Making predictions about the economy is notoriously difficult and a challenge that is best met by looking at all the sources – somewhere in the middle the truth might yet be glimpsed.

This post is a curation of what has been said online over the last couple of months with regards to the Economic outlook for 2013. Of all the predictions made this year 3 things stand out:

1. The Eurozone Crisis will not disappear, but it is less of a concern
2. American and China should continue to grow – even if it’s very modest growth
3. Investors should be looking to equities rather than bonds to increase yields

What Pensions Age said:

“The global economic environment will remain challenging and uncertain during 2013, but it will also offer opportunities for pension fund investors.” Pensions Age

Pensions Age where moderately upbeat about 2013, stating that 2012’s big storms of the Eurozone Crisis and the Chinese leadership transition will have died down considerable in 2013. They believe that low interest rates and anaemic growth will continue in 2013. They suggest “a strategy which favours higher quality stocks and is focused on enhancing yield through asset classes like high yield debt”.

What moneyweek.com said:

“‘More of the same’ is my current theme.” Dominic Frisby moneyweek.com

A rather sobering account of 2013 from moneyweek.com suggests nothing much will change. His belief is that we should look at the bigger picture, and for him that’s a ‘zombie’ like western economy with little movement in any direction. His more specific predictions are no country will leave the EU, the UK will lose its AAA rating and the Bank of England will own 40% of UK government debt.

What economicsuk.com said:

“Glimmers amid the gloom as risks start to fade.” David Smith economicsuk.com

Over at economicsuk.com David Smith gives his mixed opinion of the global economic outlook. Much like Pensions Age David thinks that the woes of the Eurozone crisis and US Fiscal Cliff are for the most part behind us, yet he says we may not be out of the woods yet and both these spectres may come back to haunt us.

What Russell Investments UK said:

“Ongoing volatility, possible recession in Europe likely will be countered by continuation of growth, albeit slow, in U.S. and Chinese markets” 2013 Annual Global Outlook

Russell Investments give a reasonably positive outlook for the year ahead. They think we have a reasonably volatile year ahead mainly due to the tug-of-war between austerity and reflationary monetary policy in the Eurozone, yet despite this investors should see signs of a global recovery, mainly due to a continuation of US and Chinese growth. Much like many other commentaries Russell see that the low yield on bonds will force investors a little up the risk curve towards equities.

What Money Observer said:

“Investors worried about the levels of debt in global economies, the lack of economic growth and the long-term costs of governments’ attempts to refloat their economies.” Heather Connon moneyobserver.com

Money Observer isn’t so sure that the Eurozone crisis is over citing that the southern countries are still on uncertain ground while the entire region is suffering lowered consumer demand due to austerity policies. The positives come in the form of global companies that are doing reasonably well and could benefit from a recovery in the US and a soft landing in China.

What the Telegraph said:

“Small but more sustained economic recovery in the latter part of 2013, which could mean another good year for equities. And investors already appear more confident, with more putting money in shares rather than bonds or cash.”

The Telegraph asked a lot of experts to make predictions about key aspects of the economy. On equities vs. bonds HSBC and others agreed that there would be a gradual slow recovery in 2013 and with such a low yield on government bonds the case for equities is strong. Again chat of the Eurozone brings in mixed opinions the worst may be over – maybe. Tech companies particularly those in the cloud and mobile computing arenas may be worth a punt in 2013 according to HSBC strategists. The outlook for housing and saving is still grim with the consensus being there isn’t much to be gained in either investment options.

This blog has been written on behalf of Russell Investments . The opinions expressed herein are not a statement of fact, are subject to change and, unless they relates to a specified investment, do not constitute the regulated activity of “advising on investments” for the purposes of the Financial Services and Markets Act 2000. This material does not constitute an offer or invitation to anyone in any jurisdiction to invest in any Russell product or use any Russell services where such offer or invitation is not lawful, or in which the person making such offer or invitation is not qualified to do so, nor has it been prepared in connection with any such offer or invitation.

Image by The Prime Minister's Office

The promised referendum will only have one question – should Britain be in the EU or not? There is no question of other issues such as monetary union being discussed. Cameron has said that he will be campaigning to stay, but that he will also be seeking a ‘repatriation of powers’.

Uncertainty

There has been criticism of the decision to announce a possible referendum for creating uncertainty. The consequences of Britain possibly leaving are at present unknown, however critics of the referendum plan say that uncertainty could discourage investment in Britain and delay economic recovery.

