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Are you a better negotiator than your child?

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Although the recession that has hit many countries around the world appears to be coming to an end, there are still millions who are impacted by pay freezes and higher prices.

It was recently announced however that one particular segment of the population has seen some good news this year.

For the first time in 7 years, “pocket money” given to children by their parents has increased.

The annual Halifax Bank pocket money survey results have been released and it’s good news for children.

This year, the typical child in the UK receives pocket money of £6.25 a week. This works out as an extra £18.72 a year and is a 6% increase on the previous year.

There were some interesting findings in the survey.

For example, there is a difference between the amounts that boys receive compared to girls. Boys now receive an average of £6.41 a week which is 32p more than the average for girls.

Just over 50% of the children polled believe they receive the right amount of pocket money whilst 43% of the children think they deserve more money (some interesting wage negotiations are no doubt ahead for these 43% when they start working as an adult!)

A total of 1,202 children aged between eight and 15 across the UK were questioned as part of Halifax’s research.

Flavia Palacios Umana, head of savings products at Halifax, said: “It is encouraging to see the amount of pocket money children receive has increased from last year, this gives kids the chance to save their money as well as spend it … teaching children important financial life lessons by using pocket money will quickly give them understanding of basic financial issues and more important the consequences associated with making and spending money.”

Is this a sign that the recession is definitely over or is it a case that children have become better negotiators with their parents?

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You’ve heard of the iPhone but what about iMerica?

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$75,876,000,000 is a lot of cash. But who does it belong to?

We blogged recently about Apple’s latest set of successful results but if you look into the figures you’ll see a staggering amount of cash that they hold.

Cashflow is a key factor for most businesses but by anyone’s reckoning $76 billion of cash is a hefty amount that will cover most eventualities.

Apple are reportedly holding onto the money for potential big ticket acquisitions but if you look at the latest market capitalisations of some well known companies on the London Stock Exchange then you can see what Apple could buy with their cash of $76 billion (£47 billion).

For example, they could purchase ALL of the following household names with cash:

BSB (Sky TV) (market cap = £14.8bn)

Burberry (£6.2bn)

Sainsbury (£6.1bn)

Marks & Spencers (£5.7bn)

Ryan Air (£4.7bn)

Next (£4.2bn)

Pfizer (£4.1bn)

Easy Jet (£1.5bn)

So, without taking out any loans or raising any additional funds Apple could buy all of the above.

These are phenomenal amounts of cash that they are holding.

They even have so much cash that they currently have more cash at hand than the US government!

According to the US Treasury, the total operating balance (in effect the amount of money the US government can spend before it hits their debt ceiling) was $74 billion. This is $2 billion less than the cash that Apple has at hand.

So, Apple has more cash than the US government. Will we shortly be seeing a picture of Steve Jobs on the one dollar bill?

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Get rid of the Michelin star and you’ll be a better restaurant…

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Running a successful restaurant is tough.

Whilst a good restaurant can me it look easy, there are a lot of things you need to get exactly right to be successful. Everything from the ingredients, the menu, the chef, the ambiance and the waiting staff have to be just right.

Plus don’t forget that it’s a very competitive industry with new restaurants popping up all the time.

Perhaps one of the best differentiators a restaurant can hope for is to earn the renowned Michelin star. This award it only given to the most elite of restaurants.

As with a lot of businesses that adopt Porter’s generic strategy of differentiation, creating differentiators comes at a cost.

La Lisita restaurant in the French city of Nimes is run by top chef Olivier Douert and received its first Michelin star in 2006. It has however just done something that many people would consider unthinkable.

Namely, they have voluntarily given back their Michelin star and reverted to a “standard” restaurant.

Surely this is commercial suicide?

Giving up the most prestigious award a restaurant can achieve can’t help the restaurant, can it?

In fact though they may well be better off as a result.

The restaurant has given up the star so that they can reduce their costs to a more reasonable level. There are several requirements for having a Michelin star. These include having a minimum ratio of one waiter for every five to six customers compared to a standard restaurant where the ratio is closer to one waiter for every twenty customers.

