Monday, 22 February 2010
The Ten Best British Thrillers
On the Headline blog, Crime Files, I've been listing the ten best British thrillers. You can read it here.
The Five Best British Thrillers
Over on The Browser, I've been choosing my five best British thrillers. It's a tough job getting it down to that few. I could have gone on and on.
Tuesday, 16 February 2010
Reading Aloud....
Last week I was up in Newcastle and then Norwich, giving some library talks, and visiting bookshop, promoting both ‘Death Force’, and the sequel Fire Force’.
As well as talking about where the books come from, one thing I do is read out loud a chapter from both books. And it struck me there is something really interesting about reading something you’ve written to an audience. You get a very real and immediate sense of what sentences work and which don’t. I’m not a skilled enough reader to really look at people closely when I’m reading – I’m looking down at the page – but it doesn’t make much difference. You can just tell from the vibe in the room when you have people’s attention and when you’ve lost it. And you have an immediate sense of how the rhythms of the sentences work, something which is hard to figure out when you are juts looking at words on a page.
If I could find a willing audience, I wouldn’t mind reading a whole book out loud.
After all, it is the most elemental form of story-telling – something like sitting around a fire in a cave, telling a tale. It would be similar to bands playing their songs live for six months before they go into the studio to record them. And I suspect the book would be a lot better for it.
As well as talking about where the books come from, one thing I do is read out loud a chapter from both books. And it struck me there is something really interesting about reading something you’ve written to an audience. You get a very real and immediate sense of what sentences work and which don’t. I’m not a skilled enough reader to really look at people closely when I’m reading – I’m looking down at the page – but it doesn’t make much difference. You can just tell from the vibe in the room when you have people’s attention and when you’ve lost it. And you have an immediate sense of how the rhythms of the sentences work, something which is hard to figure out when you are juts looking at words on a page.
If I could find a willing audience, I wouldn’t mind reading a whole book out loud.
After all, it is the most elemental form of story-telling – something like sitting around a fire in a cave, telling a tale. It would be similar to bands playing their songs live for six months before they go into the studio to record them. And I suspect the book would be a lot better for it.
Monday, 15 February 2010
Why Investors Shouod Push For Higher Dividends...
In my Money Week column this week, I've been arguing that shareholders shouod be pushing for higher dividends. Here's a taster....
What’s the most important task for the chief executive of a quoted company?
Driving earnings per share forwards, perhaps? Increasing the rate of return on capital employed? Or taking notice of a wider community of ‘stakeholders’.
A generation ago, the answer to that question would have been a lot simpler. His or her main duty was to maintain, and even better steadily increase, the amount that the company paid out to its shareholders every year.
And yet, over the last decade, the dividend has gradually dwindled in importance, until it often appears like little more than an easily expendable luxury.
That is a big mistake. Dividends are a crucial component of the total returns investors can make on their money. And they are a great way of disciplining chief executives. If there is one thing the City should try and get right in the next decade it should be getting dividends back onto the pedestal they once occupied.
Research published this week by Capita Registers showed just how far dividends have fallen down the list of the City’s priorities. In total, UK listed companies paid out £56.9 billion to their shareholders in 2009, a reduction of around £10 billion, or 15%, on 2008. Much of that was accounted for by some of the big banks scrapping their dividends as a result of the credit crunch. But it was far more wide spread than just the financial sector. Overall, 202 listed firms cut their dividends, and of those, 74 paid out nothing at all. Meanwhile, 179 companies increased their payouts, whilst 60 held them steady.
The situation is even worse if you look at the balance of payments between companies and investors. Taking the last two years together, quoted companies paid out £123 billion in dividends. But they took back £124 billion in rights issues to bolster their balance sheets (about 60% of which went to the state-rescued banks). Investors were net losers from the deal. Nor is that likely to get any better soon. In the coming year, Capita only forecasts a 5% rise in the overall levels of payouts.
Much the same is true in the US. Thirty years ago, according to Standard & Poor’s figures, 94% of American listed companies sent a cheque every quarter to shareholders. Now it is only 74%.
It is all a far cry from the days when the dividend was king.
When BP cut its dividend in 1992, during the slump in the oil market and a global recession, it was such a traumatic event for the oil giant that it was thought necessary for the whole board to be restructured. Tycoons such as Tiny Rowland could build whole careers on the simple rock of constantly paying out high dividends to armies of small shareholders.
These days chief executives appear to think they can push the dividend up or down a bit, according to market conditions. It doesn’t appear to be any more important than adjusting the advertising budget. It certainly isn’t something that would prompt the resignation of the board. Nor would it raise much more than a few grumbles among the shareholders.
