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Thursday, 19 December 2013

New Year – Same Challenges

I am coming up to my 35th year in business and I realise how little things change. Old enough to remember at least three, possibly four recessions - you see the same stories over and over again. There are a number of reasons for this and if you look at the financial headlines over the last 35 years, relevant to the recession, there are the same recurring nightmares - so why do people make the same mistakes, over and again?

My theory in regards to money is that people have a three year money memory. I may well have read that somewhere, but I do agree with the statement. So, someone making a financial mistake, enough to bring water to the eyes, may well make the same mistake three years later as the memory has been dulled. Dulled to the extent that the memory has sufficiently diluted the experience to be of no consequence – sounds odd, but I genuinely believe there is an element of truth about this.

The 80's. In the early eighties the recession was hard and I remember distinctly the banks calling in overdrafts on a number of local companies, with no justification whatsoever – just because the banks head office panicked and because they could. One particular company had traded with the same bank for 35 years and they were treated with utter indifference and 120 men and boy apprentices lost their jobs. Sounds familiar?

Mobiles were only mobile if you had a wheel barrow big enough to carry one and ‘greed was good’ when inflation topped out at 18% - compare that today at 2.5%. The Tory government of the day even posed the argument that the recession was a necessary evil to get rid of the unprofitable companies and we think Austerity is tough?

90's –The early nineties were scarily similar in as much British troops were then, as now, in Iraq with operation Desert Storm. Inflation was now under control and in single figures and this time interest rates were sky high at 15% - imagine that on a mortgage today? Mobiles were small enough to fit in two hands but there were still problems with the banks, well one bank in particular called BCCI. I knew one chap personally who lost over 2 million pounds with that banking collapse, dreadful, his life’s savings gone in a blink of an eye and he died a bitter man.

Problems with billionaire press owners were still rife with Robert Maxwell falling off his flash yacht and his sons being left to answer why millions had disappeared from pension funds leaving some loyal employees penniless. Riots on the streets of London; problems in Russia with coup and a young chap called Obama became the first coloured male graduate of Harvard. Familiar names and familiar problems too. Russia is financially stronger now but its regional leadership is as corrupt as ever and the national leadership is morally bankrupt.

The prospects for 2014 do look better with the Americans and Europe finally getting to grips with their financial woes which will impact on everyone. We have a Bank of England governor who appears to be prepared to stick his neck out and actually give direction to the financial markets and they seem to be responding well. Building and construction has improved greatly thanks to the government initiatives to stimulate the building trades. Insolvency statistics show there is a downward trend in company liquidations and business owners are finally seeing a little light at the end of the tunnel. 

So all in all 2013 was hard and consolidating year for most but there is some hope that in 2014 we may well be out of the thick of it and one other good thing to say is that whilst the Spice girls dominated the pop charts of the 90's, they are not around any longer, so there are some things to be thankful for.

Have a great and prosperous New Year.

Written by: Mike Smith  

Friday, 13 December 2013

SME ~ Caveat Emptor/Buyer Beware

I am sure that in 220 AD, when the a Roman citizen bought a chariot and a wheel came off after a few hundred yards and he complained, he will likely have been told 'caveat emptor', or buyer beware to you and me. You would think after 1,793 years later we would know better; it seems not. Not only are we sold products we don’t need by people who do not have the training, or skill sets to sell them in the first place, but in most cases the products are not even fit for purpose. Sound familiar? I bet you are thinking "the banks" right? And you would be correct, yet again.

I am almost getting fed up with writing about the banks. I say almost, but I cannot resist the temptation in adding my two pence worth. It’s not that I don’t like banks, I genuinely have no real feelings for them, one way or another. My contempt though is for the people who run these huge organisations who have brought so much misery over such a long period of time and I have yet to see one banking individual be prosecuted for anything criminal? So, fixing a cricket match warrants a police investigation, slide a big brown envelope across the table to fix a football match, or part of it and that warrants a police investigation which is splashed all over the television. Fix the LIBOR rate which impacts millions of hard working people, young and old across the world; causing mortgage rates to remain unnecessarily higher than they need to be - police investigation? Possibly, but I have missed it if there has been. These LIBOR fixers were a disgrace, but they were also behaving with criminal intent to defraud. Bonuses were paid on these targets being falsely met, that is fraud! Do you think the bank pressed charges towards its own staff? Of course not as it provides a reflection of the incompetence and disdain with which they treat customers and their hard earned money. There has been no suggestion of reimbursing those that have suffered, why? The scale of the problem would be too large to comprehend and calculate. Pensioners were adversely affected and families paying mortgages and re-mortgages were affected across the world not just in the UK.

The banks and supporters of the banks will say that they have been punished heavily with £100m here and £200m there – RBS and LLoyds were fined £90m for yet another breach over mis-selling. Surely these fines are sufficient regulatory punishment? Well no, it is not. Why? Because that money is not coming from the pockets of the chief executive, or the managing director, senior managers who made these decisions. In fact, the majority of the ‘guilty’ are sunning themselves on gold plated pensions paid for by the very customers they ripped off. Has any serious effort been made to recoup the money or punish the guilty parties? Of course not; who has the incentive? On the subject of incentives, do you think if the fines had been paid by the bank CEOs that any of the reckless behaviour would have happened?   

We can all dream; but until then, caveat emptor.

Written by: Mike Smith 

Friday, 6 December 2013

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