“Out of the night that covers me,
Black as the pit from pole to pole,
I thank whatever gods may be
For my unconquerable soul.

In the fell clutch of circumstance
I have not winced nor cried aloud.
Under the bludgeonings of chance
My head is bloody, but unbow’d.

Beyond this place of wrath and tears
Looms but the Horror of the shade,
And yet the menace of the years
Finds and shall find me unafraid.

It matters not how strait the gate,

    How charged with punishments the scroll,

I am the master of my fate:

    I am the captain of my soul.

WE Henley – poet – 1849-1903 

Heartfelt sympathies to all those who died and their bereaved families, who are suffering as a results of the appalling helicopter crash in to that pub in Glasgow on Friday night at 10.35pm. Those who helped in such harrowing circumstances deserve our undying respect and grateful thanks.

To be at Newbury for the Hennessey Gold Cup on a crisp November Saturday in convivial company with competitive NH racing in abundance, what more could anyone want, apart from some winners, which were not in evidence for this intrepid punter yesterday? There was no ‘Denman’ or a ‘Bob’s Run’ yesterday, but a strong field of aspiring 2nd season out and out staying chasers were assembled to compete over 3 miles 2 furlongs. It was a bookmaker’s garden party with so many horses justifiably laying claim to this much coveted prize. Apart from ‘Rocky Creek’ and ‘Highland Lodge’, who were in the frame, the judge was not troubled by a jolly! Nicky Henderson’s rather unfancied Triolo D’Alene, winner of last year’s Topham at Aintree and a potential Grand National challenger, won with a little in hand at 20/1! He looks as if he will stay longer than the mother-in-law. This performance will not have gone unnoticed by the handicapper – probably putting the ‘kibosh’ on Triolo’s owners’ aspirations to head for the big fences next April.!


Stock markets were very lack lustre last week with so many financial and economic issues for investors to contend with on a global basis. Volumes were dire and with huge profits banked in 2013, management was understandably reluctant to give anything back out of impatience or the temptation to head for the well, which has been plentiful most of the year, once too often. In the US Thanksgiving was at the top of the agenda, followed by the quality of retail activity on ‘Black Friday’, as well as this coming Friday’s Non-Farm Payrolls (EST +180k with the unemployment rate at 7.2%). The outcome to these imponderables will give us a guide as to when Janet Yellen may start tapering QE. Most of the smart money thinks that she leave tapering until early 2014, However the vibes from the retail sector suggest that the level of discounts offered by the likes of Target, Amazon, Walmart and Best Buy were gargantuan, thus damaging the level of profitability. Walmart is purported to have sold 2 million TVs at knockdown prices. We hear that the average spend per head may be down by 3.9% – just rumour! The level of hysteria, which prevailed in the US seems to have triggered similar discounting in the UK in an attempt to get those floor walkers to actually spend more money than they have! There is still also the question of the US budget being agreed and the debt ceiling. Congress seems to be wilfully dragging its feet. This is a worry.

In Europe unemployment fell from 12.7% to 12.1%, However inflation came in slightly higher than expected at 0.9%. Holland lost its “AAA” rating status leaving Just Germany, Luxembourg and Finland untarnished. S&P improved its outlook on Spain from negative to stable. Japan’s inflation also increased to +0.9%. Many suspect this is not down to Abenomics. It was the wrong sort of inflation, created by rising prices in food and a weak Yen rather than higher wages driven by growth.

