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Monthly Archives: May 2016
BT 2015 Annual Results.
BT announced on Thursday 5th May 2016, its annual results.
BT is the most dynamic telecommunications, broadband and media corporation, that has delivered a strong set of results.
Some very salient information can be found in the results.
Total debt is under £10bn, at £9.845 Billion.
BT has taken on £2.1bn of EE debt, which is a factor why BT’s debt has increased.
The proposed final dividend of 9.6p, up 13%
Now with 9,961,199,569 and the Sept payment of 9.6p
Thus it will cost BT £956,275,159 (£956m) in Sept 2016 for the dividend payment
BT Group held cash and current investment balances of £3.4bn. A strong position of liquidity.
BT also paid £875m into BT Pension Scheme as part of its plan to reduce the pension deficit.
EE’s figures are interesting, monthly mobile average revenue per user was £26.7 for post-paid customers, £3.9 for pre-paid.
BT is firing an all cylinders.
FTSE 100 ETF
An ETF = Exchange Traded Fund.
The UK Flagship index is the FTSE-100.
This is the UK’s leading companies. To get access to all the FTSE-100 companies, one can buy shares in all the FTSE-100 companies, or buy an Unit Trust Tracker of the FTSE-100 like the Legal and General FTSE-100 tracker:
or by and Exchange Traded Fund like the HSBC ETFS 100.
What is interesting is that the price of the FTSE-100 ETF is the same as the FTSE-100 index.
Standard Life May 2016 Dividend.
Today, the life insurer and asset manager Standard Life will pay its May dividend. (Tue 24th May 2016)
The former mutual is a power house in pensions and investments. To put things in context they have £307.4 Billion under management. (That is about 20% of UK annual GDP)
BT the most dynamic telecommunications and media company, has its money purchase scheme managed by Standard Life
http://www.btretirementsavingscheme.com/bt/
Today Standard Life will pay 12.34p per share to shareholders.
http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=186960&action=
That is a yield of 5.5%
How much has Standard Life paid out today to its shareholders ?
The share capital issued by Standard Life is 1,975,305,518 shares.
Thus:-
1,975,305,518 x £0.1234 = £243,752,700.92
That is £243 million. Lucky shareholders who own such a wonderful asset.
Lloyds Banking Group Dividend May 2016
On Tue 17th May 2016, Lloyds Banking Group paid a dividend to shareholders. That was 1.5 pence.
Now the total numbers of shares in Lloyds Banking Group are:-
71,373,735,357
This the cash leaving the business to be paid to shareholders is:-
71,373,735,357 x £0.015 = £1,070,606,030
That is £1 Billion of cash.
An interesting fact that the UK Government, care of the UK tax payer owns 9.89% of Lloyds Banking Group.
That is 7,057,718,792 shares.
Thus 7,057,718,792 x £0.015 = £105,865,782
So on Tue 17th May 2016 the UK Government received £105 million as a dividend in its investment in Lloyds Banking Group.
The Low Oil Price: A consequence for BP’s revenues
BP, one of the largest oil companies in the world.
It has been widely reported the failing price of crude. Today crude is trading at $47 a barrel = £32
In economics, Revenue is defined as Price x Volume. [R=PV]
So when the volume of oil sales remains stable, and the price is falling, then revenue will fall.
One can see this the revenues of BP over the past 3 years.
BP’s revenues in £
2015 2014 2013
£153,689m £243,791m £261,421m
in £Billion
£153 Bn £243 Bn £261 Bn
One can see the dramatic fall in revenues year on year, and this makes the dividend harder and harder to pay.
Currently the dividend yield is over 7%, the question is how long is that sustainable.
UK Interest Rates.
What seems incredible but is true, the UK Bank of England base rate has been at 0.5% since March 2009.
http://www.bankofengland.co.uk/
What is even more amazing is that anyone is the UK who took out a mortgage since 2007 has never seen a rise in the Bank of England’s base rate.
So an interest rate rise would mean higher payments on mortgages and less disposable spend in the wider economy.
But always be cautious on high level statements.
In the UK there are just under 14.5 million owner-occupied households. However, there are actually 7.5 million people, who have no mortgage at all. So an interest rate rise would be irrelevant, and if they have savings they are actually better off.
Thus there are 7 million people who have mortgages, and they are the ones would suffer if rates were to rise.
The Growth of the 1%
Inequality in society is really becoming a real issue. So alarming is the wealth gap in society, the most powerful woman in the world, Janet Yelland, the chair of the US Federal Reserve has even stated it.
[http://www.federalreserve.gov/newsevents/speech/yellen20141017a.htm]
“The distribution of income and wealth in the United States has been widening more or less steadily for several decades, to a greater extent than in most advanced countries….The extent of and continuing increase in inequality in the United States greatly concern me. ”
For the most influential central banker to speak out this issue, is sending a message to the world.
The rich are getting super rich and the poor are trapped.