There are, of course, reasons that dividends have declined in importance. They aren’t always tax-efficient – investors have to pay income tax on them, compared to usually lower capital gains taxes on increases in the share price. Companies have explored other ways of rewarding shareholders, such as share buy-backs.
But it has gone too far.
Dividends are important for three reasons.
First, they are a crucial component of shareholders’ total return. Over the medium-term, the owners of capital will be rewarded just as much by the payouts on their shares as they will be any rise in equity markets. More importantly, companies can control it. There isn’t much they can do about share prices. Equity markets are buffeted by dozens of different events. But they can always decide their dividend.
Next, it an’t be fiddled. A clever finance director can come up with all sorts of different ways of measuring performance, most of which can be tweaked depending on where you park different assets and liabilities. Investment bankers can devise fiendishly complex ways of restructuring companies that are meant to ‘create value’ for shareholders. They may or may not be real. But if a company used to pay out 50p per share every six months, it either still does or it doesn’t. It’s completely transparent.
Thirdly, the dividend is the essence of what a stock market is about. Investors gives companies their money to build factories, shops and warehouses, In return, they receive a steady share of the profits in the form of dividends. Lose sight of that, and it hard to think what the stock market is really for.
So what can the markets do about it.
Two changes would help.
First, why not link the pay of chief executives directly to the dividend? Instead of baffling schemes designed to pay-out if they hit a whole series of benchmarks, just offer them a slice of the total pay-out to shareholders. If they can get the dividend up, then they’ll make a lot of money. If they cut the pay-out, they’d loose a lot of money. It would be simple, easy to measure, and make sure they were motivated by precisely the same target as their shareholders.
Next, exert some discipline.
Institutional shareholders should get back to the policy of turning on boards that cut the dividend. It should be a last resort, to be used only an the direst of emergencies, not one of the first costs that can be sliced during a downturn. Make it clear that the chairman and chief executive are expected to offer their resignation at the same time.
Both would very quickly make paying out regular and rising dividends the main priority of most listed companies again.
And, fairly quickly, that would make for a far healthier stock market – and certainly one that was a lot more rewarding for investors.
What’s the most important task for the chief executive of a quoted company?
Driving earnings per share forwards, perhaps? Increasing the rate of return on capital employed? Or taking notice of a wider community of ‘stakeholders’.
A generation ago, the answer to that question would have been a lot simpler. His or her main duty was to maintain, and even better steadily increase, the amount that the company paid out to its shareholders every year.
And yet, over the last decade, the dividend has gradually dwindled in importance, until it often appears like little more than an easily expendable luxury.
That is a big mistake. Dividends are a crucial component of the total returns investors can make on their money. And they are a great way of disciplining chief executives. If there is one thing the City should try and get right in the next decade it should be getting dividends back onto the pedestal they once occupied.
Research published this week by Capita Registers showed just how far dividends have fallen down the list of the City’s priorities. In total, UK listed companies paid out £56.9 billion to their shareholders in 2009, a reduction of around £10 billion, or 15%, on 2008. Much of that was accounted for by some of the big banks scrapping their dividends as a result of the credit crunch. But it was far more wide spread than just the financial sector. Overall, 202 listed firms cut their dividends, and of those, 74 paid out nothing at all. Meanwhile, 179 companies increased their payouts, whilst 60 held them steady.
The situation is even worse if you look at the balance of payments between companies and investors. Taking the last two years together, quoted companies paid out £123 billion in dividends. But they took back £124 billion in rights issues to bolster their balance sheets (about 60% of which went to the state-rescued banks). Investors were net losers from the deal. Nor is that likely to get any better soon. In the coming year, Capita only forecasts a 5% rise in the overall levels of payouts.
Much the same is true in the US. Thirty years ago, according to Standard & Poor’s figures, 94% of American listed companies sent a cheque every quarter to shareholders. Now it is only 74%.
It is all a far cry from the days when the dividend was king.
When BP cut its dividend in 1992, during the slump in the oil market and a global recession, it was such a traumatic event for the oil giant that it was thought necessary for the whole board to be restructured. Tycoons such as Tiny Rowland could build whole careers on the simple rock of constantly paying out high dividends to armies of small shareholders.
These days chief executives appear to think they can push the dividend up or down a bit, according to market conditions. It doesn’t appear to be any more important than adjusting the advertising budget. It certainly isn’t something that would prompt the resignation of the board. Nor would it raise much more than a few grumbles among the shareholders.
