If you are of the opinion that the forecasting records of such experts are less than impressive, then you would no doubt have taken the elements of such an overview which could not be categorised as “bleedin’ obvious” with a sizeable dose of sodium chloride. Nonetheless many corporations lap these things up and focus their resources accordingly.

Obviously the forecasts above were dependent on a number of assumptions based on demographics, availability of resources and capital, and increasing levels of education, democracy and productivity. Oh and they used the history of economic development and applied it to their forecast model. The past is no guide to the future or those who forget history are condemned to relive it? Well you pays your money….

However one constant assertion particularly caught my attention. Although the assumptions might have been wide ranging, the model used was “extremely robust”. Oh really? I presume by this that they meant that it all added up and the calculations worked. I can’t think what else apart from the fact that it also produced pretty graphs and charts.

Having put together a number of forecasting models I know that however good you are at Excel, and however many checks and balances you put in place, your output can only be as good as your inputs. If the assumptions are fatally flawed then the model, however robust it is, will be flawed as well. It is vital that everything is questioned and verified, and that lessons from previous forecasting processes are learned and acted on.

Actually when trying to visualise the very long term future, and trying to judge what changes might take place, I find it helps to cast your mind back the same number of years.  The noted music journalist and magazine publisher David Hepworth recently mused that it was 49 years since the first Rolling Stones single was released in 1963, and if you went back 49 years from that point Gavrilo Princip’s trigger finger was about to unleash the horror that was the First World War. The inhabitants of 1914 would never have been able to envisage the swinging decade epitomised by Jagger, Richards et al.

To me that puts this whole long term forecasting lark into perspective. Anybody going back 38 years ago from today would have found themselves in 1974. Our intrepid forecasters from that time almost certainly would not have assumed a 2012 of persistent inflation, petrol price hikes, rising unemployment, world recession, and collapsing financial institutions. They might have assumed that we would have learnt from their experiences. The chances of the citizens of 2050 benefiting from us having learned the lessons of our current predicament will tell you more about the future than a “robust” forecasting model will ever do.

Since the day of the match, every soccer pundit in England has been wondering what to do with Mr Barton…Well, as the soccer authorities are clueless, let’s take a look at another winter team sport which is growing in popularity by the day.  Step forward, Rugby Union.  Violent conduct – red card and a long suspension.  Assaulting a match official – lengthy ban running into years. Cheating?  Well “Bloodgate” cost Dean Richards a three year ban from the game.  Disputing any decision during a match – a 10 yard march forward.  Yellow cards carry a 10 minute sin binning. Coaches and spectators can be sent off too.  Everyone knows who is in charge. The referee IS respected. The consequence is that there is no crowd trouble.  In the time I have been a season ticket holder at Leicester Tigers, I do not recall seeing a police officer at all…No need.  We respect each other, fans and players alike even to the extent of silence descending when either side has a penalty and elects to go for goal.  Everyone is welcome at Welford Road.  No need for crowd segregation and you can take your pint to your seat.

The clincher for me is at the end of every rugby game, from local veterans to premier league, the teams form a guard of honour to clap their opposition from the field of play then everyone (match officials too) retire to the bar.

I acknowledge the frustration of decent soccer supporters at the inability of referees to deal effectively with the devaluation of their game by the overpaid prima-donnas who play it at the highest level and cheat.  I do not know why the great referees of that game have to put up with the antics of such players when those in charge of rugby matches do not.

Interestingly, teaching friends of mine tell the wonderful story of a teenage lad who Fs and blinds at the referee when playing soccer yet transforms into a respectful and polite young man when playing rugby union.

Message to the FA…Respect starts at the top and cascades down.  There is no point in introducing a respect agenda at the ground floor when top-level players are allowed to act like morons with impunity.

To those in successful businesses and indeed the military, mutual respect and good manners are endemic.  There are the foundation stone of leadership and motivation.  Our great entrepreneurs and generals inspire those under them by setting an example.  Society’s problem now is that many who know their rights demand a level of respect they themselves are simply incapable of reciprocating.  It would do no harm for soccer stars to grow up and accept their wider responsibility to society and thus improve a game that has given each of them so very much.

Final word to the FA…Get a grip!  Ban Barton for life.  Your game doesn’t need him.

Lets start with PLUS. This small stock exchange managed to spend several times its annual revenue for years whilst failing to build a market. The Directors took excellent salaries and whilst they built what could have been a fantastic market, they saw themselves as regulators. Simon Brickles showed great promise  but failed and why his successor was chosen at all will remain a mystery forever.

