MoneyWeek issue 372 cover

Bail out!

22 February 2008 / Issue 372

Why it’s time to sell the UK... PLUS:

• The stocks that Warren Buffett’s snapping up now

• What’s gone wrong in South Africa?

• Bill Bonner on why capitalism and democracy are incompatible

Excerpt

Propping up the Rock

Amid all the hubbub over Northern Rock’s nationalisation you may not have noticed that there was some good news for UK banks this week – but you should take it with a massive pinch of salt.

Barclays’ results on Tuesday found the banking giant awarding itself a comparatively clean bill of health. True, there was a £1.6bn writedown of creditrelated securities and the bank did warn (as if anyone needed to be reminded) that 2008 would be a “less benign year”.

But by the standards of the current credit crisis, the loss of a billion or so just isn’t that bad. And a 10% hike in the dividend seemed to confirm the upbeat tone. The real trouble is, as Anthony Hilton pointed out in the Evening Standard, that Barclays’ Swiss peer Credit Suisse “made a statement remarkably similar in tone to that of Barclays” merely days before it “discovered” a pile of assets that had been overvalued by £1.5bn.

So, as Hilton says, “whom do you believe?” I’m inclined to side with the sceptics. Banks are facing pressure from so many angles that I can’t believe we won’t see a fresh stream of writedowns and nasty surprises throughout this year.