UK recession is the longest since records began

In all my posts, I have always focused my attention on positive news coming from the market beginning with the rise in the real estate sector ending with Google’s quarter results. My analyses were always critical about the approach too optimistic of transmitting the news and the way of giving a too positive economical scenario to the readers.

Today I will discuss about the GDP result published on Friday by the Office of National Statistics in London, showing that the economy is not recovering at all, on the contrary the Gross domestic product “contracted by 0.4 percent from July through September from the previous three months, and it shrank by 5.2 percent from a year earlier”.

In the past days the majority of the analysts were predicting a positive figure for the UK economy and as a consequence all newspapers were publicizing with enthusiasm the optimistic forecast; on Friday they communicated the results with surprise and shock.

The International Herald Tribune is stating a clear title and summary of what is going to discuss, giving the reader, even before reading the article, a broad understanding of the facts. It is basing its judgment on a comparison between the Euro land and the UK showing the different economy results over the past three months.

The first part is explanatory of the figures and forecast; the following paragraphs, through the chief European economist at Standard & Poor’s, try to underline the causes of this bad GDP outcome, citing consumer indebtedness as the main factor undermining a recovery in Britain:

“U.K. consumers are coming out of a period of very significant leveraging, and the process of unwinding that is long and painful”.

A simple question come to my attention at this point: why the prediction was based “on recent improvements in housing statistics, purchasing managers’ indexes and the wilting pound” and not on the consumer indebtedness?

The approach used by Bloomberg is completely different, is not just communicate the news, but it is also gathering the causes in different sectors of the UK’s economy.

The all article is based on different interviews with both analyst and politicians, in common they have the shock and the surprise of this unpleasant result: from an economist at Citigroup Inc. saying that “The surprise is across everything,” to the chief economist at the Chartered Institute of Personnel and Development stating “This is desperately disappointing news, especially given that it was hoped that a modest recovery had begun … The U.K. economy is continuing to shrink, with six quarters of contraction in output making this recession look more like a depression.”

Bloomberg is attracting potential readers by dramatizing the news, mostly of the people interviewed, prefer to express their shock instead of communicate their point of view on the fact and their possible solution.

The Telegraph is transmitting astonishment for the bad results; it is critical with the prime minister saying that “The news is a major blow to Gordon Brown…” and it communicating to the readers that “Britain looks increasingly likely to be the only major economy not to have emerged from recession by the end of September”. It is admitting that the rise in the house prices and the profits of City institution “had buoyed hopes that the worst was over” but the figures are really disappointing and the crisis is going to be longer than it was expected.

It is a simple article, well-written, clear ideas with a critical analysis of what it is happening, examining different aspects of the news.

In conclusion the prediction was wrong and based on wrong sources even though the Bank of England warned earlier this month that the strength of a rebound remains 'highly uncertain' and I cannot find an explanation of why everything is astonished about the result.

We have faced and we are partially still facing the biggest financial crisis of the modern era with complicated consequences and implications.

The crisis for the financial sector is over and it has moved in the industry and service sector that are struggling in order to overcome this period; after recovering these sectors it will be finished or “who will be the next?”

The Telegraph:

http://www.telegraph.co.uk/finance/financetopics/recession/6414147/Britain-is-still-in-recession-decline-continues.html

Bloomberg:

http://www.bloomberg.com/apps/news?pid=20601068&sid=aA4yuANivXCQ

International Herald Tribune:

http://www.nytimes.com/2009/10/24/business/global/24euro.html?em

Google: Worst behind us

In the past few weeks, mostly of the financial medias have communicate that the crisis is passing over and the companies are facing a positive phases thanks to the fact that the market is recovering and giving positive messages to the investors. During this period most of the companies traded on the stock exchange are publishing their third-quarter financial results, therefore it is possible to distinguish which companies have adopted the right strategy in order to overtake the crisis and others that have failed. Google is always been considered a crown jewelry company on the stock market: a healthy company with a strong financial statement. It was created just to improve the world of research online but it has also found the way to make huge profit undertaking a unique advertisement strategy. Two days ago Google published its astonishing financial result that was above every prediction.

The first article analyzed was taken from an Italian financial newspaper Il Sole 24 ore. It is presenting the news clearly with objectivity and awareness with a copious use of figures on how Google is performing on the market and key numbers published on the financial statement. This Italian newspaper is using a clear and unique methods of communicate the news: it is neither too technical nor too simple; it has a good mix of specific analysis and easy explanation.It always has sources from reliable and well know analysts and important companies’ executive: in this article for example is using the CEO quotes to support their point of view with a reliable source.