One of the consequences of uncertainty over Britain’s future in the EU could be an increase in the cost of government borrowing. This would be as a result of the bond market reacting negatively.

Majority would quit

A recent poll found that a clear majority of British voters would vote to leave the European Union. The referendum would happen in 2017, but if it were to happen now 34% would definitely ask to leave, along with a further 22% who probably would. The total amount who would definitely vote to remain is just 30%.

Support for remaining in the EU is in short supply across supporters of all political parties. The most pro-European are the Liberal Democrats, however even four out of ten amongst them would vote to leave. By promising a referendum despite thinking Britain should stay, it is possible Cameron is hoping for an electoral boost due to the popularity of this policy with both Conservative and Labour supporters, and to neutralise the threat posed by UKIP.

A lot could change by 2017, with both the ‘in’ and the ‘out’ camps having a chance to argue the case. The benefits of EU membership are likely to get more coverage as part of this discussion, as well as the possible risks and benefits of leaving.

Do you think Great Britain should leave the EU? Please feel free to share your thoughts in the comments below.

Image created using a photo by "Images_of_Money" found on flickr

As the 3rd largest bank in Ireland, Ulster Bank currently operate 146 branches south of the border and 90 in Northern Ireland. The decision has come as part of the company’s recent review of their branch network. The Irish Bank Officials’ Association has indicated that the ROI and NI will see roughly half of the closures each.

In 2011, the bank was forced to write off £1bn in bad loans, mostly involving property. Last January it announced plans to shed 950 jobs over the course of 2012 - 350 in Northern Ireland and 600 in the Republic. However, the high profile IT problems experienced in the summer caused the redundancy plans to be delayed.

Ulster Bank did stress that they have no further plans for redundancies beyond the 950 announced last year.

No detail of the branch closures have been revealed yet. A spokesman for Ulster Bank explained:

“We continue to keep our branch network under review to ensure that we are operating in the correct locations for our customers,” said a statement from the bank.

“As part of this review we will be closing in the region of 20 branches and sub offices on the island of Ireland in 2013. We expect to be in a position to provide further details in the next few weeks and will communicate directly with our customers and employees at that time.”

Ulster Bank is likely very keen to see many customers begin using internet and mobile banking in the UK and Ireland.

In November the National Irish Bank closed all of its branches and rebranded to Danske Bank (the name of its Danish owners), switching entirely to servicing customers via post offices, internet banking and phone banking.

Over the course of 2012 several other major banks announced branch closures on the island. In July TSB Permanent announced it was planning to close 19 of its 92 branches with around 250 job losses. Allied Irish Banks has already closed 51 of its 267 branches with another 16 set to close over the coming months.

This all comes on top of a raft of closures of small banks which folded during the financial crisis.

It looks like many Irish customers will have to get used to the idea of either doing their banking at the post office or using phone or internet banking.

Are you planning to start doing your banking online or over the phone? If so feel free to let us know your feelings about it.

UPDATE 17/1/13 - Branches/sub-offices to be closed - 22 in total:

The Republic of Ireland closures:

Belturbet (Co Cavan), Castlepollard (Co Westmeath); Glenamaddy (Co Galway), Killeshandra (Co Cavan) and Kilnaleck (Co Cavan), together with the following sub-offices: Carrigallen (Co Cavan), Delvin (Co Westmeath), Kilcormac (Co Offaly), Kilkelly (Co Mayo), Rathangan (Co Kildare) and Swanlinbar (Co Cavan).

Northern Ireland closures:

Carryduff near Belfast, Dromore in Co. Tyrone, Harryville near Ballymena, Jordanstown near Belfast, Knock near Belfast, Longstone Street in Lisburn, and Shaftesbury Square in Belfast City; together with the following sub-offices: Ardglass in Co. Down, Moy in Co Armagh. Rosslea in Co. Fermanagh and Saintfield in Co Down.

It seems like money makes the world go round. There have however been plenty of experiments involving doing away with the official currency.

Before there was proper money goods and services were exchanged directly for each other. Eventually Sumerian types decided that it was easier to trade using granary receipts rather than the grain itself.

Systems of barter have often been used instead of currency. There are some big problems with this however. For example you need to have something that the other party either wants or is confident enough in the value of. The second is the inconvenience and lack of portability of certain things for trading with.

