Monthly Archives: February 2014

TODAY’S FAYRE 28th February 2014

TODAY’S FAYRE – Friday, 28th February 2014

“The sunlight on the garden
Hardens and grows cold,
We cannot cage the minute
Within its nets of gold,
When all is told
We cannot beg for pardon.

Our freedom as free lances
Advances towards its end;
The earth compels, upon it
Sonnets and birds descend;
And soon, my friend,
We shall have no time for dances.

The sky was good for flying
Defying the church bells
And every evil iron
Siren and what it tells:
The earth compels,
We are dying, Egypt, dying

And not expecting pardon,
Hardened in heart anew,
But glad to have sat under
Thunder and rain with you,
And grateful too
For sunlight on the garden.”

Louis MacNeice – poet – 1907-1963

I can only hope that you were rather more impressed with the content of Angela Merkel’s speech to Parliament yesterday than I was. To me it was just a beautiful compendium of platitudes about the UK’s need to be a player – a spear carrier for choice, I fear – in the affairs of the EU. The Chancellor promised us nothing and offered little hope for change. During her speech PM Cameron looked anxiously on as Messrs Miliband, Clegg and Alexander just smirked and nodded like puppets at her every word. I am sure we will get that referendum in 2017, but it will be far too late.

We have so neglected other parts of the world in expanding trade. I listened to a speech from Foreign Secretary William Hague. He told his audience that he was not aware that any Labour foreign secretary had visited Canada and Australia during that 13 year tenure – What neglect!

The Street of Dreams seemed to be soothed by Janet Yellen’s testament to the Senate Banking Committee yesterday by the fact that the dip in performance by the US economy may be down to the weather, but the FED Chairman needs more data in the months come before making a ruling. She was also concerned about the Labour market with wages not rising and employment data remaining sluggish – Too few jobs being created. The FED intends to carry on with tapering unless the economy starts to deteriorate. That being the case, the FED will be prepared to reverse policy. These slightly nebulous comments buoyed the Street of Dreams yesterday, resulting in the S&P 500 breaching to a new record of 1854. The DOW finished the session up 0.46%, the S&P 500 +0.49% and the NASDAQ 0.63% to the good. Interest centred mainly around retail activity. JC Penney was making up for lost time adding 25% on the day on the back of good sales and a positive outlook. Sears also enjoyed a fine session adding 6.6%. Jos A Bank rejected Men’s Wearhouse’s $63.50 a share bid. Banks were in good cheer as was Verizon, which added 2.5%. It is interesting to note that since the blip in January, the S&P 500 has added 6.5% since 3rd February 2014.

Asia was initially rather less upbeat about life than Wall Street had been. Shanghai, Hang Seng and NIKKEI were all down by 1%+. There had concern about the Chinese economy’s outlook, which triggered the sharpest fall in the Yuan against the Greenback seen for some time. However Abenomics came to the fore in the form of a 4.4% increase in Japanese retail sales in January. At its close the ASX was down 0.2%. However Chinese indices had swung towards positive territory towards lunch – Shanghai +0.05% and the Hang Seng +0.19%. The NIKKEI was down 0.55% 30 minutes from the close, despite factory output increasing by 4% last month.

Though most of Europe experienced sluggish trading yesterday the FTSE finished the session +11 points at 6810. The bile and hatred on RBS bonuses has taken up plenty of space, even though I thought Ross McEwan’s explanation was plausible. The £2.3 billion drop in SME lending was disappointing, though understandable when attempts are being made to cut the size of the balance sheet. Shares were down 7%+. You know what they say! You cannot keep a good man down. Enter stage left, dusted down the reincarnated Stephen Hester as CEO of the beleaguered RSA with his begging bowl to the fore after 3 profits warnings for balance sheet irregularities in Ireland and excessive storm damage. RSA is looking to have a £775 million rights issue. The shares were down 5% at 98p. There were positive numbers from Capita, after a great deal with o2, Whitbread, whose Premier Inns seem to go from strength to strength and Merlin Entertainment, whose profits were up 33% since its launch in November last year. WPP put in strong numbers yesterday. Sir Martin Sorrell is always an excellent barometer for business activity. The outlook was good with WPP sales up 6% in January. Shares were off 5% on very high expectations from results, which slightly disappointed.

Man Group saw it shares rally by 12% thanks to increases in fund under management. The same phenomenon happed to Old Mutual which reported numbers today – Funds grew by 19% in the last year and profits were up 15%, though there were currency headwinds with the South African Rand dropping sharply. Bayer, the German Chemical operator saw profits down again due to currency vagaries.

UK GDP was confirmed at 0.7% for the 4th quarter and was down a point on the year to 1.8%. House prices rose by 9.4% year on year. We understand that since December Mark Carney has had the drains up over allegations of currency malpractices at the BOE. Andrew Bailey takes these comments and the condoning of sub-standard be behaviour of his nature very seriously. UBM, Mondi and William Hill also posted results. Pearson saw sales up 2% to £5.2 billion for the year, though profits were down 6% due to charges incurred in the merger between Random House and Penguin and narrowing margins in US educational sales. Rightmove the online estate agent saw sales up 17% and profits 19% better to £104 million for the year. Sight traffic was up 27%.

These are David Buik 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
http://www.panmure.com – 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.

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Please refer to http://www.panmure.com/emaildisclaimer.aspx for additional important disclaimers and legal information.

TODAY’S FAYRE – 27th February 2014 – RBS

TODAY’S FAYRE – Thursday, 27th February 2014

“It is summer, and we are in a house
That is not ours, sitting at a table
Enjoying minutes of a rented silence,
The upstairs people gone. The pigeons lull
To sleep the under-tens and invalids,
The tree shakes out its shadows to the grass,
The roses rove through the wilds of my neglect.
Our lives flap, and we have no hope of better
Happiness than this, not much to show for love
But how we are, or how this evening is,
Unpeopled, silent, and where we are alive
In a domestic love, seemingly alone,
All other lives worn down to trees and sunlight,
Looking forward to a visit from the cat.”

Douglas Dunn – poet – 1942-

So Chancellor Angela Merkel rolls in to town today to address our two Parliaments and for an audience with HM the Queen. PM Cameron has attached a great deal of credence and importance to this visit. Perhaps he sees it as symbolic in attempting to use her powerful offices to woo the rest of the EU round to the UK’s way of thinking that the EU must radically change its policies. I wish the government well in its deliberations. However I suspect time is running out, as there has been little sign of any negotiations taking place, unless the FCO has undertaken this task already out of sight from public scrutiny. Also PM Cameron has to win the election and 2017 will be upon us all too quickly.

Nonetheless, a referendum seems unlikely unless the Conservatives win the next election outright and they have much work to do to grasp 38% of the popular vote when Labour only needs 33%. The country should give the Tories a chance to finish off what they have started in terms of taking the UK economy off life support!

There will be pressure on Ed Miliband to hold a referendum to put this matter to bed once and for all, but Mr Miliband has all the hallmarks of a Europhile and with Nick Clegg likely to be a partner in crime, the need for a referendum probably recedes, despite the fact the majority of people want a referendum.