The problem of PLUS was simple – they refused to be a market, but wanted to be a regulator and they were not even any good at that. Had PLUS been alert it would have taken the 500 companies on lower AIM and in time transformed itself into a comprehensive equity based crowd funder backed by a trading platform. It had every opportunity to be a stunning success but PLUS wanted to regulate but of course nobody wanted or needed this. There are plenty of regulators about and they spend enough time annoying all of us.

Jamie Dimon wanted to become a regulator also. Having missed the job at Treasury he was angling to run the Federal Reserve. After all he is estimated to be worth more than $200 million, all made as a paid employee, so he needed the power not the money. In the meantime Jamie told everyone the banks could regulate themselves whilst ignoring the warnings that his gambling operations were losing a few billion.

In theory we can all regulate ourselves but as management you do have to keep your eyes and ears open. Having taken £25 billion or so in TARP funds courtesy of the US taxpayers Jamie was the last to figure out that there was a “whale” in his organisation (bit like the elephant in the room). Even more embarrassing is that the whale was again using those wonderful derivatives which caused the whole economic disaster we are in anyway. It proves that the management of JP Morgan and the regulators have learned absolutely nothing. But no worries as JP Morgan is too big to fail and with Jamie at the Fed driving seat the future appeared very bright.

Of course one might ask where the Bank of England was in all this or the FSA or whatever other regulator we have around here. The whale was in London and everyone knew that but Mr King was strangely quiet on the issue as he ranted about Eurozone problems. Of course regulators don’t use silly things like Bloomberg. They use sophisticated tools like people (no doubt highly paid) to work within major banks. So whilst the regulators were contemplating their next salary slips and pensions several hedge funds made a lot of money cleaning out the whale and JP Morgan.

So that gets us nicely to Greece. After all Jamie D is of Greek descent so he has some interest. The Greeks do not want to leave the Euro. Most of the people who are affected by the austere regulations put on them by the very very well paid bureaucrats living in much less pleasant climates, are simply fed up paying for the problems caused by those same regulators. The Greeks have overspent, encouraged by banks and major companies, but even worse they have never been successful in getting taxes paid. In fact my impression is that no regulation has ever worked in Greece, so why anyone gave them all that money in the first place is unclear. Banks and regulators made bad business decisions and now the taxi drivers have to pay.

Back to the question what the Greeks, Jamie Dimon and PLUS have in common? They have all found that regulation does not stop simple stupidity and they should have stuck with keeping eyes and ears open whilst doing business. Increasing regulation will not solve the problem; it will only increase the number of jobs worths.

“My agenda is to show you how to gain personal success using behavioural change techniques in all areas of life.”

Ms. Henderson is clearly a person who likes a challange. She’s just about to get her biggest to-date. Members of Parliament are being offered her services. It should be interesting when Nadine Dorries arrives as to whether she’ll manage to say much more that “here’s the bill.”

I accept that MPs are rather stressed. They must worry about how to plan their time for the six months of the year when they’re not working…sorry, sitting. How to structure their offshore trusts to avoid paying tax on their property investments, how to spend the £65,000 tax free pay-off they receive if they are not re-elected and how to plan enjoying their extraordinarily generous pensions.

Between the middle of July and the third week of September this year MPs will sit for just 12 days. That will leave plenty of time for them to visit Ms. Henderson in Harley Street. Anybody willing to bet against them claiming the costs on their expenses?

+++++++

The final details of the SEED/EIS facility which allow qualifying companies to raise up to £150,000 from private investors have been published in the Finance Bill. They are expected to become law in July when the act will be passed by Parliament. Investors are able to claim up to 50% income tax and up to 28% capital gains tax relief. All gains and dividends are tax free providing the shares are held for at least three years. The maximum investment from an individual is £100,000. A business may only use the scheme once but may be eligible to attract EIS reliefs if it wishes to attract further investors.

• Greece and the EU remain on a collision course and a strong decision needs be made as soon as possible
• Political issues, rather than fundamentals, continue to drive sentiment
• JPMorgan Chase announced $2 billion of trading losses, affecting banking stocks and increasing the pressure on regulators to clamp down on risk-taking
• There is a large difference between European politics and quality European companies. We hear from St. James’s Place fund managers on this important distinction, and the long-term opportunities arising from volatile markets.

