More Bail-Outs In scramble To Save The System

The 'bail-out' package was approved, brought into law and the Dow futures have promptly fallen 200 points leaving the Dow a smidgen off going under 10,000 points. If the main index goes below this figure it will be the first time since October 2004.

European bourses are not fairing any better as the EU governments show their usual leadership qualities by stuttering and stumbling from one cock-up to another. The Germans and French ruled out an EU-wide rescue package similar to the US last week and will look to veto any such package saying there would be no 'blank cheque' and then the Germans promptly bailed out Hypo Real Estate to the tune of 30 billion Euros.

The government and the Bundesbank came up with that old chestnut that Germany's second-biggest property lender, "is too big to fail". They met with banks and insurers in Berlin all day yesterday to discuss a revamped rescue package after private banks on Saturday withdrew their support for a 35 billion-euro rescue package brokered a week ago.

The most interesting lesson being learned from all this, to the delight of Euro-Skeptics is that when times are good the EU promotes closer economic ties, peace love and harmony but when the EU is really needed each country has employed the EFH Directive 2008.

European leaders meeting in Paris this weekend pledged to bail out their own nations' banks, while stopping short of a regional rescue effort in a classic interpretation of the 'Everyman For Himself' Directive.

This has been manifested in the most recent round of takeovers and mergers.BNP Paribas SA, France's biggest bank, will take control of Fortis's units in Belgium after a government rescue of the Brussels and Amsterdam-based company failed.

Belgium and France on Sept. 30 threw Dexia SA, the world's largest lender to local governments, a 6.4 billion-euro lifeline. UniCredit SpA, Italy's biggest bank, plans to boost its capital by as much as 6.6 billion euros and the Icelandic government is reportedly trying to arrange a 10 billion-euro injection into its banking system.

Instead of having a coordinated effort to settle savers worries countries are scrambling to give confidence. Ireland guaranteed 100% of depositors fund last weeks, this despite estimates that if the system failed the 400bn Euros required to pay depositors would by twice the GDP of the country. Talk about leverage risk!

Germany followed suit and said it would fully guarantee personal savings in a bid to ease concerns about stability.

Gordon Brown showed astonishing naivety by increasing the UK guarantee to just £50,000 from £30,000. What message does that send out?

It basically says that the extra £15,000 is all the risk the UK government is wiling to take. It points at a weakness in the UK banking system that the UK government is not prepared to underwrite. Many see this as another sign that Brown is not the man to steer us through this crisis.

Fully guaranteeing savers would have sent a message to the public and to the rest of Europe for that matter, that the UK stands behind its financial system with confidence. An increase of £15,000 has completely the opposite effect. Anybody holding money above this figure in a UK bank account must be considering a move to Ireland or Germany.

Points to watch for Dow traders this week are:

In the coming week, there are a few key economic reports, including the Fed's minutes from its last meeting released Tuesday. Consumer credit is also reported Tuesday. Pending home sales are released at 10 a.m. Wednesday, and weekly jobless claims and wholesale trade are reported Thursday. On Friday, international trade and import prices data are released.

Traders are also watching the U.S. banking sector where Wells Fargo , one of the healthiest U.S. banks, swept in with a merger offer Thursday night to beat out Citigroup's bid for Wachovia. Citigroup is protesting Wachovia's new merger deal. Its own plans to merge with Wachovia, attractive to Citi for its wealth of deposits, was brokered by the FDIC.

Bernanke speaks at the National Association of Business Economists meeting in Washington Tuesday, and Lehman Brothers CEO Richard Fuld will be on Capitol Hill answering questions on his firm's demise before the House Oversight Committee. On Tuesday, former AIG officials come before that committee.

Politician watch is the name of the game this week. Many are suggesting that the US bail-out package has come too late to stop some major problems in the market manifesting themselves in more bank failures. We will see how the politicians in Europe respond now but expect lots of back-peddling and more bold statements.

This week will be yet another roller coaster.

Good luck!

Flash Gordon Sinks Further With Limp Stamp Duty Reform

Amid the meltdown of the British economy we hear Gordon Brown say that the "UK is well-placed to withstand the global downturn". Comforting Gordy, thanks, only the OECD forecast shows that Britain is the only major economy in the world which will face recession in the next six months.

The forecast is the first time a major international forecaster has explicitly said Britain is facing a technical recession, in which the economy contracts for two successive quarters.

Jorgen Elmeskov, the OECD's acting head of economics, said: "Financial market turmoil, housing market downturns and high commodity prices continue to bear down on global growth, while at the same time evolving rapidly.

So what do we have in response from Flash Gordon to save the UK? We have Alastair Darling, that’s what we have.

So, OK he has made a few cock-ups; business tax, capital gains tax etc but surely this time we will see something spectacular to give the UK the shot in the arm it needs?

(Drum roll please)... The suspension of stamp duty on properties under £175,000 for a year!!!

Wow...

Stamp duty is to be suspended on homes worth less than £175,000 as part of a government bid to boost the ailing housing market. Alistair Darling announced that homebuyers will be offered a "holiday" from the tax, though it is unclear who exactly will benefit or for how long.

Forgive me for being sarcastic but isn't this a bit like giving free flights to Baghdad, free mountain tours in Afghanistan or would you like to have a free hotel stay in Mogadishu?

It's welcome, but does the labour government really think that this will help? Lets look at the average price of a house in the UK; £219,262 (according to the BBC) and the average salary in the UK (according to ONS) is approximately £22,000. Do the math on lending figures. Even if there are two people earning the national average wage they are still talking a loan of 5x earnings for an average house and they still would not benefit from this so-called 'relief package'.

In this current climate do you think that lenders will be doing much of this? Me neither. Also, do you think that suspending stamp duty will have new buyers rushing into the market, when most commentators think there is still plenty of downside? Not likely. There are other measures being brought in along with this including £200mn to help those already in homes.

While I applaud measures to help with those already in homes that are to be assisted with mortgage payments or shared equity deals, £200 mn doesn't seem a lot.

"We are looking at about £200 million over the next couple of years for families who are struggling with mortgages, there will also be £100 million to help with mortgage interest payments to keep people in their homes," Hazel Blears, Community Secretary told BBC Breakfast.

A friend (a Labour supporter) asked me recently "What would you do?". "Simple" I said

"Roll back the 1000's of stealth taxes that have been forced on the UK for the last 11 years, cut fuel tax, abolish stamp duty or re-introduce MIRAS (Mortgage Interest Relief At Source), regulate lenders more strictly so that loan procedures are followed, and suspend, for one year, all overseas spending on aid and loans.

Suspend funding of opera and any other thing that rich people can afford to fund anyway.... Basically, batten down the hatches and take a hit on revenue so that the British people can actually get through what is, no doubt, going to be a tough time.

My friend said "That's just ridiculous, can't be done, the rich should pay more in tax... that would sort it out"

And this is why the UK needs a new government, the only answer that Labour supporters have to the incompetency of this regime is to blame, and therefore tax, those who make the most money, oh and Flash Gordon... who, even in the Labour ads is known as "Not flash, just Gordon". I coudn't agree with Labour more... Flash Gordon was one of my childhood heroes...Gordon Brown couldn't be less heroic.