01 06 2009
Life on Earth climbs out of the Swamp….
We’re not historians but this does, to us, seem to be echoing the metaphor of Survival of the Fittest. Adapting to conditions achieves survival necessary to go on and become the fittest. With an attitude of weeding out the weak, the ‘survival’ phrase has been a business mantra throughout the 20th Century, taken to new heights during the mid 80’s and continuing until very recently.
Ironically, the fittest may no longer be fit. We have a new economic world with different surroundings. It was futile during the age of ‘might and arrogance’ to talk about the trust we’d built up with our clients. Reliability and loyalty weren’t priority characteristics in the swamp. Those that had the same ethos worked quietly alongside us without the bells and whistles of a louder, brasher way of working.
However it now appears that we might be something of an anomaly. An outcome of the economic evolution has altered many to now think about something we have been advocating since our inception 16 years ago….. Take One Step Backward to Make Two Steps Forward. Those surviving to become the fittest are those that adapted alongside us. The Brontosaurus is a better known dinosaur than the Apatosaurus but, as Sir Alan said during an Apprentice sales task, ‘novelty sells’. Whilst one is easier to say than the other, neither survived the evolutionary process, and both are the same dinosaur . The Apprentice’s Brontosaurus, whilst being novel didn’t survive as choice for the sales task either; he was deemed too expensive by the chap who got the chop.
Many believed, during Victoria’s reign, that the theory of natural selection could only have been born during that time of Laissez-Faire attitudes, which remains an argument for now, as some would say, there is many a dinosaur walking the halls of Westminster, especially looking over their comments in the news over the past few weeks. The evolutionary process of natural selection should be interesting to watch emerge from that particular swamp….. but our persistence and tenacity has ensured our clients’ and customers survival which in turn ensures our survival – proving that we’re not lofty cold-bloodied dinosaurs.
(Image credit: somegeekintn Article credit: Copyright SUF)
01 05 2009
Welcome, and a big Hello to all our new recipients, and thanks to all of you who have been in contacts with us – Always good to hear from you.
Wrecking was the regular practice of taking valuables from a shipwreck which had foundered near to a shore, and there are legends of false lights being put out to deliberately lure passing ships into danger. The allegory of our finances and economy being on stormy seas doesn’t need impressing, nor that during these times how we’re all looking on the horizon for the glimmer of the lighthouse beam and safe harbour. But are the glimmers we see real or false lights? At Step-Up Finance we look beyond the numbers which offer some light. For example; there was a small rise in mortgage lending during March but the figures given didn’t show the low level they had risen from. Little glimmers of spending being up are shown, but don’t forget that interest rates are at a record low to encourage us to spend. House prices are still high compared to earnings although one sure set of numbers is the Banks’ Balance Sheet; resulting in low Bank lending. The current beacon of light is dim but the batteries haven’t yet run out. Long term sustainability has always been the light that Step-Up Finance has looked for and we continue to do so. When short term products are sold and there is a bust, we all, including our clients, inevitably get the fallout through taxes rising…. and the Bankers disappear…..(probably laughing all the way to their Bank). The warnings are always there to stop the wrecking.
Fumbling in the Dark? Thrift is the New Black.
It’s very easy during a time when there is no let-up to think that things will never get better. However if history can show us anything, things do eventually improve. Although, comparing the past economic clunks, this recession is getting rather long in the tooth. The average recession since World War II has lasted 11 months, 1981-82 was 16 months long, but our current downturn is, depending from where you count, about 18 months old. Whether you are just starting your financial planning or you are seasoned and experienced with your funds, Step-Up Finance has always advocated some strategies that definitely should and should not be done to protect and build upon your assets.
We advocate that you Should
1. Reduce Your Expensive Debt
2. Get On a Budget
3. Guard Against the Long Term Effects of Inflation
4. Hope for the Best, but Prepare for the Worst
5. Learn a new language – Finance
We advocate that you Should Not
1. Confuse What You Want With What You Need
2. Have a Short Term Strategy
3. Ignore Common Sense
4. Forget Your Retirement
5. Treat Your Home as a Get Rich Quick Scheme
The Law Society of Scotland has protested to Abbey Bank and described a move by them as ‘grave’. 7, 000 local Solicitors will no longer handle the Bank’s conveyancing process. It would appear those affected will be smaller firms with three partners or less. Step-Up Finance has always suggested, wherever possible, when buying property and choosing your law firm, look for the word ‘Partner’ amongst at least three names from Members’ information, or check that your sole practioner has an working agreement with a larger firm.
02 03 2009
Perspective …….. a way of regarding situations or topics, etc.
Welcome to the March News and Market Update
After the closed-in feeling of Winter, having a Spring Clean creates a freshness to our things, just as we can Spring Clean our viewpoint if we look at a given situation from a different perspective.
“You have two cows” is the beginning phrase for a famous series of sometimes amusing jokes originated as a parody, featuring a farmer in a moneyless society who uses the cattle that he owns in order to trade and to show the limitations of the barter system, leading to the eventual introduction of currency and money. The cows are used as a metaphor for political socio-economic systems and as an economic model, intended to point out flaws and absurdities in those systems. For example: ‘bureaucracy’ is explained by you having two cows which, at first, the government regulates what you can feed them and when you can milk them. Then it pays you not to milk them. Then it takes both, shoots one, milks the other one and pours the milk down the drain. Then it requires you to fill out forms accounting for the missing cows – in triplicate. ‘Hedge funds’ can be explained by you and your two cows being in a field when a Bentley draws up alongside. The driver offers to take care of your cows for you in return for a year’s supply of steak and 50 percent of their milk, you’re assured they won’t be allowed to leave his compound for two years. Six months later you have half a cow, producing sour milk. “You have to be willing to lose rump today to get rib-eye tomorrow,” the hedge-fund guy mumbles through a mouthful of sirloin and champagne.