Equity market have started to stutter again. Cumuli nimbus clouds hang over Ukraine and particularly Kiev, as ‘Uncle Vlad’ conveniently masses his troops in an exercise – I think it’s called flexing you muscles against an administration you are unwilling to support. So we have seen a slight flight to quality by investors who have become temporarily risk averse, which has seen bond yields fall and the Dollar firm.

Yesterday, despite decent New Home Sales – up over 9% – the Street of Dreams put in a rather lethargic performance with the DOW and NASDAQ finishing the session just above the Plimsoll line and the S&P 500 remaining flat. JC Penney shone through the morass of mediocrity gaining 13% on the back of good numbers and an encouraging outlook. In terms of NASDAQ stocks Amgen was down 2.5%. FED chairman Janet Yellen will address the Senate Banking Committee today. Market observers will be looking for guidance on the US’s attitude to emerging markets.

Asia made a slightly better effort with a more positive mental attitude towards the trading day with the exception of Australia – ASX -0.47%, where Qantas posted a not unexpected massive loss which included 5000 proposed redundancies. Towards the close the NIKKEI was down 0.32%. At lunch the Hang Seng was up 1.3% with the Shanghai Composite 0.44% to the good.

Yesterday in Europe the mood was a tad glum. Banks were not the flavour of the month as Brady Dougan attempted to explain and not very convincingly so why Credit Suisse had harboured US clients, who had attempted to evade taxation. A ludicrous figure of $200 billion was bandied about! – Fanciful I feel. Utilities were also friendless in the ring!

Yesterday there were a slew of results with ITV and Direct Line grabbing most of the headlines with decent results. However most of the other headlines were grabbed by AO.com, which took its bow in public ownership. Shares shot up from 285p to 410p before settling at 378p – up 33% on the day. There were concerns of the 1998/9 dot.com boom returning. We hope that good sense will prevail; if not the success for the slew of IPOS becomes less encouraging. There is nothing wrong with AO.com’s business model. The IPO was either miss-priced or there is too much froth. All could be revealed on Monday, when the share are traded unconditionally. For 40 million + shares to be traded conditionally yesterday is alarming.

This morning Allianz of Germany produced good numbers and so did one of the best market barometers WPP! Pre-tax profits of £1.29 billion were up 11%. Sales were up 3.5% globally! The dividend is up 20%. The most encouraging news was the outlook – sales in January were up 6% and the order book looks good.

Finally RBS – awful numbers! A larger loss than expected £8.2 billion. Assets in UK to attract 80% of capital from 60% currently. Tier One Capital up 100 basis points to 8.6% – still too low and unlikely that 10% will be achieved in 2015. Investment banking is to be cut dramatically, with Citizens Bank to be sold – Circa $12 billion and the 28% remaining stake in Direct Line for circa £1 billion. The bonus pool of £576 million is unpalatable but very necessary to mitigate losses whilst the bank is in transition, in changing its culture from global international bank to domestic ‘Boring Bank PLC!’ – What the majority of the people in this country and the politicians want. Currently RBS employs 120k people – 30k jobs likely to go – 18.5K Citizens Bank, 4k Williams & Glyns and the rest in a cost cutting exercise. Very dramatic stuff but it is case of needs must if the taxpayer wants his/her money back.

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
http://www.panmure.com – 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 http://www.panmure.com/emaildisclaimer.aspx for additional important disclaimers and legal information.

Thursday – BATS, CAPITA, COUNTRYWIDE, DOMINO PIZZA, KAZAKHMYS, MERLIN ENTERTAINMENT, PREMIER OIL, NATIONAL EXPRESS, DIRECT LINE, RSA, STANDARD LIFE, Friday – MONDI, OLD MUTUAL, PEARSON, RIGHTMOVE, WILLIAM HILL & UBM. Thursday – BATS, CAPITA, COUNTRYWIDE, DOMINO PIZZA, KAZAKHMYS, MERLIN ENTERTAINMENT, PREMIER OIL, NATIONAL EXPRESS, DIRECT LINE, RSA, STANDARD LIFE, WPP Friday – MONDI, OLD MUTUAL, PEARSON, RIGHTMOVE, WILLIAM HILL & UBM.

TODAY’S FAYRE – AO.com & ITV

“What do they think has happened, the old fools,
To make them like this? Do they somehow suppose
It’s more grown-up when your mouth hangs open and drools,
And you keep on pissing yourself, and can’t remember
Who called this morning? Or that, if they only chose,
They could alter things back to when they danced all night,
Or went to their wedding, or sloped arms some September?
Or do they fancy there’s really been no change,
And they’ve always behaved as if they were crippled or tight,
Or sat through days of thin continuous dreaming
Watching the light move? If they don’t (and they can’t), it’s strange;
Why aren’t they screaming?

At death you break up: the bits that were you
Start speeding away from each other for ever
With no one to see. It’s only oblivion, true:
We had it before, but then it was going to end,
And was all the time merging with a unique endeavour
To bring to bloom the million-petalled flower
Of being here. Next time you can’t pretend
There’ll be anything else. And these are the first signs:
Not knowing how, not hearing who, the power
Of choosing gone. Their looks show that they’re for it:
Ash hair, toad hands, prune face dried into lines –
How can they ignore it?”

Philip Larkin – poet – 1922-1985

I was minding my own business in the dentist’s waiting room yesterday. I looked up from reading this week’s edition of the ‘Speccy’ to see a bloke sitting at the other end of the room, whom I thought I recognised and I did – Roy Hodgson – no less a person than the England football manager. We engaged in conversation for about 25 minutes, exchanging views and ideas on any number of subjects other than England’s team or its chances in Brazil. Utterly delightful company; charming and engaging and highly intelligent whilst remaining worldly! He’s the sort of bloke you wish every success in the world to, begrudging him absolutely nothing!

I was sad to hear that Johnny Murtagh has ridden his last group winner. What a fabulous jockey with 3 ‘Derbys’ and five Gold Cups and nothing to prove. I am sure he will be every bit as successful as a trainer. His charm will take him along way down the road. Like every racing supporter, I still want to know why he fell out with Coolmore, having had such a great relationship with John Oxx and the ‘Aga’ and with the likes of William Haggas and James Fanshawe. He was a terrific icon for racing!

UK equities are struggling to break the December 1999 ‘high’ of 6930, but if the US economy is ahead of the curve and we shall only find out when the snow has melted, it does not seem unreasonable the FTSE 100 should be through 7000 by the end of the year. The wave of euphoria that surrounds the IPO market is certainly very frothy. However yesterday McColl’s the newsagents got off to a rather inauspicious start to its life in public ownership. Shares were issued at 191p and they close 5% below the Plimsoll line.

