Happy Holidays (formerly Christmas)

Markets have started to wind down this week, ahead of the seasonal break, which we used to call Christmas, but is now happy holidays, or some such. There is also a noticeable dearth of Christmas cards, so either we have far fewer friends than last year, (which would be no great surprise, given market volatility), or people just don’t send them anymore.

The dramatic switch to online for Christmas shopping…

Given that the economy is so dependant on consumer demand, everyone watches the sales numbers coming out of the High Street very closely, and it does not look like a bumper season for the retailers. The obvious reasons are just that; rising unemployment, inflation, and lack of wage growth. But there is a real switch to the internet taking place.

And the stats to prove it…

 According to the Office for National Statistics, online sales have grown from 3% in 2007 to 13% now.

The interesting thing is that it was only about 8% in August, but the graph is near vertical since then. This poses a huge problem for landlords, local authorities who charge business rates, and employment levels. Something like 15% of shops are vacant, and will probably never revert to their original purpose, but re-engineering this, in the short term, is very difficult.

 Zut alors….stop bickering!

And just as we “as a nation of shopkeepers” are struggling with this problem, the French seem to have launched a concerted attack on our credit rating, prompting the Deputy Prime Minister to speak today with Christian Noyer, Governor of the Banque de France, who agreed that such public displays of disagreement were unhelpful, and would therefore desist. For a while, anyway. I suppose he could have pointed out the rank hypocrisy of Nick Clegg, in making this call, but then it is the season of goodwill. Apparently.

Which reminds me of Tony Blair standing in Downing Street, next to the Christmas tree, announcing a temporary halt in the bombing campaign of whatever country we were interfering with at that point, due to Ramadan.

Who’s in the better position? Is there one?

For what it is worth, it is the case that the French economy is in better shape than theUK. Our deficit is 9.4% of GDP this year, theirs 5.7%; whilst our inflation is 4.8% against 2.7%. (For those who read the blog last week, the Germans are trying to cement in a maximum limit of 0.5%). Hmm.

The problem is not really about the French economy, but more the fact that their banks are owed some 680 billion Euros by the weaker brethren, otherwise known as the PIIGS. Clearly, if the euro breaks up, these might be troubled assets, to put it mildly. By contrast, it is thought that we are owed some 300 billion, so we are in a much better position. Obviously. Seems to me like arguing where your slot is in the queue for the firing squad, but such is the noble art of diplomacy.

The impending year end produces the usual crop of reviews, (gilts and gold were good, mostly), and the predictions for next year. We will produce our thoughts over the next couple of weeks since there is much travelling to be done, and people to be consulted in the meantime.

Some of life’s certainties…

Amongst this fog of news and predictions, certain things are just that, certain. One of the very basic indicators is to look at shipping rates, which are a measure of global trade. Whilst demand is growing at circa 5%, in line with global GDP, supply has ballooned, and rates for hiring these things have tumbled. Thus banks are foreclosing on companies that cannot provide more collateral, whilst the ships themselves are operating well below cost. Eventually, this becomes self righting, (although maybe not for the whole fleet), but it looks a virtuous circle at the moment. The only positive is that break up values remain buoyant, due to Chinese demand for steel.

We have long feared that exactly the same conditions will come to pass in the commercial property market.

Titanic, Europe and the economy. The comparisons start here…

Next year marks the centenary of the loss of the Titanic, (early hours of April 15^th, since you ask), and as the economies here, and in Europe tank, you will see every commentator reaching for the comparison, to the point of overkill.  However you view it, the fact remains that the largest, most modern ship in the world, sank on the maiden voyage, with huge loss of life. My youngest, Henry, is studying engineering and tells me that it was due to the make up of the steel used in the hull, which did not so much tear as explode, the equivalent of dropping a glass on a stone floor. And that was unknown, at the time.

A quirky view on life…

Anyway, in preparation for this, I bought a Titanic fridge magnet, to be ahead of the curve; on good days, the bow points up, and on bad days, downhill. It seemed to work well, so I then bought a lot more to give to people who share my rather quirky view on life.

Imagine my surprise when last Friday, as I was writing the blog, the thing detatched itself from the fridge, and fell to the floor, where the magnet shattered in to a thousand pieces, and the fourth funnel fell off.

On further investigation, it turns out that she had three engines; two reciprocating, (which were novel at the time), and the central propeller driven by a steam turbine. Thus the fourth funnel was a “dummy”.

Expect the unexpected; those on board didn’t; we need to.

A Yuletide thank you…

Next week, we will try to publish on Thursday, when there might be lots to add to our thoughts, and we will attempt to keep going through the break. There are many people involved with bringing this to you, and it is perhaps a good moment to thank them for their help, and you for your support.

If you find it interesting, informative, or just amusing, please ping it on. And more than anything, feedback is wonderful.

CDO

16^th December, 2011