It was proving difficult for La Lisita to recover these additional costs as higher spending customers weren’t visiting as often as they were before the financial crisis so they decided to drop the star.

They are still planning on serving great food but under a slightly different model.

Could this be the first of many restaurants that obtain the Michelin star to prove that they can but then revert to a different model to make more money?

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Would you criticise me if I spent ALL of YOUR bonus on alcohol?

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One of the ways that governments around the world have tried to kick start the economy during the recent recession has been through the reduction of interest rates.

10 years ago the Bank of England base rate was 11.38%.

Today, the current rate is 0.5%.

If individuals have variable rate loans or mortgages on their home and the interest rate falls, their interest payments will also fall.

As a result these people will have more money in their bank account and in theory this additional money should make them feel more relaxed about buying goods. If these additional goods are purchased then the economy is stimulated.

Lower interest rates may also encourage individuals and organisations to take out new loans. This money can then in turn be used to buy products which again should stimulate the economy.

Now, whilst low interest rates are good for people that are borrowing money, they are not so good for people who are investing money and looking to receive interest on the cash they’ve invested.

Certain parts of the population are more reliant on interest received as part of their income than others. Pensioners for example, who are no longer working can be hit particularly hard as they often rely on interest income.

I’ve just had a quick look at the internet bank Egg.

Egg was established in 1998 and 4 years ago was bought by Citigroup (Citi). It’s one of the top internet banks around and offers good interest rates when compared to some of their competitors.

But what sort of interest rate do you get?

The Egg site today includes the following text:

“Egg Savings Account – watch your money GROW.

Get 0.60% gross pa/AER variable and watch your savings grow.

Includes a fixed 12 month introductory bonus rate of 0.10% gross pa/AER from the date your account is opened on balances from £1 to £1 million.”

The accountant in me likes to play with figures so let’s just think about this for a moment.

If you open an account with Egg with a £1,000 deposit, after the first year you’ll receive a bonus of £1.

Yes, a whole £1.

My favourite drink is London Pride beer and a pint will set me back £3.50.

Just think, in one year’s time if I invested £1,000 in the Egg savings account I could blow the bonus on just over a quarter of a pint of beer.

Then again, I couldn’t actually buy a quarter of a pint as I’d have to pay tax on the £1 bonus received…

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Are they really going to get their money’s worth for $8.5 billion?

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What was founded 8 years ago by 2 entrepreneurs and was last week bought by Microsoft for $8.5 billion?

Little did Swedish entrepreneur Niklas Zennstrom and his Danish colleague Janus Friis realise that the Skype product they introduced back in 2003 would be worth a mighty $8.5 billion 8 years later.

Skype, whose name comes from the abbreviation of the initial project name of “Sky peer-to-peer” has turned into the most successful online voice and video phone service.

It has over 650m users with the vast majority of users only use the free call facilities.

Even allowing for its success in terms of the numbers that use it, it’s still a pretty hefty amount that Microsoft paid for it.

If you look at the history of the company you’ll see that Zennstrom and Friis founded it in 2003, it was then purchased by eBay for $3.1 billion in 2005 in the anticipation that it would be integrated into their online auction site to help people negotiate over their purchases.

This wasn’t a huge success and eBay cut their losses when they sold it 4 years later to a group of investors with the company valued at $2.75 billion.

The investors that bought it from eBay though have done pretty well.

With Skype being valued at $2.75 billion in 2009 here we are 2 years later with Microsoft buying it for $8.5 billion – a pretty healthy return of approximately 300% over a couple of years.

If you look at the figures behind Skype then some people will argue that Microsoft have paid over the odds for Skype.

In summary, the latest reported annual figures for Skype are:

Sales: $860 million

Profit (eh, actually it’s a loss): ($7 million)

Amount Microsoft paid for it: $8.5 billion (or $ 8,500 million)

So, Microsoft paid $8,500 million for a company whose most recent reported annual results showed a loss of $7 million.

