Let the Good Times roll

Is it really only a year ago that Lehman Brothers filed for bankruptcy, thus bringing the civilised world to an end? It seems like an eternity.

Here we are now, with the FTSE 100 index up 40% from this year’s low and topping 5,000 points twice this week. Although that level did not hold at the first attempt, and we may well see some more profit taking this month and/or next, it is likely that we will be well clear of 5,000 by year end and should probably be viewing something around 4,800 as the floor.

Despite the overhanging fear that we could see a second wave of recession next year, there is just too much good news about. Globally, the world is pulling out of recession faster than expected; in the UK, manufacturing is showing signs of a genuine pick-up, exports are at last responding to the fall in the value of the pound and the housing market is bouncing back from a very low point.

The Bank of England has kept interest rates on hold and, more importantly, declined to extend its quantitative easing programme after last month’s shock. Already the press are speculating on when the next £25 billion will be added to the £175 billion already agreed. That will depend far more on the need to mop up government debt than on the general state of the economy.

One reason to feel that UK companies are still undervalued is that takeover bids from abroad have started to emerge. Kraft has come up with an offer of £10.2 billion for fellow food and drinks group Cadbury, which is hardly a basket case despite my past criticism of its sudden changes in strategy.

National Express is not on such solid ground as Cadbury. The train and bus operator has £1 billion of debt, run up in times when debt was considered to be cheap. Funny how cheap things often turn out to be expensive. The cash was used to overpay for a Spanish bus company and then for an excessively optimistic view of the troubled East Coast line in the UK.

However, even National Express got the bidding consortium, comprising private equity house CVC and Spanish family firm Cosmen to raise its indicative offer twice before succumbing and Kraft will have to offer more to win Cadbury.

Particularly encouraging is the successful placing of 44% of holidays group Thomas Cook by banking creditors of failed German retailer Arcandor. If such a massive stake can be got away without damaging the company’s share price, we are on solid ground.

Good Times (2)

Holders of Cadbury shares should hang on despite the temptation of taking profits after the Kraft bid sent the shares surging. Kraft will have to offer more whether it seeks to win over the Cadbury board or goes hostile. There is also a serious possibility of a rival bid emerging.

It would not be wrong to take some profits by selling part of an existing stake but don’t miss out on the possibility of further gains. The upside potential outweighs the possibility that the candy will be snatched away.

Hard Times (1)

A curious letter appears in the Daily Telegraph. Norman Revill from North London argues that the Beatles were not working class heroes. Eschewing the somewhat easier task of debunking the myth that they were heroes, he chooses to claim that they were not working class.

The basis of his argument is that three of them went to grammar school and one even stayed on in the sixth form to take A-levels. One became an apprentice electrician and another went to Art College. They could all string a sentence together and had intelligence and charm. Even Ringo Starr, described by Revill as the most working class of the four, speaks well.

The fact that two Beatles grew up on council estates is dismissed. Apparently, salesmen and or bus drivers, as two fathers were, could not have been working class.

It would probably come as a shock to Daily Telegraph readers if they discovered that working class children did aspire to a decent education back in the 50s and 60s and some were trained as electricians (and plumbers and joiners) rather than lured to second rate courses at third rate universities.

Even working class boys and girls were taught proper English and some, believe it or not, were quite charming.

Council houses were rented from the local authority before Margaret Thatcher decided that everyone should be forced to buy their own homes to live middle class lives. Revill’s letter tells us more about changing attitudes in this country than it does about the Beatles. I bet they knew what a jam butty was.

Hard Times (2)

Poverty levels in Britain mirror the Victorian times of Charles Dickens according to Lesley Ward, the president of the Association of Teachers and Lecturers. As a teacher, she should read some Dickens books before suggesting that the appalling squalor he describes is widespread today.

Children from the poorest areas, she says, are unable to dress themselves, use a knife and fork or go to the toilet. I dare say this is true but it is about social skills rather than poverty. Likewise the fact that they throw a paddy when told no is about poor parenting than the amount of money coming into the home. Throwing a paddy gained you very little in squalid Dickensian homes.

Some children come to school unaccompanied, help to bring up younger siblings and go home to an empty house. Well, that happened in the 1950s when such youngsters were known as latchkey children because they had a key to let themselves in with.

The trouble with poverty is that it keeps reinventing itself. What seems like poverty now was quite desirable 50 or 100 years ago. Far more shocking is a quite different point that Ward makes: low expectations among parents for their children. This will ensure that poverty continues from generation to generation.