There are, of course, reasons that dividends have declined in importance. They aren’t always tax-efficient – investors have to pay income tax on them, compared to usually lower capital gains taxes on increases in the share price. Companies have explored other ways of rewarding shareholders, such as share buy-backs.
But it has gone too far.
Dividends are important for three reasons.
First, they are a crucial component of shareholders’ total return. Over the medium-term, the owners of capital will be rewarded just as much by the payouts on their shares as they will be any rise in equity markets. More importantly, companies can control it. There isn’t much they can do about share prices. Equity markets are buffeted by dozens of different events. But they can always decide their dividend.
Next, it an’t be fiddled. A clever finance director can come up with all sorts of different ways of measuring performance, most of which can be tweaked depending on where you park different assets and liabilities. Investment bankers can devise fiendishly complex ways of restructuring companies that are meant to ‘create value’ for shareholders. They may or may not be real. But if a company used to pay out 50p per share every six months, it either still does or it doesn’t. It’s completely transparent.
Thirdly, the dividend is the essence of what a stock market is about. Investors gives companies their money to build factories, shops and warehouses, In return, they receive a steady share of the profits in the form of dividends. Lose sight of that, and it hard to think what the stock market is really for.
So what can the markets do about it.
Two changes would help.
First, why not link the pay of chief executives directly to the dividend? Instead of baffling schemes designed to pay-out if they hit a whole series of benchmarks, just offer them a slice of the total pay-out to shareholders. If they can get the dividend up, then they’ll make a lot of money. If they cut the pay-out, they’d loose a lot of money. It would be simple, easy to measure, and make sure they were motivated by precisely the same target as their shareholders.
Next, exert some discipline.
Institutional shareholders should get back to the policy of turning on boards that cut the dividend. It should be a last resort, to be used only an the direst of emergencies, not one of the first costs that can be sliced during a downturn. Make it clear that the chairman and chief executive are expected to offer their resignation at the same time.
Both would very quickly make paying out regular and rising dividends the main priority of most listed companies again.
And, fairly quickly, that would make for a far healthier stock market – and certainly one that was a lot more rewarding for investors.
Tuesday, 9 February 2010
Should Authors Remain Obscure?
Stephen Glover wrote an interesting piece in the The Independent yesterday, contrasting JD Salinger and Martin Amis. His point was that sometimes obscurity helps a writer. Salinger hid himself away, whilst Amis of course is massively over-exposed.
He may well have a point. I like Amis, as it happens (the early stuff anyway, just like everyone else). But I'm bored with his new book already, and it isn't even out yet. I'm probably less likely to buy it than I would be if it didn't have all the hype.
I think authors have a difficult balance to stike here. We're all terrified of under-exposure, ecsue there is such pressure to hit sales targerts, that we don't worry enough about the dangers of over-exposure.
He may well have a point. I like Amis, as it happens (the early stuff anyway, just like everyone else). But I'm bored with his new book already, and it isn't even out yet. I'm probably less likely to buy it than I would be if it didn't have all the hype.
I think authors have a difficult balance to stike here. We're all terrified of under-exposure, ecsue there is such pressure to hit sales targerts, that we don't worry enough about the dangers of over-exposure.
Monday, 8 February 2010
Get People Owning Shares Again....
In Money Week this week, I've been discussing why the government should be trying to get people owning shares again. Here's a taster....
Who owns the UK?
According to the latest figures, it isn’t you and me. It isn’t even the big insurance and pension funds, although they have a far larger slice of it than ordinary individuals. Increasingly, it is foreign institutions.
That matters far more than most people realise.
In the 1980s, the Conservative government of Mrs Thatcher campaigned for wider share ownership. It is time some of those ideas were revived, because who owns the UK is likely to be even more relevant for the 2010s than it was for the 1980s. One opportunity for a new Tory government, if it wins the election this year, will be to get ordinary people buying shares again, both through restoring the tax breaks on equities, and by using the privatisation of the banking system to distribute shares more widely.
The Office for National Statistics last week published data that showed the ownership of British quoted companies has changed significantly in the last few years. Individuals now own just 10% of the shares quoted on the London market, down from 13% in 2006, and from 54% in 1963. That is an all-time low.
Meanwhile, the proportion held by foreigners has risen dramatically. Foreign investors now account for 42% of London-listed shares, compared with 28% back in 1997. Insurance companies account for 13%, whilst ‘other financial institutions’ (mainly hedge funds) account for 10%. The balance is made up of unit trusts, charities, and, rather ominously, the government, which now owns 1% (mainly Royal Bank of Scotland – hardly the basket you’d want all your eggs in).
