Monthly Archives: November 2013


Today is Thanksgiving – so maybe it is time to reflect on markets to date in 2013 and the outlook for 2014.

To date this year the S&P 500 has rallied by 25% and 166% since 9th March 2009; the FTSE in the same periods by 12.7% and about 92%. The FTSE 250 is up 23% on the year. The DAX has rallied by 22.6% in the last year. By any standards these are substantial gains.  We have also seen 69 IPOS come to the market in the UK this year, valued at £17.3 billion against IPOS valued at £2.8 billion last year.

So one can understand the reticence and reluctance of investors to surrender ‘hard earned’ gains. So many have shut up shop already.  After the RMG and Merlin IPOs, there was always the chance of indigestion hitting the market. Investors are far more fly than they were a decade ago! Fund managers don’t like buying from private equity companies, which have had the living daylights, in terms of value, squeezed out of them.

In regards to the valuation of RMG and the furore created in Parliament, I think the government has always had a hidden agenda.  The RMG always was the sprat to catch the mackerel. Had the RMG float been anything but a howling success, investors would have spurned any offerings from TSB, Lloyds and eventually RBS. So in my opinion.

I suspect that there won’t be much of a Christmas rally in the UK as mining, banking and energy stocks, which are influential in the FTSE 100 are not vogue sectors.  3rd quarter GDP of 0.8%, we suspect may not be sustainable – investment in business on a pro rata basis is at its lowest ebb since 1955.

2014 – The first 6 months look very choppy as tapering quantitative in the US looks like a massive imponderable.  I am also very concerned about Europe’s recovery – I don’t believe a word of it despite reassurance from the ECB in good faith and the charming robust rhetoric from Van Pompuy and Barosso. Greece is only a pimple on economic society, Spain and possibly France look like carbuncles waiting to be lanced.  However equities in the 2nd half of the year may well crack on.


These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator
+44 (0)20 7886 2775

Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom – The information in this e-mail and any attachments is confidential and may be legally privileged. It is intended solely for the addressee(s). If you are not an intended recipient, please delete the message and any attachments and notify the sender of mis-delivery: any use or disclosure of the contents of either is unauthorised and may be unlawful.

Panmure Gordon (UK) Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange.

Please refer to additional important disclaimers and legal information.



There were three issues on the financial and economic agenda yesterday – confirmation and adjustment that UK GDP had grown by 0.8% in the 3rd quarter; the Royal Mail’s half yearly results and the BIS Committee meeting on the pricing of RMG’S IPO; The possible SFO’S investigation of criminal activity by its global restructuring group, which alleges the inappropriate sale of clients assets at knock-down prices, having forced them in to liquidation having denied them loans at serviceable levels. Chairman Sir Philip Hampton vigorously defended RBS’s corner, though promised to have the drains up and deal with any malpractices if they manifested themselves.

Thursday’s estimate of the UK’s third quarter GDP growth of 0.8% underlined the breath-taking recovery of the country’s economic fortunes during the course of 2013. Economists continue to fall over themselves to upgrade their growth forecasts for this year and beyond, with the OECD blazing the trail, closely followed by the CBI

In January there was every chance that the UK was about to dive into a ‘triple dip’ recession. However the UK has now leapt from being one of the slowest growing G7 economies to the fastest. George Osborne cannot help but preen himself like a peacock

Recent revisions to UK industrial production and construction figures ahead of yesterday’s release suggested that the first estimate of a 0.8% rise in GDP was re-confirmed. The UK has now posted its highest growth rate since the second quarter of 2010. Moreover, the most recent PMI readings suggest that the UK economy accelerated further in October; a good start to the final quarter of 2013, which should stand the UK’s economy in very good stead.

However, the composition of UK’s GDP seems to be lop-sided and lacking in consistency. The strength of retail sales in the third quarter suggested that household spending accounted for most of the overall expansion and that did indeed prove to be the case – only more so. Consensus had assumed that private consumption growth accelerated to 0.6% over the last quarter. Instead it grew at 0.8% – the highest rate in three years.

UK exporters have used the relative weakness of Sterling to bolster margins, rather than expand market share. With the Euro zone recently showing sign of economic relapse, there must be a real risk that the trade balance deteriorates further.

A similar holding pattern emerges when looking at investment. Stripping out the contribution from the public sector, this remains on a downward path with investment by UK businesses down by another 6.3% in the last quarter – its worst level since 1955. BGC’S Mike Ingram stated very succinctly – “The confidence to spend on capital expansion is simply not there. Unfortunately household deleveraging in the UK has hardly begun. At best this will be a long slog as UK household finances remain hard pressed; average wages are rising at only a third of the level of inflation.”

Dr Cable and Michael Fallon were simply not having it yesterday, when the BIS Committee accused them and Lazard’s William Rucker of selling off the RMG too cheaply.  This came on the back of half yearly profits which increased and saw its shares rally by 6.8%.  Dr Cable insisted that the disposal of RMG had been a huge success and that there would be no investigation. Many cannot help feeling that the government had an ulterior motive.  In the back of their minds will have been the future sales of next year of TSB, part of Lloyds and maybe the Coop.  So to have offered the public a fully priced ‘dog’ would have been folly.  The BIS and Chancellor will deny this diseased ridden thought out of hand, but I am not so sure.

The ECB expressed concern at the damage tapering in the US could have on the recovery process in Europe by unofficially driving up interest rates in the Eurozone. The same sentiment may well be held in the UK and I would be very surprised if Mark Carney did not allude to it in today’s Financial Stability Meeting. The property bubble may well come up on the agenda, though the BOE’s feeling is that loans to first time buyers are a  small proportion of the current mortgage market.

