1. Interest Rates
Gilts rose today as minutes of the last meeting of the Bank of England's Monetary Policy Committee diminished hopes of any early cut in rates. The nine-member committee voted unanimously to leave interest rates at 4.50% earlier this month, despite growing signs of an economic slowdown.
Some members of the committee, however, did think that risks of prolonged economic weakness had increased over the previous month, but they wanted to wait until next month's meeting before coming to a firm view.
Comment: At Bewarethesharks.com, we have recently discussed a continuing weakness in performance of UK PLC and particularly the gap between Government expenditure plans and revenue. With the Chancellor's "Black Hole" in funding, the likelihood of tax rises next year are very high. As the consumer continues to reign in expenditure as disposable income falls and combined with an increase in the savings rate, the pressure on the economy will grow. Even with an increase (albeit at a lower rate than expected) in inflation (CPI), we see the next move in interest rates as down, rather than up. Good news for those with UK mortgages.
2. Corruption - Who are you dealing with?
At Bewarethesharks.com, we take a holistic, top down approach to investing. We analyse every aspect of an investment decision. As part of your risk analysis, not just in overseas locations, you have to account for corruption, as the first principle of any investment strategy is the protection of capital. Therefore it is with some interest that we looked at the Corruption Perceptions Index 2005 for an investment project we are presently researching.
There are 158 rankings ranging from Iceland at number 1, i.e. the least corrupt, to Chad and Bangladesh jointly at 158. There is also a scoring system which relates to perceptions of the degree of corruption as seen by business people and country analysts between 10 (highly clean) and 0 (highly corrupt). Here are some examples:
| Country | Rank | Score (10 to 0) |
| UK | 11 | 8.6 |
| USA | 17 | 7.6 |
| Spain | 23 | 7 |
| Cyprus | 37 | 5.7 |
| Italy | 40 | 5 |
| Czech Republic | 47 | 4.3 |
| Slovakia | 47 | 4.3 |
| Latvia | 51 | 4.2 |
| Colombia | 55 | 4 |
| Bulgaria | 55 | 4 |
| Turkey | 65 | 3.5 |
| Syria | 70 | 3.4 |
| Croatia | 70 | 3.4 |
| Poland | 70 | 3.4 |
| Laos | 77 | 3.3 |
| China | 82 | 3.2 |
| Lebanon | 83 | 3.1 |
| Rwanda | 83 | 3.1 |
| Romania | 85 | 3 |
| Mozambique | 97 | 2.8 |
| Serbia and Montenegro | 97 | 2.8 |
Source: Transparency International
Comment: Any serious analysis of a property investment market must consider the levels of corruption prevalent and analysed and hedged using a risk management matrix.
3. Think 3D when investing overseas!
We have received a number of enquiries from members of our investment community this week about some overseas investment markets. We always emphasise thinking laterally and looking at all the factors:
"Conquerors estimate in their temple before the war begins. They consider everything. The defeated also estimate before the war, but they do not consider everything. Estimating completely creates victory. Estimating incompletely causes failures." Sun Tzu
There are investment countries which are presently being marketed in the UK which clearly do not have a specific UK residential or second home demand. Therefore questions which rightly arise are:
Who will I rent to?
Who will I sell to?
Sometimes with investing you just have to use common sense, but analysis also helps. If I was investing in Marrakech, Morocco for instance, I would look at the demand from the French, although there are also a growing number of British people living there. If I was looking at Panama, it would be the indigenous population and the US..............and so on.
The fact the the British do not normally buy in a location should not, per se, be a red card.