Market volatility continues

• Greece and the Eurozone reaching the end game
• Political issues, rather than fundamentals, continue to drive sentiment

Greece and the EU remain on a collision course. A strong decision needs to be made that Greece either leaves the Eurozone entirely, or accepts the austerity measures to which it originally agreed. There is no middle ground and the pressure to find a solution is intensifying. Equity markets hate uncertainty and political wrangling is clouding the economic progress being made around the world and the improved strength of many companies. Undoubtedly, Greece leaving the euro would see short-term turbulence across a range of asset classes, but it would not necessarily see the end of the single currency entirely. A stronger politically coherent euro could be the result.

Looking beyond the turbulence caused by European politics, last week’s market sentiment was driven by heavy losses incurred by JPMorgan Chase and Spanish banking woes. Global stocks have been through their longest run of losses for six months, while the euro has experienced its longest run of reverses since 2008. Investors tentatively returned to equities late in the week, despite JPMorgan Chase’s $2 billion trading losses, pushing equities higher for two consecutive days. The tone for a week of volatility was set by the elections in Greece and France, as the subsequent political posturing in Athens threatened to unravel the country’s bailout deal, again raising doubts over Greece’s continued participation in the single currency. This situation is likely to remain a short-term problem for equity markets until a compromise is found by politicians. Mohamed El-Erian, CEO of PIMCO agreed. “Simply put, this translates into more fragmented European politics, at least in the short term. A politically disparate Europe will find it even more challenging to reach common ground on a range of important issues. Europe’s election results sound an alarm for European integration and, consequently, the wellbeing of both the region and the global economy. Let us hope that the inevitable short-term volatility is a precursor to a more decisive effort to deal with the problems.”

“Ultimately, there can be no strong Germany without a stable Eurozone; no stable Eurozone without a strong Germany; and no global stability without both. It is time for Europeans to make the difficult longer-term choices that are critical to sustaining and enhancing their regional project.”

Action by the Spanish government to address their own banking problems improved risk sentiment as Spain took a 45% stake in Bankia, while forcing other lenders to set aside new provisions amounting to around €30 billion of capital to protect against bad loans. The upbeat note was further enhanced by US consumer confidence reaching a four-year high, balancing out the impact of JPMorgan Chase’s troubles on the US market. The FTSE 100 Index pared losses for the week after closing at 5,575.5, down 1.4% in total as banking stocks suffered amid speculation of tighter regulation. Among commodity markets, gold’s perceived status as a safe haven took a further knock, retreating to four-month lows below $1,600 per ounce and falling 3.5% for the week. Elsewhere, crude oil and copper slipped further, hindered by weak economic data and a strong US dollar.

JPMorgan Chase suffers huge losses

• JPMorgan Chase announces $2 billion in trading losses
• Banking executives express concern that regulation will be toughened as a result

JPMorgan Chase caused billions of dollars to be wiped from the value of banking stocks, while also increasing the pressure on regulators to clamp down on risk-taking at financial groups. The value of JPMorgan Chase fell more than 11%, more than $10 billion, and had a significant effect on Goldman Sachs, Citigroup and Morgan Stanley as investors troubled themselves over the possible impact on other institutions. Speculation increased that the bank may lose more money as traders tried to identify whether the company was still linked to derivative positions. Jamie Dimon, the chief executive, had previously succeeded in distinguishing JPMorgan Chase from the competition on Wall Street by concentrating on managing risk; with the result that deposits with the bank had been boosted by over $400 billion in the last five years. Investors recognised it as the safest of the major US full-service banks. Given the reputation forged over recent years, it is perhaps even more difficult for investors and regulators to understand how such a situation was allowed to occur.

Regulators were investigating the JPMorgan Chase losses from trading credit derivatives in its chief investment office. Rival banking executives expressed concern that rules governing trading would be tightened in the aftermath, worrying that US politicians may look to make political capital out of the announcement. JPMorgan Chase has thus far refused to explain how the strategy went awry, presumably because it still holds some of the loss-making positions and is afraid of allowing rivals to take advantage of the situation. Critics have cited the news as evidence that investment and retail banking operations should be split, but bank sources have warned that the plans by the UK and US would not have prevented the $2 billion loss. All retail banks have a treasury department tasked with hedging risk, just like the operation at JPMorgan Chase. Nevertheless, we believe that further tightening of legislation around the banking sector is inevitable.