Wolseley, Kingfisher, Marston’s & Thos Cook post numbers today.



These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator
+44 (0)20 7886 2775

Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom – The information in this e-mail and any attachments is confidential and may be legally privileged. It is intended solely for the addressee(s). If you are not an intended recipient, please delete the message and any attachments and notify the sender of mis-delivery: any use or disclosure of the contents of either is unauthorised and may be unlawful.

Panmure Gordon (UK) Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange.

TODAY’S FAYRE – Wednesday 27th November 2013

TODAY’S FAYRE – Wednesday 27th November 2013

“Hence Burgundy, Claret, and Port,
Away with old Hock and madeira,
Too earthly ye are for my sport;
There’s a beverage brighter and clearer.
Instead of a piriful rummer,
My wine overbrims a whole summer;
My bowl is the sky,
And I drink at my eye,
Till I feel in the brain
A Delphian pain –
Then follow, my Caius! then follow:
On the green of the hill
We will drink our fill
Of golden sunshine,
Till our brains intertwine
With the glory and grace of Apollo!
God of the Meridian,
And of the East and West,
To thee my soul is flown,
And my body is earthward press’d. –
It is an awful mission,
A terrible division;
And leaves a gulph austere
To be fill’d with worldly fear.
Aye, when the soul is fled
To high above our head,
Affrighted do we gaze
After its airy maze,
As doth a mother wild,
When her young infant child
Is in an eagle’s claws –
And is not this the cause
Of madness? – God of Song,
Thou bearest me along
Through sights I scarce can bear:
O let me, let me share
With the hot lyre and thee,
The staid Philosophy.
Temper my lonely hours,
And let me see thy bowers
More unalarm’d!” 


John Keats – poet – 1795-1821

You have to admire Alex Salmond’s arrogant confidence!  The fellow has more front than Blackpool Pier.  He just thinks, that subject to a ‘yes’ vote to independence that Westminster is just going to roll over, tickle Mr Salmond’s tummy and give him what he wants in terms of fiscal and monetary help. I don’t know what ‘happy juice’ he’s been sipping, but can I have some? He seems to be suggesting that Scotland retains Sterling, has access to the gilt market, is regulated by the Bank of England, remains in NATO but bins trident and keeps its arrangement with the rest of the UK over EU membership! Surely whether Tory, Labour or coalition, Scotland has no chance of negotiating any of these demands. There is no depth to the 650 page SNP dossier, much of it being fanciful. Anyway the vote will go against Scotland gaining independence.  Many believe that the stance taken by the pro independent vote is just a cute way of persuading Westminster to step up to the plate and pay more into Scotland’s coffers. I think Alastair Darling has been immense in his campaign to keep Scotland within the UK. The reasons are politically understandable. Nonetheless he has rubbished the SNP with style and Conservative supporters will be very glad that he is not Shadow Chancellor.  Long live Ed Balls!


So very sad to see a sportsman of Jonathan Trott’s undoubted ability suffering from stress related illness. Time will no doubt tell us more about his infliction.  Until then messages of goodwill and a quick recovery are the order of the day.  Marcus Trescothick, the former England opener and Somerset stalwart spoke most articulately and with candour on Monday night. He has suffered similarly to Trott and time has allowed him to find an influential niche back in the professional sport that is part of his DNA.

Though the DOW finished yesterday’s session on the Street of Dreams above 16k, though flat on the day, equities overall were reluctant to select another gear ahead of the Thanksgiving holiday, which starts tomorrow. The S&P 500 finished the session just above the Plimsoll line and the NASDAQ was up 0.58%, much of it due to positive expectations about Hewlett-Packard’s results, which were posted after hours.  The NASDAQ breached the 4000 barrier for the first time in 13 years… These HP numbers were a huge improvement on last year’s efforts when, due to some controversy over the value of Autonomy, a loss of $1.4 billion was posted. Last night Meg Whitman posted a profit in excess of $700 million. New homes housing data was positive which saw the likes of Lennar and Pulte add over 4% in value. However Consumer Confidence fell to its lowest level last month for 7 months. This sent worrying vibes along Wall Street, blunting any progress, ahead of the US’s biggest shopping day of the year – on Friday.  However Tiffany’s pleased its acolytes with good results sending the stock up by 8.7%. The MSCI makes its seasonal adjustments shortly and Apple, Exxon Mobil and Oracle may suffer due to a decrease in reweighting. Since 9th March 2009 the S&P has added a breath-taking 166% in value.

Yesterday the FTSE 100 dropped 58 points to 6636, thanks in the main to a drop in Chinese economic activity, which triggered measurable falls in export driven stocks such as SAB Miller and Diageo.  The mining and banking sectors were also on the back foot! Mark Carney enjoyed a mixed day with the government. The Governor was pleased to accept responsibility from George Osborne for the capitalisation of banks through the FPC. Also the BOE would set the leverage ratios for lending. However Mr Carney locked horns with MPs over the value of ‘forward guidance’.  It was suggested that the policy ‘was dead on arrival’ due to the fact that the economy had picked up much more virulently than had been expected, which should be endorsed by 3rd quarter GDP today at 0.7% – might even be a touch better.  Mr Carney reiterated that the economy was still brittle enough to leave interest rates where they were! He repudiated the idea that there was confusion over forward guidance.  He felt that households, business and politicians would be grateful for the introduction of ‘FG’ for clarification purposes.