This morning JP Morgan, Jeffries and Numis brought AO.com to the sacrificial altar of public ownership. The shares were issues at the top end of the range at 285p, valuing the company at £1.1 billion. Within 20 minutes 2 million shares had been traded at the share price shot up to 400p. The shares briefly touched 410p before settling at 400p – up 40% on the day! This kind of movement takes us back to the halcyon days of the dot.com boom in 1998/9. I hope this is not the case! However when you see the price paid by Facebook for WhatsApp ($19 billion), it becomes food for thought! One can only hope that AO.com’s advisors undervalued this company. Investors would be wary of too much froth in view of the number of companies waiting in the wings to take their bow. With Pets At Home, House of Fraser, Poundland, ISS, Tomkins and B&R all chomping at the bit for a public quote plus all these banking stocks and a slew of small and medium sized companies, one just hopes that AO.com can justify this very frothy share price. Share trading does not go unconditional until Monday 3rd March 2014. Notwithstanding that near 20 million shares have changed hands and it is only just after 10.20am.

There are so many market luminaries, analysts and commentators out there: that I will leave you today to their tender loving care, to advise on and talk about markets. I want to talk about ITV. It has been a huge success story. I will leave the analytical research to our excellent Alex de Groot who has flagged the company up for about 2 years and congratulations to him!

ITV posted results today with profits before tax up by 27% to £581 million on a 9% increase in turnover to £2.38 billion. 5 years ago this company was going nowhere. Greg Dyke flirted with the idea of buying it in conjunction with Apax Partners if my memory serves me right. The idea was binned. In fairness to Lord Charles Allen he did a great job dealing with ITV’S licences and in terms of artistic and programme improvement Michael Grade was no slouch. However the partnership of Adam Crozier CEO and Archie Norman has triggered a renaissance few would have countenanced. In February 2010 BSKYB was forced to sell 10.4% of its holding at 48.5p for £196 million, incurring an outlay loss of £350m. Sky has kept its 7.5% and has seen the share price rally to circa 200p. The results triggered a ‘travel and arrived’ sell off – down 5% to 195p. Even though the results may show a little vulnerability today – this corporate story is a huge success. Producing decent programmes that people want to watch on the back of an economy is improving thus attracting advertising is an attractive potent!

I also smell M&A in the air, despite current valuation of ITV at £8.2 billion – Vodafone and BT – both cash cows – both need to expand their horizons with telecom margins narrowing. Media must be the place to go! We shall see or is my diseased ridden mind just working over-time?

Companies posting results tomorrow and Friday.
Thursday – BATS, CAPITA, COUNTRYWIDE, DOMINO PIZZA, KAZAKHMYS, MERLIN ENTERTAINMENT, PREMIER OIL, NATIONAL EXPRESS, RSA, STANDARD LIFE, Friday – MONDI, OLD MUTUAL, PEARSON, RIGHTMOVE, WILLIAM HILL & UBM.

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
http://www.panmure.com – 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.

MARKET UPDATE – HSBC, VODAFONE, DIXONS & CARPHONE

It is 4.28pm the FTSE 100 is up 11 points at 6850. It just won’t go down! You would be forgiven for thinking that the Chinese data on property lending was discouraging enough for equities in Europe to pause for reflection. There is no US data to worry about and we have to wait until Thursday before UK GDP numbers are posted. Despite the rather anaemic data of last week in the US, the Street of Dreams refuses to be downhearted and there was no sign of investors having a dose of the ‘pip!’ The three main US indices on Wall Street were up an average of 0.9% as I scribe!

Bunzl excelled itself with numbers – up 7%. Bovis Homes also pleased their acolytes. Initially Bovis shares rose like the proverbial grilse – up 4% but eased back to +2%. Panmure’s Mark Hughes is of the opinion that after a terrific run, house builders, may before too long, be transferred from ‘hold’ from ‘buy’ recommendation. AB Foods look as if it is becoming too reliant on Primark with food taking on a spear carrying role – down 2.7%. There has been massive volume in Vodafone – 254 million shares traded today – up 5.8%. We’re back to turnover in 2000. I smell the possible stench of M&A plus the offload of the unwanted VZ stock on the US market hasn’t been as smooth as silk.

As for HSBC, punters are looking to niggle at what look like marginally disappointing numbers. However this bank looks as sound as a pound with decent tier one capital, a broad based business. Clever observers are whingeing about PPI, LIBOR and money laundering, which I think is yesterday’s news. Foreign Exchange fixing allegations, if true, may cause a ripple or two! Considering the profit made – circa £14 billion, perhaps £2.3 billion in bonuses is almost tolerable and Stuart Gulliver’s £1.8 million almost parsimonious.

The big M&A news today was the proposed love affair between Carphone Warehouse and Dixons. The market thinks it makes sense pooling the resources of 1300 shops (800 Carphone and 500 Dixons) – Carphone +8.4%, Dixons +6.5%

I just had a cursory look at Fusionex. That has been a decent little ‘Arfur Daley’ since December – up from 300p to 735p – though no trade to speak of today.

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
http://www.panmure.com – 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 http://www.panmure.com/emaildisclaimer.aspx for additional important disclaimers and legal information.

TODAY’S FAYRE – 24th February 2014 – HSBC & markets

“Half of my life is gone, and I have let
The years slip from me and have not fulfilled
The aspiration of my youth, to build
Some tower of song with lofty parapet.
Not indolence, nor pleasure, nor the fret
Of restless passions that would not be stilled,
But sorrow, and a care that almost killed,
Kept me from what I may accomplish yet;
Though, half-way up the hill, I see the Past
Lying beneath me with its sounds and sights,–
A city in the twilight dim and vast,
With smoking roofs, soft bells, and gleaming lights,–
And hear above me on the autumnal blast
The cataract of Death far thundering from the heights.”

Henry Wadsworth Longfellow – poet – 1807-1882

Mitchell Johnson may well have been the star bowler in the recent “Ashes” series down under, but there is no doubt in my mind that Dale Steyn, the South African fast bowler is currently the greatest plier of his trade on the planet. Watching him destroy Australia on a slow and relatively benign wicket, taking 4 for 55 in 20 overs was a sight to behold – He bowled quickly; cut the ball just enough with some reverse swing. It was text book fast bowling! He has no peer in the realm.

So it’s Russia or the EU that Ukraine is looking to for support, depending on which political faction you support. Though Ukraine is a pimple, in terms of international financial society, politically it is a veritable carbuncle. The withdrawal of financial aid from Russia could mean that Ukraine will default. Can Olli Rehn and his EU cohorts act quickly enough to fill the gap? History says it is unlikely. One would have to fancy Putin’s chances of bringing influence to bear in the long term. Ukraine is in the middle of Russia and possession is 9 points of the law!

The G20 finance and Central bankers’ meeting in Sydney saw little in the way of tangible policies, though Mario Draghi did say that further stimulus initiatives may be required, presumably to stave off the threat of deflation, though the ECB President did not spell it out in words of one syllable.

On the face of it China might have thrown a temporary spanner in the works if the rumour that Chinese banks will be restricting any extension of loans to property companies is confirmed. Asian stock markets had their feathers ruffled. Though the ASX finished just in positive territory, at one time the Shanghai Composite was down over 2% and the NIKKEI and Hang Seng were easier by 1%+. However towards the close the Hang Seng was only down 0.8% and the NIKKEI a paltry 0.19%.

European equities opened on the back foot. Initially the FTSE was down 10 points thanks to buoyant results from Bovis, Bunzl and to a slightly lesser degree AB Foods. Vodafone was up 3% early on. There were some buy recommendations last week and on Friday 130 million shares were crossed. That is grown up by any standards. Simon Calver resigned as CEO of the trouble Mothercare. At 9.25am the FTSE 100 settled down 13 at 6824.

