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Some Business News as at 2006 03 08House
prices boom in Europe
While house prices in the UK stuttered forward with only modest rises last year, Europe saw a property market boom, with the continent's north leading the way, says the Royal Institute of Chartered Surveyors (RICS.) Mortgages worth more than the value of the property they are secured against were handed out in some regions, but poor old Germany, while all around properties boomed, saw prices fall 2%. The figures go to show that economic wealth and house prices don't necessarily go hand in hand. After all, the European economy has been struggling in second gear for some time, and yet 2005 marked the seventh year of a European wide property boom. Protectionists who worry about the rise of China, would be advised to bear in mind that the main factor behind the strength of the European wide property market is the low rate of interest, and this has only been made possible by low inflation, with the cheap import of products from China a major contributing factor to this. Some have argued that that house price booms in Europe have been exported from the UK, with the influx of British residents leading to a rippling out effect. But the contrary argument to this is that while Brits might affect prices on the Costas and in certain residential areas of France and Portugal, rises in the cities are less easily explained by this. RICS says that boom is partially down to lenders taking a more relaxed attitude to lending. In Holland for example "60% of all mortgages are where the loan to value ratio is above 100% (ie, where the amount lent is more than the value of the property)." Top of the pack in Europe last year was Estonia, with a stunning 24% growth in prices. Denmark was second, Spain third and Sweden fourth. Unfortunately, at the time of going to press we did not have details of all countries in Europe. This is a shame, because a cursory look at the two graphs below would show that there is a correlation between the high level of house prices in Estonia and growth in GDP. And while this link does not always work, it would seem safe to assume that other countries in Eastern Europe with expected high growth rates are likely to see similar rises in property prices. European housing review –
RICS
Enron:
key witness speaks out
This is the dilemma. By market capitalisation the company is ranked as the seventh largest firm in the US, but when things are worse than the market thinks, what do you do? For Enron's chief financial officer, Andrew Fastow, the solution was with what became known as "LJMs." The three letters were taken from the initials of Mr Fastow’s family, and entailed using Enron's money to support investment vehicles for buying company assets that no one else wanted to own. It was a nice little earner for Mr Fastow, with large sums of money being paid into his account. His wife was told they were gifts, and she didn’t need to declare them on her tax return. And her price for believing her husband: a year in jail. Mr Fastow said he thought he was the hero of Enron, saving it from disaster, but after the company's collapse in 2001, maybe even before, he regretted the action, and eventually full of contrition, accepted a ten-year prison sentence, fully aware that it would only be reduced by good behaviour. Authorities agreed to drop other charges against him in return for his testimony against the Enron bosses of Jeffrey Skilling and Ken Lay. And the questions that prosecutors wanted answering in court yesterday was this; did Messrs Lay and Skilling know about these "LJMs?" Yesterday, Andrew Fastow, prosecution's key witness against Lay and Skilling spoke. And his testimony: Not only did Skilling know what was going on, said Fastow, but he said "I love LJMs. I want to get all the deals that I can with LJMs. I just don't want the footnotes"– meaning he didn't want details of the LJM recorded in the company's official documents. And when Fastow approached Skilling with an idea for a new set of "LJMs" his boss said "Get me as much of that juice as you can." And by juice says, Fastow, Skilling meant juice up the earnings. Skilling and Lay deny all knowledge of Mr Fastow's dealings. Japan
prepares to up rates
Some think this could be a massive mistake. Many blamed arch
conservatism in Japan as a key factor behind its decade long period of
economic turbulence, and that the Central Bank was too rigid with
monetary policy at the outset. The argument goes that the Bank of Japan
should have struck much faster than it did, and that when it finally
lowered rates to zero percent it was too late. Then, in the late '90s, central bankers feared inflation, upped rates, dotcoms crashed, and the Bank of Japan was left looking foolish. At least that's how it appears from our perspective. Now, with inflation on the rise in Japan, it's been above zero for three months in a row now, the Central Bank is meeting. Many expect a rise in the rate of interest to follow. They could be right to do so, but recent history tells us that in the case of Japan, being prudent is in fact quite risky, and that for once the cautious approach would suggest keeping rates at zero for a little longer. Penguin
picks up a Greenspan
