Looks Like It's A Charity Shop Christmas As Credit Crunch Bites
With the credit crunch biting there's at least one area of the High Street that is reporting a boom in sales - Charity Shops.
Charity shops are reportedly defying the credit crunch as cash-strapped shoppers turn to secondhand stores in search of bargains.
While High Street retailers are bracing themselves for poor Christmas trading, shops such as Scope and Save the Children are experiencing a mini boom.
And with the festive season approaching, the shops are predicting a further boost for sales, with people buying up everything from children's clothes to books and DVDs.
One shop manager said: "There seems to be a big change happening at the moment.
"We have seen an increase in customers and sales recently. A lot of new faces are coming in and we are selling a lot of clothes."
"We have definitely noticed more young people coming into the shop, and an increase in families with children," she said.
Nogger is famed for his work with charity as you all know, although he doesn't like to talk about it. So it looks like Mrs Nogger will be getting some second-hand skimpies from the British Heart Foundation this year. Lucky old her.
Even Chelsea Can't Afford New Players In January As Credit Crunch Bites
Chelsea, the Premier League football club controlled by Russian billionaire Roman Abramovich, has binned 15 scouts and will sign fewer new players because of the credit crunch, Chief Executive Officer Peter Kenyon said.
The club has told manager Luiz Felipe Scolari that he is unlikely to have funds available to make signings in the January transfer window, said Kenyon.
''We have reviewed the business, the vision and structure,'' Kenyon told an audience of sports business leaders at the International Football Arena conference in Zurich. ''We have taken a prudent view, we are reviewing our cost base. I think it is a good practice for every business.''
Other clubs have already been affected by the global credit crisis. Manchester United jerseys are sponsored by American International Group Inc., the giant insurance company now controlled by the U.S. government.
Newcastle players wear the logo of Northern Rock Plc, the mortgage-lender that was nationalized in February. West Ham United lost shirt sponsor XL Leisure Group Plc in September when the tour operator grounded all its flights because it ran out of money. West Bromwich Albion hasn't even landed a shirt sponsor after being promoted from the second-tier Championship.
Kenyon declined to say whether Abramovich's personal wealth had suffered amid the market turmoil of recent months. A Bloomberg survey published in October revealed Russia's 25 wealthiest people lost more than $230 billion between May 19 and Oct. 6.
Chelsea is likely to achieve a target of breaking even by 2010, Kenyon said. Abramovich has plowed around £560 million (€689 million) into Chelsea since acquiring it in 2003.
While Chelsea has obtained interest-fee funds from Abramovich, the United and Liverpool are paying interest on loans used to acquire the teams. They carry about £900 million of debt between them, plus Wes Brown.
Auf Wiedersehen Debt?
The market is already starting to react as if the worst financial fire in history is over. Up until now, more effort has been expended on arguing who is to blame, rather than trying to find the extinguishers.
Lets hope that the worst if over. Let's hope that we never again have to witness a Chancellor's vacant stare whenever asked a simple financial question, even as his eyebrows squirmed like engorged caterpillars in their death throes betraying his ignorance.
I feel almost embarrassed to say it, but maybe Gordon Frown has played this one as well as could be expected, under the circumstances?
It feels like we may now get away with a 45 degree slide into recession, rather than the full-blown Alton Towers 90 degrees downwards into Oblivion version.
I was going to call this article Bailout Winners And Losers, but swiftly decided that there were probably really only degrees of loss. It is interesting to speculate who may come off the worst out of all this.
The Irish were the first to leap to their feet with their (initially much-criticised, but inevitably swiftly-followed) blanket guarantee of all bank depositor's money. The fact that this "guarantee" in fact calculated out at nearly three times gross domestic product should not be overlooked. If these guarantees had been called, they could never have all been paid.
The subsequent rapid inflow of cash to the safest haven there was, may soon now turn into a mass exodus. Those depositors who acted like startled rabbits will soon work out they are better off and better covered in government controlled banks back home.
As the new rules bite runs may develop on smaller groups such as building societies that have not been invited to play with the big boys. Government guarantees do not and cannot extend to such groups. Banks like Santander and Commerzbank will probably end up absorbing dozens of these local mutuals.
Most major industrial countries therefore will end up with a handful of large semi state banks which will dominate the domestic deposit markets.
