Another round of banking fines left investors comparatively unmoved. Yes, HSBC (HSBA) and Royal Bank of Scotland (RBS), who will pay over £430 million between them slipped back a few pence and so did Barclays, which will take its punishment in one dose when other regulators get in on the act. More fines will follow.
Every portfolio should have a bank share in it
We have seen this line of penalties stretch out to the crack o’doom, to paraphrase Macbeth, and it is tempting to see the fines as yet another business tax. It is, after all, grossly unfair to punish the shareholders rather than the executives who encouraged traders to make as much money as possible by fair means or foul.
The fining season for banks is far from over but they have survived everything thrown at them so far and are still back to making profits. Every portfolio should have a bank share in it. Mine has HSBC and Lloyds (LLOY)
Beware Internet Rumours
If there’s one place more lawless than banking, it is the internet, as shareholders in G4S (GFS) discovered this week. The impact of an encouraging trading statement was spoiled somewhat by a hoax email suggesting that the security services group had discovered errors in its accounts and the finance director had been sacked. The hoax was compounded by comments on Twitter.
I’m afraid we are going to get more of this sort of thing from time to time and investors need to remain vigilant. The statement did not appear on the company’s own website, nor on the London Stock Exchange’s Regulatory News Service, which is where investors should check before acting in haste.
In the event, the hoax was not widely believed and the shares fell only 2.5p before the release was declared to be false. Still, that is enough for people to make, and lose, a fair amount of money.
European Economies on a Tightrope, While British Wages Rise
More people are in work and fewer people are looking for employment as the promising news of the jobs front continues. The third quarter figures indicate that we are doing better than Europe. Indeed, we are doing better despite the poor performance in Europe, our main market.
Germany, supposedly the powerhouse of Europe, has seen economic growth of only 0.1% in the third quarter, doing no more than offsetting the 0.1% fall in the previous quarter. That makes six months of stagnation.
Much has been made of the fact that many new UK jobs are lower paid, which doesn’t generate so much in tax and creates little spare cash to get the economy going. Yet it does get people out of benefits and if you take the withdrawal of benefits into account the poor effectively pay a higher rate of tax than the rich.
Lower paid people – the ones who don’t get bonuses – are also starting to see wages creep up. Basic wages rose an annualised 1.3% in the three months to September, thus keeping up with inflation at last.
Wages are, however, still subdued and they will not start to fuel inflation for some time. Bank of England Governor Mark Carney thinks inflation will stay below the 2% target for the next three years and with oil prices still falling he could well be right.
He is in serious danger of having to write to the Chancellor of the Exchequer explaining why inflation has fallen below the 1% floor, though that is a pleasanter task than that faced by his predecessor, Mervyn King, who penned several explanations of why inflation was through the 3% ceiling and showing no signs of subsiding.
I do not believe that we are in danger of falling into deflation, as Europe may be, but the date of the next interest rate rise is moving outwards again. I am not yet ready to abandon my longstanding forecast of a quarter point increase in February. It is not so long ago that a rate rise this autumn seemed a distinct possibility.
However, I concede that February now looks too early rather than too late and we could see no change before the general election.