Light relief from the crisis we’re all witnessing offers us a different perspective, therefore, parodying our economy is currently very tempting. Turning to humour when feeling powerless is a way of coping. Whilst our current economy is no joking matter, making a joke about those that have placed us in this situation can help us put some perspective to something in which we have no control. The recent CEO`s of the Banking debacle requires a darker sense of humour. Their arrogant assumption that, amongst other things, short -term self interest overrides any long-term survival of their Institution is, were it not so immersed in reality, almost laughable. Mortgage lending activity continues to be very weak and while people are searching eagerly for some signs of recovery, it would be unrealistic to expect a meaningful revival in lending in coming months,” said Bob Pannell, the CML’s head of research.
Lower prices when caused by slow demand, as opposed to low production costs, cause problems for our economy as the real value of debt increases and deflation means it’s harder to pay off debts, which, in turn, reduces disposable income . This deflation is often the sign of depression rather than recession. As far as we’re aware Ferrari and Apple are coping through the meltdown however the sight of the Black Stallion reduced to cart horse and Apple Mac’s emblem being almost completely eaten away gave us a smile….. followed by a slight wince at a time when the optimist thinks “this is as good as it’s going to get” and the pessimist thinks “he might be right”. Whether we are in recession or depression is still debatable, as are the various definitions. Some say it’s a matter of degree such as, a recession is when your neighbour loses his job, a depression is when you lose your job. Recession, depression, tomato, tom-A-toe….. and off we go again.
The World Economic Forum ended at the beginning of February. During the forums Gordon Brown said “This is not an economic crisis in one country, it is a global crisis.” Valerie Jarrett, Obama’s assistant for intergovernmental relations conveyed on behalf of the USA their thoughts as “Our economy is global, our crisis is global and our solutions must be global,” Merkel said “a UN Economic Council based on a new charter of global economic principles should be created to monitor the global economy”, whilst Swiss Economics Minister Doris Leuthard noted “free trade could serve as the largest economic stimulus package to revive the global economy” The next G20 summit scheduled for April is considered an occasion for major leaders to make important decisions and action plans on the financial crisis.
The Bank of England cut interest rates again from 1.5% to 1%.- the impact is likely to be limited as Banks have been reluctant to pass the base rate cut onto consumers. Yorkshire Building Society will keep their Standard Variable Rate at 4.5% whatever the Bank of England do. They are keen to keep their savers as without saving deposits it is difficult to have a sufficient fund to enable lending new mortgages. They argue cutting interest rates could even be counter-productive as it will make it more difficult to attract savers. As time has progressed, our thoughts are turning that Base may reduce to 0.5%, however, this could be very counter-productive taking into account all the relevant factors. Only existing borrowers on Tracker products may benefit (assuming no collar applies), the chasm for those on Fixed rates will widen further, savers will be hit yet again and have to pay tax on their nearly non-existent interest and the Banks will react by adjusting their margins (again) to justify their raison d`etre. We have commented many times that the cycle can take 12 to 18 months before any real effects can be felt, so a Bankers margin of Base plus 4% means that when rates rise, a Base of 5% (which has been the case many times) leads to the borrower paying 9% which could lead to further consumer problems of affordability. There has never ever been such a delicate time to fully review financial affairs.
It appears that C&G may have been caught out by one of their earlier products, the Below Base Rate Mortgage as, theoretically, approximately 1500 customers have nothing to pay! Their computers may struggle with the anomaly so borrowers may be charged a small amount and reimbursed at the end of the deal. Other products have a collar clause which prevents this, however, few lenders have had these collars,although if rates fall further the lenders will not be paying the borrower. We believe the FSA may support the view that when you take out a mortgage deal, you pay money to a lender for lending, a legal opinion that has never been tested… as yet
And some miscellaneous musings, however, please remember to check with HMRC with regards to your personal circumstances….
Time to claim VAT refunds running out
Businesses have until 31 March 2009 to submit VAT refund claims to HM Revenue & Customs (HMRC). At a time when cash flow is most likely to be stretched, every business should see if they have a valid reason to submit a claim and benefit from this window of opportunity.
Furnished Holiday Lets
If you own a second home you may consider letting it as a Furnished Holiday Let. FHLs qualify as a trade and so losses can be offset against your income, unlike Buy To Let where losses can only be put against other Buy To Let income.
Buy To Let – Energy Saving Allowance
Buy To Let investors can claim up to £1,500 against letting profits for loft insulation; cavity wall insulation; draught proofing; solid wall insulation and hot water insulation.
ISAs : the maximum allowed for the tax year 2008-09 is £7,200 whilst 16 and17 year olds can invest up to £3,600 for the tax year 2008-09 in a cash deposit within an ISA. These limits cannot be carried forward so it is important to use the full allowance before the end of the tax year.
It has come to our attention that a well known online comparisons website just can`t take the heat – Their most recent offering in the self-employed mortgage arena is dated ….wait for it… 16th october 2008. We think that four months out-of-date is just a little too much of resting on their laurels – Perhaps a degree of Perspective is needed.
(Image and Article credit: Copyright SUF)