The UK economy could decline for another year and take a further two years to recover

A National Institute of Economic and Social Research study says the current economic decline is "very similar" to the slowdown at the start of the 1980s.

The latest estimate predicts a 1.5% decline in the first quarter of 2009.

In a separate study by Nationwide, UK consumer confidence fell in March as worries continued about jobs.

The building society's consumer confidence index dropped two points to 41.

The Bank of England's Monetary Policy Committee (MPC) begins its latest interest rate-setting meeting on Wednesday, with its decision due to be announced at midday (1300 GMT) on Thursday.

The MPC is not expected to cut the Bank rate further from its current record low of 0.5% having cut the rate six times since October in attempt to boost the economy.

Jobs market

UK unemployment recently hit two million for the first time since 1997.

Nationwide said consumer confidence was "broadly stable since the start of the year, but feelings about the current labour market have weakened".

"Further reports of job losses are likely to have affected consumers' views of this," the report said.

Nationwide said consumers' confidence fell for the ninth consecutive month in March.

The building society's survey came as a report from the Recruitment and Employment Confederation/KPMG showed little sign of a strong recovery in the number of permanent jobs available in the UK.

Although its "permanent placements indicator" rose to 33.5 in March from 30.3 in February, that was still well below the 50 level, where growth begins.

"These latest figures leave no doubt that the UK jobs market is at its worst in the 11-year history of the survey and recovery might take longer and be more protracted than many hope," said Mike Stevens, partner and head of business services at KPMG.

However, the Nationwide's survey of 1,000 consumers indicated that they had became more optimistic about UK economic conditions.

"Increased optimism towards the current and future economy is encouraging," said Nationwide's Fionnuala Earley.

A succesful U.S. Treasury plan to rid bank balance sheets of poorly performing assets may be the key to unclogging the arteries of global credit marke

New U.S. bank diagram welcomed by funds and debt markets. U.S. Treasury Secretary Timothy Geithner provided further details of the complex program which could rid U.S. bank balance sheets of up to $1 trillion of bad assets. The highlight of the programs was the generous financing offered by the government to persuade private investors to participate.
The Treasury plans to team with investors to buy up to a half-trillion dollars of bad bank assets in hopes of opening up lending again.

An earlier smaller $80 bln plan, known as the Super SIV, failed in October 2007, and the original $700 bln Troubled Assets Relief Program (TARP) failed in late 2008 due to a lack of participation by private investors.
Early market reaction to the U.S. Treasury's latest plan appeared to be more positive on Monday.
"My own view is the plan is a sensible one," Byron Wien, chief investment officer of Pequot Capital Management, told the Reuters Private Equity and Hedge Fund Summit on Monday. "This is a PIMCO, BlackRock sort of thing, where some credit-oriented hedge funds will participate."
The plan is being launched at a time when lawmakers are furious about big bonus payments to executives at bailout recipient American International Group.
In an effort to spur investor participation, U.S. Treasury Secretary Timothy Geithner said private partners in his plan will not face the tough executive pay restrictions that apply to recipients of government bailouts.
GENEROUS INCENTIVES
The main incentive for private investors to participate in the latest U.S. Treasury plan appeared to be generous financing terms to boost the return on the investment.
As well as the initial financing from the Treasury and private investors, the Federal Deposit Insurance Corp (FDIC), a U.S. banking regulator, and the Federal Reserve will be tapped to offer further financing.
Under one part of the plan focused on bad loans, the Treasury will provide up to 80 percent of initial capital alongside investment by private funds. The FDIC would then offer debt financing for up to six times the pooled amount.
In addition, the Treasury will approve up to five investment managers and match their money one-for-one. It will then offer debt financing for 50 percent of the combined capital pool to buy securities banks want to unload.
Two major U.S. money managers, BlackRock and PIMCO, expressed interest in participating in the toxic-assets plan, which could produce big profits.
"From PIMCO's perspective, we are intrigued by the potential double-digit returns as well as the opportunity to share them with not only clients but the American taxpayer," Bill Gross, PIMCO's co-chief investment officer, told Reuters in an interview.