Shocks create opportunity

• It is important for any long-term investor to recognise opportunities that arise from volatile markets
• There is a large distinction between European politics and quality European companies

The weekend press was awash with debate over how investors can cope with the market volatility caused by the ongoing Eurozone problems. All offered different solutions, with certain sections of the media still highlighting gold as a safe haven, despite the argument that a ‘safe haven’ asset should not fluctuate sharply in price in relatively small periods of time. Julian Jessop, Chief Global Economist at Capital Economics, agrees:

“Gold is now behaving like a risky asset. This can be seen in the unusually high correlation in daily prices of gold and European equities. A low or negative correlation should be a key characteristic for a safe haven.”

Diversification across asset class and geographical region remains the essential tool to reduce volatility within any investor’s portfolio; we have always advised clients to hold any short-term liquidity funds in cash to enable them to take a longer-term view with their growth assets. It is difficult to predict short-term fluctuations, especially when these movements are based on political wrangling and investor sentiment, but volatility does not need to be feared by a long-term investor.

Now that the dust is starting to settle on the news that Angela Merkel may not be able to rely on French support, and Greece may decide not to repay its debts, it is important to recognise the potential opportunities that open up. It is also a chance to weigh up exactly what it means for investors exposed to European companies. Stuart Mitchell, manager of the St. James’s Place Continental European funds, opined: “Stripping away the election rhetoric and Anglo-Saxon press hysteria, not very much will change with the election of François Hollande in France. There will undoubtedly be some sort of face-saving deal whereby the stability pact will remain firmly in place, but it will be adapted with some sort of growth pact. This could take the form of a number of infrastructure investments financed by the much-speculated-upon ‘eurobond’. As to his other plans, such as reducing the retirement age to 60, these are impossible to enact while growth remains weak and France remains committed to a balanced budget until 2017. Mr Hollande will also be conscious that markets will be keeping a close eye on his every move. At the end of the day, Europe will probably muddle through. The debt challenge to Europe is, in reality, less severe than those facing the UK and the US. However, the key difference is political. In contrast to more macro-orientated investors, we continue to be impressed by the strength of the corporate sector. Whilst a number of our company meetings have revealed weakening demand in Italy and Spain, this is more than offset by accelerating growth in the US and continuing demand from emerging markets.”

“At a company level, you can buy some of the best multinational companies in the world at 40–50% discounts to their competitors in the US. The only real difference is that their headquarters happen to be located in Europe.”

This is a view shared by Ken Broekaert of Burgundy Asset Management, whose view remains unaffected by short-term news flow. “Nothing has changed as a result of the European election results. Our views on our French holdings [Sanofi, Publicis and Neopost] have not changed at all, nor has our overall sentiment on the European situation as a whole. We are happy owning a portfolio of high-quality global businesses not dependent on European fortunes for their success. More than 50% of the profits derived by our companies are earned outside of Europe, and while the news is unwelcome, it will not affect our long-term focus.”

For equity investors, it is important to understand the nature of the businesses themselves, rather than placing unnecessary prominence on where the company is listed. News flow, both positive and negative, will continue, and the road to economic recovery will be long, but history shows that this is where the greatest opportunities arise. Richard Oldfield, manager of the St. James’s Place High Octane fund, stated: “We feel that the macro-economic dominance will continue for some time, but this provides an opportunity.”

“A company like Fiat SpA, though quintessentially Italian, is in fact a global company with well over half of its profits derived in the US through Chrysler, and 18% in Brazil. However, its share price has been battered by the problems of the Eurozone.”

“We think we are quite likely to lurch from crisis to crisis in Europe but, in the meantime, the window of opportunity in terms of valuations could well be open. It may well take time, but it is still an opportunity. If we knew for sure things would get worse, we would delay investment, but not knowing this, we should take advantage of a level of valuations in the likes of Renault, Fiat and ENI where it is difficult not to see significant returns over the long term.”

Patience is often rewarded

Weak economic growth in the UK, as well as the continued troubles of the European Monetary Union, may well see lower equity returns for investors in the short term. Looking further ahead, equity investors need to focus on the strengths of the individual companies in which they invest. For example, the price/earnings ratio, which takes into account the current share price and the previous year’s earnings, is often used as a guide as to whether a share is ‘cheap’; the lower the number, the cheaper the share. Since 1990, the average price/earnings ratio for the UK stock market has been 17.3; while over the last ten years, it has been 12.9 (source: Capital Economics). At the start of 2012, the ratio stood at 11.7, meaning that any reversion to the long-term average could see significant long-term opportunity. Of course, this is just one guide and there are no guarantees, but whether the subject is Europe or the UK, there are reasons for optimism assuming that investors, at some point, return to judging companies on their competitive strengths.