[https://www.youtube.com/watch?v=QzQYA9Qjsi0]
Paul Krugman, the famous US economist has also spoke out about this.
In a period of low growth, people with assets, are getting richer as asset values are rising. This means again means the rich are getting richer, and this can only lead to down stream problems, as wealth inequality will result in the poor being effectively marginalised and the rich could even buy political power. It is a lethal cocktail.
Saudi Arabian Oil Reserves.
There is a lot of speculation in the media about the possible floatation of the state oil company of Saudi Arabia, Aramco.
5% of the Saudi Aramco is being suggested to be floated, giving a valuation of $2.5 Trillion = £1.72 Trillion.
That is 113% of UK Annual GDP.
The size of Aramco can not be underestimated. They are responsible for a ninth of global oil supply.
So the question is how much oil does Aramco have ?
Well, again the numbers are huge. The proven reserves are 267,000 MILLION barrels.
That is 267,000,000,000.
So what is that value in today’s prices ?
Crude oil trades at $45.51 a barrel = £31.53.
Thus:-
267,000,000,000 x £31.53 = £8,418,510,000,000
That is £8,418 Billion = £8.418 TRILLION.
US Mortgage Backed Securities owned by the US Federal Reserve.
The US Central Bank, the Fed (The US Federal Reserve) has a vast balance sheet
https://www.federalreserve.gov/releases/h41/current/h41.htm
Just over $4,500 Billion ($4.5 Trillion)
One line item of the assets that makes up the $4,500 Billion are mortgage back securities.
These are effectively the debt of mortgages that the US Fed now owns after its programme of bond purchases since the start of finance crisis.
These are worth $1,762 Billion.
Effectively these are mortgages owned by the US Fed. US homeowners are paying the debt back via their monthly payments.
One can make some very rough calculations on this $1,762 Billion figure
If the average US house price is say $190,000, and say the mortgage on this house is say $175,000.
One could make a rough guess of mortgages held by the US Fed.
Mortgage Back Securities owned by the US Fed: $1,762 Billion
$1,762 Billion = $1,762,000 million
Average US Mortgage = $175,000 = $0.175 million
This number of mortgages owned by the US Fed = $1,762,000 million / $0.175 million
Thus = 10,068,571 Mortgages.
That is over 10 Million US Mortgages (homes) are owned by The US Federal Reserve.
The Truth About Low Growth and the 1%
Western Economies are exceptionally sluggish. We are in a sustained period of slow growth and high levels of government debt (Sovereign Debt).
Interest rates are low, wage inflation is very low, and consumer goods such as food and fuel have enjoyed a period of deflation.
In the UK it was normal for 1 loaf of bread to be £1.20
Now one can buy 2 loaves of bread for £1.
What is very obvious is that the rich are getting richer, the 1%.
What has happened since the financial crisis that began in March 2007 with Bearn Stearns being rescued by JP Morgan, and then UK mortgage bank Northern Rock applying for emergency funding from The Bank of England in late August 2007, we have seen other asset classes rise in value.
Property has rocketed in value, Shares have gone up in value.
Thus anyone like the rich owning financial assets likes real estate or shares, have seen their wealth increase, for doing nothing. That is what happens when you are lucky enough to be in the right place at the right time.
Japan’s Electricity Production
One of the most technically advanced nations in the world is Japan. Home to companies like Toshiba, Mitsubishi, Toyota, Nintendo, Nissan, Sony, Mazda, Panasonic, and of course famous for its amazing Bullet Train.
As a modern society, electricity production is key to its economy.
Japan produces 4.5% of the world’s electricity, which is 1061 Terawatt/Hours.
(The UK produces 335 Terawatt/Hours which is 1.4% of global production)
Moneyfarm
Self investment opportunities seem to be growing all the time. To give investors access to global opportunities that was only in the reach of brokers and other investment professionals.
www.moneyfarm.com is a new player on the market.
A new portal to allow investors a develop a financial portfolio using low cost ETF’s (Exchange Traded Funds) which are very similar to index trackers.
So one is investing is whole index’s on stock and bond markets around the world.
HM Government Borrowings: April 2016
Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.
In April 2016, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.
There were “only” 4 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury:-
20-Apr-2016 0 1/8% Index-linked Treasury Gilt 2026 £1,424.8030 Million
13-Apr-2016 3½% Treasury Gilt 2045 £2,012.4980 Million
07-Apr-2016 1½% Treasury Gilt 2026 £2,874.9890 Million
05-Apr-2016 1½% Treasury Gilt 2021 £3,162.4990 Million
When you add the cash raised:-
∑(£1,424.8030 Million + £2,012.4980 Million + £2,874.9890 Million + £3,162.4990 Million) = £9,474.79 Million
£9,474.79 Million = £9.474 Billion
On another way of looking at it, is in the 30 days in April, HM Government borrowed:-
£315 million each day for the 30 days.
We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2021, 2026 and 2045. All long term borrowings, we are mortgaging our futures, but at least “We are in it together….”