Switzerland is relaxing key bank secrecy laws

UK Prime Minister Gordon Brown yesterday hailed announcement that Switzerland is relaxing key bank secrecy laws .Switzerland, Austria and Luxembourg announced a relaxation of their banking secrecy laws on Friday (13 March) following mounting pressures on both sides of the Atlantic to crack down non-cooperating tax zones.
The news comes only one day after Liechtenstein and Andorra made similar declarations, as a number of financial centres around the world attempt to pre-empt any decision coming out of the G20 leaders summit on 2 April.

As western governments feel the pinch due to expensive stimulus spending projects coupled with reduced tax receipts, the spotlight has been turned on a handful of geographic locations that profit by harbouring capital owned by companies and wealthy individuals from abroad.

The Swiss government said on Friday that it intends to adopt OECD standards on the sharing of banking information between different countries, citing its desire to avoid being placed on the organization's 'black list' of tax havens.
UK Prime Minister Gordon Brown said the changes were "the beginning of the end of tax havens." "Tax evasion, which costs the global economy billions of pounds each year, will become more difficult in future."

money market mutual fund assets rose by $461 million to $3.906 trillion for the week

Investment Company Institute said Money fund assets rose to $3.906T in latest week.
Assets of the U.S. retail money market mutual funds rose by $10.67 billion in the latest week to $1.365 trillion.
Assets of taxable money market funds in the retail category rose $11.04 billion to $1.075 trillion for the week ended Wednesday, the Washington-based mutual fund trade group said. Tax-exempt fund assets fell by $361 million to $289.83 billion.

Assets of institutional money market funds fell by $10.21 billion to $2.541 trillion for the same period. Among institutional funds, taxable money market fund assets fell by $12.05 billion to $2.349 trillion; assets of tax-exempt funds rose by $1.84 billion to $192.18 billion.

The seven-day average yield on money market mutual funds fell in the week ended Tuesday to 0.29 percent from 0.32 percent the previous week, said Money Fund Report, a service of iMoneyNet Inc. in Westboro, Massachusetts. The 30-day average yield fell to 0.33 percent from 0.36 percent, according to Money Fund Report.

The online service Bankrate.com said its survey of 100 leading commercial banks, savings and loan associations and savings banks in the nation's 10 largest markets showed the annual percentage yield available on money market accounts fell to 0.49 percent as of Wednesday from 0.50 percent week earlier.

Financial Q&A..............

Q: I took my credit cards and created myself a summer job – when I am not teaching – by building a house. I am almost finished building the house with my credit cards and about to go bankrupt. The banks tell me they will not make me a loan even when I finish the house, as my credit-card debt is too high. I tried to explain to them that I wanted to pay off the credit cards, but they said it made no difference. What should I do?

A: If Joel Doelger had the power to turn back the clock, the director of counseling at Credit Counseling of Arkansas says that he would have recommended that you use a traditional builder's spec loan to cover the initial cost of building the home. That would have allowed you to purchase supplies, but with a lower interest rate than the credit cards have charged.

Unfortunately, that's not the case. And to worsen matters, given the current soft housing market, it may be difficult to sell a completed home, much less an almost completed home.

It's a bit of a long shot, but Mr. Doelger knows of one loan product that could help both you and any potential home buyer. The FHA offers a rehab loan that allows the buyer to roll the cost of home improvements into the initial loan.

If you found a buyer who would qualify for such a loan, he or she could buy the home now – as is – and roll the completion of the home into the initial loan. That would prevent the borrower from having to turn around right away to qualify for a second mortgage to complete the home.

Second mortgages typically have higher interest rates than first mortgages. If a buyer can purchase the home in its present state, you may be able to get out of this venture now, without having to sink additional money into it to make it marketable.

If you aren't able to pay the credit-card bills with the sale of the house but are hesitant about filing for bankruptcy, you might be able to use the services of a credit counseling agency, Doelger says. You'll want what is called a debt management plan (DMP). A legitimate agency will help you determine your current financial situation and assess the suitability of a DMP, as well as other options, for helping you repay the debt.