Asian bourses were a mixed bag this morning with Australia and Japan’s NIKKEI being out of sorts (average -04%), though Shanghai and the Hang Seng made modest progress. Europe opened up just in positive territory. The FTSE 100 was up 16 points at 6652.  Royal Mail posted a decent set of numbers for the half year. Revenues of £4.52 billion gleaned a profit of £283 million. Panmure’s Gert Zonneveld felt that the Interim results reflected solid revenue growth and strong improvements in underlying profits and margins. Cash flows were strong and net debt fell from £906m at the end of March 2013 to £723m by the end of September 2013. These numbers come ahead of today’s grilling Dr Cable, Michael Fallon and Lazard’s William Rucker is likely to receive from the BIS committee for selling RMG off cheap. Tesco posts a trading statement next Wednesday which may see like for like sales drop by 1.5%. Waitrose, Sainsbury, Aldi and Lidl have probably benefitted.  Tesco shares fell by 2% yesterday.  The outlook for 2014 is likely to improve. Results from Punch Taverns, United Utilities and Compass were also posted.

These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator
+44 (0)20 7886 2775

Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom – The information in this e-mail and any attachments is confidential and may be legally privileged. It is intended solely for the addressee(s). If you are not an intended recipient, please delete the message and any attachments and notify the sender of mis-delivery: any use or disclosure of the contents of either is unauthorised and may be unlawful.

Panmure Gordon (UK) Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange.

Please refer to additional important disclaimers and legal information.





If the Scottish electorate is daft enough to vote for independence next September, allowing themselves to be as free as a bird by 24th March 2016, then so be it! In my opinion it would be insanity personified – oil or no oil – Scotland will eventually run out!

 However, please Mr Salmond, you and your cohorts must not attempt to dictate terms!  If you broker your country in to an invidious position; then you live by the sword and you therefore must be prepared to die by it!  I would be horrified, as would millions, if a Conservative/Coalition Government allowed you to keep Sterling or be regulated in London, let alone use the facilities of the gilt-edged market, to fund your requirements at preferential rates – “On yer bike!” Yes, Germany allows France to hang on to its coat tails – what a nonsense that is! I can see a Labour government acquiescing, as it has everything to lose without Scottish seats in Parliament. The resentment in the UK would be humungous! Mrs S – you should have contingency plans in place with the EU – Van Rompuy & Barosso would welcome you with open arms!


As for the gobbledygook talked about tariffs being introduced as a result of not being able to use Sterling and the potential loss of 50,000 jobs in England – rubbish?  Am I bovvered as Catherine Tate would say?  No! It is just tub thumping and jingoistic behaviour in the same manner as pro EU protagonists tell me that BMW, BASF, Sanofi Aventis, SAP, Mercedes, Fiat et all won’t sell to UK without tariffs, if the UK wants out of the EU!  Oh yes they will trade with us.  As Leslie Crowther said all those years ago – “Come on down if the price is right!”

 It would be terrible if Scotland left the UK, but the Tories would be doing backward summersaults – No profligate Labour government in the foreseeable future. Christmas every day.  Anyway, it’s not going to happen. ‘Rip Van Winkle’ has already had his day in the sun and we have all woken up to the realities of life!  Finally never let it be said that the rest of the UK would not want to trade with Scotland!  Of course they would!

TODAY’S FAYRE – Tuesday 26th November 2013

 “Nobody heard him, the dead man,

But still he lay moaning:

I was much further out than you thought

And not waving but drowning.

Poor chap, he always loved larking

And now he’s dead

It must have been too cold for him his heart gave way,

They said.

Oh, no no no, it was too cold always

(Still the dead one lay moaning)

I was much too far out all my life

And not waving but drowning.

Stevie Smith – poet – 1902-1971

Three distinguished people in their own fields died yesterday. In terms of eminence let’s pay tribute initially to Robin Leigh-Pemberton – Lord Kingsdown – who died aged 86. Before becoming a highly respected Governor of the Bank of England at the time of the greatest financial changes to markets in the UK, particularly the introduction of ‘Big Bang’ in 1986 and the UK’s embarrassing, though gratuitous exit from the ERM in 1992, he was a hugely successful CEO of Nat West. He was a popular leader both in the private sector as well as a public servant!

Manchester United lost two favourites yesterday – both centre halves – Billy Foulkes aged 81 and Brian Greenhoff aged 60. Billy Foulkes who helped ‘The Red Devils’ win the European Cup in 1968 – the first time for a British club – was in the same mould as 2 other centre halves of the day – Maurice Norman of Spurs and Liverpool’s Ron Yeats – all three were colossuses! Old styled stroppy centre halves with necks like giraffes – boom! Boom! Brian Greenhoff, brother of Jimmy, was more subtle as a stopper.  He was not very big, but read the game really well!

Even though it is still November, we are slipping into Christmas festivities almost with indecent alacrity.  There is little in the way of economic data to unsettle the markets this week. Thursday is ‘Thanksgiving’ followed by what we hope will be a mega retail Friday – the biggest US shopping day of the year. The next major Non-Farm Payrolls, due out on Friday week, 6th December, are expected to confirm that close to 200k jobs will have been created in November. So within a narrow trading range equities show little sign of surrendering much in the way of value for the next week or so.

