TODAY’S FAYRE – Sunday 30th March 2014
“When I was born, you waited
behind a pile of linen in the nursery,
and when we were alone, you lay down
on top of me, pressing
the bile of desolation into every pore.
And from that day on
everything under the sun and moon
made me sad — even the yellow
wooden beads that slid and spun
along a spindle on my crib.
You taught me to exist without gratitude.
You ruined my manners toward God:
“We’re here simply to wait for death;
the pleasures of earth are overrated.”
I only appeared to belong to my mother,
to live among blocks and cotton undershirts
with snaps; among red tin lunch boxes
and report cards in ugly brown slipcases.
I was already yours — the anti-urge,
the mutilator of souls.”
Jane Kenyon – poet – 1947 –
I know I have been a lonely, uninspiring, disconsolate and irritating voice in the wilderness, complaining about the lack of quality diplomacy in finding any kind of meaningful resolution to this international spat in Ukraine and the Crimea. So if Putin has called Obama to find that key to a solution, let’s hope the rather arrogant President Obama responds with some kind of token olive branch! It would make a pleasant change. Oh and by the way sending Secretary of State Kerry to negotiate is not an adequate response. The world wants the engine drivers to deal with the problem; not their oily rags! It would be fantastic if the world could see just a tad more from President Obama’s Presidency than just being a brilliant orator. To date there is little to eulogise over his dynasty. Talk about flatter to deceive.
I am not sure I really want to read about the orderly dismantling of Gwyneth Paltrow’s marriage to Chris Martin. That is a matter for their lawyers, children, family and her publicists. Though Chris Martin certainly maintains his status as an ‘A’ listed pop star, I fear M/S Paltrow may have drifted down in to the ‘B’ category of Hollywood legends, however concerned she may be about maintaining her status in the higher echelons of ‘celluloid society!’
“Still one thing more, fellow-citizens – a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities.” – Thomas Jefferson – 3rd President of USA – 1743-1826
Last week saw a choppy rudderless session in global stock markets, created by an environment of uncertainty – a touch of the ‘good, the bad and the ugly!’ The Good came in the form of possible extra stimulus packages to re-ignite the flagging Chinese economy, some stellar retail numbers in the UK (+1.7% for February and Y/O/Y +3.7%, though some of this may have come at the expense of a drop in savings) and benign UK inflation data (1.7%). There was also a ground swell of opinion that the ECB may have to ‘digitum extractum’ next week, to save the EU from the threat of deflation. Such initiatives as negative interest rates and the ECB buying in commercial paper was muttered in dispatches. The ‘Bad’ actually was not that awful. It came in form of rudderless diplomatic inertia towards Russia from the West, slightly soft data in the US on housing, factory orders and Consumer Confidence. The ugly was of course the treatment meted out by the government and the FCA on UK insurance companies plus the coalition and opposition parties duplicitous behaviour on energy policy, which looks highly toxic to me with horrible ramifications for the future – like the lights going out by 2016. More of that anon.
The net result on the week was that the S&P 500 lost 0.5%, with Europe responding rather more positively to its plight – FTSE 100 +0.9%, European bourses by an average of 1.9% with Japan’s NIKKEI up by 3.3%. Gold plunged $42 on the week to $1292 an ounce and the Dollar made modest gains – +0.3% against the Euro. Bond yields in most countries dropped a few basis points. On the Street of Dreams King Digital Entertainment had a disastrous debut falling by 16% on the first day’s trading by 16% (about $1 billion in value). Blackberry believes it is in sight of halting terrible losses. The shares fell by only 2% on news that 1.3 million smart phones had been sold in the 4th quarter. Shares in Tesla rallied by 4%. Facebook had a week to forget as its shares fell by nearly 6% on the week. Zynga was up 4% on the week once Steve Cohen of SAC Capital announced a passive stake of 5.3% in the company had been accumulated.
In London the insurance sector took a beating for the second week in succession. The previous week it was the government’s approach to annuities. This week the FCA served notice that it would be having the drains up over the servicing of long-term insurance annuity and pension policies. This put the cat amongst the pigeons. Resolution was down 7%, Aviva by as much as 5% and L&G by 6%, before recovering some poise. Even the mighty ‘Pru’ suffered initially, losing 3%. The threat of an investigation in to 30 million policies was enough to wipe £3 billion in value off the sector’s value. The FCA has a right to investigate as well as to protect the consumer but frankly its initial handling of this initiative was dangerously insensitive. No body, however powerful, has the right to trash a sector’s value without some consultation, prior warning or negotiation. There will probably be repercussions and quite rightly so. Martin Wheatley, the head of the FCA, will be severely under the cosh, with many calling for his head on a charger a la John the Baptist for his overly-zealous aproach.
Most investors felt that House of Fraser would be taking its bow as another IPO later in the year. It now transpires that Sanpower, a Chinese conglomerate is in advanced talks about a takeover. Card Factory, advised by UBS and Morgan Stanley and currently owned by Charterhouse, is expected to go public in an IPO, valuing the company at £700 million.
It was suggested that the Government and Mark Carney were considering some ‘rinky dinks’ as to how the UK’s borrowing and gilt holdings could be accounted for in the future. This level of creative accountancy may require a little more clarification. Morrison’s CEO, Dalton Phillips, felt discretion was the better part of valour in waving his £375k bonus, in the face of 2 profits warnings and a sharp fall in the share price. It was also noticed that Peter Sands and the senior directors at Standard Chartered Bank saw a cut in their bonuses after a less than stellar performance, though they were hardly suffering penury in sharing £9.5 million.
The following companies post results this week – Monday – SKYE PHARMACEUTICAL, Tuesday – ABERDEEN ASSET MANAGEMENT, ICAP, Wednesday ASOS, DOMINO PIZZA, Thursday – BOOKER, THORNTONS, DUNELM and TATE & LYLE, Friday – EASYJET traffic. Watch for Non-Farm Payrolls this coming Friday 4th April 2014. Though Janet Yellen has played down its importance in terms of influencing the tapering of QE, most investors will want to know whether the appalling weather has stunted growth in the US.
These are David Buik personal views
Twitter – @truemagic68
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