Who said there is no synergy within Pearson between its FT subsidiary and its big earner, Penguin Books? Rumours have been rife that the company is planning to sell the world famous newspaper. But today it has emerged that Penguin has bought the rights to Alan Greenspan's memoirs. The exact sum forked out is not publicly known, but it's understood bidding topped $7mn. "Irrational exuberance" Alan held the hot seat at the Fed for 19 years until he was replaced by spelling champ Ben Bernanke earlier this year. These days business is fast looking like the new rock'n'roll, with business books, such as the story of Google, Freakonomics, and books from the likes of Warren Buffet raking in the bucks. Maybe the "pink 'un" could end up as the online sales arm of Penguin's business books. Google
makes mistake
As you probably no doubt know by now, Google says "do no evil" and for the company a part of that policy of only following the good side of business is not to issue profit and sales projections. It was a bit of a surprise then, when sales projections appeared on the company's investor relations web site. The statement said that it expected revenue to grow from $6bn last year to $9.5bn in 2006, but that it expects a squeeze on profits from its ad sense programme. But now it appears that the company has not fallen to the dark side at all. Apparently, it was all a mistake, and the projections were meant for an internal meeting and were erroneously displayed. Lets hope the company doesn't accidentally present doodling from Brin and Page's note book, You know the sort of things those student types write… Berezovsky must not be handed over to Putin's tender mercies Simon Heffer 08/03/2006 There are few sharper ways of measuring a country's diplomatic priorities than by examining its extradition policy. This subject is much in the news. Three British bankers, with alleged links to the Enron scandal, have been told that they must be extradited to America, a country that treats white-collar crime - quite rightly - far more sternly than we do. However, supporters of the NatWest Three (as they have inevitably become known) say they have been charged with offences not on the statute book here, and in effect have no case to answer. If so, then their doubtlessly brilliant lawyers will emerge triumphant. Should the case reach the American courts, the Three will at least be before a justice system that is fair and fitted to a democratic country. That we deal so straight with America shows, not least, the bond our nation feels for theirs, something that has, of course, had far more cogent expression over the past three years in the sacrifice of the lives of more than 100 British soldiers in the common adventure of the war in Iraq. Another extradition story suggests that America, however, is not so ready to play the game in return. Congress is refusing to ratify a mutual extradition agreement, passed by Parliament three years ago. The main consequence at the moment is that a number of paedophiles wanted in this country but living in America cannot be tried for their alleged crimes. With the mid-term elections coming up in November, Congress is unwilling to alienate any constituency within its electorate. True to form, and despite the lesson that the events of September 11, 2001 ought to have taught supposedly intelligent American people, the main fear is that the British Government might run after some IRA suspects if the agreement is settled. I wish it would, but this Government's cowardice in the face of these murderers and gangsters has proved unlimited. Indeed, it has more or less told the American political class this, and without any apparent sense of shame, in order to persuade Congress to agree the treaty. Our weakness is appalling. Most countries in our position, with a track record of strong support for an ally from whom they ask nothing other than equitable treatment, would know what to do: they would threaten to act towards the Americans in the manner of some other European powers, and see how that went down. However, there is as much chance of that as there is of our authorities at last going after America's unlovely coven of Irish republican murderers. These problems merely fall, however, into the category of differences among friends. They do not compare with what, to my mind, is the most shocking question of possible extradition facing our authorities, and about which we need to show a sense of resolution far beyond our usual capabilities: the demand by Russia to deport to that country's mercy the refugee Boris Berezovsky. For the avoidance of doubt or misunderstanding, I had better declare what amounts to my interest in this case. I have twice met Mr Berezovsky, who is usually described (with what degree of accuracy I am not competent to judge) as "a billionaire tycoon". I found him affable and interesting. I have never accepted hospitality from him, and he has certainly not given me any form of bribe, kickback or hedge fund recommendation, or enabled me to pay off my mortgage at a single bound. My interest in his case is motivated by no personal consideration of any sort, but simply by my amazement and outrage at the rhetoric now used about him by members of our Establishment, not least the Foreign Secretary, Jack Straw. Mr Berezovsky is in our country because, having made his fortune during the economic liberalisation of the Yeltsin years, he fell out with his former friend and colleague Vladimir Putin and left Russia at the beginning of this century, accused somewhat nebulously of "fraud". He was granted asylum here in 2003, such was the unpleasantness of the threat to his wellbeing were he to return to Russia. At that stage, Mr Berezovsky seemed to fall into the category of another fabulously rich Russian, the "billionaire oil baron" Mikhail Khodorkovsky. Both