On the Street of Dreams all three indices closed just above the Plimsoll line yesterday, with activity almost derisively inadequate. There were a few interesting developments to stimulate interest. Walmart’s CEO Mike Duke will be replaced by Doug McMillion as CEO after a year. McMillion has been with Walmart since 1984. Blackberry, having failed to consummate a professional marriage with Fairfax Financial, is having a ‘last throw of the dice’ with its management changes. John Chen is the new CEO and James Yersh has replaced Brian Bidulka as CFO. Chrysler’s IPO has postponed until the New Year.

Yesterday the FTSE 100 added 20 points at 6694, with Aberdeen Asset Management, after decent numbers and easyJet twinkling through the growing market inertia.  Mining and utility stocks were unpopular on the day.

The day was taken up with the Tomlinson Report on RBS’s alleged reprehensible behaviour for capitalising on selling assets which the bank sold when its customers floundered thanks to the severity of loan rates or the fact that loans were not forthcoming. This was music in Vince Cable’s ears. As standard bearer for banker bashing; he has no peer in the realm. His cause was aided and abetted by the RBS commissioned report by Sir Andrew large on SME lending, which was also highly critical.

Not surprisingly enter stage left the wise men from the Lords – Their Lordships Lawson, Welby, Turnbull and McFall, baying for bank management blood – cut bonuses; split banks; defer bonuses for a decade, meet regulators more frequently; bring bankers legally to book!  What splendid rhetoric! All that was missing were swords and bayonets for them to be ‘gung-ho, fixed bayonets and over the top!’ Their intellect is without question, but I sometimes wonder if they are on the same planet as many of us. Of course bad behaviour must never be condoned, but does a Leeds entrepreneur – Lawrence Tomlinson – really understand all the machinations of a bank, even though he may well have been hugely successful? I somehow doubt it.  Yes Mr T has amassed a large fortune with care homes, when money was easy and in plentiful supply.

Perhaps some people are suffering from amnesia.  RBS in 2008 was bust! Its balance sheet was a gargantuan £2.2 trillion!  It had to be tapered.  It is down now to about £1.4 trillion – an amazing achievement.  How can you cut a balance sheet and increase lending without there being some misfortunate mistakes and problems – impossible. The public and the market need to be more sanguine and understanding than they are.  Perhaps RBS should have been split then.  I was against it as I could never see the taxpayer being repaid for 20 years. At least the SME lending would have been accommodated, but at a HUGE cost to the public.

Asia was suffering from a dose of inertia, with the NIKKEI closing down 0.67% and the Shanghai Composite and the Hang Seng finishing the session flat. Equities in Europe were again a little rudderless though good results from Britvic – up 3.4%, a reasonable effort from M&B +1.9% and some encouragement for the future outlook for De La Rue – +2% – all in early trading.

As for capping the payday lenders; the government U-turn may be a mistake, dropping the needy unnecessarily deeper in the financial manure!

These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator
+44 (0)20 7886 2775

Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom

TODAY’S FAYRE – 25th November 2013

“I wandered lonely as a cloud

That floats on high o’er vales and hills,

When all at once I saw a crowd,

A host, of golden daffodils;

Beside the lake, beneath the trees,

Fluttering and dancing in the breeze.

Continuous as the stars that shine

And twinkle on the milky way,

They stretched in never-ending line

Along the margin of a bay:

Ten thousand saw I at a glance,

Tossing their heads in sprightly dance.


The waves beside them danced; but they

Out-did the sparkling waves in glee:

A poet could not but be gay,

In such a jocund company:

I gazed–and gazed–but little thought

What wealth the show to me had brought:

For oft, when on my couch I lie

In vacant or in pensive mood,

They flash upon that inward eye

Which is the bliss of solitude;

And then my heart with pleasure fills,

And dances with the daffodils.”



William Wordsworth – poet 1770-1850

The hugging, kissing and back-slapping that took place in Geneva between John Kerry, Baroness Ashton (EU Foreign affairs commissioner) and the Iranian delegations on agreeing a degree of non- proliferation of nuclear power for a 6 months cooling off period seemed a little extravagant to me.  Yesterday in concert with North Korea, Iran was the most feared country in the world.  This morning it is on many Western countries’ Christmas card list. UK Foreign Secretary William Hague’s body language suggested that he did not believe a word of it.  I am with him on this issue, though perhaps not quite as dispirited or cynical as Israeli PM Netanyahu or Saudi Arabia. A degree of vigilance must surely be adopted. There is little evidence that Iran can spell the word ‘truth’ even though it only has one syllable!

There is little in the way of key data this week to lead equity acolytes off their chosen path until Friday, when the US government posts Non-Farm-payroll and employment data, which is expected to be positive. The Thanksgiving holiday takes place on Thursday to be followed by the biggest retail shopping day on the US calendar.  So those looking for bad news this week may have to dig quite deep. Asia started well this morning with all if not most bourses looking as if they will close in positive territory. Europe is expected to open positively – up about 0.5%.

There is some bad news to add to the toxic effect of the Cooperative Bank scandal and that will be the contents of the Government’s commissioned report by Lawrence Tomlinson on the business lending practices to small and medium sized enterprises by RBS and Lloyds Banking Group post the financial crisis which manifested itself in 2008. Some of these practices are alleged to have been disgraceful, causing the financial downfall by the withdrawal of lines of credit from companies with good financial track records. Some companies, as a result of heartless policies adopted went down with many assets being sold or seized such as property at ‘give-away prices.’ It is understood that some smaller estate agents suffered badly. It is of course well chronicled that Dr Cable loathes banks and has no interest in seeing any rehabilitation of the sector, despite knowing that the recovery of the economy needs a strong, repentant and helpful banking sector.  This report has been sent to the FCA for further investigation.

