Almost a year ago the Telegraph’s Thomas Pascoe put out an interesting piece on gold. We’ve decided to reprise it this Friday because we think it offers an interesting and useful perspective on current developments in the gold market:
One of the most popular trading plays of the late 1990s was the carry trade, particularly the gold carry trade. In this a bank would borrow gold from another financial institution for a set period, and pay a token sum relative to the overall value of that gold for the privilege.
It’s been a really bad week for a pair of household names, and next week promises to be pretty awkward for a third. The eclipse of Nokia is set to become a classic business school study. From the world’s fifth most valuable brand in 2006, and a market value of E100 billion in 2007, no fashionable mobile-toter would be seen with one today, and the business is now valued at E12 billion. The fall of Sony has been no less dramatic. The producer of the best telly in nthe world, in the shape of the Trinitron, has reached the point where it is contemplating stopping production altogether. The shares have also lost nine-tenths of their value since 2007, and have fallen by two-fifths since the start of last year.
The two companies have little else in common, but in both cases the managements ignored the signals from the customers. In 2006, Nokia’s position seemed as unassailable as, say, Apple’s does today. It not only had a dominant share of a growing market, it had margins twice those of its nearest competitor (remember Motorola?). It could outspend and thus out-develop any company which threatend its hegemony. Read more
Attention George Osbourne.
The UK taxpayer will not get out of RBS clean. There will be no early return to recent share price highs and the bank will not meet its return on equity targets (15 per cent by 2013!), in fact they will soon be abandoned. Read more
Rupert Murdoch desperately tried to keep alive his bid to take full control of British Sky Broadcasting on Monday, the FT says, as his company was hit by fresh allegations his newspapers accessed the family health records and bank accounts of Gordon Brown when chancellor and prime minister. Against a backdrop of mounting political fury and signs that the phone hacking scandal was spreading to other parts of his newspaper empire, the News Corp chief in effect decided to put his BSkyB bid on hold for up to a year. Meanwhile Reuters says that legal experts believed News Corp could become the subject of a bribery probe in the US, pointing to the Obama administration’s stepping up of bribery law enforcement in the past two years.
Dominique Strauss-Kahn, the head of the International Monetary Fund, was denied bail on Monday after being formally charged in New York court over an alleged sexual assault on a maid at a hotel in the city, the FT reports. The prominent French politician, who has considering running in next year’s presidential race in his home country, arrived at the Rikers Island prison complex Monday evening and is to remain there until a hearing on Friday. A judge at the Manhattan criminal court decided against releasing him on bail. Mr Strauss-Kahn’s wife had wired $1m to New York for that purpose. The Guardian now speculates that either France’s Christine Lagarde, Turkey’s Kemal Dervis or former UK prime minister Gordon Brown may be possible candidates to succeed Strauss-Kahn as the head of the International Monetary Fund.
David Cameron scotched Gordon Brown ’s chances of becoming the next managing director of the International Monetary Fund on Tuesday as he indicated that his predecessor was not up to the job, writes the FT. Although there is not yet a vacancy for the post, Dominique Strauss-Kahn, the fund’s head, would need to resign in the summer if he wanted to try to become the Socialist candidate for president of France. Mr Strauss-Kahn is widely thought to have been an excellent head of the fund, bringing the organisation back from obscurity, challenging national leaders to find a solution to the financial and economic crisis and leading the international efforts last week to address the crisis and set the world on a path towards sustainable and balanced growth. His possible departure was the talk of the IMF spring meetings in Washington last week but outside British circles, Mr Brown was not generally listed among possible candidates. Instead, the debate was whether a European candidate would again secure the post or if it would go for the first time to a candidate from an emerging market economy.
We said earlier on Monday that only one bank came off badly in the interim report from the Independent Commission on Banking.
We were wrong. Read more
David Cameron, the leader of Britain’s Conservatives, swept into power on Tuesday promising a “strong and stable government” after the Conservatives and Liberal Democrats agreed a five-year deal to form the UK’s first coalition government since WWII, reports the FT. Lib-Dem leader Nick Clegg was confirmed as deputy PM and George Osborne as chancellor. Speaking after five days of political negotiations, Cameron pledged to tackle the UK’s £163bn budget deficit. However, reports Bloomberg, the pound fell on doubts about the coalition’s ability to cut the deficit. Earlier, Gordon Brown announced his resignation. See FT.com’s “Conservative Who’s Who“.
David Cameron was finally handed the keys to Number 10 on Tuesday night after Gordon Brown bowed to the inevitable and resigned as British prime minister, the FT reports. The Tory leader, having finalised a coalition agreement with Britain’s Lib Dems, accepted the Queen’s invitation to form the country’s next government.
To review Brown’s last moments in office – and Cameron’s first — review the Westminster blog’s live updates with the FT’s Kiran Stacey.
The crackshot live-bloggers over at the FT’s Westminster blog are on the case (warning: for UK politics wonks only):
5.36pm: Jim wants to contradict my contradiction of his post (see 5.24pm), making the point: Read more
Britain’s Liberal Democrats are now negotiating with the incumbent Labour party, after the UK election failed to produce a government amid fiscal challenges. Analysts quickly raised the chances of a sovereign downgrade on news of the deal, FT Alphaville notes. Read more
Gordon Brown agreed on Monday evening to step down as Labour leader as the Liberal Democrats opened formal talks with the party about forming a coalition government, the FT reported. The shock development came on an extraordinary day of political wrangling, as Lib Dem MPs offered a lukewarm response to their leader’s initial plans for a power-sharing deal with David Cameron’s Conservatives.