accumulated epic sums of money by means that probably would not encourage the committees of most London gentlemen's clubs to elect them to membership: but that is not the issue here. Russia in the 1990s was like the Wild West, or England immediately after the Conquest. Some men became very rich very quickly, often by being in the right place at the right time, or having the right friends. None of this would have counted against Messrs Berezovsky and Khodorkovsky had it not been for one of the uses to which they wished to put their wealth: a political career, and, more especially, one that put them in opposition to Mr Putin. Russia claims to be a democracy, but the treatment of Mr Khodorkovsky proves it isn't. Having failed, unlike Mr Berezovsky, to get out of Russia, he was arraigned on trumped-up charges of tax evasion. His personal assets and those of his company were confiscated by the state, which also levied a vast (and unpayable) tax demand for good measure. The media in Russia were confidently told of the verdict and sentence on Mr Khodorkovsky before his trial even started. As predicted, he is now doing 10 years in one of Russia's exceptionally enjoyable prisons. Mr Berezovsky's latest offence - though this was one in the eyes of the Foreign Secretary - was an interview he gave a few weeks ago to a Moscow radio station. "President Putin violates the constitution," he said, "and any violent action on the opposition's part is justified today. That includes taking power by force, which is exactly what I am working on." Mr Straw said that "we condemn these comments unreservedly". He warned that Mr Berezovsky's asylum status could be reviewed if he fomented a coup from this country. Russia at once re-applied for his extradition. The case awaits consideration. What Mr Berezovsky said about Mr Putin is true. Mr Putin has, in the past two or three years, abolished regional elections, rigged a general election, imposed strict sanctions on the media and, as we saw with Mr Khodorkovsky, abandoned anything resembling a fair and just legal system. The first application to extradite Mr Berezovsky was on grounds of his alleged fraud. Can any right-minded person imagine he would get a fair trial for fraud in any Russian court? In the remote event that he did, and if he were found guilty, can any right-minded person also imagine that the sentence that would be handed down would be remotely appropriate to the offence? In recent times, exiles here from other countries have said and done far worse things in relation to foreign powers than Mr Berezovsky, and have not been deported. But then there are no "community relations" issues at stake in sending a rich Russian Jew back to the certainty of a kangaroo court, a show trial and quite possibly the rest of his life in a brutal jail. This is all part of an ignorant Foreign Secretary's desire to do the bidding of his masters, and placate the new Russian tyrant for reasons most civilised people cannot grasp. I know this Government sets justice, freedom, civil liberties and the rule of law as pretty low priorities. But if Boris Berezovsky were to be extradited to Russia under its present regime, it would put a stain on our reputation for justice that would be impossible to expunge. See also: UK the 51st State? New green plan for oil recovery Oil giant Shell and Norwegian state-owned energy company Statoil have agreed a joint project to use carbon dioxide for recovering oil offshore. The scheme involves capturing carbon dioxide from power generation and using it to enhance oil recovery, which gives increased energy production with a lower carbon dioxide impact. The different elements of the project in Norway will be phased in during 2010-2012. Shell said the scheme was "technologically and commercially challenging" and that it would depend on substantial government funding and involvement. It said the project "responds to the important challenges of increasing energy supplies and addressing the related CO2 emissions." Jeroen van der Veer, Shell chief executive, said: "This is an important milestone for Shell towards our vision for greener fossil fuels with part of the carbon dioxide captured and sequestrated underground." Helge Lund, chief executive of Statoil, said: "Our aim is to establish a broad partnership in order to realize this ground breaking project. This CO2 project responds to vital future challenges facing the society, the environment and the industry." A plan for Statoil to build a gas-fired power plant has been held up by Norwegian government demands that it should not emit carbon dioxide, the main gas blamed for global warming. Estonia
Europe's hotspot for the second year
By Edmund Conway Estonia was Europe's property hotspot last year, while UK house price inflation dropped faster than anywhere else on the continent, research has shown. An annual survey from the Royal Institution of Chartered Surveyors shows how much the property pendulum has swung in favour of Europe's younger democracies. Its other conclusions are that the riskiest place to buy is the Mediterranean coast and that Ireland and Holland have had the biggest house price booms. Unprecedented demand for properties in the Baltic states helped push Estonian house prices up 28pc in 2005. The country - whose popularity has been boosted by cheap flights to its capital, Tallinn - was top of the RICS European house price inflation league for the second year running. Experts said the country's success was also due to its proximity to Finland, which provides much of its