TODAY’S FAYRE – 9th March 2014 – round-up

TODAY’S FAYRE – Sunday 9th March 2014

“When I am an old woman I shall wear purple
With a red hat which doesn’t go, and doesn’t suit me.
And I shall spend my pension on brandy and summer gloves
And satin sandals, and say we’ve no money for butter.
I shall sit down on the pavement when I’m tired
And gobble up samples in shops and press alarm bells
And run my stick along the public railings
And make up for the sobriety of my youth.
I shall go out in my slippers in the rain
And pick flowers in other people’s gardens
And learn to spit.

You can wear terrible shirts and grow more fat
And eat three pounds of sausages at a go
Or only bread and pickle for a week
And hoard pens and pencils and beermats and things in boxes.

But now we must have clothes that keep us dry
And pay our rent and not swear in the street
And set a good example for the children.
We must have friends to dinner and read the papers.

But maybe I ought to practice a little now?
So people who know me are not too shocked and surprised
When suddenly I am old, and start to wear purple.”

Jenny Joseph – poet – 1932 –

“In war-time”, I said, “Truth is so precious she should always be attended by a bodyguard of lies!” – Sir Winston S Churchill – Prime Minister & statesman – 1874-1965

The headline on the front page of Saturday’s FT explains very succinctly what is wrong with the EU – BUREAUCRACY! To suggest that the EU intends to deal with executive pay with new rules would make George Orwell smile wryly from beneath the daisies! Those who enjoy and have thrived on free enterprise culture, should insist that shareholders bring far more influence to bear on executive remuneration including share incentive schemes than they currently do. It is preposterous that bureaucratic regulation should have anything more than a passing interest in these deliberations and proposals. Abrogation of responsibility by institutional shareholders is just not an option any more.

I was absolutely appalled that Danny Alexander should surreptitiously leak fresh government policy on tax-free allowances at the Lib-Dems ‘Mickey Mouse’ spring conference for this unattractive party, for purely political expedience. The House of Commons should be the only place that information of this sensitivity should be divulged! That is disgraceful behaviour.

I thought Alexander, in his capacity as Treasury Secretary, was one of the rare good guys coming from the Lib-Dems in this truly rudderless coalition government. However since his malevolent leak, he has dropped down a few notches in the ladder of respect and frankly he is just as much of a maverick as Messrs Cable & Davey!

Though the Tories and big business seem determined that the EU can be persuaded to change its ways, Dr Cable is equally determined to indulge in unsubstantiated jingoistic behaviour, frightening the electorate that a referendum on the UK’S membership of the EU will stunt investment, which is desperately needed for the economy to take a quantum leap forward. This is arrant nonsense! What the electorate is terrified of is the prospect of a Labour government or a Lab/Lib-Dem coalition in 2015. Now either of those outcomes really could keep the lid on investment. Many fearing the worse, have been reluctant to commit whole-heartedly to long term investment unless an alternative outcome manifests itself.

The Ukraine crisis has so far created the level of economic and political uncertainty that would be expected. There is no doubt that President Putin is a ‘playground bully.’ If Russia were allowed to march all over Ukraine with its ‘hob-nailed’ boots, then it is not unreasonable to expect that Moldova, Belarus and other satellite countries could be in the ‘hugging bear’s’ sights. However the level of diplomacy used by the West to take any sting out of the existing tension, apart from Messrs Merkel and Haig has been of kindergarten quality – truly awful, thus driving the political tension to levels of intolerance. Obama and Kerry have embarrassed many by suggesting personal financial sanctions against individuals. Their naivety is just breath-taking. Diplomacy achieves more behind locked doors than on the front pages of the press or TV cameras.

Putin is not a monosyllabic congenital ‘ugh merchant’ and should not be treated as such. Russia is capable of damaging the west economically – from the supply of gas to the car industry in the US for openers, as well as tipping Europe back in to a vortex of recession. No one is suggesting that Russia should be allowed to run amok nor should Putin roll over on his back so we can “tickle his tummy!” However openly threatening Russia in its own backyard is never going to glean a satisfactory result. Some diplomacy is required please! Otherwise all the good work done in bringing the world’s economy back on to the bridle could be wasted.

No one doubts for one minute that Russia needs access to international capital and that the reaction to this political impasse was dramatic to say the least. The Russian stock market was down 12% last week and 23% on the year so far – uncomfortable by any standards. This will have not gone unnoticed in the Kremlin. How Putin has never been known as a philanthropist, having his people’s best interests at heart. No should the UK even contemplate the idea that the US is our best mate! The US above all else is pragmatic. We should be under no illusions that Russia could make life very uncomfortable for Europe. On a positive note Russia is very keen to do business as well. Hopefully Chancellor Merkel can find the key to the kingdom. Few others seem to have the inclination or the ability to do so.

Last week the S&P 500, despite the turmoil added 0.82%, breaching the all-time record, despite mixed data. The S&P 500 has added 178% since its 12 year low. Friday’s non-farm payrolls were better than expected with 175k jobs having been created in February though unemployment went up a notch to 6.7%. We shall need to see data for another2/3 months before we know whether it was poor weather that stunted progress or whether the US economy is plateauing out. The FTSE last week eased by 1.4%, European stocks by 1,6% and Tokyo’s Nikkei was up by 2.9%, thanks to another huge dose of Abenomics and stimulus packages as well as a weaker Yen. Last month China saw exports drop by 18% and PPI data was worryingly benign. However the Chinese authorities are insistent that its economy will grow by 7.5% this year. There are still massive concerns about ‘shadow banks’ in China – alternative ways for people to raise finance. The authorities will be desperate to make sure this burgeoning matter does not get out of hand.

On the Street of Dreams there was much talk about Netflix, whose share price has rallied by meteoric proportions in the last year from $195 to $451. Microsoft is also determined to grab some more headlines with its plans for on-line games. Retail was very much in the news with Big Lots adding 18% and Foot Locker 6%. RadioShack and Staples both were trolleyed by 15%. Horilland added 8% in the hope that Reynolds American would make a $19 billion bid for it.

In Europe Germany’s DAX experienced its biggest weekly decline since the New Year. Ukraine provided many dark cumuli nimbus clouds. It was miners, including Glencore from the FTSE 100 that suffered badly at the end of the week. This was partly in response to the $15 billion bond default by Shanghai Chaoic. There was no change in rates from either the MPC or ECB meetings last Thursday. Many are of the opinion that UK rates start to rise in June of next year. That presupposes that the economy really is under a wet sail.

Morrison’s, having fallen behind the curve, maybe selling £500 million of properties to shore up its capital as well as finding the where-with-all to fight back against the likes of Aldi. Finally to finish on banks; Antony Jenkins, Barclays CEO has not smothered himself in glory with news that a share INCENTIVE scheme valued at £5 million is being drawn up. There is nothing wrong with the principal, but why is the presentation always so awful and ill-timed! There was confirmation that the BOE would be setting up its own committee to investigate allegations it may have allowed manipulation of the FX market to take place thanks to sloppy policing. This committee may be chaired by Sir David Lees and is in addition to the Travis Smith enquiry. Some of the BOE’s FX managers lunching arrangements with commercial banks may have been considered to be unorthodox. I am not sure this is right. One of the best ways of finding out what is going on is at lunch – no doubt about it. So to cast aspersions may be precipitous.


These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

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