It’s true that individual share ownership has been on a steady downward trend ever since the figures first started to be published in the 1960s. In part, that reflected the rise of the big unit trust and pension companies, which owned shares collectively. In the 1980s and early 1990s, however, the percentage at least held steady at around 20%. But under this government, it has halved again. On current trends, it will expire completely in another decade, perhaps when some elderly pensioner in Eastbourne finally decides to sell those British Telecom shares they bought in the 1980s.
Of course, its understandable that most investors are fed up with buying shares. It has been a miserable decade for equity investors. Unless your timing is exceptionally good, you’d have lost money. And the tax breaks on Individual Savings Accounts have been steadily whittled away, making share ownership gradually less attractive. Instead people piled into property, or just spent all their money.
But just as we did in the 1980s, we should be trying to get more people to own shares. Here’s why.
First, it gives people a stake in the system. As Mrs Thatcher saw clearly, people will only support a free market, capitalist economy if they feel they are a part of it. Over the last decade, the government has steadily loaded more and more taxes onto business, either directly through higher payroll charges, or else indirectly, through regulations that grant more and more rights to workers. If people don’t have any stake in business as shareholders, then they will probably support that – after all, it’s better if someone else pays the taxes rather than you. But if they can see every new corporate tax lowering the price of the shares in their portfolio, and reducing their dividend income, they are a lot less likely to sympathise.
Next, all the evidence suggests that individual shareholders are far more willing to support companies in the long term. Foreign investors will move into and out of the UK depending on the shape of a big chart in a Power Point presentation in Boston or Beijing. The hedge funds don’t hold onto a share for more than a few weeks. Private investors tend to buy and hold, not because they are intrinsically patient, but because they don’t have the time or the interest to constantly shuffle their portfolio around. Whilst nobody wants to see restriction on takeover deals, there can be no question that companies do best when they have long-term, supportive, patient shareholders, who will allow managers to focus on the long-term, without having to worry to much about next-quarter’s results, or designing some fancy piece of financial engineering that allows it to boost its share price for a few weeks.
Finally, British industry is going to desperately need more capital over the coming decade. After a decade in which it was puffed up with debt, and a tidal wave of public spending, the UK is going to have to develop new industries to get itself growing again. Capital will be in short supply. Savings are low, and the government will be borrowing most of the money that is available. Private shareholders will be one of the few sources of fresh capital for the new, entrepreneurial companies the UK needs to encourage.
The government can, in reality, do plenty to encourage people to own shares again.
It can restore the tax advantages. In the last decades, the tax breaks on an ISA have been sliced away so that they are virtually meaningless for standard rate tax-payers. Why not offer tax relief on contributions, just like a pension, and raise the annual contribution limit to £15,000. That would give people a powerful incentive to build up a portfolio of shares, rather than just putting all their money into property. You could go further. Why not make all dividends on shares in UK companies free of income tax – after all, corporation tax has already been paid on the profits that are being distributed.
Next, when the banks are privatised, use it as opportunity to spread share ownership. Selling off the utilities in the 1980s wasn’t just about raising money. It was about changing attitudes towards business. Why not give everyone free shares in RBS? After all, we already paid for them. And then make them free of all taxes if held for five years?
In a globalised economy, dominated by big investment funds, you’ll never get back to the high levels of individual share ownership of the 1960s. But 10% is a shockingly low figure – and if it could be nudged up a few points, it would help fix some of the problems with the UK economy.
Who owns the UK?
According to the latest figures, it isn’t you and me. It isn’t even the big insurance and pension funds, although they have a far larger slice of it than ordinary individuals. Increasingly, it is foreign institutions.
That matters far more than most people realise.
In the 1980s, the Conservative government of Mrs Thatcher campaigned for wider share ownership. It is time some of those ideas were revived, because who owns the UK is likely to be even more relevant for the 2010s than it was for the 1980s. One opportunity for a new Tory government, if it wins the election this year, will be to get ordinary people buying shares again, both through restoring the tax breaks on equities, and by using the privatisation of the banking system to distribute shares more widely.
The Office for National Statistics last week published data that showed the ownership of British quoted companies has changed significantly in the last few years. Individuals now own just 10% of the shares quoted on the London market, down from 13% in 2006, and from 54% in 1963. That is an all-time low.