Reprehensible behaviour in business should never be condoned under any circumstances. However many politicians suffer conveniently from amnesia.  The credit crisis necessitated many banks to cut their balance sheets dramatically, especially Lloyds Banking Group and RBS, though it’s Global Restructuring Group.  RBS has cut is balance sheet from £2.2 trillion to £1.4 trillion in 5 years – no mean achievement.   Consequently many loans perceived to be doubtful in terms of credit worthiness will have been withdrawn or not granted.  There will also have been a reluctance to offer fresh lines of credit. That goes with the territory. It is unreasonable to expect banks to lend money to people who can’t pay it back for the sake of political expediency. I suspect that RBS and Stephen Hester will be pleased that it called upon the good offices of Sir Andrew Large – ex BOE – to provide its report on SME lending. We might now get a more balanced opinion.     These are David Buik’s personal views trade

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775

Panmure Gordon & Co One New Change
United Kingdom

TODAY’S FAYRE – Sunday 24th November 2013

“Between my finger and my thumb
The squat pen rests; as snug as a gun.
Under my window a clean rasping sound
When the spade sinks into gravelly ground:
My father, digging. I look down

Till his straining rump among the flowerbeds
Bends low, comes up twenty years away
Stooping in rhythm through potato drills
Where he was digging.

The coarse boot nestled on the lug, the shaft
Against the inside knee was levered firmly.
He rooted out tall tops, buried the bright edge deep
To scatter new potatoes that we picked
Loving their cool hardness in our hands.

By God, the old man could handle a spade, Just like his old man.

My grandfather could cut more turf in a day
Than any other man on Toner’s bog.
Once I carried him milk in a bottle
Corked sloppily with paper.
He straightened up To drink it, then fell to right away
Nicking and slicing neatly, heaving sods
Over his shoulder, digging down and down
For the good turf. Digging.

The cold smell of potato mold, the squelch and slap
Of soggy peat, the curt cuts of an edge
Through living roots awaken in my head.
But I’ve no spade to follow men like them.

Between my finger and my thumb
The squat pen rests. I’ll dig with it.”     

Seamus Heaney – poet – 1939-2013             

I understand that a ‘white paper’ on Scottish Independence will be circulated next Wednesday 27th November 2013. Any thought of Scotland leaving would be insane, economically and politically. I am very surprised that Alistair Darling has been the only major standard bearer from Labour’s senior ranks to openly support Scotland remaining in the Union. The one consolation those people living in England and for that matter the rest of the UK, who do not support Labour, is that they would be very unlucky to see another Labour government in their life time!   Also any thought that Scotland could raise money through the gilt-edged market or keep Sterling as their currency clearly have not thought this out!  Independence means independence.  If you live by the sword; then you must be prepared to die buy it. Of course the residue of the UK would be happy to trade with Scotland if terms were mutually agreeable.  I hope Mr Alex Salmond checks out EU/Euro membership or membership of EFTA with its own currency before stitching the Scottish electorate up!   “We have rights, as individuals, to give as much of our own money as we please to charity, but as members of Congress we have no right so to appropriate a dollar of public money.” – Davy Crockett, Member of Congress, 1827-31, 1832-1835.   If there is one issue that makes my blood boil; it is the idea of the EU/Brussels interfering with the free enterprise system, as suggested on the front page of the FT on Saturday. For the men in grey suits to suggest that they want to control the distribution of pay-TV is ludicrous and counterproductive – go away!  Whatever happened to the free market?  Allow companies to charge what the traffic will bear; otherwise the anti-EU brigade will continue to mass their troops and who can blame them?  Excessive bureaucracy and red tape irrevocably damages competition and the ability to compete.   I suspect Jamie Dimon and the management of JP Morgan Chase will regret the rather vulgar bash it hosted at Buckingham Palace last week in the wake of all its scandals. It will have been like water off a duck’s back to ‘Teflon Tone!’ Unfortunately the glittering occasion was booked months ago; so difficult to pull out, though embarrassing the Duke of York will have been the least of JPM’s concerns.

The Coop scandal is becoming messier by the day. Len Wardle and Peter Marks, chairman and CEO of the Coop movement should never have allowed Rev Flowers in the front door of the building, let alone be appointed chairman of the bank. Graeme Hardie has been vilified by the FCA for allowing Flowers to be appointed. Regardless of any political persuasion, to use the collapse of the Cooperative Bank as a political football strikes me as very short sighted.  Neither parties comes out of this debacle with much credit.  Maybe Ed Balls did encourage the purchase of Britannia Building Society in 2006.  Labour have been associated with the movement virtually from its inception.  I have no doubt the Coop Bank was George Osborne’s and Vince Cable preferred choice to buy 632 branches of Lloyds Banking Group, which the EU was forcing the ‘Black Horse’ to sell, rather than allow Lord Levine’s embryonic NBNK to buy them.  That was understandable.  With the best will in the world Metro Bank and NBNK will take years to compete with the main four on the high street.  The government needed the assistance of a well-known brand to kick start the competition process in a meaningful manner. However any acquisition or deal was always going to be down to the regulator’s due diligence.  Were the capital and regulatory requirements going to be met? That was always was going to be the case. What seems very hard to fathom is the fact that the FSA repeatedly warned the Cooperative Bank that it had a capital black hole about 5 months before the official approach to buy Lloyds Banking Group’s 632 branches. It was only last November that CEO Barry Tootell and FD James Mack owned up to the Cooperative Banks’s capital shortcomings.