At 8.15am HSBC announced a 9% increase in profits for the year of HK28.5 billion (US$22.6 billion). Return on shareholders’ funds was 25.4% up from 22.8% in 2012. Earnings per share were up 38% to HK$13.95 per share (HK$10.11 per share in 2012). The total dividends of HK$5.50 per share for 2013 (HK$5.30 per share in 2012). Tier 1 capital ratios both 13.8% at 31 December 2013 under Basel III; (capital adequacy ratio of 14.0% and core capital ratio of 12.2% at 31 December 2012 under Basel II). 40,000 jobs have been lost in recent years. The bank is now mean and lean and impairment charges jumped a smidgen by HK150m to HK536m – a mere bagatelle in comparison to other banks. HSBC employs 250,000 people. The bonus pool was £2.36bn – equivalent to 15% of pre-tax profits. The bank will ask shareholders for permission to pay 200% bonuses to some individuals, something a bank has to do if it wants to breach guidelines that cap bonus payments at 100% of salary. The numbers look a tiny bit short, but the bank on a global basis looks strong. HSBC’s shares eased by 3.79%

This is an important week in the US with many retail operators posting numbers. Retail is key to growth in the US – 70% of GDP so outlook on the following companies will be important – HOME DEPOT, LOWE’S, TARGET, MACY’S, TJX, JC PENNEY, BEST BUY & GAP. With some economic data looking a little soft in the US thanks to the weather, some reassurance will be required.

Other UK companies to report this week include – Tuesday – GKN, LADBROKES, Wednesday – CSR, GREGGS, DIRECT LINE, ITV, HAYS, PETROFAC, RESTAURANT GROUP, TAYLOR WIMPEY, SEGRO, TRAVIS PERKINS, WEIR GROUP, Thursday – BATS, BARRATT DEVELOPMENT, CAPITA, COUNTRYWIDE, DOMINO PIZZA, KAZAKHMYS, MAN GROUP, MERLIN ENTERTAINMENT, PREMIER OIL, NATIONAL EXPRESS, REDROW, REED ELSEVIER, RSA, STANDARD LIFE, WPP, XCHANGING Friday – MONDI, OLD MUTUAL, PEARSON, RIGHTMOVE, WILLIAM HILL & UBM.

We are only just over 100 points of the all-time high for the FTSE 100. Unless the global data turns ugly it is possible that 7000 could be eclipsed in the next 3 months. Remember the FTSE only rallied by 14% last year thanks to poor performances from the mining sector. The DAX added over 25%; so there is some catching up to do!

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
http://www.panmure.com – 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.

TODAY’S FAYRE – FED, MARKETS, HSBC, & RBS

TODAY’S FAYRE – Sunday, 23rd February 2014

“It was your birthday, we had drunk and dined
Half of the night with our old friend
Who’d showed us in the end
To a bed I reached in one drunk stride.
Already I lay snug,
And drowsy with the wine dozed on one side.

I dozed, I slept. My sleep broke on a hug,
Suddenly, from behind,
In which the full lengths of our bodies pressed:
Your instep to my heel,
My shoulder-blades against your chest.
It was not sex, but I could feel
The whole strength of your body set,
Or braced, to mine,
And locking me to you
As if we were still twenty-two
When our grand passion had not yet
Become familial.
My quick sleep had deleted all
Of intervening time and place.
I only knew
The stay of your secure firm dry embrace.”

Thom Gunn – poet – 1929-2004

George Osborne the Chancellor has been rather bold in rebuking emerging countries within the G20 for criticising mature nations for their insensitive financial management during the G20 finance conference in Australia. Mr Osborne must remember that we need these emerging countries’ support for broadening our economic base for business. The G20 is responsible for 85% of the world’s growth. Criticism levelled at Russia should obviously be excluded from my comments. President Putin’s wooden spoon stirring up unrest in Ukraine is clearly unwelcome.

Comment of the FED’s behavior and action during the pinnacle of the credit and sub-prime crisis in 2008, which became available last week, is surely worthy of a few minutes thought. Here are a few observations to contemplate –

Six weeks post the Lehman Bros crisis the then Fed chairman Bernanke gave his central bank colleagues a precis view of the comments he made to government officials concerning Hank Paulson and others’ decision to pull the rug from under Lehman, according to the NY Times.
“What in the heck were you guys doing letting Lehman fail?” he said, according to minutes of a closed Fed meeting in late October 2008 that were released on Friday.
Mr. Bernanke made little reference to Lehman’s demise at the Fed meeting held on Sept. 16, the day after the investment bank filed for bankruptcy, according to the newly released minutes. But from the comments in the October meeting, he appeared to have been aware that the government’s decision to let Lehman fail was coming under intense scrutiny from prominent financial figures around the world who said it was a huge and unnecessary mistake that caused global financial markets to freeze up.

There is little doubt that as a result of the indecent haste to close down Lehman, the reputations of Bernanke, Paulson and perhaps Geithner have been damaged.

The transcripts of those 2008 Fed meetings that were published last Friday provided one of the fullest pictures yet of the thought and decision making process of top government officials on Lehman’s implosion. The documents will most likely prompt a fresh examination of the decisions made in that crisis year. In response to their critics, both Mr. Bernanke and Mr. Paulson have since said that they could not save Lehman because their hands were legally tied. Mr. Bernanke made that argument at the Oct. 29 meeting of the Federal Open Market Committee meeting.

“The Fed and the Treasury simply had no tools to address both Lehman and the other companies that were under stress at that time,” he said. Few will be suffering from such an acute an attack of amnesia to forget that tools were readily found to bail-out Bear Stearns, AIG, Freddie Mack, Fannie Mae and to coerce and manipulate the takeover of Merrill Lynch by Bank of America. So why, in the name of all this is wise and wonderful was Lehman ditched so precipitously? There is no doubt that the decision to pull the plug on Lehman exacerbated the financial crisis significantly. Hindsight is the greatest dealer in the world, but this insight does not make great reading. One must surely be forgiven for wondering if the FED has ever been on top of its game for the past 25 years. Dr Alan Greenspan was a financial maverick, if ever there was one!

As I said last week, I have been rather surprised by the somewhat flippant manner investors have reacted to quite indifferent economic data submitted in the US in the last 2 weeks! ‘Don’t worry about it! It is all down to the vile weather the US has been experiencing. It will all come right in the spring’ has been the cry.

Regardless of the fact that bad weather hampers growth investors are absolutely convinced that the US is recovering and will eventually ‘come under a wet sail’ in the merry month of May, when the sun is high on the yardarm! Despite concern that the FED is keen to carry on regardless with its tapering plan, confirmed by FED chairman Yellen and some truly shocking Existing Homes sales, which were down 5.1% last month, which temporarily knocked the Street of Dreams back on its heels on Friday, investors did not lose their poise over the week. In fairness US manufacturing data (PMI) was very satisfactory. The S&P 500 added 0.31%, the FTSE 2.6%, European bourses an average of 0.81% and Japan’s NIKKEI a humungous 3.8%, thanks to further stimulus policies adopted by Abe-san, such as expanding credit availability. So far, of the 463 S&P 500 constituent companies that have so far reported results, 74% have beaten expectation with an average increase in profits of 8.6%.