Many of the current problems have been caused by lets call it "creative accounting," some might call it over-optimism, some might call it other things. Institutions with much of their capital "invested" in unlisted property, private equity and other opaque vehicles, may be forced via legislation to be more realistic in the valuations of their portfolios. I've never been a big fan of pension funds and I certainly aren't warming to them now.
There isn't going to be enough money in the pension kitty for people to retire when they had planned due to the fact that many pensions have been mismanaged for years.
Welfare is another area that wants looking at. In the UK unemployment has sank from well over two million to under a million. Meanwhile, those of working age but permanently incapacitated soared from under a million to well over two million! Well it looks like unemployment is going to start rising again busting the budget even further. So this is an area where we need to toughen up.
It is worth recalling that in absolute terms European institutions own more of America's mistructured and bankrupt sub-prime debt than the Americans themselves! Where is it? Too much, many believe, is in Italy.
There there are a huge number of highly-geared cross holding companies, mystery nominee companies etc. In short another house of cards just waiting to collapse.
A post-Olympic China also looks a certainty to be forced to reluctantly join the world recession party. The collapse in commodity imports, from copper to steel, oil to iron, already shows that a slowdown is already under way.
The west is in a recession. We don't want, or more precisely can't afford, their plasma TVs, Nintendo Wii's and fridge freezers that can also bake you a cake.
If we want a new car and we can't borrow the money to buy it then we are going to have to save. Thus the impact on retail economic activity is dire, as governments tax more and cut expenditure, and the consumer is forced to save.
It is worth noting that in the 1970s and early 1990s recessions, savings rates in advanced countries rose dramatically.
Whilst liquidity and lending will gradually improve, governments will want to rebuild 'their' banks' balance sheets as fast as possible. Globally, official interest rates will be slashed; the unusually co-ordinated cuts last week by six major central banks is but the start.
Credit Crisis Implications For The Grain Trade
This story recently appeared in The Financial Post of Canada:
"The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.
"Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.
"'There are all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit,' said Bill Gary, president of Commodity Information Systems in Oklahoma City. 'The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy.'
"So far the problem is mostly being felt in U.S. and South American ports, but observers say it is only a matter of time before it hits Canada. 'We've got a nightmare in front of us and a lot of people are concerned it's going to get a lot worse,' said Anthony Temple, a grain marketing expert based in Vancouver.
"Access to credit is key to the survival of maritime trade and insiders now say the supply is being severely restricted. More than 90% of the world's trade by volume goes by ship. 'The credit crisis has made banks nervous and the last thing on their minds is making fresh loans,' Omar Nokta, an analyst at investment bank Dahlman Rose, said in an interview with Reuters.
"While shipping has always been a cyclical industry whose fortunes rise and fall with the global economy, analysts said the current crisis over the drying up of credit is something they have never seen before."
There's another way of looking at this story too. Say you were a Chinese grain importer. You have one cargo of wheat bought back in the spring for shipment in November. One vessel of wheat requires you to provide a letter of credit for maybe $22m. However you could buy the wheat on today's market for $15m. Isn't going to suit you right down to the ground to provide a letter of credit that the supplier isn't happy with? And remember this is for just ONE cargo of wheat.
Inter-Bank Borrowing Rates Climb To Record
Before its even been passed by the House, a growing feeling that the U.S. government's $700 billion financial-rescue package will fail to revive confidence among banks, is circulating the globe.
The euro interbank offered rate, or Euribor, that banks charge each other for three-month loans increased to an all-time high of 5.34 percent today and the Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record.
The world's financial institutions are refusing to offer each other loans for any longer than a day even as central banks pump record amounts of cash into money markets.
The Libor-OIS spread, the difference between the three- month dollar rate and the overnight indexed swap rate, climbed to 273 basis points today. It's the third consecutive day the spread has risen to an all-time high. The average was 8 basis points in the 12 months to July 31, 2007, before the credit squeeze began.
Investment advice
If you had purchased £1000 of Northern Rock shares one year ago they would now be worth £4.95.
With HBOS, earlier this week your £1000 would have been worth £16.50.
£1000 invested in XL Leisure would now be worth less than £5.
But if you'd bought £1000 worth of Carlsberg Special Brew Lager one year ago, drank it all, then took the empty cans to an aluminium re-cycling plant today you would get £214.
So based on the above statistics the best current investment advice is to drink heavily and re-cycle!