Meanwhile, the proportion held by foreigners has risen dramatically. Foreign investors now account for 42% of London-listed shares, compared with 28% back in 1997. Insurance companies account for 13%, whilst ‘other financial institutions’ (mainly hedge funds) account for 10%. The balance is made up of unit trusts, charities, and, rather ominously, the government, which now owns 1% (mainly Royal Bank of Scotland – hardly the basket you’d want all your eggs in).
It’s true that individual share ownership has been on a steady downward trend ever since the figures first started to be published in the 1960s. In part, that reflected the rise of the big unit trust and pension companies, which owned shares collectively. In the 1980s and early 1990s, however, the percentage at least held steady at around 20%. But under this government, it has halved again. On current trends, it will expire completely in another decade, perhaps when some elderly pensioner in Eastbourne finally decides to sell those British Telecom shares they bought in the 1980s.
Of course, its understandable that most investors are fed up with buying shares. It has been a miserable decade for equity investors. Unless your timing is exceptionally good, you’d have lost money. And the tax breaks on Individual Savings Accounts have been steadily whittled away, making share ownership gradually less attractive. Instead people piled into property, or just spent all their money.
But just as we did in the 1980s, we should be trying to get more people to own shares. Here’s why.
First, it gives people a stake in the system. As Mrs Thatcher saw clearly, people will only support a free market, capitalist economy if they feel they are a part of it. Over the last decade, the government has steadily loaded more and more taxes onto business, either directly through higher payroll charges, or else indirectly, through regulations that grant more and more rights to workers. If people don’t have any stake in business as shareholders, then they will probably support that – after all, it’s better if someone else pays the taxes rather than you. But if they can see every new corporate tax lowering the price of the shares in their portfolio, and reducing their dividend income, they are a lot less likely to sympathise.
Next, all the evidence suggests that individual shareholders are far more willing to support companies in the long term. Foreign investors will move into and out of the UK depending on the shape of a big chart in a Power Point presentation in Boston or Beijing. The hedge funds don’t hold onto a share for more than a few weeks. Private investors tend to buy and hold, not because they are intrinsically patient, but because they don’t have the time or the interest to constantly shuffle their portfolio around. Whilst nobody wants to see restriction on takeover deals, there can be no question that companies do best when they have long-term, supportive, patient shareholders, who will allow managers to focus on the long-term, without having to worry to much about next-quarter’s results, or designing some fancy piece of financial engineering that allows it to boost its share price for a few weeks.
Finally, British industry is going to desperately need more capital over the coming decade. After a decade in which it was puffed up with debt, and a tidal wave of public spending, the UK is going to have to develop new industries to get itself growing again. Capital will be in short supply. Savings are low, and the government will be borrowing most of the money that is available. Private shareholders will be one of the few sources of fresh capital for the new, entrepreneurial companies the UK needs to encourage.
The government can, in reality, do plenty to encourage people to own shares again.
It can restore the tax advantages. In the last decades, the tax breaks on an ISA have been sliced away so that they are virtually meaningless for standard rate tax-payers. Why not offer tax relief on contributions, just like a pension, and raise the annual contribution limit to £15,000. That would give people a powerful incentive to build up a portfolio of shares, rather than just putting all their money into property. You could go further. Why not make all dividends on shares in UK companies free of income tax – after all, corporation tax has already been paid on the profits that are being distributed.
Next, when the banks are privatised, use it as opportunity to spread share ownership. Selling off the utilities in the 1980s wasn’t just about raising money. It was about changing attitudes towards business. Why not give everyone free shares in RBS? After all, we already paid for them. And then make them free of all taxes if held for five years?
In a globalised economy, dominated by big investment funds, you’ll never get back to the high levels of individual share ownership of the 1960s. But 10% is a shockingly low figure – and if it could be nudged up a few points, it would help fix some of the problems with the UK economy.
Thursday, 4 February 2010
First Review of Fire Force
The first review of Fire Force appeared in City Am today, and it's a corker. You can read it here.
Or here....
The A-Team meets James Bond in this gung-ho mercenary adventure
Thursday, 4th February 2010
Overgrown boys will love a tale about old soldiers in Africa in which real men carry Kalashnikovs
FIRE FORCE
BY MATT LYNN
Headline, £12.99
by Jeremy Hazlehurst
YOU’VE got to hand it to Matt Lynn, he can certainly write a first line. “Until you’ve sat down to a game of poker inside Africa’s most brutal jail, you don’t really know what it’s like to sweat,” begins his second novel. No man, surely, can fail to read on.