The Street of Dreams is still underpinned by a slew of deals – Charter/Time Warner and Actavis/Forest Labs and then last Wednesday the $19 billion bazooka bid by Facebook in lifting Whatsapp, making Sequoia’s Michael Moritz Wales’s richest man – approximately $3 billion, having paid $8 million for his stake in 2011. Blackberry’s shares also reacted positively – up 9% on their messaging prowess. At the other end of the spectrum Groupon shares fell 22%. Their results and sales were disappointing. Wal-Mart have also found it difficult to select another gear. So the world’s largest supermarket has decided to open another 270-300 new small outlets or convenience stores.

In London there were torrid times for BAE Systems, whose shares initially fell 10%, though they recovered by about 4% on the week – net down 6%, thanks to inadequate outlook for immediate sales, despite better news in Saudi Arabia. The US no longer provides the rich pickings that it used. CEO Ian King has his work cut out. Centrica/ British Gas have lost 340k customers and will be forced to cut tariffs. Chairman Rick Haythornthwaite has warned the politicians of the irreparable damage they could be inflicting on the supply of energy with their jingoistic rhetoric. Vodafone, having returned £21 billion to shareholders, we are told is vulnerable to AT&T’s overtures. I hope Vittorio Colao gets on the front foot by buying in to media – Why not an arrangement with BskyB? It is also rumoured that BT and ITV could join hands in financial marriage. With margins in telecoms narrowing, media could be ‘the goose that laid the golden egg’ of the future. BskyB and John Malone’s Discovery Communications may be looking to buy Richard Desmond out of Channel 5. Malone through Liberty Global are also large EU cable TV pioneers. Virgin Media is one of its outlets

It look as though Just-Eat will be the first IPO to benefit from the LSE’s new high growth platform, though only 10% of the £900million valuation will be offered for sale. Also SSP, which Upper Crust is part of, will also be going public with a £2 billion price tag and under Kate Swann’s guidance – ex WH Smith CEO. It has not taken long for Stephen Hester to get his feet under the table as CEO of RSA. It looks as if there will be no dividend thanks to storms and balance sheet irregularities in Ireland. Also a £800 million cash call may be necessary.

HSBC is expected to post a 20% increase in profits for the year to £24 billion on Monday. Stuart Gulliver the CEO’s remuneration package may hit £7.5 million. Ingenuity may come in to play for his bonus to avoid EU legislation capping bonuses to 100% of salary. The redundancy programme is also being carried out. There are unlikely to be any surprises in RBS’s numbers on Thursday – a loss of £8 billion, 30k redundancies over the next few years including the sale of Citizens bank and bailing out of investment banking.

Other companies to report this week include – Monday BOVIS HOMES, BUNZL, HSBC Tuesday – GKN, LADBROKES, Wednesday – CSR, GREGGS, ITV PETROFAC, RESTAURANT GROUP, TAYLOR WIMPEY, SEGRO, WEIR GROUP, Thursday – BATS, CAPITA, COUNTRYWIDE, DOMINO PIZZA, KAZAKHMYS, MERLIN ENTERTAINMENT, PREMIER OIL, NATIONAL EXPRESS, DIRECT LINE, RSA, STANDARD LIFE, Friday – MONDI, OLD MUTUAL, PEARSON, RIGHTMOVE, WILLIAM HILL & UBM.

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
http://www.panmure.com – 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.

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TODAY’S FAYRE – RBS – 21st February 2014

TODAY’S FAYRE – Friday, 21st February 2014

“Season of mists and mellow fruitfulness,
Close bosom-friend of the maturing sun;
Conspiring with him how to load and bless
With fruit the vines that round the thatch-eves run;
To bend with apples the moss’d cottage-trees,
And fill all fruit with ripeness to the core;
To swell the gourd, and plump the hazel shells
With a sweet kernel; to set budding more,
And still more, later flowers for the bees,
Until they think warm days will never cease,
For Summer has o’er-brimm’d their clammy cells.
2.
Who hath not seen thee oft amid thy store?
Sometimes whoever seeks abroad may find
Thee sitting careless on a granary floor,
Thy hair soft-lifted by the winnowing wind;
Or on a half-reap’d furrow sound asleep,
Drows’d with the fume of poppies, while thy hook
Spares the next swath and all its twined flowers:
And sometimes like a gleaner thou dost keep
Steady thy laden head across a brook;
Or by a cyder-press, with patient look,
Thou watchest the last oozings hours by hours.
3.
Where are the songs of Spring? Ay, where are they?
Think not of them, thou hast thy music too,—
While barred clouds bloom the soft-dying day,
And touch the stubble plains with rosy hue;
Then in a wailful choir the small gnats mourn
Among the river sallows, borne aloft
Or sinking as the light wind lives or dies;
And full-grown lambs loud bleat from hilly bourn;
Hedge-crickets sing; and now with treble soft
The red-breast whistles from a garden-croft;
And gathering swallows twitter in the skies.

John Keats – poet – 1795-1823

There will be much news about the G20 financial shenanigans over the weekend. Today I want to concentrate on the possible forthcoming changes at RBS.

Since the financial crisis of 2008 a great deal of water has flowed under the Firth of Forth Bridge and for that matter Tower Bridge post Royal Bank of Scotland collapsing in to the arms of the taxpayer to the tune of about £45 billion. Share holders had already been shredded for £12 billion in a rights issue at £2 a share to buy the toxic remnants of ABN AMRO. No more than a few months after this deal and the bail-out RBS shares hit 11p.

In 2008 RBS’S balance sheet had reached gargantuan proportions – £2.2 trillion – larger than UKPLC’s balance sheet. RBS had been on the rampage buying anything that moved in the previous 5 years as well as becoming a prominent player in investment banking activities.

Unfortunately RBS has slipped on one banana skin after another – exposure of toxic assets to LIBOR misdemeanours to PPI mis-selling to IT problems – none of them down to Stephen Hester, the government’s choice to steer RBS out of turbulent waters. One suspects that he received very little in the way of support and after nearly 5 years his relationship with George Osborne, the Treasury and UKFI was irreparably damaged, triggering his resignation.

I am a supporter of Stephen Hester? It is not easy clearing the decks of the old and tarnished management nor is it easy selling assets in a ‘buyers’ market, whilst being bullied by Vince Cable to up your lending to SMES. Frankly it is impossible to do both well. Hester chose to cut the balance sheet down, which is now down by £800 billion to about £1.4 trillion.

With pressure from the TSC, the Vickers commission and the BOE, Ross McEwan has been forced to take radical steps to streamline RBS into another domestic bank – Another Boring Bank PLC. RBS posts numbers on Thursday and a loss of £8 billion, including a £4.5 billion impairment charge, will come a no surprise. A flawless high street bank is clearly what the majority of people want from RBS. I think it could hamper London’s prowess to remain at the pinnacle of financial excellence. Time alone will tell.