This Bailout Thing
How the hell is pumping $700 billion to $1 trillion (depending on who's figures you believe) into the markets really going to make any difference at the end of the day?
Why is crude up $17/barrel on the back of it? The idea that the lower prices we've seen will stimulate & increase consumption is surely just pie-in-the-sky.
The average consumer isn't suddenly going to start buying more petrol because the pump price has come down a few pence. Their decision was made when oil almost hit $150/barrel. The SUV has been sold & the Corsa is on the drive.
Unemployment is still rising (ask ex-Lehman's employees), as is the cost of living. Home fuel bills are still going up. I don't see half of Americans suddenly leaving the lights on all night thanks to the Fed throwing cash at Wall St.
And I certainly don't see the mortgage company sending out letters saying "Dear John, don't worry about the mortgage this month Bernanke's paid it."
It all seems like a massive knee-jerk reaction to me. Once reality kicks in, we'll all be back to square one. Except the US government will be $700 billion plus behind where they were last week.
Still that's Obama's problem.
AIG Shares Sinking Fast
Shares of troubled American International Group Inc. are falling sharply as Wall ST opened Tuesday as investors grew increasingly pessimistic the world's largest insurer would find funding to avoid a liquidity crunch that could touch off even more global financial turmoil.
AIG shares were down $3.02, or 63 percent, to $1.74 in early trading Tuesday. Shares have traded as high as $70.13 during the past year.
Late Monday night, S&P, Moody's and Fitch all cut their ratings on AIG.
Having already bailed-out Bear Sterns and Fannie & Freddie the Fed is said to be baulking at the idea of doing likewise from AIG.
Having let Lehman Bros go to the wall over the weekend it would seem that the Fed are saying "enough is enough."
Goldman Sachs & JP Morgan are said to be in discussions with AIG over how much money it needs to help it stay afloat.
It's looking increasingly likely that the answer is...too much.
Trouble In America
AIG's credit ratings were downgraded by S&P and Moody's Monday, threatening efforts to raise emergency funds to keep the company afloat.
The ratings reductions occurred it was revealed that the biggest U.S. insurer by assets is seeking $70 billion to $75 billion in loans arranged by Goldman Sachs Group Inc. and JPMorgan Chase & Co. to replenish capital.
AIG plunged 61 percent yesterday in New York and has declined 92% this year.
Rumours that Manchester United would come to the rescue of it's shirt sponsor by auctioning off one of Wes Brown's legs, have still to be officially confirmed.
Meanwhile Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by S&P because of the deteriorating housing market.
Washington Mutual are one of the main protagonists in the doomed Alt-A mortgage scam which will be the next big thing to add to the woes of the US housing market.
See US Housing Market Isn't Going To Get Better Anytime Soon for more info on that one.
Hewlett-Packard (HP), the world's largest computer company, says it plans to cut 24,600 jobs to help streamline its business.
Apocalypse Now: USD1.6 Trillion in Losses and Counting
It seems that with each passing month the estimates for losses in the international banking system keep rising. This time last summer the largest estimates (from credible sources), if memory serves me correct, were around $400 billion, give or take a few months. By the end of the year it was in the neighbourhood of twice that. Then last quarter we saw estimates approaching $1 trillion. Last week, the number being broached was $1.6 trillion, by Bridgewater Associates, one of the top, and more credible, analytical firms in the world.
Telegraph -- Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn [$1.6 trillion], four times official estimates and enough to pose a grave risk to the financial system.
The giant US hedge fund said that it doubted whether lenders would be able to shoulder the full losses, disguised until now by 'mark-to-model' methods of valuing structured credit.
'We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse,' said the group in a confidential report, leaked to the Swiss newspaper Sonntags Zeitung.
Bank losses on this scale would have far-reaching effects. Lenders would have to curtail loans by roughly 10-to-one to preserve their capital ratios. This would imply a further contraction of credit by up to $12,000bn [$12 trillion] worldwide unless banks could raise fresh capital.
Never Never land
US credit crisis even affects Mr Whacko Jacko himself....
Michael Jackson’s home was scheduled to be auctioned off this week because of the $24.5 million that he owes on his mortgage for his Neverland Estate in Los Olivos, Calif. However through a “mutual agreement” with his creditors, the auction has been postponed to May 14, according to the Associated Press. The postponement will give Mr. Jackson time to refinance or sell the property, the AP quotes Mr. Jackson’s attorney as saying.