The recapitalisation of Cooperative Bank – debt for equity – is far from guaranteed. Some of the bond holders may well be reluctant to take the haircut that is required for the hedge and fund managers to come on board. Understandably they want 70% of the bank to come on board.  There is also the matter of £500 million having to be spent upgrading its computer system. It should not be forgotten but there are only 300 branches. We are not talking about HSBC in terms of size and influence.  What is the alternative?  Perhaps the Nationwide could be the knight in white shining armour? Again Graham Beale is too intelligent to be hoodwinked with a bad deal, for the sake of a face saving exercise.  However perhaps the branches – clean from this mess – could be dissolved in to the Nationwide. Of course the other alternative is for Virgin Money to scavenge the good parts of Coop, as it did with Northern Rock or conveniently tuck them into TSB’s forthcoming IPO – the irony!

Last week Janet Yellen was all but confirmed as the next chairman of the FED.  Whether she is more dovish that Bernanke remains to be seen.  However improving economic data which may be endorsed this coming Friday, when November’s Non-farm- payrolls are posted, is likely to trigger the implementation of tapering of QE either in December or early in the New Year. I still believe that it more likely to be March, when the effect of hopefully a really upbeat Thanksgiving & Christmas holiday shopping spree can be felt.  The recovery process seems to be wildly different from what is being experienced in Europe, where more stimulus packages may be required to electrocute the economy back to life.  People assure me that life in Ireland, Spain and Greece is improving measurably!  I think it is in Ireland but as for the rest – ‘inshallah!’  As for France, make no mistake President Hollande is deeply unpopular and the French economy is not just suffering the slings and arrows of outrageous fortune, civil unrest waits in the wings!  There is still, of course, the question of the recapitalisation of the banks and EU bank unity. German IFO numbers did improve last week, but EU GDP numbers for the 3rd quarter was nothing to be proud of!

Last week’s market machinations were reflective of the year end appearing even earlier than usual over the horizon.  The S&P has added 24% this year and the FTSE about 19%.  Banks and fund managers are reluctant to surrender such gains; so volumes are derisory. There has been quite an expansion of IPO business in 2013. Royal Mail and Merlin have done well, as have many small caps and AIM companies.  However there is a bit of indigestion, resulting in investors being reluctant to still back the truck up until next year unless there is a another market snip.  RMG heads for the FTSE 100 and Merlin for the 250. Foxtons was also a success but we must remember a further tranche of Lloyds, TSB, possibly the Coop plus Poundland are up for grabs – many of them in the first half of 2014.

Last week the DOW added 0.7%, the S&P 0.19%, the NASDAQ 0.1%, with the FTSE 100 easing by 0.29%. European stocks were flat and the NIKKEI was up 1.4%. The Street of Dreams was quite volatile in thin trading. Comcast may buy Time Warner Cable (+10%), Intel was down 5.4%, Biogen Idec was up 13% on a new multiple sclerosis drug and Tyson Foods rallied by 10%.  There were some big losers also – Tesla Motors -10%, Intel -5.4%, Ross Stores -5.7% and Dollar Tree.  Exchanges were popular on news that Euronext may be up for sale – ICE +7.4%, NADAQ +6.8% and CME +5.4%.  In London, Whitbread was popular at the end of the week, as was ARM Holdings.  Tui failed to pass muster losing 7.8%.

Next week company results are thin on the ground – UK – Monday Aberdeen Asset Management (TS), EASSAR ENERGY, Tuesday – MITCHELL & BUTLERS, BRITVIC, Wednesday – COMPASS GROUP, RMG, UNITED UTILITIES, PUNCH TAVERNS (TS), Thursday – MARSTON’S, THOS COOK, PENNON, JUST RETIREMENT (TS), KINGFISHER & WOLSELEY.     Companies next week.      These are David Buik’s personal views trade

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775 Panmure Gordon & Co One New Change | London | EC4M 9AF | United Kingdom

TODAY’S FAYRE – Thursday 21st November 2013

“GLORY be to God for dappled things
For skies of couple-colour as a brinded cow;
For rose-moles all in stipple upon trout that swim;
Fresh-firecoal chestnut-falls; finches’ wings;
Landscape plotted and pieced—fold, fallow, and plough;
And áll trádes, their gear and tackle and trim.
All things counter, original, spare, strange;
Whatever is fickle, freckled (who knows how?)
With swift, slow; sweet, sour; adazzle, dim;
He fathers-forth whose beauty is past change:
Praise him.”

Gerard Manley Hopkins – poet – 1844-1889  

As I awaited to be ushered in to the Grimond Room in Portcullis House for the BIS Select Committee meeting on the Royal Mail IPO yesterday morning, I spent a few minutes musing and admiring an oil painting of Lord Alec Home, painted in 1974 by Henry Mee. It was a superb portrait. Lord Home had one of those craggy unforgettable faces, often cruelly cartooned by Gerald Scarfe and others as a ‘skull!’ Even Lucien Freud would have been proud of this work of art. Lord Home was depicted in the painting wearing a very scruffy shirt and a badly tied I Zingari club cricket tie – bold black, orange and yellow stripes! I can only describe the characterisation of this revered statesman as just perfect – Henry Mee had him down to a tee!   Today’s missive will be short and to the point.  I just want to touch base on the neurotic state of investors who trawl equity markets in fear of US monetary and fiscal policies. In recent weeks market protagonists only seem to react to their interpretation as to when they believe the FED will implement the tapering of quantitative easing. After yesterday’s penultimate valedictory minutes of Ben Bernanke’s dynasty, it seems that the FED will start to reduce stimulus in the coming months, as the US economy improves – December? March? Who knows?  We are told that Non-Farm Payroll data on 6th December, if encouraging could be the catalyst.  By my monosyllabic congenital throw back standards, that is still incomprehensible ‘geek talk!’ – Gobbledygook!  Perhaps, when she is confirmed tonight as Bernanke’s successor as FED chairman, Janet Yellen will speak in layman’s terms, thus allowing us to throw away a Bletchley style code book!  Anyway the threat of tapering took some froth off equities yesterday, as the Street of Dreams surrendered about an average of 0.3% yesterday.