The Financial Times article is stating the news with a deep explanation of facts and figures. It is giving facts and figures in detail in order to give to the readers all the instruments to have a personal opinion at the end of the lecture. All the news facts are described clearly analyzing the different reasons of this kind of result such as “the amount advertisers pay each time a user clicks on their ads rose 5 per cent compared with the second quarter of this year, though the figure was still 6 per cent lower than a year before” and “The decline in the dollar since the end of June contributed to the rebound from the preceding quarter, since it raised the value of the 53 per cent of Google’s revenues that are earned outside the US”

The Business week is structuring and stating the news in a completely different way. It divides the article in four parts: the first one broadly explains the actual news and the other three focus on the key aspects of Google financial results (A revival for online AD spending; Expansion could curb margins; and Open to strategic acquisition). Comparing the Business week with the other articles, it is noticeable that is using a different approach in the way of explaining news; it takes in consideration the industry overall and specific analysis in order to judge Google performance. This kind of method facilitates the readers to create their own well-informed point of view on the news and on the market.

For some industry the crisis is over and are ready to invest again on innovation, expansion and hiring. It is noticeable that companies recovering from the crisis are just a few and caught my attention that all of them are those companies that have always based their revenues on tangible business and real economy avoiding conflicts with structured finance.It is my opinion that the finance world should learn from these healthy companies that add value to the economy and understand that maybe the period of high leverage and risks is over and it is time to “come back to basics”.

Il Sole 24 Ore:

http://www.ilsole24ore.com/art/SoleOnLine4/Finanza%20e%20Mercati/2009/10/google-trimestre-eric_schmidt.shtml?uuid=b63f0fdc-ba1f-11de-8daa-d0ad6a308883&DocRulesView=Libero

Financial Times:

http://www.ft.com/cms/s/0/17bc7acc-b9c8-11de-a747-00144feab49a.html?nclick_check=1

The Business Week:

http://www.businessweek.com/technology/content/oct2009/tc20091015_635656.htm

Gold hits fresh record high

Over the past year, through the crisis, the financial world should have understood that the peaks of the market are not always synonymous of a good investment; mostly of the time this “peaks” are exaggeration and do not reflect the right and real value on the market.

The articles that I took into consideration are all explaining the incredible rise of the gold over the past months therefore a simple question caught my attention: is gold peak another market bubble or is a justified raise in price of a commodity?

The first article analyzed is from the Financial Times: clear structure and sophisticated overview of the argument. As always FT have interviewed the best expert in the market to give the readers a depth understanding of the facts, analyst from HSBC and Barclays Capital. The first part is based on future forecast as “We believe gold has a significant upside potential into 2010…” while the last few paragraphs are characterized by an accurate explanation of the gold trend. The reader is no influenced by any comments of the journalist but surprise me the interview with Ashraf Laidi, chief market strategist at CMC Markets that seems justifying the gold record, focusing on historic data and therefore trying to reach the readers attention to communicate them: gold is still a good investment.

Bloomberg uses a more technical approach to the news. It is a complicated article made for specialist readers that already know the news and want to have specific details of the rise and technical overview of the matter such as “Gold for immediate delivery gained as much as 2.6 percent to a record $1,043.78 an ounce yesterday, and traded at $1,038.46 at 10:35 a.m. in Singapore”. The last paragraphs are based on assumption of the global head of technical analysis at Barclays Capital that is explaining that the gold rise is “by no means unstoppable, as none of the charts show prices concurrently pressing against their respective all-time highs,”. All the facts and figure are described with absolute objectivity basing all the comments and forecast on technical analysis.

From a completely different point of view is the piece of work of The Guardian that is focusing on the correlation between the raise of gold and the declining power of dollar “fresh speculation about the declining power of the dollar as the world's reserve currency sent the greenback sliding and gave the precious metal a boost”

The Guardian is using its typical approach of communicating the news, giving the reader a broad understanding in the easiest way as possible. It interviewed well-know analyst and instead of analyzing the datas (as FT and Bloomberg) is trying to forecast the phenomenon through the losing power of dollar "as long as we don't see a sustainable rally in the dollar, I don't think the rise will stop." From the reader side is a well-structured article but does not appear objective at all; it tries to transmit the euphoria of the new record without taking into consideration the possibility of negative aspects and implications.