While there are definitely those who would relish the hassle they could cause by paying a parking fine with a sheep, difficulties involved in barter often lead to the creation of so-called ‘alternative currencies’.

Sometimes alternative currencies are local. An example of this being London’s ‘Brixton Pound‘. There are also places where the currencies of other nations are used (often illegally due to instabilities in the local currency). An example of this is Zimbabwe, where US dollars are used.

A high tech example of an alternative currency on the very cutting edge is Bitcoin. This is a totally digital currency (based on cryptography) intended to bypass the need to use troublesome online payment systems.

Bitcoin has been the subject of a certain amount of controversy. Part of this is because because of its percieved (arguably not actual) anonymity it was being used by some to facilitate illegal activities. There are also open questions about whether the whole Bitcoin project is actually an elaborate ‘pump and dump’ scam - though that is a question for another day.

The issue of alternative currencies is perhaps a timely one. The single European currency has been kept operational - barely. How long this situation can continue is anybody’s guess, though the desire of members to control their own monetary policies is certainly growing.

A country leaving the Euro would need its own currency. There have been rumours that governments have begun to print their own replacement currencies in readiness for such a scenario.

In the event that a country such as Greece were to ditch the Euro it is likely that the exchange rate for the new country would be set to match the Euro. After the launch date however it is inevitable that the value of the new currency would plummet.

Perhaps the difficulties surrounding government backed currencies will lead to alternatives being widely sought and accepted. One thing is certain however: while currencies may come and go wealth will remain.

What is your view on alternative currencies ?

Who cares when your holiday was this cheap

It is the cheapness I want to talk about today. Most of the time wisdom tells us that if we get ourselves organised and book well in advance we will save money, but that isn’t always the case with a holiday.

Booking a holiday in advance can help us plan and budget over a longer period of time, but by doing this you miss out on the potential savings that can be had when hotels and operators find they have more capacity than demand, making them slash their prices at short notice.

The logic for hoteliers is that they would rather have someone in the room paying anything than the room sit empty.

Over the last decade many websites have sprung into existence that capitalise on this opportunity for hoteliers to fill otherwise empty rooms and offer consumers massive savings on their accommodation. It’s a win, win, win opportunity for all involved.

One these companies lastminute.com have a rather fun offering called Top Secret Hotels.

Big expensive 4 and 5 star hotels don’t really want to advertise that they are letting rooms at massively cut back prices, imagine all the rich guests that booked months in advance coming down and demanding they get the same reduction?

Lastminute.com has got around this problem by not actually mentioning the hotel. All the customer is told is roughly where the hotel is, that it is a minimum 4* and how much of a saving they’ll make.

I remember traveling around America only booking hotels on the day I arrived in a city. I ended up traveling around America in 5* hotels for the same price as motels!

Now that the summer is over there are even more savings to be had by booking a last minute holiday, all you need now is some inspiration. lastminute.com have just made this little widget to help you with that. Be inspired and get out of here on the cheap!

Image by: Feral78

It seems that prevention rather than cure is no longer a savvy saying for business minded moguls.

Although it is obvious that protecting a company’s technological infrastructure from hackers will ultimately pay-off in profits (or, at least, in the prevention of loss), there is now more money to be made by making sure you are part of the solution when everything does descend into chaos.

The best way to protect your business? Invest in a company who knows how to.

The technology and business worlds are constantly reporting on the huge hacks of major companies. Millions of Sony users had their personal details published on the Internet last year, whilst more recently, Bank of America and Godaddy.com were brought to their knees by hackers.

Although these companies thought they had sufficient security measures in place, hackers constantly find smaller and smarter gaps in security systems to weasel their way into. Wired journalist Mat Honan’s digital destruction is enough to put the fear of god into any Internet user, never mind a multi-million pound company that is responsible for screeds of its customers’ information.

Investing in an Internet security company may mean all is not lost when a spanner is thrown in the works - a small silver lining to a very grey cloud, but a glimmer of a win nonetheless.

Image by: bandarji

Who should you invest in?

 McAfee is a major player in the Internet security world and is now owned by Intel. In a recent earnings report, the company reported a $75million (£46.3million) growth in its Software and Services Operating areas and a $28million (£17.3million) increase in operating income, after a $14million loss last year. Thank you, hackers.