These figures clearly show that Microsoft are hoping to create a lot of value from the acquisition of Skype and possible integrations discussed include using Skype within Microsoft Outlook and their computer game XBox.

This is a big amount of money to recover though and only time will tell whether the largest acquisition in Microsoft’s history will turn out to be a good call or not.

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I trust the Sugar trader but not the salt trader…

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At the core of many businesses is the relatively straightforward concept of “trading”. In simple terms you buy an item for a certain price and then sell it for a higher price.

A slightly more complex version is where you buy individual components, get them assembled into a new item and then sell the newly constructed item for a higher amount than the sum of the individual parts.

I’ve just finished reading the autobiography of Alan Sugar, or Lord Alan Sugar to give him his full title.

It’s an excellent and inspirational read.

For any of you outside of the UK that haven’t heard of Lord Sugar he’s a “rags to riches person” who through a combination of hard work and good ideas created various very successful business empires. He’s also the star of the hit TV show “The Apprentice”.

I personally feel that Lord Sugar is a role model for business men and women around the world and people can learn a lot from him.

At the other end of the spectrum though is Mr Guo from Wuhan in China.

Unlike Lord Sugar, Mr Guo showed a complete lack of ethics, research and business acumen. Following the terrible tragedy of the recent earthquake and tsunami in Japan, Mr Guo decided to purchase 6.5 tonnes of salt.

His purchase decision was made on the basis of rumours that were spreading in China that the iodine in salt would help prevent any radiation sickness from the disaster at the Fukushima nuclear plant. He was expecting the price of salt to increase so arranged for 3 truckloads of salt to be delivered to his apartment in the expectation of selling it at a high price to people that were desperate to avoid radiation sickness.

Alas for Mr Guo the Chinese authorities announced that Chinese residents would not be affected by any radiation from Japan and the salt wouldn’t help.

The end result was that salt prices didn’t increase.

It gets worse for Mr Guo though.

Apart from the salt prices stabilising, he has been told that it will be illegal for him to sell the salt as he doesn’t have a receipt for the purchase.

The end result is that the unsuccessful trader is currently sat in his apartment accompanied by 6.5 tonnes of salt.

Perhaps Mr Guo should buy a copy of Lord Sugar’s book?

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What’s the link between the London Metal Exchange, a little old lady and Armenia?

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If you have some friends that are normal in most ways apart from a strange interest in different types of metals then head over to the website of the London Metal Exchange (LME) to get hold of some information to impress them.

The LME was established over 130 years ago and is the world’s premier non-ferrous metals market offering a range of futures and options contracts for metals.

Dig a bit deeper into the site and you’ll find some background on copper.

According to the LME, copper was first traded on the Exchange back in 1877 and was “the first mineral that man extracted from the earth and along with tin gave rise to the Bronze Age. As the ages and technology progressed the uses for copper increased.

Copper is an excellent conductor of electricity, as such one of its main industrial usage is for the production of cable, wire and electrical products for both the electrical and building industries. The construction industry also accounts for copper’s second largest usage in such areas as pipes for plumbing, heating and ventilating as well as building wire and sheet metal facings.”

I’m not sure any of this was on an elderly Georgian Lady’s mind this week when she was digging in the ground for copper to sell for scrap.

The 75 year old had been digging near the capital of Tbilisi when her spade damaged a fibre-optic cable. This cable was quite an important cable as it in effect provided 90% of the internet access for Georgia’s neighbouring country of Armenia.

The end result of this 75 year old lady’s action was that 90% of the web users in Armenia’s 3.2 million population were unable to access the internet for 5 hours. This Grandmother’s spade had cut through the cable and in essence, internet connectivity for a whole country was lost for the majority of the working day.

On Friday, copper prices were up 2% and the three-month copper prices on the LME closed at $9,875 per tonne, its highest in more than a month.