It seems that the FT has been well briefed by RBS. Anyway on Thursday Mr McEwan is likely to confirm that Citizens Bank will be sold in the summer for circa £10 billion. That means that 18.500 jobs will go out of 120,000. It is then thought that over the next 5 years a further 11,500 jobs will go – mostly from investment banking globally. Then of course there are 4,500 jobs which goes with the Williams & Glyns sale.

This tidying up operation looks like a real ‘dog’s dinner’ to me. I fail to see how the taxpayer will get his money back for at least a decade, whilst the income stream has been cut at source.

It is regrettable that we must wait for Stephen Hester’s memoirs to find out what straw broke the camel’s back. Was it being forced to break RBS up? Surely it could not have been the sale of the bank programme? There was little that the investing public could have latched on to. Or was it that Mr Hester was not left to get on with his job? His appointment always was going to be a ‘poisoned chalice.’

Needing 500p per share to break even that goal seems a million miles away for the taxpayer -circa 356p.
.

On reflection the Government should have taken RBS in to care and split the operation then. The problem was this bank was gargantuan in size and it would have damaged the government’s already very tarnished reputation for financial management – Alistair Darling and Lord Myners apart.

Chris Sullivan is to be promoted to head SME lending. In closing what a shame that Hester was financially unable to retain the brilliant services of Steve Ashley, the then treasurer and his team. Their considerable prowess saved RBS billions in their hour of need. Unfortunately an understandably limited reward scheme for services rendered in a bank that had been trashed and subsequently owned 81% by the taxpayer, saw them seek greener pastures elsewhere.

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
http://www.panmure.com – 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.

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TODAY’S FAYRE, IPOS, RETAIL & RESULTS

TODAY’S FAYRE – Wednesday, 19th February 2014

“You did not come,
And marching Time drew on, and wore me numb.
Yet less for loss of your dear presence there
Than that I thus found lacking in your make
That high compassion which can overbear
Reluctance for pure loving kindness’ sake
Grieved I, when, as the hope-hour stroked its sum,
You did not come.

You love not me,
And love alone can lend you loyalty;
-I know and knew it. But, unto the store
Of human deeds divine in all but name,
Was it not worth a little hour or more
To add yet this: Once you, a woman, came
To soothe a time-torn man; even though it be
You love not me.” You did not come,

Thomas Hardy – poet & author – 1840-1928

Going to the Royal Opera House to see Mozart’s ‘Don Giovanni’ is always a huge privilege and last night’s performance under the sensitive baton of Nicola Luisotti proved to be no exception. I am now so out of date as to who the main ‘shakers & movers’ are in Mozart’s operas. However all I can say is that they were entirely to my taste – Maruisz Kwiecien as Don Giovanni – Alex Esposito as Leporello, Veronique Gens as Donna Elvira, Atallia Ayan as Don Ottavio, who had just flown in that morning and Elizabeth Watts as Zerlina all contributed to a memorable performance. The production was new and brilliantly staged. I never cease to feel a real buzz of excitement every time I visit this palace of music and singing!

All the brouhaha concerning Scottish Independence is now under a wet sail with still 7 months to go until the vote. George Osborne’s sop to the SNP offering to widen the existing facility for Scotland to issue tartan bonds I doubt it will cut much ice with Alex Salmond. Nonetheless he is not going to be offered too many scraps from the Chancellor’s table.

Chancellor Osborne will warn the country in a speech in Hong Kong today that the recovery process is still very much under way with much to do for the UK’s economy that is not balanced. He believes that there is too much credence attached to City of London and the service sector. He’s right but it would be folly to play down its incredible importance.

Everyone has dismissed the declining quality of US economic data – employment, retail and housing as a blip – just down to the weather! That may well be, but the fact remains that the weather affects growth and cannot be dismissed as irrelevant. Add the declining manufacturing data in China, the worst for 7 months and the widest trade deficit in Japan ever recorded and investors’ beliefs and convictions could be forgiven for wobbling! Asia had a dispiriting session this morning with only the ASX ironically shining through the gloom. Japan’s Nikkei was 2.15% lower and the Hang Seng was down 1.25%. This followed in the wake of lack-lustre performance on the Street of Dreams, where the 3 main indices fell by an average of 0.7%. The only piece of astonishing news was the $19 billion price tag that Facebook paid for Whatsapp! It was almost cardiac arrest material for me, little did I realise that it enjoys the patronage of 450 million hits on a monthly basis. For those like me who have never heard of the company it offers free texting on the internet and computer. Let’s hope Mark Zuckerberg’s company is still in the ascendency in a few years’ time! That is a massive price when one considers that in 2006 Google secured YouTube for $1.5 billion. Of course life has cracked on and good technology carries a huge premium.

With a slew of companies, many of them retail orientated looking to go public – Poundland and Pets at Home to the fore with House of Fraser, AO.com, McColl’s & B&M Bargains also in the frame – all looking to capitalise on the euphoria of their recent success, a cautious approach should be adopted by intrepid punters. Many of these retail operators are owned by Private Equity. When Private Equity wants to bank some profits, many cynical investors believe that metaphorically speaking that ‘the fair has left town and the retail investors are being left to pick up the trash!’ In so many words many of these companies are fully valued. So unless they are offered at an attractive price, when sentiment is buoyant, their success can be limited. There are too many of these investors wanting to unload at much the same time. Add the banks to the list plus ISS and Tomkins and its ‘call for the Rennies!’ Investors may well be more attracted to many of the SME, looking to expand with attractive growth prospects to put their cash in to. Maybe the Vodafone/Verizon money will be returned but it does not necessarily have to burn a hole in fund manager’s pockets.

Talking of retail I see Jeffries upgraded M&S having been impressed by its improved website. M&S still need to do something about its fashion. Hats off to Mike Ashley. Sports Direct in the last quarter sales up 11% and profits by 14%. Stack ‘em high sell ‘em cheap! The shops are awful. The gear is correctly priced and the punters cannot get enough of them.

Centrica posted annual results today. Profits were down 2% at £2.69 billion. Having taken a mauling from Ed Miliband, Ed Davey and the PM in recent times, about 400k clients have moved their account – much of it down to inadequate articulation on the need for investment in building new power stations and other infrastructure which costs money. It will be interesting to see whether Sam Laidlaw gets the trip and whether new chairman Rick Haythornthwaite can bring some stability to the party.

Centrica has invested £2.6 billion this year, including: £1.5 billion of organic investments, predominantly in North Sea E&P, including in major projects such as Cygnus C$1 billion Canadian upstream gas acquisition, in partnership with Qatar Petroleum International and the acquisition of a 25% stake in the Bowland shale exploration.

BAE Systems’ euphoria on news on renegotiating margins with Saudi Arabia was short lived. The shares fell 10% early on this morning, after their results were posted. Though sales were up 2% at £18 billion with profits up 9% at £806m, concern was expressed at lower spending by US government and the order book not looking as robust as it might. Investors are very unforgiving these days.

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
http://www.panmure.com – 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.
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Thursday – BAE SYSTEMS, CENTRICA, PLAYTECH, REXAM, Friday – MILLENNIUM COPTHORNE.