Our hero is Steve West, an ex-special forces soldier whose former colleague Ollie Hall is in the jail (described as “Hell’s Butlins”), and West is here to break him out. Before the first 20 pages, as well as a jail-break, we’ve had a card game, an Irish bomb-maker, a brutal local hardman and scantily-clad bar girls. It’s fair to say that if you don’t have a Y chromosome, then this book is going to leave you cold.
Fire Force’s plot is simple: a gang of mercenaries – Brits, gurkhas, South Africans, you name it, some of whom appeared in Lynn’s previous book, Death Force – go on a job to assassinate the dictator of the African country of Batota. It’s a mix of Casino Royale, The Day of the Jackal and back copies of Commando magazine, with a bit of the A-Team thrown in. There are helicopters, people crying: “We’re going in!” and a posh conservationist called Samantha. And it’s as much fun as you can have without firing a rocket-propelled grenade into a fireworks factory.
You can tell that Lynn has done his research, and the book absolutely screams authenticity. It even has an appendix about the weapons used in the book – if you ever wanted to know more about the Mi-24 gunship or the KPV machine gun, this is for you. It’s not going to win the Booker Prize, but this is a fast-paced and well-told tale of derring-do that guarantees entertainment.
Or here....
The A-Team meets James Bond in this gung-ho mercenary adventure
Thursday, 4th February 2010
Overgrown boys will love a tale about old soldiers in Africa in which real men carry Kalashnikovs
FIRE FORCE
BY MATT LYNN
Headline, £12.99
by Jeremy Hazlehurst
YOU’VE got to hand it to Matt Lynn, he can certainly write a first line. “Until you’ve sat down to a game of poker inside Africa’s most brutal jail, you don’t really know what it’s like to sweat,” begins his second novel. No man, surely, can fail to read on.
Our hero is Steve West, an ex-special forces soldier whose former colleague Ollie Hall is in the jail (described as “Hell’s Butlins”), and West is here to break him out. Before the first 20 pages, as well as a jail-break, we’ve had a card game, an Irish bomb-maker, a brutal local hardman and scantily-clad bar girls. It’s fair to say that if you don’t have a Y chromosome, then this book is going to leave you cold.
Fire Force’s plot is simple: a gang of mercenaries – Brits, gurkhas, South Africans, you name it, some of whom appeared in Lynn’s previous book, Death Force – go on a job to assassinate the dictator of the African country of Batota. It’s a mix of Casino Royale, The Day of the Jackal and back copies of Commando magazine, with a bit of the A-Team thrown in. There are helicopters, people crying: “We’re going in!” and a posh conservationist called Samantha. And it’s as much fun as you can have without firing a rocket-propelled grenade into a fireworks factory.
You can tell that Lynn has done his research, and the book absolutely screams authenticity. It even has an appendix about the weapons used in the book – if you ever wanted to know more about the Mi-24 gunship or the KPV machine gun, this is for you. It’s not going to win the Booker Prize, but this is a fast-paced and well-told tale of derring-do that guarantees entertainment.
Tuesday, 2 February 2010
Newcastle Talk
I'll be up in Newcastle next week, talking about 'Death Force' and 'Fire Force'. Details here.
On Seeing My New Book For The First Time...
Headline sent through first copies of the hardback of 'Fire Force' last week, ahead of the publication of the book at the end of this week.
As you can see, it looks fantastic. The cover is slick and sharp, and not quite like anything else on the market.
Despite the inevitable trials and tribulations of this job, there is nothing quite like seeing your book in print for the first time. It is an incredible rush. I usually spend a fair few minutes just looking at the thing. After that, I usually put it down on a coffee table, and walk around it a bit, looking at it from different angles.
After that, I'll flick through it, and read a few favorite passages to myself. And then read a few at randon. And after that, I'll probably put it back on the table, and walk around it a bit more.
This can go on for days.
Ok, I'm nuts.
But, I suspect, most authors, if they are being honest, do something similar.
I don't imagine that thrill ever wears off. I hope not anyway.
Monday, 1 February 2010
Stocks Won't Rise On A Change of Government...
I my Money Week column this week, I've been looking at why stocks won't rise on a change of government. Here's a taster....
The date of the next British election may still not have been decided. Still, one thing is certain. A date has to be set for early June at the latest, with May 6th the most likely day. Within a couple of months, and possibly sooner, the country will be struggling to stay awake during Gordon Brown’s launch of his manifesto, and trying to keep a straight face as Nick Clegg earnestly outlines his plans for government.
