Will there be knock on effects?
Cyprus is now the fifth eurozone country to require a bail out to recapitalise the country’s banking sector.
One of a number of measures currently being proposed is a one-time tax on bank deposits, which will unnervingly extend to deposits below the €100,000 compensation limit and ‘guarantee’ which applies across Europe. Savers will be ‘compensated’ with bank equity as well as bonds linked to natural gas revenues, but this has not eased the anger that many Cypriots (and ex-pats) feel.
Reaction to the bail-out plan has been mixed with Germany not surprisingly in favour of the plan, whereas Russia is strongly opposed with President Vladimir Putin calling the measures “unfair, unprofessional and dangerous”.
How the Retail Distribution Review will, or rather won’t, affect you
Changes in legislation from January 2013 mean that many investment companies and financial advisers will need to dramatically change how they do business. Fortunately we’re not one of them.
Meanwhile the Olympic torch heads past FPC
As the UK heads towards the Diamond Jubilee weekend, most of the population will be focused on the progress of the Olympic torch and the prospect of an extended weekend!
But in Europe, all eyes are are focused on Spain, Greece and Ireland
Spain is under scrutiny, following the Spanish government decision to inject £15bn into its fourth largest bank, Bankia. Spain’s borrowing costs are now at 6.7%.
Today, we also see the Irish voting on whether to ratify the EU’s Fiscal Pact. The result may reflect another public outcry against austerity, but in reality with only 12 of the eurozone states needing to ratify it, the outcome is not necessarily critical.
What is critical is the emergence of a joint solution to reconcile the need to address the deficit with the desire to stimulate growth.
What does this mean for investors?
FPC has warned that inflation should be feared and the combination of high inflation and very low interest rates for money held on deposit has led many savers to look for better returns elsewhere.
Sadly, the recent issue of National Savings and Investments (NS&I) tax free Index Linked Savings Certificates proved too popular and were quickly withdrawn.
Not missing a trick, this gap in the market is being filled by similar-looking offerings from several major banks and even the National Grid and the Post Office.
But are they as attractive as they might first appear?
One of the main financial stories of today is that Moody’s (an internationally recognised credit rating agency) has downgraded the credit rating of 12 UK financial firms. Although this may cause you some initial concern, we thought you might sleep easier with some relevant facts.
Peter StanyerIndependent Economic Consultant and author of the ‘Economist’s Guide to Investment Strategy, How to Understand Markets, Risks, Rewards and Behaviour’. To find out more about Peter’s extensive career, click here
Yet again the financial markets have delivered great volatility and uncertainty when many investors would prefer to be relaxing on holiday. US politicians have made a mess of raising the legal limit on Federal government debt, which has to happen time and again because the budget is so far from balance.
New issues of saving certificates
NS&I has reintroduced new Issues of its Index-linked Savings Certificates and Fixed Interest Savings Certificates for general sale. They are only offering a 5-year term, and this will only be available direct from NS&I.
But don’t believe the hype
Some may have noticed this sensationalist headline in yesterday’s Daily Mail:
Career journalist James Salmon supports this sweeping statement by referencing: “European financial difficulties, high inflation… and the threat of rising interest rates” – none of which are trivial concerns. Our view, however, is somewhat different.
Just like the Credit Crisis, the Spending Review will have an impact on our lives for many years to come and, not surprisingly, it has caused much debate. We asked independent economic consultant Peter Stanyer, author of The Economist: Guide to Investment Strategy, for his views on how our investment clients might be affected.
You can read our quick five point summary together with our comment on his findings and you can also download Peter’s paper in full.