Daniel Nickolas, Old Mutual

Company Reports

KBC Advanced Technologies - £42m at 75p

Earnings not slipping

First Quarter Trading reported to be solid despite continuing tougher market conditions in Europe. Management remain confidence of meeting full-year estimates although there is a second half bias. KBC is an independent consulting, process engineering and software group seeking to optimise operating efficiency and financial performance for clients in the oil refining, petrochemical and other process industries worldwide. Two major contracts have been signed since the start of the year. One of these is a license renewal and extension for PetroSim with a major Latin American client, worth £1.1m per year over three years. The other is a consultancy project with an Australian gas producer to support upstream operations feeding a new LNG plant. This project is estimated to be worth £3.2m, to be executed in 2012. The overall pipeline is said to have remained healthy, with some uptick seen in Russia and the Middle East. Profits for December 2012 are forecast at £7m for an EPS of 8.1p giving a Prospective P/E of 9.2x with a yield of 3.5%. Acquisition opportunities are still being exploited.

Financials

Dec 2011 year-end cash balances were £5.9m.

Energetix Group (EGX) – £13.5m at 20.24p

Power to the People

The First DC 100 Data Centre Installation Centre went live last week providing ‘ mission critical’ back-up power to the Co-Op. This reference site could be a significant milestone in the development of this once boiler maker into an alternative and efficient energy supplier. Energetix originally developed the Kingstone boiler and the new focus will be becoming an energy supply business. An innovative part the strategy is to provide a boiler at no cost to the consumer but selling th energy under contract.  This creates new distribution opportunities as there are around 1.5m boilers installed in the UK each year and they can cost between £2,500 and £3,500 each. Energetix intends to offer its Kingston boiler to householders at no charge except for installation costs of around £1,000. In return Energetix will generate income from selling gas and electricity to the customer, who has to sign up for five years. This is to be launched and rebranded in the autumn and is a strategy that will require significant cash. A business model is based on just 300,000 customers could make the business highly profitable.

Energetix still owns 100% of back-up power business Pnu Power which won the Co-op  deal but getting a significant contract from National Grid is likely to be the catalyst for the sale of the business.  VPhase is quoted on Aim and Energetix have a 27.2% stake, which has been diluted as this voltage optimisation technology developer’s raise funds. Both businesses are non-core.  Revenue for the Interims to June 2011 were £0.1m with a loss of £1.6m.  There are no forecasts although the finals to December 2011 will reflect the changes underway.

Financials

In February Cenkos raised £4.5m at 25p a share and there is no longer term debt.

Ultima Networks (UTN) – £3.4m at 1.23p

Cloudy skies

Ultima Networks’ cleantech and renewable energy operations are becoming increasingly important to the company. The finals to Dec 2011 showed that revenues increased 55% to £2.97m with solar energy installations making an initial contribution of £320,000. Pre –Tax  profit improved  from £356,000 to £486,000.The green technology division, which mainly supplies electric bicycles, generated three-fifths of revenues with the benefits of designing a new range of bicycles for the Netherlands. There are differences in designs for each of the main European markets and a new range is being developed for Germany. Ultima has installed more than 1MW of solar capacity in the UK and this has led to opportunities in Mexico and Pakistan. There is also potential for large scale solar plants in Morocco. Ultima is looking to move into the ground source heat market and it has invested in its own drilling equipment. A typical installation costs £15,000-£20,000 and it can save around £2,300 a year for 20 years. Ultima plans to come up with a package where the payments for the installation are matched with the savings. The legal software business continues to make progress and generate cash that can be invested in the other activities. There is continued investment in the software business as well with new versions being launched. The historic P/E of 6x reflects the changes in UK Law on Feed In Tariffs on solar installations which will lead to a changes in business model.

Finance

There was £388,000 in the bank at the end of 2011. The NAV per share is 1.25p and is mainly property, plant and equipment.

Mr. and Mrs. Angry decided to enter as a team and to their surprise reached the final round where they faced ‘The Redundancies’ a group of former hospital managers who were now rather wealthy due to Andrew Lansley paying them all off.

The result came down to final round:

Question One: “Who died in Texas on 22 November 1963?”

Mr. Angry leaped up and down and shouted out that he knew the answer.

“John Wayne. It was John Wayne” he cried.

Mrs. Angry slapped him hard and gave the right response.

“John F. Kennedy” she said in a quiet voice.