Amusement, and no doubt boredom aside, that will pose and interesting question for investors and the markets. If you look at the historical record, it suggests that this is the time to be backing Britain. Sterling traditional does well when the party in power is about to change. And, if you believe that, as the polls suggest, the Conservatives will be forming the next government, that too is a reason to buy: stocks have always done better under Tory administrations than Labour ones.
Not this time, however. In reality, investors should steer clear of the UK until well after the election is over. There is still too much uncertainty over the result. And it isn’t clear the country is ready for the kind of tough medicine it will take to get the economy back on track. Britain will be a buy again one day, but probably not until 2012 at the earliest.
So what does the past tell us is likely to happen this year?
In the past, you’d have made money by buying into British assets ahead of a change of government.
Take a look at sterling.
In the run-up to, and the immediate aftermath, of the two last changes of government, the pound rallied significantly. After falling to a level of 95 on a trade weighted index in 1976, the pound soared to a 130 by 1981. The tight budget restrictions imposed by the IMF, followed by the spending cuts of the incoming Thatcher government, restored the faith of the markets in the pound.
Something similar happened when Tony Blair took office. After falling steadily through during the early 1990s, the pound climbed again in the second half of the decade. It dipped down to 80 on a trade-weighted basis in 1996, but was back above a 100 by the time Blair was getting used to the view from Downing Street. The markets were re-assured by all that talk from Gordon Brown about ‘prudence’ and ‘golden rules’. They turned out to be deluded, but no one knew that then.
How about equities?
Again, the record is encouraging. At the end of 1978, as the country went into an election year, the FTSE All-Share Index stood at 220 (the FTSE, of course, wasn’t invented back then). By the end of 1981 it had risen to 313. Pretty good.
It smiled on Blair as well. The FTSE was just over 5,000 when 1996 ended, and as the country looked forward to the end of 18 years of Conservative rule. Over the next three years, it carried on rising steeply, hitting its all-time high of 6930 in December 1999. What happened next wasn’t so good, but there is little question the change of government was good for stocks.
If a change of government is good for stock, changing to a Tory one should be doubly good. As John Littlewood pointed out in a recent report for the Centre for Policy Studies, shares always do far better under Conservative governments than Labour ones. The market rose by 74% under the 1951-1964 administration, and by 166% under the 1979-1997 government. By contrast, they dropped 7.5% under Clement Atlee, 13% under Harold Wilson in the 1960s, 11% under the Labour Government of the 1970s, and, up until 2009, had dropped 26% under Blair and Brown.
The past, then, suggests that a victory for the Conservative Party in either May or June would be good for both the pound and UK stocks. Maybe it’s time to ditch those euros, and get rid of the Shanghai tracker, and get your money into the FTSE instead?
Well, not quite. True, the four most dangerous words in investment are ‘it’s different this time’. The past doesn’t always repeat itself, but it follows patters more often than we usually think. Those caveats accepted, however, it does actually look different this time around.
Here’s why.
First, the result is by no means a foregone conclusion. The Conservative Party needs to win a huge number of seats to get a stable majority. Any sign of a hung parliament, and the markets are going to wobble dramatically.
Right now, the only thing keeping sterling alive is the prospect of a change of government. No one has any confidence in the willingness of Brown to bring public spending under control. If the election isn’t decisive, the markets will realise that the UK is Greece minus the sunshine. The pound will collapse, and the equity markets with it, amid fears of insolvency.
Next, it is by no means clear that a new Conservative Government will have the clear mandate to deliver the tough medicine the economy needs. The Irish Government has delivered swinging cuts to public spending, slashing wages in the public sector, whilst keeping taxes down. There is very little sign that the public is ready for that in Britain, or that the unions will allow it. A Cameron government, with a slim majority, may face a tough battle with the public sector, with the Labour opposition will be braying that you can just print money instead. Don’t count on it winning that showdown.
Cameron might well be another Edward Heath: a Prime Minister who knows that tough decisions have to be taken, but doesn’t have the public backing to push them through. And how did stocks do under Heath. Not very well, since you ask. Shares fell 11% between 1970 and 1974.
Britain will be a buy again one day. The labour market is a lot more flexible than it was in the 1960s and 1970s. It may well bounce back relatively quickly. But it is not likely to happen until it is clear the new government can get on top of Britain’s deficit. Unlike the past, you don’t want to be buying ahead of an election.
The date of the next British election may still not have been decided. Still, one thing is certain. A date has to be set for early June at the latest, with May 6th the most likely day. Within a couple of months, and possibly sooner, the country will be struggling to stay awake during Gordon Brown’s launch of his manifesto, and trying to keep a straight face as Nick Clegg earnestly outlines his plans for government.
