“Oh, the world is all too rude for thee, with much ado and care;
Oh, this world is but a rude world, and hurts a thing so fair;
Was there a nook in which the world had never been to sear,
That place would prove a paradise when thou and Love were near.

And there to pluck the blackberry, and there to reach the sloe,
How joyously and happily would Love thy partner go;
Then rest when weary on a bank, where not a grassy blade
Had eer been bent by Trouble’s feet, and Love thy pillow made.

For Summer would be ever green, though sloes were in their prime,
And Winter smile his frowns to Spring, in beauty’s happy clime;
And months would come, and months would go, and all in sunny mood,
And everything inspired by thee grow beautifully good.

And there to make a cot unknown to any care and pain,
And there to shut the door alone on singing wind and rain–
Far, far away from all the world, more rude than rain or wind,
Oh, who could wish a sweeter home, or better place to find?

Than thus to love and live with thee, thou beautiful delight!
Than thus to live and love with thee the summer day and night!
The Earth itself, where thou hadst rest, would surely smile to see
Herself grow Eden once again, possest of Love and thee.”

John Clare – poet – 1793-1864

Concern was expressed by the Bank of England yesterday, at the poor level of house building, which has hardly returned to pre-2008 levels. Recent figures have suggested that 175,000 homes have been built in the last year against expectations of 250,000! However, conditions have improved, as reflected in share prices of companies such as Persimmon Bovis and Taylor Wimpey. The banks are very limited as to what they can do, unless they want to revisit the 2008 graveyard where 110% mortgages all but destroyed the economy. Mortgages could be extended from 25 years to 30 years and maybe more aggressive fixed price mortgages priced against the bond market could be adopted in a perfect world, but that is unlikely! What could happen is that restrictions on building applications and planning permission could be lightened up.

Local authorities are reluctant to grant too many applications for environmental reasons. Also some of the designs of houses put up since WW2 are diabolical. If more land for building was available, maybe the building firms would submit competitive applications for the right to build and the quid pro-quo would be for them to produce acceptable designs that communities can live with – rather than dreadful eye sores! So let’s see the Chancellor, the Bank of England and Eric Pickles bang their heads together!

By the by enough said on bonuses/RBS. If Ed Miliband does not understand that the whole bonus culture has changed out of all recognition, then he never will. Labour never were up to much in terms of running or understanding the economy, though everyone has huge respect for Alistair Darling. Also as Mark Carney so succinctly points out, splitting banks up will not necessarily create more competition. Otherwise those overseas lending banks who left our shores in 2008 in their droves would have returned by now.

The World Bank stepped up to the plate yesterday and adjusted its outlook for world growth from 2.4% to 3.2% for 2014. I am not sure how influential this prognosis is. No matter – the Street of Dreams saw reason to respond positively, even if the bunting was not hung outside the windows along Wall Street. The DOW ended the session up -0.66%, with the S&P 500 rowing in with a gain of 0.52% and the NASDAQ with 0.76% to the good. The content of the Beige Book was sufficiently bland in suggesting that economic activity had expanded at a moderate pace, with retail activity just about passing muster over the holiday period despite inclement weather conditions. This data did not harm sentiment Bank of America’s results cheered investors – +2.3%. Apple, despite losing brand support in the UK and Europe gained 2% during the session, thanks to its JV partners China Mobile announcing that 1 million iphones had found homes in China.

There were plenty of nuggets of news today – None were earth shattering and few that would do damage to growth here in the UK or for that matter anywhere. The IMF’s Christine Lagarde warned against the threat of deflation world-wide!

George Osborne gave a hard hitting speech beseeching Europe to change on a number of fronts from welfare benefits to bank regulation, threatening that if changes were not implemented then the UK would reserve the right to reconsider its position. I liked the stamp of his speech. However more worryingly we have not heard from the PM on the subject for a year. I know there has been a key election in Germany, but now Mr Cameron, we must push on with his ‘wish-list.’

European car sales rose by 13% in December from 839k to 948k – always a decent barometer of economic activity. It is as well to note that that number just managed to pare the drop in sales over the year of 1.8% to 12.3 million. Ford increased sales by 20%, thanks to an aggressive 12.2% average price discount.

I must confess that I am very surprised that the ECB wants such a low capital ratio requirement for bank stress tests of 6%. That seems far too low for me considering UK banks are approaching double figures and most Swiss banks in excess of that!

The FTSE 100 had a decent day yesterday – as discussed yesterday. It was slightly surprising that investors took such a tough line on Hargreaves Lansdown for dropping their charges to clients by about 0.65% in response to forthcoming FCA guidelines. Though it may cost the retail fund manager and broker several million, HL may make it up in terms of growing market share in the months to come. ABERDEEN ASSET MANAGEMENT, AB FOODS, BOVIS HOMES, DIXONS RETAIL, HALFORDS, HOME RETAIL, LADBROKES and OCADO posted trading statements today. Ocado saw a 20% increase in sales with Christmas week yielding a 29% increase. Halfords pleased their acolytes. So did Dixons and AB Foods (Primark) with sales up 12%. Shares were off – travelled and arrived. Ladbrokes managed to avoid a profits warning.

Asia enjoyed a rather nebulous session this morning with the NIKKEI closing down 0.3%, though the Hang Seng and the Shanghai composite ended the session in positive territory – up 0.4% and 0.1% respectively.

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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