TODAY’S FAYRE – MARKETS INFLATION & BARCLAYS

“A little Learning is a dang’rous Thing;
Drink deep, or taste not the Pierian Spring:
There shallow Draughts intoxicate the Brain,
And drinking largely sobers us again.
Fir’d at first Sight with what the Muse imparts,
In fearless Youth we tempt the Heights of Arts,
While from the bounded Level of our Mind,
Short Views we take, nor see the lengths behind,
But more advanc’d, behold with strange Surprize
New, distant Scenes of endless Science rise!
So pleas’d at first, the towring Alps we try,
Mount o’er the Vales, and seem to tread the Sky;
Th’ Eternal Snows appear already past,
And the first Clouds and Mountains seem the last:
But those attain’d, we tremble to survey
The growing Labours of the lengthen’d Way,
Th’ increasing Prospect tires our wandering Eyes,
Hills peep o’er Hills, and Alps on Alps arise!”

Alexander Pope – poet & author – 1688-1744

The controversial chairman of the ECB, Giles Clarke, who is unlikely to ever get a first-class honours degree in interpersonal skills, has enjoyed ruffling the feathers of the ICC, in suggesting a radical overhaul of its financial security. I will take his word for it that it was justified.

However for Mr Clarke to have a pop at Shane Warne’s cricket commentary on Sky about England’s decision to ‘bin’ Kevin Pietersen, in telling the World’s greatest spinner that he was biased in favour of Australia and that his comments about Pietersen were irrelevant is an absolute insult and grossly discourteous. Mr Warne is better qualified to have an opinion on players’ ability and contribution than Mr Clarke will have in a month of Sundays.

Though the Ralph Fiennes directed film ‘The Invisible Woman’ was hugely enjoyable with great performances from Fiennes, Felicity Jones, Kristin Scott-Thomas, Tom Hollander and Joanna Scanlon all of whom made their mark in this historical adaptation of Charles Dickens complicated life, the script seemed rather glib and shallow. Also Dickens only came across as a literary and thespian genius, who was utterly selfish and self-indulgent. It should be remembered that he was a robust and radical critic of the appalling conditions suffered by the poor and under-privileged during the evolution of the industrial revolution. His concerns were of course often expressed in some of his novels.

In the opening scene if that was the beach at Margate then I am the man in the moon. I venture to suggest that was Lady Anne Beach at Holkham in Norfolk, near Brancaster.

Yesterday we heard Scotland’s senior shop steward, Alex Salmond, filling his SNP supporters full of bile and vitriol, blaming Westminster’s politicians for using bullying tactics. Going back to basics it is as well to remember that Scotland is about 80% blue collar worker of whom a large group think no further than xenophobic hatred of the English. The persuasive powers of the SNP and Scottish Socialists will play a crucial role because what Cameron represents is anathema and revives memories of Thatcher – sadly still a figure of revulsion north of Hadrian’s wall. Many are becoming increasingly worried that the unthinkable is slowly becoming a realistic possibility.

It was President’s Day in the US yesterday – one of their copious 15 public holidays in their calendar; so there was no divine guidance on offer during Europe’s session. The FTSE 100, despite a slew of rather suspect US economic data last week, decided to select another gear in adding 1.15% at 6736. Of course the ISA season is gathering momentum and this tax free concession has to be dealt with by the end of March. However the euphoria and enthusiasm to buy stocks and for markets to crack on personally escapes me. Equities remain the only decent asset class but valuations are being challenged in places. However it is fair to say that there are huge order books for IPOS and ‘placings’ by small and medium sized companies in March and many large IPOS – banks and retail operation in particular will also manifest themselves in the spring. So the appetite for sound long-term investments is indisputably there!

This morning Tokyo’s NIKKEI was given a fabulous boot injection by Abe-san who opened the stimulus doors and dealt with credit issues sending Japan’s premier index up by a monster amount – 3.3%. Just buying time in my opinion, but the market loves Dr Abe’s medicine. As for today there were decent result from BHP, Drax and an acceptable effort from IHG. Essar’s trading statement was disappointing and the shares fell a further 1.8% to 66.9p. John Wood posted great numbers and the shares were up 4%. I will leave detailed comment on these stocks to the more erudite in the community. Insurance companies will be very much in the front line for the next 3 months. What of the cost of these awful floods – £425m up until 23rd December? The total cost now is loosely calculated at about £1.2 billion, which could mean between 9-12% cut in profits for Aviva, RSA and Direct Line.

It is UK inflation day today. I suspect, inflation which has dropped from 2.9% last June to 2% in December will remain at 2% at 9.30am though I think it to fall to 1.9% next month. Why? Oil prices have come down and surprisingly food prices have only been increasing at 1.5% in recent months. For reasons quite difficult to comprehend house prices have been kept out of the inflation calculations and the threat of any bubble is now the responsibility of the Financial Policy Committee, which apparently has plenty in its armour to blunt house prices. One supposes higher deposits and a smaller multiplier on salary being amongst the tools in the box. This news on inflation is a two edged sword. It’s great for low interest rates, BUT deflation, threatened in the EU, must not rear its ugly head!

Looking at the threat of this awful EU transaction tax which could cost the UK as much as £3.6 billion in terms of savings and the damage done to bond markets, equities and pension funds and to Germany, it maybe as much as €150 billion, the UK government, regardless of the Treaty of Lisbon, should have no part of it. It is UTTER MADNESS. A banking levy, such as introduced by George Osborne should be introduced instead of this debilitating tax, which could wreck the service industry and damage these countries economy irreparably. A levy can easily be measured and quantified.

It will be great when Barclays no longer attracts bad headlines. Today we heard news that post the 2012 admission by Barclays to malpractices in LIBOR, where a fine of £294 million was paid, made public by Bob Diamond, 3 employees out of allegedly 100 interviewed will shortly be charged with manipulating LIBOR. Let’s hope that these indictments are heard at the instigation of the SFO and not the DOJ in the US, whom we hear also want a chat on the subject. I suspect this story will run like “Eastenders.” Also other indictments are likely to pop up in the future within other banks.

We hear that Sir David Walker will be replaced as chairman of Barclays next year and that Sir Mike Rake will also be relieved from being Deputy Chairman. Everyone speaks highly of Sir David as a member of the human race. He was a necessary political appointment to restore the ‘Bald Eagle’s’ reputation. However he has run his race and were he to stay any longer he could be seen as a chairman lacking inspiration. Barclays needs a dynamic chairman, who can not only oversee the adoption of the bank’s policy, but can also introduce business and be an proactive spokesman. I cannot remember the last time Sir David made profound and regular comments. It would be great if someone like Bill Winters could be appointed or a great communicator such as Sir Terry Leahy, who understands the retail business. Sir Nigel Rudd wouldn’t be a shabby idea and nor would Lord Paul Myners, if he could be released by the Co-op!

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
http://www.panmure.com – 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.

TODAY’S FAYRE – SUNDAY, 16th FEBRUARY 2014

“Now, God be thanked Who has matched us with His hour,
And caught our youth, and wakened us from sleeping,
With hand-made sure, clear eye, and sharpened power,
To turn, as swimmers into cleanness leaping,
Glad from a world grown old and cold and weary,
Leave the sick hearts that honour could not move,
And half-men, and their dirty songs and dreary,
And all the little emptiness of love!