Symantec, developers of Norton Antivirus are currently in control of around 10% of the worldwide cyber security market and have recently hired new CEO Steve Bennett in a bid to increase that share.

Lesser-known Check Point Software Technologies specialises in IT security for companies and is used by 98% of all Fortune 500 companies. They must be doing something right.

Ultimately, as business dependence on the Internet increases, so will the threat of security hacks. In a changeable environment, betting on disaster seems to be the best way of ensuring a winner.

What are your top tips for cyber security investment?

Motorists around the country groaned as the price of petrol rose once again as they went to fill up. But motorists could potentially have something to shout about.

Picture by Images_of_money

The Office of Fair Trading (OFT) has announced it will investigate whether motorists are getting a fair deal from the fuel industry.

When there is a reduction in the price of crude oil, it should mean the savings are passed onto the motorists, but the OFT is concerned this isn’t the case.

The watchdog will gather information from the industry, consumer bodies and motoring groups over the next six weeks with the results to be published in January 2013.

Since June 2007, the price of petrol has risen by 38% while diesel rose by 43%, showing just how expensive it is to drive these days. That’s not including the 3p fuel duty they plan to put into place in January, which was postponed from August.

But it’s not just the UK who is feeling the hit in their wallet. Other European countries have also experienced similar rises in fuel.

It might be hard to believe, but the UK isn’t the most expensive. This table shows that The Netherlands, Italy and the Scandinavian countries are paying more to fill up their vehicle.

You can compare the prices of petrol in different countries here. The graph below shows the dramatic difference in prices between the UK (blue) and the US (purple).

Infographic by Staveley Head

Do you think petrol prices in the UK are fair? Tell us in the comments section below.

It was really only a matter of time; we’ve been relying too much on German coffers to keep Europe’s struggling nations (in particular Greece and Spain) afloat.

However, now its much coveted AAA rating has been classed as “outlook negative”, meaning they’re on the edge of being downgraded.

It’s all tied to the ever increasing liklihood that Greece will exit the euro and that Spain might be looking for a full bailout.

Spanish banks are reported to be sitting on losses as eye-wateringly high as €180bn. It looks like they’ll be borrowing an initial €30bn to prop up the banks until September when they’ll decide how much of a €100bn bail out they’ll accept. Scary stuff.

So now Germany is following France, Austria, Netherlands and Luxembourg who are also on a negative outlook.

Adam Mayer asks the question on everybody’s mind:

#Germany‘s #AAA rating under threat… how long will they continue fueling more #EU #bailouts? bbc.co.uk/news/business-…

— Adam Mayer (@adam_mayer) July 24, 2023

Despite the gloom for Germany, some people aren’t confident in Moody’s. Who rates the ratemen?

Moodies really doesn’t have any credit worthiness themselves, they are just a glorified analysts #germany #AAArating — Patrick May (@confusdeconmist) July 24, 2023

 Peter Spiegel, the Brussels bureau chief of the Financial Times has a slightly more tongue-in-cheek perspective:

Summer arrives in Brussels! Warmth! Sun! Blue sky! What could possibly go wrong? #Spain #Greece #Moodys #etc — Peter Spiegel (@SpiegelPeter) July 24, 2023

And Max Keiser, the financial meltdownist at Russia Today has a solution to the Spanish problem:

Spain should bring back bull fighting, but with banksters instead of bulls.

— Max Keiser (@maxkeiser) July 22, 2023

Okay, we don’t want to make too much light of what is a very serious situation.

Germany was always been viewed as the financial powerhouse of Europe and if it can fall onto the credit rating chopping block, things for the rest of us don’t look so good.

Are you worried that Germany will lose its AAA rating? What will be the impact on the UK and the rest of Europe? Tell me what you think in the comments below.

Debt is never far from the news these days. Here are some of the similarities and important differences between government and personal debt.

The comparison to the kinds of debts held by governments and the problems of that and personal financial responsibility is an understandable one to make. The numbers involved, after all, are so astronomically high that it is hard for anybody to get their head around.

Image via Sandra Fortner (Pinterest)

Government borrowing is frequently described as being like a person borrowing to live beyond their means. The great advantage of this analogy is that it is simple and easy for anybody to understand.

We can all easily grasp this concept as it relates to our everyday experience. The big disadvantage to it though is that it does not really accurately reflect the reality of the situation as it actually is.

The biggest misconception is that governments are expected to pay off their debts in their entirety.
If an individual takes out a loan then they are expected to repay the whole thing, but his is not really the case with governments.