Here in Old Blighty we were preoccupied with the intriguing complex machinations of the Coop, and where its future lies. Even though Aurelius Capital has sold its 9.9% stake in Coop to Perry Capital, which has helped out companies such as GM successfully, there is no guarantee that the bond holders in the Coop will take a huge hit by way of a haircut to allow the hedge funds and private equity mavericks to take a minimum 56% controlling stake. The Bank of England last Thursday at its Financial Policy Committee meeting called a halt on the supply of money from the ‘Funding for Lending Scheme’ to mortgages applicants, to avoid a property ‘bubble’ bursting. The scheme will now focus on lending to SMES. The BOE seems to be showing plenty of leadership qualities under Mark Carney and the ability to be flexible. I think markets respect this. What is interesting is the fact that to date building societies, who have availed themselves of the ‘FLS’ have increased their mortgage lending. The banks apparently have not directly as a result of the ‘FSL!’ Many were amused to see the Government involved in yet another ‘U’ turn on policy with the potential adoption of freezing energy prices until 2015.

At the end of the week the achievements from the markets was fairly nebulous – the S&P 500 added +0.06%, the FTSE 100 was down by 0.4%; European stocks bucked the trend adding +0.6% and the NIKKEI a very satisfactory 1.8%.

Ever since 2008 I have been ploughing a lonely furrow, in championing the cause of the banks’ recovery process and refusing, as far as the UK is concerned, to accept that casino banking as Dr Cable calls it, had very little to do with the demise of the UK banking system, with the exception of RBS’s purchase of ABN AMRO. In essence, I maintain that I have been right. Injudicious lending and the gargantuan size of balance sheets, which were wholly unrealistic, were the main problems. I have received tirades of abuse for my stance and in defending and maintaining a radical change in the bonus system, based on long-term share incentive schemes on the delivery of sustainable profits.

Then 2 years ago out of the woodwork comes astronomical problems with PPI, LIBOR and money laundering – not in essence the responsibility of trading or investment banking – very much the domain of retail and wholesale banking. Then last week the revelations about RBS’S alleged contemptuous treatment and sale of some of its ailing clients’ assets in a wholly unacceptable manner through its ‘Global Restructuring Group’. It would appear that RBS was allegedly ‘unscrupulous” in its treatment of some business customers, deliberately pushing some firms into insolvency in order to buy back their assets at rock-bottom prices. I suspect we have not heard the last of this Tomlinson Report. I am also told that trouble cannot be ruled out, thanks to MORE allegations that the rigging of foreign exchange rates at the midday fixing will highlight misdemeanors and unacceptable practices. Banking seems to be hemorrhaging malpractices. Until people are held to account and the guilty go to jail, there will be no deterrent in place forcing bankers to behave with the utmost propriety. This is such a sad state of disrepair!

When I read on Friday that 3500 bankers in Europe were paid a minimum of E1 million bonus last year –an increase of 11%, I was not remotely surprised. Despite trading revenues remaining disappointing, M&A activity, bond issues and wealth management have been stellar. Banking is a global; so bonuses will remain part of the competitive practices. However for the general public, they will be unpalatable!

Finally, once PM Cameron returns from his ‘love-in’ with China, Chancellor Osborne will present his pre-budget report on Thursday. With the election only 16 months away, he must start to appeal to the electorate on a broader base. The budget deficit, though down by 1/3rd since 2010, remains a real issue and needs to be cut further. However tax concessions need to be found for small businesses. Surely business rates should be abolished for those employing less than 200 people or something of that nature. Stamp duty will go up on property for the most expensive house. Hopefully any kind of a mansion tax can be staved off apart from very rich non-residents, who may have to pay some sort of capital gains tax. Also buy-to-let investors may feel the wheels of pain across their backs. This pre-budget will just, I suspect, be all about just a little tinkering, for the Chancellor will need to keep his powder dry as there are potentially two more budgets for him to titillate the voter. Needless to say George Osborne will extoll the virtues of austerity and the improving economy – better than anywhere in Europe if you live in the South East. He is bound to drive home the improving feel good factor and don’t let Labour destroy the good work. However the Chancellor needs to attract the disenchanted. A big shout, as nationally to date Mr Cameron’s coalition government is not the flavour of the month for all! Under new boundary changes Labour only needs 33% of the vote to form a government. Conservatives need 38%

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

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