Question Two: “Who died in Paris on 31 August 1997?”

“I know that one” yelled Mr. Angry. “It was Marlon Brando while filming ‘The Last tango in Paris’.”

Mrs. Angry belted him harder this time and told the quizmaster that it was Diana Princess of Wales.

Mr. and Mrs. Angry needed to answer the final question to win the quiz.

“Which family did Juliet belong to?”

“I know that” announced Mr. Angry. “It’s either the Montagues or the Capulets: Juliet was a member of the Montagues.”

“Wrong” said the quizmaster. “I can offer it to the other team!”

Mrs. Angry says that her husband will be released from hospital tomorrow.

The Metro recently reported that a team at the Harvard medical school has found that they are able to activate the ‘longevity gene’ in mice by giving them the red wine compound resveratrol. In fact despite having ‘high fat’ diets they report that the mice lived longer.

As far as I can see they were given the compound, but not the alcohol. Resveratrol is actually found in the skin of the grapes that the red wine is made from and can also be found in peanuts, blueberries and cranberries. It could be argued that the same benefits can be achieved by drinking grape juice or taking supplements, but little research has been done involving humans to investigate this.

There are some additional problems. Earlier research involving mice indicating similar results would mean that a human would need to drink 60 litres of wine a day to replicate the dosage of resveratrol given to the mice. As you may be aware, that is in excess of the governments current suggested unit guidelines and is clearly unlikely to be recommended anytime soon.

Another report has stated that from a pharmacological point of view the interaction between alcohol and the human body is probably about 20% understood, and even my limited mathematical ability tells me that there is still much to learn about what really happens when alcohol is ingested.

In the not too distant past there were advertisements that featured medical Doctors recommending particular brands of tobacco. They were happy to be portrayed smoking cigarettes, proudly displaying their ‘preferred choice’. Most probably they were paid for the ‘privilege’ and at the time saw no conflict in promoting what we now know to be a very damaging and potentially deadly addiction.

Currently many doctors promote ‘responsible drinking’ as being ‘fine’ within the suggested guidelines despite growing evidence that alcohol may actually be more damaging than was originally thought and that the use of alcohol as ‘self medication’ is costing the UK billions in consequential damage to people, property and society.

I would suggest that the human evidence indicates that alcohol isn’t that good for humans. There are non damaging alternatives available to all of the promoted benefits and if the ambition is truly to live longer then using those alternatives is undoubtedly the way forward.

But that’s not why people drink the stuff is it?

• The US equity market hits a four-year high but ends the week disappointingly
• US unemployment falls, but expectations are too high
• Nicolas Sarkozy is ousted as Francois Hollande is voted in, becoming France’s first socialist President since the 1980s
• In Greece, a clear majority of the population voted for parties opposed to budget cuts imposed by the European Union
• Irish home values unchanged in March; the first month without a fall since August 2010. Ireland is benefitting from facing up to problems early

A week for the bears

• US market hits a four-year high but ends the week disappointingly
• US unemployment falls, but expectations are too high

Last week saw debate rumbling on over whether the UK is truly in recession, but analysts also remain undecided on the US economy and the sustainability of its recovery. Both sides of the Atlantic experienced disappointing data and uncertainty increased over whether further central bank support for markets would be forthcoming. A weak US unemployment report triggered falls in equity and commodity markets, fuelling demand for US and German government debt. This came after the Dow Jones Industrial Average Index reached a four-year high earlier in the week.

Only 115,000 US jobs were created in April, far fewer than the expected 170,000, adding weight to the bears’ argument that the recovery is running out of steam. Whilst positives can be taken from the jobless rate falling to a three-year low of 8.1%, expectations have risen so high that any disappointment was likely to see a negative reaction from markets. To further complicate matters, there was a general view that, despite the disappointing jobs data, the economy was not yet showing sufficient signs of weakness to warrant a further round of quantitative easing from the Federal Reserve.

The FTSE 100 Index closed the week at 5,655.1, down 4.7% from the 2012 high in April, as resource stocks took a beating and commodity prices saw steep declines. Crude oil saw falls of over $4 per barrel on Friday alone, while losing more than $7 for the week. There is significant concern about over-supply as US inventories stand at 21-year highs on the back of reduced demand, while senior members of OPEC have repeatedly voiced displeasure over price levels. Among other commodities, the price of copper fell significantly while gold dropped $18 per ounce to $1,640.