For governments the important thing is that borrowing can allow economic growth to continue, and being in debt is really no bar to this happening.

Some of the periods of most rapid growth in the economic history of both the United Kingdom and the USA have occurred at times in which the governments of these countries were heavily indebted.

With government borrowing whether debt is good or bad is a very complicated question.

It is not really one that can be answered with domestic finances as the frame of reference as there are exponentially more factors involved and concerns to be born in mind. For individuals though, the difference between good and bad debt is very easy to see.

Getting Personal

The only kind of debt that an individual can have that can really be seen as beneficial is that which is facilitating growth. The most obvious example of this is a mortgage. Paying off a mortgage rather than spending money in rent usually actually amounts to saving, with the increase in property prices over time sweetening the deal.

Another example of a personal debt that can be seen as being a good thing to get into are student loans. This is a controversial topic, but in theory at least borrowing money to fund an education is worth it because it allows greater income in the future.

Bad debt is also easy enough to understand in the realm of personal finances. The absolute worst are loans at exceedingly high rates of interest.

These tend to be for small amounts and are intended to be paid back over a short period of time. They can however quickly spiral out of control, especially as it is the financially disorganised who are likely to need them rather than having some cash in a savings account to smooth out cash flow issues.

Has getting into debt helped or hurt your finances? Share your experiences in the comments if that’s your bag.

University fees are on the increase in the UK, with some English universities now charging as much as £9000 for tuition.

Students and educators across the country have expressed their concern over these increases, worrying that the higher cost will exclude many prospective students from pursuing a degree - and new figures suggest that their concerns may be well-grounded.

Image via Tulane Public Relations on Flickr

It was reported today that as of the end of June 2012, applications for places on courses commencing in Autumn 2012 are down by 7.7% (according to the Guardian) and 8.9% (according to the BBC) across the UK. England sees the sharpest drop, with 10% fewer applicants than this time last year, while Northern Ireland is down by 5%, Wales by 3% and Scotland by just 2%.

At first glance these figures suggest that prospective students are being put off by the increased tuition fees, but of course there is some debate over how best to interpret the statistics, and even whether such a drop is necessarily to be seen as a bad thing.

For instance, Nicola Dandridge, chief executive of Universities UK, seems to take an optimistic view of the situation. She is reported as saying:

 ”These figures confirm that the fall in applications is far less dramatic than some were predicting for this year. We must remember that the numbers here relate to applicants, not places. There will still be considerably more people applying to university this summer than there are available places.”

This massive wave of applicants reflects the long-held belief that a university degree is a passport to a better future.

In years past, when there were fewer graduates and more jobs, this certainly was the case. But as most western economies continue to flounder and more and more students emerge onto the job market only to find there is no employment for them, many are questioning the value of the traditional university degree - especially those in subjects from the arts and humanities that may not have direct relevance for many jobs.

There was less of a drop (only about 3%) in applications from 18-year-olds just leaving school than from older students aged 19 and up (a 12% decrease).

While some unemployed people in their twenties may initially have tried to wait out the recession by further developing their education and skills, this decrease in applicants may indicate that fewer young people view higher education as a means to better employment prospects and are no longer willing to make the commitment in terms of time and expense.

This tendency would contradict Universities Minister David Willetts’ belief that “people continue to understand that university remains a good long term investment for their future.”

However, there is still some anecdotal evidence that employers still look at university degrees as a means of winnowing down the vast number of applicants they receive for each advertised job. In some cases it may give applicants an edge, as undergraduate degrees at least have become so common nowadays that anyone without one may be automatically disqualified in favour of more educated peers.

It is also unclear how many potential students who decide against university are furthering their prospects in other ways, such as undertaking training in a trade. Some would argue that redirecting young people away from traditional universities (which are already oversubscribed) and into other avenues where there are shortages in fact redresses a bigger imbalance, and may in fact improve the individual’s job prospects in the long run.

Similarly, it is not clear whether more affluent students are also pursuing other options, such as studying abroad or taking a gap year - which could explain why there was a bigger drop in applications from affluent areas than from poorer segments of the population - a rather counterintuitive result. (Although it must be remembered that poorer students are still underrepresented in the university system as a whole.)

What do you think - are university degrees still a good investment? Is the drop in application numbers caused by rising fees, or by people deciding other options might be better?