Asia put in a mixed session with the NIKKEI putting on just short of 2%. The Hang Seng and Shanghai were just below the Plimsoll line at lunchtime.  The European markets may well be lack lustre this morning, as they did yesterday, with the main three European bourses likely to surrender 0.5% circa. There were results from SAB Miller, National Grid, Close Brothers, Investec and Johnson Matthey.

Let’s end on a sour note – Rev Paul Flowers, ex-chairman of the Cooperative Bank – strong allegations of drugs, prostitution and fiddling charitable expenses. If guilty Flowers needs to go behind bars out of harms’ way PDQ!  Wherever did Len Wardle and Peter Marks dig this individual up from?  How did he qualify for such a prestigious appointment?  We understand the government is setting up 3 enquiries. The reputational damage to this so called bank/mutual is immeasurable.  Hopefully for the sake of their loyal customers the Coop will survive.  Let’s hope the new major shareholders appoint management with impeccable reputations in FINANCE & BANKING. The bond holders must accept their losses before any positive steps can be taken by the new hedge and fund managers.  Finally no more loans or gifts to Labour until the bank is safely in recovery!

These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775 Panmure Gordon & Co One New Change | London | EC4M 9AF | United Kingdom


At the best of times appearing before a Parliamentary Select Committee is a daunting prospect.  It is probably fair to say it’s akin to what the Court of the Star Chamber would have been like 600 odd years ago.

Adrian Bailey MP certainly proved to be a robust chairman on the Business, Innovation & Skills Committee, which this morning was having the drains up as to whether Goldman Sachs, UBS and Lazard had advised the government poorly as to the real value of the Royal Mail Group and whether the taxpayer had been ‘stiffed’ to the tune of £1 billion to £1.5 billion.

To use this opportunity as an independent analyst to score cheap points against the most august of investment banks in the land would have been tasteless in the extreme and counter-productive. Pricing an IPO is never easy.  You need to please the client/government, vendors, purchasers and shareholders and there are so many imponderables in pricing the value of a company – value of assets, distribution platform, political and economic considerations – home and abroad and the size of the IPO.  Royal Mail is the largest IPO since 2006. The ability to place 600 million shares some with fund managers, some with the retail investor, 10% with the workforce with 30% remaining with the Government was no easy task. Some IPOs have fallen below this issue price.  It was imperative that this did not happen to RMG

Richard Cormack of Goldman Sachs and James Robertson of UBS – both lead banks with Lazard Brothers – were given an extremely tough time by the chairman, Brian Binley and Mike Crockart aided and abetted by a more courteous and measured interrogation by Bill Bain, Robin Walker, Rebecca Harris and Katy Clark.  Gracious me! Robin, Member for Worcester, was a real chip off the old block – Peter Walker of Slater Walker and government minister fame. Goldman valued RMG at between £3.1 billion and £3.7 billion and UBS at between £3.5 billion and £4.6 billion.

John Mayne of JP Morgan, Ben Story Citibank and Jeremy Quin of Deutsche Bank all pitched to be on the ticket but lost out, as did Panmure Gordon & Co.  Many of you will remember that Gert Zonneveld was the first to flag up his enthusiasm for the IPO, suggesting it was excellent value for his investors and that they should get on this good thing taking a one year! He thought 260-330p was far too low. He felt that the share price could breach 500p early on.  I was absolutely staggered how low the fees were in comparison to yesteryear – The winning bid was £13 million, whereas JP Morgan was £16 million and Deutsche Bank £14 million.

What of course we will never know is how much value should be attached to the value of some of the property portfolio, bearing in mind that Royal Mail will need most of these buildings to perform its duties. Would the real threat of industrial action damage the valuation?  Is there any correlation between P/E ratios of peer companies such as Deutsche Post and RMG?  Could the inability of the US government to deal with the debt ceiling and possibly subsequent default have sent equities in to free fall? Dividend policy is key as are regulatory controls – all imponderable. How are modernisation and an increase in parcel services valued? Did Dr Cable’s insistence on significant retail shareholding add froth to the share price? Pension issues were also a concern Certainly JP Morgan and Deutsche Bank valued the IPO at £6.1 billion and £5.5 billion minimum respectively – way above Goldman and UBS – £3.1-£4.6 billion and £3.5-£4.6 billion.

All the banks who were interrogated insisted that submitting an initial ranging valuation was totally different from a more exact IPO valuation. My colleague at Panmure, Gert Zonneveld gave an extremely good account of himself, refusing to get sucked in to any political nuances.  He felt it was his responsibility to tell his clients that in his opinion this IPO offered extremely good value. Of course there were possible mitigating circumstances but all in all he stood by his initial valuation as an independent analyst and was unrepentant in saying that 330p as an issue price was too low on pure valuation.  However hindsight is a great trader.  He was not remotely concerned that Dr Cable considered him an ‘outlier.’  Mr Zonneveld put it most succinctly – Dr Cable is a politician and I am a stock broker! Needless to say Mr Zonneveld’s valuation of Royal Mail has been endorsed by market forces.