The Federal Trade Commission produces a variety of useful brochures on financial issues, including one on how to select a credit counseling agency (ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm).

Q: Could you help me find the best and safest annuity company in Switzerland? I would rather have a fixed annuity, but they aren't available at this time in Switzerland.

A: One source of information on this might be swissannuities.com. On this website you can learn a lot about the ins and outs of Swiss annuities – who sells them, who regulates them, what the advantages are to owning one, etc.

What you won't find is direct advice on which particular annuity to buy. And when we contacted the Swiss Financial Planners Organization, in Bern, CEO Nicholas Koechlin said that, by law, financial advisers in his country cannot dispense such guidance. For general information on personal finances you can ring them at 011-41-31-326-2730, or e-mail them at info@sfpo.ch.

Back stateside, Rich Arzaga, a financial planner in San Ramon, Calif., can't vouch for a Switzerland-sold annuity (nor could we find anyone else in the United States with Euro-specific experience on annuities). Regardless of the country of sale, there are common threads to annuities that Mr. Arzaga says a buyer should consider:

•Time horizon. How long are you willing to tie up your money? How big a penalty are you willing to take if you withdrew more on an annual basis than the annuity contract allows?

•Risk tolerance. You say you can't buy a fixed annuity. That would leave you with a variable annuity in the US, and they mostly invest in the stock market.

•Fees. Annuities carry sales charges, as well as other fees for add-ons such as death or survivor benefits. The more add-ons, the more fees.

Annuity sales and marketing are regulated in the United States at either the federal or state level, depending on their type. There also are rating agencies that assess the claims-paying ability of insurance companies that market these products.

Billionaire Warren Buffett said the economy will be “in shambles” this year

Buffett Says Economy ‘In Shambles,’ Promises Recovery
Billionaire Warren Buffett said the economy will be “in shambles” this year, and perhaps longer, before recovering from the reckless lending that caused the worst “freefall” he ever saw in the financial system. The economy and stocks will rebound, and the best days for the U.S. are ahead, said Buffett, chairman of Berkshire Hathaway Inc., in his annual letter to shareholders Feb. 28. Buffett said he’ll spend the recession shopping for new investments for Omaha, Nebraska-based Berkshire.

“The economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond,” said Buffett. “Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.”

Buffett, an informal adviser to President Barack Obama, said the consequences of the U.S. housing bubble are now “reverberating through every corner of our economy.” Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said last week.

Late last year, “the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country,” said Buffett, 78. “Fear led to business contraction, and that in turn led to even greater fear.”

Berkshire’s fourth-quarter net income fell 96 percent to $117 million, the firm said Feb. 28. Book value per share, a measure of assets minus liabilities, slipped 9.6 percent for all of 2008, the worst performance under Buffett’s watch, on the declining value of derivatives and the stock portfolio.

‘Socks or Stocks’

Berkshire fell $4,250, or 5.4 percent, to $74,350 at 10:16 a.m. in New York Stock Exchange composite trading. The stock has plunged 47 percent in the past 12 months.

The Standard & Poor’s 500 Index will probably gain in three-fourths of the next 44 years, just as it did in the period since Buffett took over Berkshire in 1965, he wrote. The benchmark dropped 38 percent last year, the most since 1937.

“We enjoy such price declines if we have funds available to increase our positions,” Buffett wrote. “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Berkshire’s cash hoard was about $25.5 billion at year-end, down from $33.4 billion on Sept. 30.

Buffett disclosed increased holdings of Posco, Asia’s third-largest steelmaker, and Sanofi-Aventis SA, France’s biggest drugmaker. Berkshire sold $4.77 billion of equities in the fourth quarter to help fund private deals for preferred shares in Goldman Sachs Group Inc. and General Electric Co. The sales included shares of Johnson & Johnson, Procter & Gamble Co. and ConocoPhillips, holdings that, Buffett wrote, “I would have preferred to keep.”

‘Major Mistake’
Buffett said he made a “major mistake” in buying shares of oil producer ConocoPhillips when oil and gas prices were near their peak last year.