Obama’s Economic Challenge

Millions of people are gathering in the US capital to see Barack Obama sworn in as America’s 44th president, and its first African-American leader. But the new president faces serious challenges. America is gripped by uncertainty as the economy faces its worst crisis in decades.

(more…)

The brightest economic outlook in years

If you have picked up a newspaper, or switched on the television recently then doubtless to say you will know that we experiencing an ‘economic disaster’ (their words not mine). But are things really that bad?

(more…)

A new low for Mean Street

Whilst share prices on Wall Street may not yet have found their floor, surely the big investment banks moral standards can’t sink any lower than Goldman Sachs paying $2.6bn in bonuses in a year when their profits are down more than 80%, their share price has plummeted by two thirds, they sought emergency funding from the US Government and dispatched 10% of their global work force to the unemployment queue.

(more…)

‘Biggest ever sale’ at Woolies (and probably it’s last)

This weekend Woolworths held it’s biggest ever sale, prompted no doubt by it’s administrator Deloitte wanting to clear as much stock as possible before other high street retailers declare all-out-war in an attempt to salvage something from this Christmas shopping season by slashing prices across their stores.

The opening shots were fired by M&S when they held their first 20% off everything one day sale, with other retailers quick to join in by holding their own one day sales.

With discounts of up to 50% in Woolies the result was dramatic with the ailing chain on Saturday experiencing it’s busiest day ever in it’s 99 year history. Judging by the empty shelves and long queues in my local store shoppers were keen to take advantage of Woolies peril.

However, fighting my way through the store looking at the tickets on the shelf edges the savings were no where near 50% on most things, in fact the majority of goods had only been discounted by 10-20%. Many items such as CDs, DVDs and games were still more expensive even after the price reductions than the major online stores and supermarkets.

So why were the stores cleared out by eager shoppers if the discounted prices still often reflected poor value?

One explanation might be that early shoppers snapped up the real bargains on items such as toys which always reflected good value for money from Woolies, and perhaps grabbed a few other items too which could have been bought cheaper elsewhere.

Another explanation could be that people followed the crowd, so having seen other shoppers rushing to clear out Woolies they assumed that everything must have been a bargain and did the same. This is a phenomenon known as ‘herding’ to economists.

The final possible explanation that I can offer is that for many people Woolies has been as much a part of Christmas shopping as Turkey is to their Christmas dinner. So news that Woolworths is very likely to disappear from the high street in a matter of days led to panic buying, with shoppers desperately rushing to experience ‘their Woolies’ one last time.

£20bn gamble to save the economy

By cutting VAT today from 17.5% to 15% along with various other smaller measures Alistair Darling has effectively placed a £20bn bet to try and save the economy. Whether he had any choice might be debatable, but if he gets this right you can guarantee he will be handsomely rewarded with lucrative consultancy contracts upon retirement from his position as Chancellor.

However get it wrong and he’ll probably continue to serve out this term before retiring on his MP pension, i.e. he is placing this with no risk of actually losing out himself. So there is a huge reward on offer with little financial risk attached to failure for him, isn’t that exactly what Brown and Darling have been saying is wrong with the banking sector?