So Labour got smashed in the local elections. No big surprise, really. It’s tempting to quote Bill Clinton’s famous maxim on what decides an election.
In fact, it’s so tempting that I will.
"It’s the economy, stupid."
And it was economic worries that were on the minds of most voters who entered the polling booths yesterday. Those on low-incomes had recently been hit by the scrapping of the 10p tax rate. Those better off have the memories of Brown’s stealth taxes. And, of course, the ever-present credit crunch is making all of us nervous.
Where now for Gordon Brown? If he leads Labour into the next general election, Labour will lose. That certainly seems to be the opinion of many in Brown’s own party.
Call me a conspiracy theorist, but I reckon Labour backbenchers deliberately bided their time on the 10p tax issue. Brown announced it last year in his final Budget as Chancellor. But it was only once it came into force — conveniently one month before elections — that the rebels kicked up a stink.
Few MPs in marginal seats are looking forward to fighting an election under the Flag of Gordon. They know that the struggling economy will give opposition parties some priceless ammunition over the next couple of years. Brown can’t really duck those bullets — he was Chancellor for ten years.
Expect further dissention in the Labour ranks. In fact, the only people who stand to benefit from Brown’s continued premiership are the Conservatives. If they’re clever they’ll keep the pressure on Brown moderate enough that he stays on.
But if he wants his party to stand a chance of retaining power, he won’t. The only reason he might stick around is if he’s extremely stubborn.
Oh.
Who will build those 3 million houses?
The Government has grand plans to build 3 million new homes by 2020. Trouble is, who’s going to build them? And if anyone does want to, will they be allowed to?
Today we read that private housing orders during the first quarter of the year were 29% down on those in the same period last year. The construction industry, as everybody knows, is in a slump. Homebuilders are building fewer houses.
I’ve said this before about mortgage lenders, but the same applies to homebuilders: private businesses make decisions based on what’s best for them. Not to hit some government target.
This is how it should be, of course. This is capitalism.
But there’s another reason why the Government’s target looks impossibly ambitious. Even when a homebuilder does want to build, the red tape can often make it impossible.
A short while ago Tom Bulford, our resident small-cap expert, wrote a great article on this, which explains exactly why the 3 million homes target is complete pie in the sky.
So at some point this policy will probably be quietly ditched. But as I’ve noted above, Gordon Brown may not be at the steering wheel for that particular U-turn.
What went wrong with Exxon?
On Tuesday Garry White wrote about the "earnings surprise" gravy train. Oil analysts are consistently underestimating the oil price, which means they also underestimate oil company profits.
This has created a great investment opportunity.
But yesterday ExxonMobil announced that its profits had missed consensus. That is to say, they were less than analysts expected.
So does that mean Garry was wrong?
"No," says the man himself. "This says more about Exxon as a company than it does about the sector. This gravy train is still on the rails, my friend. Choo choo!"
Find out why a defiant Garry says: "There’s nothing wrong with my assessment!"
China’s next big investment...
As we all know, China’s growing rapidly. But to achieve this, it needs raw materials.
And where better to get them than mineral-rich Africa?
"This deal will net the Chinese up to 10 million tonnes of copper, and 400,000 tonnes of cobalt," says an excited Manraaj Singh. "Not to mention how much it could make investors who get in now!"
One jumps... while 2,000 others are pushed from the finance sector
Madman banking boss Paul Idzik has resigned. Idzik, who was Barclays’ chief operating officer, has something of an eccentric reputation. He once jumped the security gates at Barclays headquarters, as a test to see how long it took security to wrestle him to the ground. He also snapped a colleague’s pen because it bore the logo ‘Royal Bank of Scotland’.
Sounds like my kinda guy!
But now Idzik has reportedly grown fed-up with the boardroom tension between John Varley and the man with the biggest face in finance, Bob Diamond. Other Idzik gripes include Barclays’ bureaucracy and its IT system.
Meanwhile, Northern Rock yesterday announced that it will be making 2,000 staff redundant. It’s difficult for me not to be emotional when writing about this topic. As I’ve mentioned before, I used to work for Northern Rock. A lot of my friends and former colleagues are now sweating it out, wondering if the axe will fall on them.
It’s tempting to rail against the incompetence of the Rock’s management which got them into this mess. Tempting also to recount the numerous frustrating incidents I encountered that demonstrated an obsession with small detail while being oblivious to the big picture.
But it’s all been done already. And besides, Idzik’s resignation from Barclays is something of an eye-opener. We minions at the Rock were often frustrated that, try as we might, we were unable to change inefficient business practices.
But, unless Idzik’s just having a massive whinge, it seems the big boys at the top can’t do much about that either.
So what chance did those 2,000 Rock staff have to change the course of their own destiny? Not much, however hard they worked, however talented they were.
Instead of complaining, then, I’m going to pay a tribute to my former colleagues. To all those facing an uncertain future after yesterday’s announcement, I’m thinking of you.
Good luck, take care, and I hope it all works out.
Until Tuesday
Ben Traynor
P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.