The committee was underwhelmed by some of the answers given. All investment banks present said a discount of between 10-15% was normal.  The 38% premium on the first day’s trading for RMG was unusual but 30 years ago BT traded at a 30% premium. I suspect there is little correlation between these two situations.  Brian Binley suggested that Goldman and UBS had been incompetent in seriously undervaluing the company, thus stitching the taxpayer up.  Cormack and Robertson were adamant that the Government accepted their sound and decent advice.  I suspect that next week Dr Cable and Michael Fallon can expect a real grilling.

What we don’t know and never will know is whether Dr Cable/government had any ulterior political motives.  This IPO had to be a huge success to accommodate TSB, Lloyds and eventually RBS in the future. Absolutely no chance of their being any admitted tacit connection, but where there’s smoke there is sometimes fire! It was interesting to note that UBS downgraded RMG Group to 450p this morning – Three syndicate banks initiated research today with target prices ranging from 450p to 580p – a mile away from the issue price!

TODAY’S FAYRE – Wednesday, 20th November 2013

TODAY’S FAYRE – Wednesday 20th November 2013

 “If you wake at midnight, and hear a horse’s feet,
Don’t go drawing back the blind, or looking in the street.
Them that ask no questions isn’t told a lie.
Watch the wall, my darling, while the Gentlemen go by!
Five and twenty ponies,
Trotting through the dark —
Brandy for the Parson,
‘Baccy for the Clerk;
Laces for a lady, letters for a spy,
And watch the wall, my darling, while the Gentlemen go by!

Running round the woodlump if you chance to find
Little barrels, roped and tarred, all full of brandy-wine,
Don’t you shout to come and look, nor use ’em for your play. Put the brishwood back again — and they’ll be gone next day!

If you see the stable-door setting open wide;
If you see a tired horse lying down inside;
If your mother mends a coat cut about and tore;
If the lining’s wet and warm — don’t you ask no more!

If you meet King George’s men, dressed in blue and red,
You be carefull what you say, and mindful what is said. If they call you “pretty maid,” and chuck you ‘neath the chin,
Don’t you tell where no one is, nor yet where no one’s been!”


Rudyard Kipling – author & poet – 1865-1936


What a shambles that game at Wembley was last night! I know Roy Hodgson has to keep morale up, but few will have gained much confidence from a performance by England, who lost to 0-1 to Germany, was rudderless and without basis skills. There will be no easy groups or draws. I hope England and their fans enjoy Brazil. I suspect England’s involvement may be brevity personified, short of a miracle. Endeavour is always there.  England has it in spades; but skill? – sometimes there is more on Wormwood Scrubs on a Sunday morning.

I think the market may have been rather underwhelmed at the lack of content or guidance in Ben Bernanke’s valedictory speech as FED chairman prior to handing over to Janet Yellen in the New Year assuming her appointment is confirmed on Thursday.

We expected some clarification on the difference between tightening monetary policy and tapering quantitative easing. It wasn’t forthcoming – just more ‘FED talk’ riddles to decipher. Also some ‘mea culpa’ for leaving interest too high in 2007 at around 4% would have been a humble note for Mr Bernanke to take his leave.

Christmas seems to have started early this year as many banks and fund managers have already largely ruled off for the year, having enjoyed healthy gains as bulls, despite the FED’s misleading guidance over tapering and the dispiriting lack of volatility from a broker’s perspective. The Street of Dreams enjoyed some stellar results from Home Depot with profits up by 43% thanks to an improving housing market and very acceptable efforts from TJX.  Notwithstanding these little gems, Wall Street was unmoved and this was reflected by the rather risk averse attitude the market adopted yesterday. Wall Street is on “FOMC” watch and it will be looking for guidance from Janet Yellen in the New Year. Patience may be the name of the game.

I commented yesterday’s on the OECD’s downgrading of the world’s economy.  I perhaps should state that the OECD was metaphorically concerned about the size of the US debt ceiling and the damage that any default on debt repayment could have on, not only the US economy, but also the world’s economy. It was confirmed that JP Morgan will pay $13 billion by way of fines ($4 billion) and the rest as compensation.  Microsoft’s Steve Ballmer finally took his leave from an emotional Steve Ballmer. The market was surprised that no replacement as CEO was announced.  Could it be Ford’s Alan Mullaly or Nokia’s Steve Elop or the internal candidate Kevin Turner? Hopefully there will be an announcement before too long.

This morning Asia put in a not surprising neutral performance with the NIKKEI closing below the Plimsoll line – -0.33%.  Conversely the Hang Seng was up +0.32% just after lunch.  Again the FED remains a small cumuli nimbus cloud of uncertainty, preventing increased activity. Yesterday the FTSE closed down 25 points at 6698. easyJet wore the yellow jersey with great numbers. Well done Carolyn McCall and her team – shares up 7%. The Cooperative Bank, in the wake of Len Wardle’s resignation with immediate effect and the disgraced Rev Paul Flowers taking his leave as chairman of the bank, have appointed the much respected Ursula Lidbetter, CEO of Lincolnshire Co-op as chairman of the bank.  Again though her credentials are impeccable as an operator, I fear she knows as much about the machinations of banking as I know about non-ferrous welding!

These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator

+44 (0)20 7886 2775

Panmure Gordon & Co
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