Flashes, via Reuters:
10May10 RTRS-UK’S PM BROWN SAYS LIB DEMS WANT TO HOLD FORMAL GOVT DISCUSSIONS WITH LABOUR PARTY Read more
David Cameron moved closer to the prime ministership on Sunday after Conservatives and Liberal Democrats held almost seven hours of what they called “very positive” power-sharing negotiations, including proposals to cut Britain’s £163bn budget deficit. Both Cameron and Nick Clegg, Liberal Democrat leader, were aiming to strike a deal as early as Monday, even as incumbent Gordon Brown met top Labour colleagues yards away in Downing St to plot a counter offer to Clegg.
David Cameron’s hopes of becoming prime minister were in the balance on Friday morning, as election results suggested that the UK could end up with a hung parliament, says the FT. The Conservative leader insisted that Labour had “lost its mandate to govern” as the Tories looked set to easily overtake Labour as the largest party. But Cameron faced an agonising wait to learn whether he could secure a Commons majority, even as incumbent PM Gordon Brown engaged in frantic talks on whether he could form a coalition with Nick Clegg’s Liberal Democrats to keep the Tories out of power. See also FT.com’s live election night blog by the FT’s Westminster team.
From an email doing the rounds in the City of London on Thursday morning:
David Cameron emerged from last night’s showdown television debate as the clear election frontrunner, after Gordon Brown failed to grasp his last big chance to claw his way back into contention, reports the FT. Instant polls concluded that the Conservative leader won the third and final leaders’ debate with Nick Clegg, Lib Dem leader, coming second in most polls; Mr Brown trailed in third place.
British premier Gordon Brown attacked the “moral bankruptcy” of Goldman Sachs on Sunday after the US Securities and Exchange Commission accused the world’s most famous bank of fraud, the FT reports. His comments came as it emerged that Goldman and the SEC had not discussed a settlement prior to the announcement of charges last week, and as documents emerged revealing the strained relationship between the bank and the regulator during the 20-month probe.
Gordon Brown on Monday launched Labour’s manifesto claiming it was “rooted in the day to day concerns of the British people” and would produce “a fairer, greener, more accountable and more prosperous” country once the recovery was secured, the FT says. Key policies for the recovery include the promised new high-speed rail link, a green investment bank, broadband for all, a “new culture” in the City and moves to ensure that the banks pay their fair share to society through an international banking tax.
Gordon Brown finally launched the general election campaign on Tuesday, with Labour facing an uphill battle to retain a swathe of key marginal seats which have been hard hit by the economic downturn, the FT said. An analysis by the FT of 50 marginal constituencies David Cameron’s Tories must win to secure a majority found that the jobless rate in the seats has jumped from below the national average in 2005 to above it today. See also FT Alphaville on minority risk in the UK elections.
Gordon Brown will on Tuesday call an election for May 6, giving the Labour Party four weeks to overturn a clear Conservative lead in the opinion polls, the FT reports. The Tories have yet to open up a sufficient poll lead to be confident of a majority, with the latest ICM poll for the Guardian newspaper giving them a lead of only four percentage points.
Angela Merkel challenged Gordon Brown on Wednesday to drop his objections to European regulation of the hedge fund and private equity industry. The German chancellor called for greater progress in agreeing new financial regulations at an international level, and singled out UK opposition to the proposed European Union hedge fund directive. Finance ministers delayed a decision on hedge fund legislation on Tuesday after Mr Brown, Britain’s prime minister, pleaded that the issue be shelved until after UK elections.
London’s hedge fund and private equity industry won a last-minute reprieve from contentious new European regulations on Tuesday, after Gordon Brown pleaded that the issue be shelved until after the general election. The prime minister’s intervention staved off certain defeat for Britain at a finance ministers’ meeting in Brussels, where France leads a powerful coalition that is calling for tough regulation.
UK prime minister Gordon Brown on Wednesday confirmed Britain’s Budget would be held on March 24, in what is expected to be his government’s last major political event before the start of the general election campaign. Mr Brown said that his government had “the character” to weather the economic storm and to carry out the cuts needed to bring order to the public finances and to cut the £178bn deficit, says the FT.
Gordon Brown said on Wednesday that the world’s leading economies were close to agreeing a global bank tax, highlighting UK hopes of agreeing a deal at the G20 summit in Canada in June. In an FT interview, Brown indicated he believes that public opinion has shifted in favour of a globally co-ordinated tax after President Barack Obama’s move last month to raise $90bn from a US bank levy. The UK prime minister has been pushing a global charge on banks.
Pimco has laid into the UK again – this time having a go, specifically, at the Labour government.
In an interview with Dow Jones Newswires, Scott Mather, head of global portfolio management, said there was an 80 per cent chance of a credit rating downgrade for the UK if the chancellor’s debt reduction plans remain as they are. Read more
On Monday we reflected on the recent performance of Smiths Group, the world leader in airport security and inspection.
Since the failed terrorist attack on a US-bound airplane over Christmas its shares have risen almost 10 per cent as investors have focused on the possibility of full body screening being introduced at airports globally. Indeed, our own prime minister has committed Britain to using the controversial technology. Read more
A copy of the letter sent by Joanthan Keeling, chief executive of Arden Partners, to the FT:
Dear Sir, Read more
Might other countries follow the UK’s lead and hit the bankers where it really hurts?
That certainly is the impression one gets reading the letter penned by Gordon Brown and Nicolas Sarkozy in the Wall Street Journal on Thursday. Read more
From page 48 of the pre-Budget report, unveiled on Wednesday (emphasis ours):
Box 3.2: Banking Bonuses Read more