investment. Professor Michael Ball, author of the RICS report, said: "We are essentially talking about Tallinn here. There is a lot of overseas interest in property there, although it's essentially a very different market to other countries in Europe, is starting from a low base and is very small. They, along with a number of overseas countries, have also started to introduce mortgages recently, so domestic demand is now picking up." The UK, which in 2004 was one of Europe's fastest-growing markets, had house price inflation of just 3pc last year, making it one of Europe's worst performers. Prof Ball warned that the days when one could make thousands on the European property markets may now have passed. "People from around the world have been buying houses in Europe," he said. "There might have been bargains five years ago but I'd be very surprised if there were now. The riskiest area to buy would be around the Mediterranean," he added. "There is a lot of local demand and, given the European Central Bank is raising interest rates, homeowners may suffer. There is also a lot of house building." Despite the slowdown, Britain has had the continent's third-biggest property boom, with prices 137pc higher than when activity accelerated in 1995. But the report concluded it is Ireland, with inflation of 243pc since 1992, that has seen the biggest bubble. ITV profits soar despite advertising fall Caroline Muspratt 08/03/2006 Broadcaster ITV said profits soared last year despite a decline in advertising revenues at its flagship ITV1 channel. The company also said it would return £300m to shareholders over the next few months through buying back shares. Charles Allen, chief executive, said: "ITV has had another successful year with strong profit growth helping us to double our profits in the last two years. We have strong cashflow which has allowed us to invest in our businesses, improve the pension position and still be able to return cash to shareholders." Sales rose to £2.18bn last year from £2.05bn the year before, while reported pre-tax profits jumped to £311m from £168m. ITV said that operating profit rose 42pc to £460m. However, while net advertising revenue at ITV rose 2.7pc to £1.63bn last year, ITV1 - home of Coronation Street and The X Factor - saw a decline of 3.3pc. ITV said advertising revenue had been lower in the first few months of this year, and is expected to be down around 10pc in the first quarter. It said the decline was due to the fact that Easter fell in the first quarter last year while it will be in the second quarter this year, along with the football World Cup. By April, ITV said it expected advertising revenue to be up 6pc year on year. Mr Allen said: "As digital television approaches universal takeup in the near future, the downward pressure on ITV1 viewing share and revenue will slow, enabling ITV1 to return to growth alongside our rapidly growing digital channels." ITV, which bought Friends Reunited last year, said its target of achieving £150m from multi-channel by 2007 was now expected to be reached one year early. It has set a new target of £250m of multi-channel advertising and interactive revenue by the end of 2008. It added that revenue from digital channels rose 91pc last year. The broadcaster will launch a new games and quizes channel, ITV Play, in April. Mr Allen said: "We believe that ITV Play has enormous potential to lead the market for participation TV with higher production values, better programmes and bigger prizes." The company will pay a final dividend of 1.8p a share on July 3, giving a total of 3.12p a share for the year, an increase of 30pc. The shares rose 2¾ to 113½p in early trading. No
signs of recovery in advertising market
Newspaper publisher Johnston Press sees little sign of an early upturn in the advertising market after a tough start to the year. Advertising revenue excluding acquisitions fell 10.5pc in January and February, chief financial officer Stuart Paterson told reporters in a conference call. "In the early weeks of 2006 the advertising market remains challenging with no early signs of recovery," said chairman Roger Parry. Last week Trinity Mirror revealed their advertising revenue had fallen 13.5pc in January and February. However, Johnston is still hopeful of making progress over the year as a whole. "Providing market conditions do not significantly worsen, we are confident that 2006 will again be a year of progress in building our local media franchises," said Mr Parry. Pre-tax profit for the year to December edged up to £151.4m compared to £149.8m the previous year. Advertising revenue, excluding that from acquisitions, rose 3.7pc last year. The company acquired more than 50 new titles in Scotland and Ireland last year with the largest deal being The Scotsman Publications for £160m. Johnston Press proposed a final dividend of 5.6p, up 16.7pc on last year. The shares were down 5½ at 471½p in morning trade. World
Bank to provide $42M to Palestinian Authority
WASHINGTON: The financially strapped Palestinian Authority will get $42
million in World Bank funding to meet its immediate needs to provide
basic public services.The grant will be made through a multi-donor trust fund with support from international donors, reports the Middle East and North Africa agency. "The Reform Fund was designed to help the PA deliver essential public services under fiscal duress, while it continues to stabilize its public finances and advance fiscal reforms," said the bank's David Craig. |
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