Key European elections

• Nicolas Sarkozy ousted as François Hollande is voted in
• No outright winners in Greece as angry voters deliver a stinging protest vote

Elections were always going to play a key part in the short-term future of the eurozone and the result in France could be as important as any other. On Sunday evening, François Hollande celebrated victory, becoming France’s first socialist president since François Mitterrand in the 1980s, earning around 52% of the vote. Nicolas Sarkozy became the first French president in over 30 years to fail to win a second term, damaged by poor approval ratings amid the country’s economic woes, and will now leave politics entirely. The younger vote was crucial to the result after spending cuts caused widespread anger amongst this most politically active section of the population. The French debt problems remain the same but Mr Hollande is thought to offer a renewed hope to the younger generation, promising more jobs and better salaries. He wants to raise the minimum wage, hire an extra 60,000 teachers, and reduce the retirement age from 62 to 60. The president-elect also promises to raise taxes on big corporations, as well as individuals earning in excess of €1 million a year, with tax rates of up to 75% being mooted. In his victory speech to tens of thousands of supporters in Paris, Hollande said:

“Europe is watching us; austerity can no longer be the only option. I am the president of the youth of France; you are a movement that is rising up.”

While optimism sweeps certain sections of France, Mr Hollande must act quickly to reassure key European partners that he will face up to the considerable challenge he inherits. German Chancellor Angela Merkel congratulated him by phone and is thought to have invited him to Berlin for talks as soon as possible. It is anticipated that he will visit Germany on 16 May, the day after he takes office. With the president-elect talking many times in his campaign about a renegotiation of budget treaties, Angela Merkel wants this settled quickly and a special EU summit will take place within four weeks. He has pledged to push for less austerity and many other policies which the German Chancellor would oppose, including delaying the deficit-reduction plans and renegotiating the fiscal treaties signed by all but the UK and the Czech Republic. Mr Hollande is convinced that he can lead a coalition, including Spain, to press for more EU spending, including direct intervention from the European Central Bank.

In Greece, a clear majority of the population voted for parties opposed to the budget cuts imposed by the European Union. No coalition government could be formed, prompting the need for another general election, most probably on 17 June. The two main parties that came together last year to implement the austerity programme were severely punished, having their total vote slashed by half. This leaves the two parties that have dominated Greek politics for decades struggling to renew their coalition and implement plans for €11.5 billion of fresh cuts at the end of June as demanded by the EU. This election was the first opportunity for the Greeks to express their views on the terms of the bailout after a planned referendum was cancelled under EU pressure. The doubts surrounding Greece’s continued participation in the single currency will loom large over the coming days, with economists at Citi raising their odds on the country leaving the single currency to 75%.

Reaction to the Greek result has been predictable. Angela Merkel immediately warned Athens to stick to reform plans agreed under the bailout plans, while Christine Lagarde, managing director of the International Monetary Fund, echoed other policymakers in acknowledging the importance of economic growth in Europe. She said:

“There’s no avoiding the need for a brake in fiscal adjustment; but if calibrated correctly, we can make sure it doesn’t do too much harm to growth.”

In terms of how this directly affects the UK, the French news in particular was not necessarily positive. David Cameron had publicly backed Nicolas Sarkozy in February and refused to meet with François Hollande while the candidate was visiting London. Looking forward, a shift in focus by Brussels towards growth would be welcomed in the UK, depending on how it is achieved. In addition, the proposed 75% tax rate on those earning more than €1 million per year could see many French people looking for a new home for their wealth.

Uncertainty is not what is required for markets. Market reaction to the election results saw Asian markets fall, European equities experience a sharp sell-off in early Monday trading, and the euro slide against other major currencies. At the time of writing, these reactions had been substantially reversed as a result of improving German manufacturing data, reflecting the fact that a weak currency may actually benefit certain sectors of the eurozone. It also suggests that, reassuringly, investors may still be focussing on fundamentals rather than politics. However, major concerns remain over the future of the euro – the election results clearly show that voters are not feeling good about the austerity measures, which are at the heart of a resolution to Europe’s debt problems. As we have always stated, this will be a long road to recovery and there are likely to be many more political problems to solve in the short term. Investors need to step aside from the media headlines and focus on the global news at a company level which, on the whole, continues to surprise on the upside. That the two major economies of the eurozone appear to be at odds with one another will not help the immediate global situation. Editorial comment in The Times summed it up stating, “Mrs Merkel must recognise the new political reality, but Mr Hollande must accept the unchanged economic reality”.