Amusement, and no doubt boredom aside, that will pose and interesting question for investors and the markets. If you look at the historical record, it suggests that this is the time to be backing Britain. Sterling traditional does well when the party in power is about to change. And, if you believe that, as the polls suggest, the Conservatives will be forming the next government, that too is a reason to buy: stocks have always done better under Tory administrations than Labour ones.
Not this time, however. In reality, investors should steer clear of the UK until well after the election is over. There is still too much uncertainty over the result. And it isn’t clear the country is ready for the kind of tough medicine it will take to get the economy back on track. Britain will be a buy again one day, but probably not until 2012 at the earliest.
So what does the past tell us is likely to happen this year?
In the past, you’d have made money by buying into British assets ahead of a change of government.
Take a look at sterling.
In the run-up to, and the immediate aftermath, of the two last changes of government, the pound rallied significantly. After falling to a level of 95 on a trade weighted index in 1976, the pound soared to a 130 by 1981. The tight budget restrictions imposed by the IMF, followed by the spending cuts of the incoming Thatcher government, restored the faith of the markets in the pound.
Something similar happened when Tony Blair took office. After falling steadily through during the early 1990s, the pound climbed again in the second half of the decade. It dipped down to 80 on a trade-weighted basis in 1996, but was back above a 100 by the time Blair was getting used to the view from Downing Street. The markets were re-assured by all that talk from Gordon Brown about ‘prudence’ and ‘golden rules’. They turned out to be deluded, but no one knew that then.
How about equities?
Again, the record is encouraging. At the end of 1978, as the country went into an election year, the FTSE All-Share Index stood at 220 (the FTSE, of course, wasn’t invented back then). By the end of 1981 it had risen to 313. Pretty good.
It smiled on Blair as well. The FTSE was just over 5,000 when 1996 ended, and as the country looked forward to the end of 18 years of Conservative rule. Over the next three years, it carried on rising steeply, hitting its all-time high of 6930 in December 1999. What happened next wasn’t so good, but there is little question the change of government was good for stocks.
If a change of government is good for stock, changing to a Tory one should be doubly good. As John Littlewood pointed out in a recent report for the Centre for Policy Studies, shares always do far better under Conservative governments than Labour ones. The market rose by 74% under the 1951-1964 administration, and by 166% under the 1979-1997 government. By contrast, they dropped 7.5% under Clement Atlee, 13% under Harold Wilson in the 1960s, 11% under the Labour Government of the 1970s, and, up until 2009, had dropped 26% under Blair and Brown.
The past, then, suggests that a victory for the Conservative Party in either May or June would be good for both the pound and UK stocks. Maybe it’s time to ditch those euros, and get rid of the Shanghai tracker, and get your money into the FTSE instead?
Well, not quite. True, the four most dangerous words in investment are ‘it’s different this time’. The past doesn’t always repeat itself, but it follows patters more often than we usually think. Those caveats accepted, however, it does actually look different this time around.
Here’s why.
First, the result is by no means a foregone conclusion. The Conservative Party needs to win a huge number of seats to get a stable majority. Any sign of a hung parliament, and the markets are going to wobble dramatically.
Right now, the only thing keeping sterling alive is the prospect of a change of government. No one has any confidence in the willingness of Brown to bring public spending under control. If the election isn’t decisive, the markets will realise that the UK is Greece minus the sunshine. The pound will collapse, and the equity markets with it, amid fears of insolvency.
Next, it is by no means clear that a new Conservative Government will have the clear mandate to deliver the tough medicine the economy needs. The Irish Government has delivered swinging cuts to public spending, slashing wages in the public sector, whilst keeping taxes down. There is very little sign that the public is ready for that in Britain, or that the unions will allow it. A Cameron government, with a slim majority, may face a tough battle with the public sector, with the Labour opposition will be braying that you can just print money instead. Don’t count on it winning that showdown.
Cameron might well be another Edward Heath: a Prime Minister who knows that tough decisions have to be taken, but doesn’t have the public backing to push them through. And how did stocks do under Heath. Not very well, since you ask. Shares fell 11% between 1970 and 1974.
Britain will be a buy again one day. The labour market is a lot more flexible than it was in the 1960s and 1970s. It may well bounce back relatively quickly. But it is not likely to happen until it is clear the new government can get on top of Britain’s deficit. Unlike the past, you don’t want to be buying ahead of an election.
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