Oh! we who have known shame, we have found release there,
Where there’s no ill, no grief, but sleep has mending,
Nought broken save this body, lost but breath;
Nothing to shake the laughing heart’s long peace there
But only agony, and that has ending;
And the worst friend and enemy is but Death.

Rupert Brooke – poet & soldier – 1887-915

In last week’s ‘Spectator’, Alex Massie wrote an article on Scotland’s Independence drive and how Alex Salmond was on course to win! I suspect he and the wily, articulate SNP leader did not expect a massive wall of resistance in the media from such an august collection of political, economic and business luminaries – Messrs Cameron, Osborne, Balls, Alexander, MacPherson and Dudley plus a raft of retail moguls. They all stuck their ‘two penny’s worth’ in. Mr Salmond and his thousands of followers delude themselves if they think Scotland can walk out of the Union dictating draconian terms! – No chance! North Sea oil won’t pay all your bills, particularly if the major exploration companies come further south and drill off East England!

Alex Massie wrote a terrific article, but he is clearly a great romantic rather than a pragmatist – much in the same vein as Owen Jones, who promulgates a style of left-wing politics which are simply impossible to deliver. Close the vote on Scottish independence may be, but at the day of reckoning, it would be economic suicide for Scotland to say ‘sayonara’ to the union!

When Mohamed Al Fayed sold Fulham FC to the Pakistani/American business man – the owner of the NFL Jacksonville Jaguars – Shahid Khan, I was full of hope for the future. Our side was ageing and Martin Jol had failed to bring in sufficient young, experienced and talented new blood. Mr Khan has a thing or two to learn about the Premiership. You have to be proactive. Khan changed the manager too late and what CEO Ian McIntosh was doing during the transfer window left a lot to be desired? However good Felix Magath is, Rene Meuelensteen was treated shabbily. Magath’s appointment won’t stop Fulham being relegated. If Fulham miraculously beat the drop it will be down to luck and a little bit of Meuelensteen organisation.

So Lord Stevens, the former Chief Commissioner of the Metropolitan Police, in his submission from his enquiry, privately commissioned by Sheikh Mohammed, has exonerated the UAE Prince from any blame, in terms of the doping scandal in his racing empire in Newmarket. So we’ll take that as read. However we need some names who were involved, apart from his trainer, Mahmood Al Zarooni. Don’t tell the racing world at large to accept that Al Zarooni was the only person involved in this unacceptable practice.

It was sad for all football fanatics to hear of the death of Sir Tom Finney at the age of 91 years. When the likes of Sir Tom played for PNE and England conditions were totally different. The playing service was very often like a ploughed field, the football boots were like army boots and the ball, when it was wet weighed a ton. Heading it very often rattled your brains! That is why it would be wrong to under-estimated the skill the likes of Finney and Matthews gave to the game – every bit as exceptional in their own way as Best, Rooney, Marsh and Bowles in their day.

Last week certainly had its moments in terms of the global economy and the performance of equities. In the face of appalling weather in the US, retail sales falling by 0.4% in January, dipping consumer confidence, indifferent monthly employment data for December and January, the Street of Dreams bizarrely put its best foot forward, allowing the S&P 500 to increase in value by 2.07%.

The FED and the BOE certainly grabbed centre stage for part of the week. Janet Yellen spoke very much in the same vein as Bernanke about her aspirations for the US economy, continuing with the tapering of QE, provided the US economy remained robust and unemployment continued to fall below 6.5% – currently 6.6%, though the accuracy of the that figure would be challenged in every one of the 52 states in the union! M/S Yellen was crystal clear in saying US’S recovery, which looks positive at around 3-3.5% for 2014 is very much work in progress. As for Mark Carney’s chairing of this quarter’s Inflation Report, the governor came in for some unwarranted stick with many suggesting that his ‘forward guidance’ policy was in tatters.

I disagree! The policy was always supposed to engage the average ‘John Doe’, mortgagees and small businesses, so that they can all plan their respective lives. It was not for the benefit of the ‘City.’ So the economy has ‘come under a wet sale’ since August of last year. In those circumstances it is perfectly reasonable to alter the financial yardsticks for raising interest rates in 2015 rather than in 2016, IF unemployment continues to fall and assuming wage inflation gathers some momentum and there is little sign of that happening, apart from the better off, then rates will increase modestly to about 2% maximum. There is still plenty of slack in the economy and deflation, which threatens the EU’s economy may also knock at the UK’s door, starting on Thursday, when official inflation for January is expected to drop below 2% for the first time in 5 years at least. Mr Carney said the BOE had raised its growth target from 2.8% to 3.4% in 2014. That surprised many observers – quite rich in the circumstances.

Barclays’ results were embroiled in controversial bonus issues, coupled with draconian redundancies totalling 12k. It is possible that Sir David Walker and Sir Mike Rake may not remain as chairman and deputy of Barclays in a few months from now. Lloyds posted a really bold recovery and almost dismissed the £8 billion that has been returned to customers for PPI misdemeanours as irrelevant. The government’s ambitious plans for the sale of the remaining 33% of LBG may push on in the spring. Investors may be cautious in their approach as these shares have already rallied by 65% in the last year. LBG is now ‘Boring Bank PLC’ – it is hard to get excited about growth at a lower rate of progress.

Rolls Royce incurred the wrath of its shareholders with a murky outlook for 2014 and accounting issues over its very attractive servicing contracts with existing clients. John Rishden the CEO is under the cosh as shares fell by 15%. Tate & Lyle another old UK brand also had a profits warning, driving shares down by 16%. Anglo-American improved its market standing after a torrid year. Anglo shares fell by 25% in 2013. A profit of £1 billion was posted. Rumours abound that Centrica, despite losing 400k clients in the energy price row, may increase profits above last year’s £2.7 billion to be announced on Thursday. It is possible that Sam Laidlaw could leave in the not too distant future. BP’s Chris Weston has been flagged up as a possible successor. No , all be revealed by Centrica’s new Chairman Rick Haythornthwaite.

Essar Energy could make a retreat in to the private hands of the Ruia family, rumoured to be aided and abetted by finance from a Kremlin bank at about 75p a share, a far cry from the IPO 420p a share. Vodafone are expected to return £21 billion to shareholders. That means the 133k shareholder will get an average pay out of £3,500. Finally to these awful flood in the UK and the devastation and anguish they have caused. The damage has been loosely estimated at £11 billion. Consequently profits at RSA, Direct Line and Aviva could fall between 9-12% this year.

Last week the FTSE 100 added1.4%, European stocks an average of 2.4% with the NIKKEI falling by 1%. This week the following companies post results or trading statements – Monday – HAMMERSON, BHP BILITON, Tuesday – DRAX, IHG, JOHN WOOD, ESSAR ENERGY (TS), Thursday – BAE SYSTEMS, CENTRICA, PLAYTECH, REXAM, Friday – MILLENNIUM COPTHORNE.

These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator

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