This spike in prices is reportedly nothing to do with a shortage of copper due to the little old lady being arrested and taking a break from her copper digging…

I’ll have two beers, some peanuts and 50 shares please…

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Fancy having a drink of beer and getting some shares in the company as well?

Well, if you’re in Australia that is exactly what you can do at the moment.

Taking a novel approach to raising finance the Australian beer brand Broo is currently offering free shares with purchases of their beer.

Consumers need to purchase between one and fifty cartons of Broo via their website for AUD 54.99 each (approximately £35) and then they are entitled to get 10 free shares in the company for each cartoon.

The company is hoping to give away up to 10 million shares and these will be shares with full voting rights so it’s definitely more than a PR exercise.

The share prospectus can be found here but shares are only available to Australian residents who have until the end of the month to apply for them.

If you’re a heavy drinker then you won’t become the major shareholder in the company as the maximum number of shares each individual can get is 500.

All in all this seems a great idea by the company. Drinking beer and investing at the same time – sounds like a nice strategy!

Just how many mines are there in London and Toronto?

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It’s Valentine’s Day next Monday and love appears to be in the air as far as stock exchanges are concerned.

Last year, the Australian and Singaporean stock exchanges announced plans to merge.

Earlier today the London Stock Exchange and Toronto Stock Exchange announced that they had formally agreed to merge and Deutsche Borse and NYSE Euronext, two of the world’s largest stock exchange operators, have now just disclosed that they are in “advanced merger discussions”.

Wow – it’s all happening on the exchanges.

If you look at the transatlantic merger between the London and Toronto exchanges then the merger has been valued at an impressive £5.5 billion.

It has been presented very much as a “merger of equals” and not a takeover (although the London Stock Exchange shareholders will get 55% of the newly created entity).

The new entity will have its headquarters in both London and Toronto and whilst some people may say that having two headquarters is a bit of a “cop out”, it does avoid the accusation that one organisation has taken over the other.

There will of course be an interesting internal discussion about where THE boardroom will be located. The more likely situation though is that they will have two boardrooms, one in London and one in Toronto.

Either way the new enlarged entity will certainly become a dominant player. It will have over 6,700 listings and will become the largest exchange in terms of companies traded with an aggregate market capitalisation of approximately £3.7 trillion.

Mining companies will also no doubt be interested as the Toronto exchange claims to be the world’s leading resources market and approximately a third of the companies in the FTSE 100 Index (the 100 largest companies on the London Stock Exchange) are from the mining and energy sectors.

The proposed benefits of the merger include anticipated annual savings of £35 million by the second year of the merger.

Whether they could save more by only having the one boardroom table is a separate discussion point.

The flight is cheaper than a single piece of paper…

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Ryanair is Europe’s largest low cost airline.

Their strategy is very much based on cost leadership and is a classic “no frills” approach on the strategy clock model.

In simple terms you don’t pay a lot for the service but at the same time you don’t get a lot. This approach can be very successful when comparing for example to another extreme where you pay a lot but don’t get a lot!

It released its results for the final quarter of 2010 today.

Air traffic control strikes and the bad weather in December were blamed for the Euro 10 million loss that was reported although the company is still confident of achieving full year profits of between Euro 380 million and Euro 400 million for their year ended 31 March 2011.

The average fare during the last quarter was reported as being Euro 34 and this will get you the flight and that’s about it. Extras which require additional payment include taking hold luggage, payment by credit card and seat allocation.

Their whole ethos is to minimise their costs. For example, they have a pretty aggressive policy when it comes to boarding passes.

Their terms and conditions state that passengers must print out their boarding pass at home. If they fail to do so and need one printed out at the airport then Ryanair will charge the passenger £40 to print the one piece of paper.

£40 to print a single piece of paper is pretty high but Ryanair argue that if passengers print out the boarding pass at home then it saves the cost of employing check in staff at the airport.

They have reported that people who forget to print out the boarding pass and are subsequently charged £40 remember to print it the next time.

Of course, it could be that if they’ve been charged £40 for printing one piece of paper then “next time” may well be with another airline as opposed to Ryanair.