TODAY’S FAYRE – Thursday 6th February 2014

“Perspective betrays with its dichotomy:
train tracks always
meet, not here, but only
in the impossible mind’s eye;
horizons beat a retreat as we embark
on sophist seas to overtake that mark
where wave pretends to drench real sky.’

‘Well then, if we agree, it is not odd
that one man’s devil is another’s god
or that the solar spectrum is
a multitude of shaded grays; suspense
on the quicksands of ambivalence
is our life’s whole nemesis.

So we could rave on, darling, you and I,
until the stars tick out a lullaby
about each cosmic pro and con;
nothing changes, for all the blazing of
our drastic jargon, but clock hands that move
implacably from twelve to one.

We raise our arguments like sitting ducks
to knock them down with logic or with luck
and contradict ourselves for fun;
the waitress holds our coats and we put on
the raw wind like a scarf; love is a faun
who insists his playmates run.

Now you, my intellectual leprechaun,
would have me swallow the entire sun
like an enormous oyster, down
the ocean in one gulp: you say a mark
of comet hara-kiri through the dark
should inflame the sleeping town.

Sylvia Plath – poet – 1932-1963

I am so incandescent with rage over Fulham’s ignominious defeat against Sheffield United, I am forced to comment on any other subject – no matter how spurious. So let’s comment on obesity! At a recent poll 74% of the population of Doncaster suffers from obesity or being over-weight – the highest level recorded in the country. I suggest that the resident MP Ed Miliband does something useful for once in his life by taking Jamie Oliver on his next visit to his constituency to sort out the constituency’s dietary requirements and eating habits.

I had to turn the party political broadcast on BBC after the 6 o’clock news by the DPM Clegg on EU membership and the non-referendum. My God his mob has been duplicitous about the promised referendum. The conversation and debate on this subject is sickeningly unbalanced. Democracy? The Lib-Dems certainly cannot spell the word! Disgraceful!

The Institute of Fiscal Studies has quite rightly pointed out the dangers of crucifying the top income earners. This august body points out that official figures show that there are 300,000 people earning more than £150,000 a year. They now pay almost 30 per cent of all income tax — and 7.5 per cent of all tax revenue. In response to the Cable/Alexander bid to slaughter wealth Jason Hollands riposte to Cable’s obsession with a mansion tax was to make this cutting remark – “fair share” is just code for legalised theft!”

Today is the 56th anniversary of Manchester United Munich air crash. What heroes were lost – Duncan Edwards, my all-time hero, Eddie Coleman, Roger Byrne, David Pegg and Mark Jones. So great to see that Sir Bobby Charlton is still with us!

In March of this year it will be 5 years since interest rates in the UK last changed. In 2009 base rate was lowered to 0.5% and, despite the ‘Doubting Thomases’, there is little reason to challenge Mark Carney’s forward guidance policy adopted by the BOE last July. Yes, the economy has improved rather more quickly than most people thought. Unemployment is falling and it is possible that it could reach 6.5% in the next 2 years, below its current level of 7.1% recorded in January. Unemployment, as we are led to believe, is a key driving force for the MPC to react to, in terms in raising rates.

However the real key to the Kingdom is wage inflation and there is little evidence of that. Wages have only increased by about 0.7% against inflation of 2%+. We need to return to the commercial realities of life with a proper commercial interest rate structure as soon as possible, but the recovery is still brittle. The EU still hangs in rags; so there is no hurry. I suspect Mark Carney’s idea of an increases in rates in 2016 may not be a million miles from the truth, unless Labour wins the election and the Pound suddenly falls out of bed!

Yesterday on the Street of Dreams markets spent much of the day ruminating. There was no real appetite for trading and during the day all 3 main indices remained lack-lustre – The Dow closed easier by 0.03%, the S&P 500 was down 0.2% and the NASDAQ by 0.5%. This all followed in the wake of a nebulous session in London where the FTSE 100 rallied by a modest 14 points to 6464. The main talking point was RSA, on news of Stephen Hester’s appointment; its shares added 3.9% in value. The market also thinks RSA is now less vulnerable to a takeover.

The talking point in New York was Twitter, which posted its first results since going public in November. Its monthly active users totaled 241 million in the fourth quarter, up 30 percent from 185 million a year earlier and slower than 39 percent seen in the prior period. Usage also dipped, with 148 billion views of Twitter timelines compared with 159 billion views in the third quarter. While Chief Executive Officer Dick Costolo said in an earnings call that he is focused on reversing the trend, Twitter’s stock plunged as much as 19 percent in extended trading. After hours the shares dipped by 10%.

There has been a fair bit of press comment about ‘cyber attacks’ on banks, highlighted by BOE’S Andrew Bailey, Head of Prudential Regulation, who believes banks may not be properly geared up to any ‘cyber-attacks.’ The trial of Anglo-Irish Bank executives – Sean Fitzpatrick, Pat Whelan and Pat McAteer – started yesterday. Their behavior, which included giving loans to favoured clients, is alleged to have precipitated the €30 billion bail-out. If guilty, they could end up spending time at the Taoiseach’s pleasure!

This morning Credit Suisse reported a net profit of CHF 267 million for the fourth quarter of 2013, lower than a Reuters forecast of CHF 448 million. “Results so far this year have been largely consistent with the good starts we have seen in prior years, with some variability across businesses,” CEO Brady Dougan said in a press release. He was confident the group could achieve its targeted return on equity of 15%. Credit Suisse is in the middle of a cost-cutting drive designed to save 4.5 billion Swiss francs in annual costs by the end of 2015. Dougan said that the program is on track. It had delivered 3.1 billion Swiss francs of expense savings by the end of 2013. In the third quarter of 2013, the second-largest Swiss bank by market value missed analysts’ profit forecasts. There is still an element of promises, promises from this once titanic bank!

In London today there were a number of results from he likes of Astra Zeneca, Smith & Nephew and trading updates from Vodafone, Compass, Tui Travel Enterprise Inns and easyJet. Notes from Panmure are out on many these companies. Even though Vodafone’s share price was up 1.6%, this mobile giant is struggling in Europe and doing well in emerging markets. FX reverses have also been uncomfortable in places. In February Vodafone should receive over $70 billion for its sale of 45% of Verizon. Let’s hope Vodafone expands in media apart from Kabel Deutscland. Maybe BskyB will be worth having a look at.

These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
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