At the end The Telegraph that in three paragraphs resumes the whole news with explanation, analysis and forecast gives a well-written flash of the gold news.

It is an easy reading article with good and sophisticated assumptions based in the inflation “The gold price is still significantly below its inflation-adjusted high. The price hit $850/oz in January 1980, which represents a price today of about $2,300/oz when adjusted for inflation”.A short article but with all the information needed to understand the news.

After having analyzed all four articles it comes to my attention that none of them have never mentioned a possible negative impact of the rising of gold or put on the readers attention that this peaks could be generate by the crisis. After a long period of depression financial media could finally write about good news coming from the market and seems to me that are trying to reassure the public with positive assumption and approach forgetting to speak about negative implications.

This way of transmitting the news could create confusion and misunderstanding between the readers and lead to have a too shiny point of view of the market that unfortunately on my opinion is not shining at all.

Financial Times:

http://www.ft.com/cms/s/0/04c1aa8a-b33a-11de-ac13-00144feab49a.html

Bloomberg:

http://www.bloomberg.com/apps/news?pid=20603037&sid=a0m8QhfjdEG4

The Guardian

http://www.guardian.co.uk/business/2009/oct/07/gold-prices-rise-dollar-decline

The Telegraph:

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/6269593/Gold-hits-fresh-record-high.html

House prices rise for a fifth month

More than a year ago the global crisis was initiated by the real estate sector with the sub-prime mortgages in the United Stats and then extended to the whole economy around the world.

Today after more than a year of bad news about the real estate market, newspapers are reporting a rise in the housing price in United Kingdom but remarking that this sign does not have to be interpreted as a full recovery of the market due to the fact that the future is still uncertain.

Major newspapers are giving the news with particular attention to not communicate the reader a too optimistic view of how the market is performing; they try to state the news in the most objective way in order to not influence the reader opinion.

The first paragraphs of the Financial Times are focusing on figures gathered from the Nationwide building society: “Prices rose by 0.9 per cent to an average of £161,816 over the month on a seasonally adjusted basis after a 1.4 per cent rise in August.”

The second part of the article is based on the interview with Martin Gahbauer, chief economist at Nationwide where he is stating the different reason of the risen and the future expectations “Normally, housing turnover is well correlated with house prices, but when there is only a small number of homes available on the market – as is the case at the moment – even a low rate of turnover can lead to rising property values.”

As a characteristic of the FT the people are expecting an objective article without the journalist intervention or opinion; this could be a perfect example simple structure and clear explanation of facts and figures.

As BBC News states figures and the interview with the chief economist, the structure is completely different structure and is approaching the matter focusing in details on the impact of mortgages on the risen of prices.

In the introduction is explaining how 300 billon have been borrowed from the beginning of 2008: “further £7bn was added to people's equity in the country's housing stock.” or “an extra £29bn has now been added to the value of their stake in the UK's housing wealth.”

From the point of view of buyer could be identified the sceptical point of view on the Nationwide announcement by the declaration of the BBC economic editor: “The more fundamental reason why prices might start falling again is that, by most measures, they are still significantly over-valued”.

It is noticeable that the Guardian article is targeting middle-class people that are interested on the news but with simple concept and easy numbers. The main difference is the people interviewed: the Guardian has interviewed estate agents around England and not famous expert in the sector.

The article uses a simple language and concept although with a good level of understanding of the matter and clear explanation of the actual situation.

The entire article is based on the lack of supply in the housing that have helped the risen of the prices "It doesn't seem the typical market in housing, because it is constrained in different ways: it's constrained by finance; it's constrained by supply," he said. "It's reasonable to assume that lack of supply is still underpinning prices."

Also in this article the caution of communicate good news and the attention of giving also the bad scenario to the readers are underlined.

Reading these articles I had the impression that the crisis has increased the awareness and the objectivity of the media and has created a more sceptical approach of accepting the good news.

All three articles have tried to give the buyers different point of views and multiple way of interpret the news’ aspects.

FT : http://www.ft.com/cms/s/0/2781502e-af26-11de-ba1c-00144feabdc0.html?nclick_check=1

BBC News: http://news.bbc.co.uk/1/hi/business/8286028.stm

The Guardian: http://www.guardian.co.uk/business/2009/oct/02/nationwide-doubts-housing-market-recovery