesn’t tackle the systemic risk within the financial system. To do that, the US government would have to take clear steps to buy up most of the dodgy debt floating about in the US financial system”What we’re seeing here is just another dead cat bounce.”

There are other reasons to be cautious. One indicator we like here at Fleet Street is the Baltic Dry Index. The Baltic Dry Index tracks the movement of freight shipping rates. As such it gives an indication of the state of world demand for goods and raw materials.

The Index has been falling since June. Yesterday it continued its downward trend. Real economies are still facing all the same problems they did last week. Yesterday’s stock market exuberance can’t hide that.

Any optimism right now should, at most, be cautious optimism. And pretty soon I expect it will be relegated back to mere caution.

Source: Time For Cautious Optimism? Or Just Caution?

Not being a Guardian reader, I missed the now famous interview in which Alastair Darling described the economic outlook as the worst for sixty years. But since it caused such a furore and has pulled the rug out from underneath Sterling, I thought that I should look it up and see what he actually said.

Had Darling been taking a keen interest in economics before he became Chancellor he would not now come out with comments such as this: ‘We knew that the economy was going to slow down…but we had no inkling that a financial crisis was about to unfold. No-one did. No one had any idea.’ I beg to differ. Many people for many months had been warning of reckless lending practices, overvalued properties and a dangerous credit binge. If anybody should have been hearing these minority views and taking them seriously then it should have been Alastair Darling and, of course, his predecessor Gordon Brown.

But the fiction that today’s economic problems somehow came out of the blue is being spun furiously. There is some truth in the assertion this country has no control over the price of oil and other commodities, but we certainly do have control over domestic lending. Labour politicians are now desperately trying to bundle these two quite distinct matters into one big economic tsunami that rolled upon our helpless and indefensible shores.

They are not alone. The other day I heard a director of one of our leading building societies assert that the only thing holding back the housing market is the collapse of the supply of wholesale funding – the result, he was quick to add, ‘of the global credit crunch that began in the USA’. Such an explanation conveniently absolves building society bosses from having approved risky business models and sitting back as they indulged in foolish lending. And it also dodges the issue of which came first – the decision of wholesale funders to withdraw lines of credit or the realization that UK house prices were far too high and set for a fall.

Shameless historical revisionism to pass the buck

So we are now into a period of shameless historical revisionism, the main purpose of which is to blame our economic problems on others, especially if they are foreigners, and on forces beyond this country’s control. The Government wants to portray itself as the crew of a ship in rough waters, selflessly trying to give what help it can to sick passengers. Bankers are talking about ‘learning the lessons’ of the crisis, rather than considering whether the loss of billions of pounds of shareholders cash is a matter for resignation. Indeed only this weekend I heard one from HBOS saying that ‘taking responsibility and resigning are two different things – and we have taken responsibility.’ So that’s OK, then!

Gordon Brown is desperately trying to steer a course between saying that the crisis is out of his hands and beyond his control, while also giving the impression that he can do something about it. And we have a Chancellor who explains the fundamentals of the job in words that one might use to a child of five. ‘Becoming chancellor is completely different from any other appointment. Even when times are easy, it’s important, because you’re dealing with money and money affects how everything works. When times are far from easy, it’s even more difficult.’

The whole spectacle does not really inspire confidence, does it? No wonder Sterling has been on the slide. Are you ready for this? Take a look at this brand new report from my colleague, Ben Traynor, for one smart way you can protect yourself before it’s too late.

Source: It’s Not My Fault, Guv…

Things appear to be going from bad to worse over in Britain. The latest growth forecasts from the OECD say the country is already in recession, and is the only major economy to reach this dreaded condition…so far. Ben Traynor at Fleet Street Daily says the outlook is grim for the the economy, the FTSE index and the British pound. But there are still ways to make profits when times are hard.

This from Ben:

Theo Casey and I have been taken to task by a reader. He writes:”Please, don’t encourage politicians to lie or be economical with the truth. It should not be acceptable to let them lie.”

It’s a fair one. You’ll recall that on Monday we were talking about Alistair Darling’s weekend truth outburst. The chancellor had told the nation what we all already know – that the economic situation is bleak.

“What Darling has done is confirm fears,” wrote Theo. “Consumers, investors and businesses that were not previously worried, now are. They have been told from the highest office in the land that it’s time to cut back.”

If you regularly read Fleet Street Daily, you’ll be used to hearing that things are bleak (I don’t especially enjoy writing as much, but the way things are are the way things are). But, believe it or not, there are some people who still set store by the official government forecast that the economy won’t enter recession. So you’d expect negative talk from the chancellor to have an economic impact (indeed it did. The FTSE 100 and the pound fell hard on the back of Darling’s comments).

But I take our reader’s point on board. We don’t encourage the chancellor to lie. We’re just acknowledging that his moment of honesty has made a bad situation that little bit worse.

Not that it makes much odds this late in the game. Darling could talk the economy up, down or sideways for all the difference it would make now – as an influential new report demonstrates.

The Organisation for Economic Co-operation and Development (OECD) has published its growth forecasts for the G7 group of leading economies. Here’s what the OECD predicts for the rest of this year:

GDP Growth in the G7 countries (annualised quarter on quarter growth, %)

	2008 Q3	2008 Q4
Japan	2.4	1.4
United States	0.9	0.7
Canada	0.8	2
G7	0.8	0.7
Euro	0.4	0.8
France	0.2	0.6
Germany	0	0.1
Italy	0	0.6
United Kingdom	-0.3	-0.4

Source: OECD

As you can see, it reckons the UK has already slipped into recession. By the end of this year, according to the forecast, we will have posted two consecutive quarters of negative growth.

Alarmingly, the OECD reckons Britain’s is the only major economy that will hit recession this year. So if they haven’t already, the newspapers will soon be raiding their archives for those ‘sick man of Europe’ articles penned 30 years ago.

One thing is abundantly clear. Going forward, Britain will be a bad place to do business. This, we expect, will have a negative impact on investments.

But there is protective action you can take. We’ve already identified one major global trend which British investors can exploit. This trend is set to continue regardless of what happens to the British economy. Find out here how you could profit from this trend.

And later this week I’ll be unveiling a brand new report that offers you an alternative to stocks. We expect the investment we’ve identified will actually benefit as Britain’s economy weakens.

Source: Can Telling A Lie Save The Economy?