Viva Ireland

• Irish house prices stabilise
• Ireland shows signs of benefitting from early action

Whilst the Southern Europe contingent of the often-quoted ‘PIIGS’ nations (Portugal, Ireland, Italy, Greece, Spain) continue to be mired in political and economic uncertainty, Ireland’s association with the other countries now seems somewhat dated. Last week, news was released showing that Ireland’s residential house prices were static in March – the first time values have not fallen since August 2010. In Dublin, house prices rose by 0.7%.

The problems created in Spain and Ireland were similar as cheap credit fuelled a construction boom. Building projects were started that relied on demand remaining sky-high, with Spanish prices doubling between 1995 and 2005 and Irish prices quadrupling between 1997 and 2007. Many in Spain believe the demand is still there and assert that once the economy gets back on track, the oversupply will be absorbed. However, the problems the Spanish face are 24.4% unemployment (a 20-year high), recession and forecasts for the economy to shrink by 1.8% in 2012. The Spanish real estate problem is one of the eurozone’s biggest tests – Spain’s economy is twice the combined size of those of Portugal, Ireland and Greece.

The key difference between Spain and Ireland was the speed of response to problems. Spain has procrastinated but Ireland faced up to the challenge. In 2009, Ireland created the National Asset Management Agency (NAMA), an entity through which bonds could be used to buy commercial real estate loans from the banks. The loans had a face value of €74 billion, for which NAMA paid €32 billion. Banks needed capital, leading the state to provide liquidity and nationalise five of the largest lenders in the country. NAMA is now seeking investors for the assets it can sell, and forcing debtors to rent out some of the remaining properties to produce revenue. Michael Noonan, the Irish finance minister, recently told the Parliamentary Committee, “The big knock to the domestic economy was the fact that building and construction completely collapsed, meaning 20% of the economy was immediately gone.”

“It is beginning to move once again; there are very tender shoots of growth at the moment.”

Due to early intervention, the International Monetary Fund has forecast the Irish economy to expand by 0.5% this year and 2% in 2013.

QE plans on hold?

This week, the Bank of England makes a decision on increasing the £325 billion stimulus programme, signalling whether it is more concerned with high inflation or Britain’s return to recession. Most economists always believed the May meeting to be crucial due to the Bank having completed the February £50 billion round of bond purchases. The decision by the Monetary Policy Committee (MPC) has been made more difficult as weaker-than-expected economic data has combined with stubbornly high inflation – at 3.5% it is well above the February forecasts. Vicky Redwood, chief UK economist at Capital Economics, said, “For now, we think that the MPC will put more weight on the sticky inflation figures. Accordingly, we expect the MPC to pause but it will be a closer decision than looked likely a few weeks ago.”

It wasn’t just me… I asked every one of the team here in the office and each of them gave me a different answer.

But, as is my wont, I’m starting the story in the middle.

The advert is for my wife’s business and is to go into a local directory magazine.  At the top of the advert is the name of the business, with a picture (very cute) of Barney the office dog underneath it.  Just underneath that there’s the slogan:

Businesses’ Best Friend

Now, I knew that there had to be an apostrophe somewhere towards the end of the word Businesses, but where:

Business’?

Business’s?

Businesses’?

I asked around the office and I got different answers.  I looked at Google, no help there, either.

So, eventually, I rang the Royal Holloway, University of London.  The reason I rang this uni was that I went to see it when I was 17 and thinking about college.  (I was going to study English but was put off by some graffiti carved into one of the desks.  Here’s what it said:

I could eat alphabet soup and shit better poetry than this.)

Anyway, I rang the uni and got through to the English department.  A very nice lady patiently explained to that ‘first we need to make it plural: businesses and then we need to add the possessive: businesses’.

Phew!

I’m really glad we got it sorted out and I can, with confidence, look at the advert and think to myself: thank goodness the apostrophe is absolutely in the right place.

But all joking aside, it is important, particularly in training, to get everything right.  If you don’t it very often spoils the learning experience. Once, many years ago, I put a visual up on a slide which was different from the visual in the workbook… they both said the same thing, they just looked a bit different.

The problem was a lady picked up on the error and told me bluntly at a break: ‘I’m now wondering if anything else you’re saying isn’t right’.

Ouch, but fair enough and a lesson learned very early in my career.

I always worry about a culture of ‘good enough’ because it just isn’t.  Everything that goes out of the door has to be checked, re-checked and then subject to one more chcke.

Oops… I mean ‘check’.