Wealth Management Newsletter from Ward Goodman
This months Highlights:

* The Bank had £150bn ready to stop a run
* Darling to concede recession worse than he forecast
* £61.6bn Bank loans kept secret
* OECD confirms that Britain is lagging behind the world's leading economies
* Nationwide reports falls and predicts flatlining
* Savills warns of dip in prices

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£150bn ready to stop a run

The Bank of England feared that it might need up to £150bn of emergency funds - more than double the figure which it admitted to last week - to pump into the banking system to prevent a run on the banks in October last year.

The full extent of this enormous emergency rescue plan, which was put in place over the first weekend in October, emerged after Mervyn King, the Governor of the Bank, revealed to the Treasury Select Committee last week that it had provided £62bn of secret tax-payer backed loans to Royal Bank of Scotland and HBOS last autumn.

Sources told The Independent on Sunday this weekend that the Bank was on standby to lend more than double the £62bn because of fears that a number of big depositors were preparing to pull their money out of the UK the following week, as they feared for the solvency of the banks, one source said.

Source :
The Independent on Sunday page 81 - 29.11.2009.

£61.6bn Bank loans kept secret

In a shock announcement, the Bank disclosed that it had been forced to use its lender of last resort facility last October to "buy time" for RBS and HBOS, which were "effectively... bust". It managed to keep the loans - the equivalent of almost £3,000 for every household in the UK - a complete secret to all but a handful in the City for well over a year. The loans, which began on 1 October 2008 for HBOS and seven days later for RBS and lasted until January this year, show that even after being effectively semi-nationalised, fellow financial institutions were still refusing to lend the banks money. Like Northern Rock the previous year, they were forced to call on the Bank's assistance, although unlike Northern Rock they did not disclose the support.

Source : Daily Telegraph page B1 - 25.11.09. Also reported in Daily Mail page 8, The Times page 3, The Guardian page 28, The Independent page 43, Daily Express page 4.

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Savills warns of dip in prices

Savills, the upmarket estate agent, has given warning that the British housing market faces a "w" dip. House prices are expected to rise about 4pc this year despite soaring unemployment and a 14.7pc fall in 2008. However, according to Savills' new annual forecast, prices will fall 6.6pc in 2010 as demand from cash-rich buyers runs out and poor economic conditions push homes on to the market. Lucian Cook, a residential research director at Savills, said: "In the short term, we are facing events with the potential capacity to discourage house purchases. The uncertainty preceding an election - the prospect of public spending cuts, higher taxes, continuing mortgage rationing, further unemployment, possible stock market correction, inflation or future interest rate rises - all have the potential to impact the mainstream, even if the precise timing of such impacts is difficult to pinpoint."

Source : Daily Telegraph page B2 - 6.11.09. Also reported in Financial Times page 4.

Novembers Round Up

Welcome to my monthly round up from various papers. This should help you take a step back and put into perspective what has been happening over the course of the month.

The bigger picture…Our view a few months ago was that long term interest rates looked likely to remain low this now looks more certain. We also agree with Savills prediction that property prices would fall next year.

Stock Markets continue to increase. The Dubai issue was almost brushed aside last week as many investors and managers now understand that many of these issues won’t spill into the mass market. More importantly investors are not panicking like they were at the start of the crisis. This indicates an acceptance that these things happen and a return to normality. We expect to see the markets continue to rise as cash leaves low interest savings accounts and enters the investment market in order to maintain its value and capture higher dividend income.

Finally Britain does seem to be in a worse state than many other economies so our view that a global portfolio would be more beneficial for our clients looks like being the right plan..


Darling to concede recession worse than he forecast

Alister Darling will admit in next month’s pre-Budget report that the recession has been much deeper than he forecast in March, the Financial Times has learnt. The chancellor is expected to say that the economy contracted by 4.75 per cent in 2009, shrinking at least one percentage point more than predicted in the Budget. But he will also say that the UK has at last turned a corner and is on the road to recovery, ahead of a probable general election in May. The Treasury’s forecasts assume the economy has started to grow again in the final three months of this year, Treasury insiders said on Thursday.

Source : Financial Times page 1 - 27.11.09.

OECD confirms that Britain is lagging behind the world's leading economies

Britain's economy is lagging well behind other leading industrialised countries, a leading economic think-tank confirmed yesterday. Figures from the Organisation for Economic Co-operation and Development (OECD) showed that while the UK remained in recession between July and September, the other leading seven economies expanded. The 30 nations under the OECD umbrella also averaged economic growth of 0.8 per cent in the third quarter. Official preliminary estimates of UK GDP published last month showed that the economy shrank by 0.4 per cent between July and September.

Source : The Times page 51 - 24.11.09.

Nationwide reports falls and predicts flatlining

The mini revival in house prices is set to come to a juddering halt, Britain's biggest building society has warned. Reporting a 62 per cent fall in pre-tax profits, Nationwide said it believed that house prices will "flatline" at best in the coming months because recent rises have been fuelled by a lack of supply of property rather than a true improvement in sentiment. In its latest survey, Nationwide found British house prices in October were up two per cent on the year - the first annual rise for 19 months.

Source : The Independent page 53 - 21.11.09. Also reported in Daily Mail page 106, The Daily Telegraph page 38, Daily Express page 78, Financial Times page 1.

The above are our thoughts and various extracts from the media. Before taking any action you should consult a professional adviser.

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