"Don't part with your dreams - when they are gone you may still exist but you will have ceased to live" - Mark Twain

"Do you know that this blog wouldn't exist if it wasn't for you being here to read it!?" - Bobby Gill

Thursday, 5 February 2009

Interest Rates, Banks, Property and the Economy

Not only is it freezing outside and snowing, the economy is in a severe winter as well.

March 5th 09 Update: Interest rates reduced to 0.5% and Quantitative Easing measures to boost economy to be 'tried' by pumping £75 Bn into the economy!!

- Interest rates at historic lows of 1%.
- Banks still not increasing credit supply.
- Property bargains to be had and investors are buying.
- Is the economy in a recession and can you still make money?

Here is a quick (ish) run down on the Interest Rates, banks, property and the economy.
It started as an interest rate update and a few hours later it turned into so much more. If you don't have time to read it all, skip to the section that is relevant to you.


Interest Rates

Falling rates, going down, down and down...
Interest rates are now down to an historic low of just 1%

8 October 2008: 4.5%
6 November 2008: 3.0%
4 December 2008: 2.0%
8 January 2009: 1.5%
5 February 2009: 1.0%

Source: http://newsimg.bbc.co.uk/media/images/45448000/gif/_45448232_boe_466.gif

It's not really good news for savers or the economy, as there is a huge reduction in the credit supply available for spending.
The pound won't like another cut either as it is already weak against the other major currencies.

I won't even go into inflation as the government is not entirely sure how it is measured either and how to fudge it to fit the figures that they want. (RPI, CPI and RPIX)


Source: http://newsimg.bbc.co.uk/media/images/45447000/gif/_45447761_key_rates_5feb_gr466.gif

Libor is what banks charge when the lend to each other and it still looks like there are still trust issues between the banks.

Small businesses are being allowed to go out of business but large companies and banks are being bailed out by governments. The money is going into the banking system but not coming out the other end.
Giving the banks money that isn't passed onto their customers leaves tax payers looking like idiots.

Bailing out companies and banks that should have been allowed to go bust is not a very smart and ethical move, the mistakes shouldn't be covered up and the entire market allowed to correct to what is an acceptable level.
Putting bans on selling bank and other related stocks short is ludicrous. The whole point of an open market is to allow buyers and sellers to help it find it's price.
This leaves the stocks overpriced (if you can't sell short and only allowed to buy, it is artificial inflation of the value!)

Quantitative Easing and pumping more money supply into the economy surely can't fix the problem can it, how much longer before it all goes bang!?
Check out this brilliant article on The End of Money. The idea isn't as far fetched as it may first appear. The End Of Money by Chris Martenson

Whereas the banks have been bailed out for their criminal behaviour, they are now treating companies and individuals like criminals. Pot calling the kettle black!?

If you are having a tough time financially then stop waiting and go get good debt advice now.
Check out this article and the below links for more info:
(Mention Bobby Gill's Blog when you contact any recommended parties to make sure they look after you)



What do interest rate cuts mean to homeowners and investors?
If you can raise the deposit of 25% or negotiate a discounted deal with a seller, then rates are so low that it is a good time to take out some long term borrowing.

Already own property and on a variable rate? Great, if it is discounted rate you will be below 1% already saving you hundreds of pounds a month.
This is a good opportunity not to go out spending but either stockpiling some cash or paying off the capital on your mortgage, better still pay off other high interest debts like credit cards and loans. The extra money is a bonus and it is up to you to either invest (reduce debt) and save it - or splash out on doodads and toys. Make the smart decision now and you'll be glad you did.

Currently cash is king and those with liquidity and able to structure smart deals will be stocking up on property.

James Caan is still buying. I was lucky enough to see him speak at a presentation in London, at the Wealth Intelligence Academy last weekend.
His views were the interest rates are likely to go down virtually to zero and that there are plenty of great deals out there. For example he recently purchased a £10m property, being offered at £7 for just £4.1m because that was all it was worth to him. Nearly 60% BMV (below market value) is a great deal and this is proof that such deals are just waiting to be done.

Richard Branson says fortunes are to be made in a downturn. Assets can now be bought cheaply and the recession will provide "massive" opportunities for entrepreneurs.
Source: http://news.bbc.co.uk/1/hi/business/davos/7860333.stm

Usually big deals are immediately bought up by large firms and pension funds. They are not buying anymore and more likely to be off-loading their property at the moment to stock up on cash. What a great time to buy.

The current climate is only a problem for flippers and property traders, not property investors.
Investors know property always has been about the medium to long term.

Finance is a little harder to raise but deals are still there to be had. With less competition, as average investors are scared by the news, could there be a better time to buy!?

As a contrarian, like Robert Kiyosaki, my view is that it's now the best time to buy as people are desperate to sell and panicking.

It may be winter but Spring will be here soon. Look after you cash flow short to medium term and reap the rewards later.

The Economy

Are YOU in a Recession or making money?

The UK economy (GDP) has shrunk for the second successive quarter meaning that the country is now technically in recession. I won't even look at inflation as the government fudges that each time to suit and has various methods of measuring one thing (RPI, CPI, RPIX), roll a dice and pick a figure!

McDonalds are one of the biggest winners at the moment:
Source: http://timesbusiness.typepad.com/money_weblog/2008/10/the-10-biggest.html

People are still going to take holidays, so tourism locally will increase as people will not go abroad. With a better exchange rate it will also attract international travellers visiting the UK.

Food companies are still doing pretty well and other companies that provide basic necessities, like utilities. People want to reduce their bills and increase their income so companies like this will expand in this climate.

Drop me an email to find out more on how to save money on your utilities and earn an extra income too. Utility Warehouse can save you money on your bills and household shopping!
Take a quick look at this French & Saunders video, reminds me of the PC / Mac adverts lol...

There is still money to be made and it is only an economic slump if you aren't prepared to look for the opportunities.
Bob Proctor
says that their may be a recession on but he is refusing to participate in it. What decision are you making?

Surround yourself with people moving forward, not those sat watching TV, drinking beer waiting for things to change for them. Take a look at these Mastermind groups being set-up around the UK and get yourself a peer group that supports you.


None of the views or news above is good or bad. It just depends which end of the shotgun you are looking at!

And on that happy note, make sure you're on the right side ;-)


P.S. Remember it's all just a game and you can win if you want to!

1 comment:

  1. Hey Bobby
    Great info and I trust people will listen - especially the using of spare mortgage cash to re-invest and not buy more handbags...:)