TODAY’S FAYRE – Sunday 16th March 2014
“Is it for now or for always,
The world hangs on a stalk?
Is it a trick or a trysting-place,
The woods we have found to walk?
Is it a mirage or miracle,
Your lips that lift at mine:
And the suns like a juggler’s juggling-balls,
Are they a sham or a sign?
Shine out, my sudden angel,
Break fear with breast and brow,
I take you now and for always,
For always is always now.”
Philip Larkin – poet –1922-1985
This is only the second Cheltenham Festival I have left financially unscathed since 1986! However, for me, Friday – Gold Cup Day – was a financial bloodbath. My judgement was so impaired. I couldn’t hit a barn door at five paces. The Gold Cup – the spectacular ‘Blue-Riband’ event of this three-day NH racing bonanza – was an odd affair with none of the fancied horses running up to their expectations with the possible exception of ‘The Giant Bolster’, who with respect, is no more than a high-class handicapper. ‘Bob’s Worth’ came up the hill as if he was either drunk or he was a spent force and ‘Silvigniaco Conti’ looked like he did not quite get home.
Take nothing away from Jim Culloty’s ‘Lord Windermere’ who won by a short head from Willie Mullins’s ‘On His Own’. Davy Russell, the jockey could well have lost this race in the ‘Steward’s Room.’ However good sense prevailed. Lord Windermere did win the RSA novice chase last year and was clearly the ‘apple of his trainer’s eye’, though he did run a shocker in the Hennessey last November. This was fairy tale stuff for Jim Culloty, having won three ‘Gold Cups’ as a jockey on the universally loved ‘Best Mate!’
Tony Benn – alias Anthony Wedgwood-Benn; alias Viscount Stansgate was a deliciously irreverent and a courteously maverick of a politician, though a real heavyweight right up until his death on Friday at the age of 88, though in his twilight years, his influence diminished. There was absolutely no side to him. Champagne socialism with all the trappings of grand cuisine and fine clarets was not for him, despite his background. He was very content if there was a cup of tea and a few sandwiches on offer as an alternative! His extreme views were always amusing, though he believed passionately in the public sector, nationalisation and contempt for the membership of EU. Also it is fair to say that living in Holland Park never really embarrassed him or caused him any real pain!
In passing I find it astonishing that Mr Benn and Mr Crow were given valedictory obituaries, which is kind and humane. It would not have surprised me if some commentators had not called for state funerals, such was the wave of respect of respect and pouring out of affection. Conversely, Baroness Thatcher was vilified as some sort of ogre before she was even laid to rest! As they say – “There’s now’t as queer as folk!”
Irritated and frustrated investors are looking to shovel blame on Putin for the markets’ ailing condition, which may be exacerbated by the Crimean vote today, which is likely to be in support of Russia. However look over your shoulder at an equally compelling reason why markets have surrendered value in the last two weeks. Asia’s faltering growth is driving global growth down led by China – due to the desperate need for rebalancing away from top-line growth. Results and data in Q1 and Q2 will be disappointing on growth. No, it’s not the weather. The economy in China is suffering. It seems hard to believe that growth of 7.5% for this year will be achieved and industrial production of around 9.5% now appears to be just a myth. Shadow banking is a real problem and credit issues and defaults are verging on catastrophic, unless the Chinese government starts imposing real restrictions on these unattractive usurers. Crude oil in these conditions could easily fall to $85 a barrel, if the current Chinese economic downturn prevails. Gold gained nearly 3% last week at $1378 an ounce and bond yields eased – 10-year US treasury yield eased from 2.79% early in the week and touched 2.65%
I am told that insider stock market selling is at its highest level in 25 years, according a metric that strips out the largest shareholders from the ‘sell-to-buy’ ratio.
What makes this development so ominous is that, while no indicator is perfect, the research has shown that “the adjusted insider ratio does a better job predicting year-ahead returns than almost all of the better-known indicators that are popular on Wall Street.
There have been two prior occasions when the adjusted insider ratio got almost as bearish as it is today — early 2007 and early 2011. The first came a half a year before the beginning of the worst bear market since the 1930s. While the market didn’t fall as much following the second of these two instances, the May-October decline in 2011 did satisfy — based on intraday levels of the S&P 500 index — the semi-official definition of a bear market as a 20% drop. Last week European stocks dropped by 3.1% and the FTSE 100 by 2.75% – these bourses have fallen 4-5% in the last 2 weeks and it is difficult to see where the halt comes, when so little good news appears to be on the horizon. With West/East relations looking desperate, this impasse provides classic ‘bear attack’ conditions. The Street of Dreams faired slightly better with the S&P 500 easing by just 1.6%. Tokyo’s NIKKEI was battered most of the week – a strong Yen and a growing perception that Abenomics may be just incomprehensible gobbledygook.
As a precautionary measure, billions of Dollars have been withdrawn from Western banks by the likes of Sberbank and VTB representing operations such as Lukoil, and businesses owned by the Alisher Usmanovs and Roman Abramovichs of this world, ahead of possible sanctions, the freezing of assets and travel restrictions. The US’s Federal Reserve has supposedly seen a drop of $105 billion in Treasuries held by foreign institutions. We are also led to believe that the top 10 Russian Oligarchs may well have lost $6.6 billion of their net worth. It strikes me that President Putin is more than happy for his people to feel more excruciating financial and emotional pain, as well as damage to its economy than our leaders in the West are. I don’t think Obama and Kerry appreciate that fact. Gentlemen, you need to raise your diplomatic game!
In New York it was retail stocks that disappointed with the likes of Aeropostale, Abercrombie & Fitch, American Eagle and Urban Outfitters all failing to pass muster with falling sales. Here in Old Blighty mining stocks against diminishing Chinese demand were clattered in places. Morrison’s profits warning saw supermarket prices mangled with Morrison down 12% one day, dragging Sainsbury lower by 7.5% and Tesco by 4%, as the price war triggered by the beleaguered Bradford based operation gathered momentum. Barclays had a decent week as it served notice to cut exposure to investment banking. Investors love the scent of blood flowing through the city’s streets and through Canary Wharf. There were great numbers from Prudential, who shares reached record levels despite the market downturn. Aberdeen Asset Management’s shares felt the wrath of God saw its value ease by over 3%. St James’s Place, however, was still in upgrade mode. Phoenix IT was also a winner on the week as Schroder Investment Management orchestrated the appointment of Mr Vaughan as CEO. Ocado also posted encouraging sales numbers with an 18% increase in the last quarter.
IPOS gathered momentum last week with Poundland gaining 23% on its first day’s trading. Pets at Home initially did not achieve its same objective and its shares fell 5% below its Plimsoll line. On Friday Boohoo.com stepped up to the plate for its debut and a 40% gain manifested itself. This leaves B&M and House of Fraser to consider their positions. Sentiment is not great; so a little vigilance may be the order of the day. In New York King Entertainment the owner of ‘Candy Crush Saga’ games announced that 22.2 million shares priced at $24 would be sold on the NYSE, valuing the company at 47.6 billion. These games have attracted 150 million users so far. A decent debut is in prospect. Jimmy Choo has not been backward in coming forward. Labelux is Austrian owner, bought the shoe company for £525 million and will be looking for a price tag of £1 billion. Not to be left out, Aldermore, a challenger bank, will be looking to nudge through this crowded IPO market with its £850 million price tag! Finally Alibaba, China’s answer to Amazon, has selected to New York for its $15 billion IPO. This issue could rank in value pari-passu with Facebook.
Last week ECB President Mario Draghi wittered on about deflation and felt that the Euro was far too strong as it flirted with E1.40 to the Dollar. Steps would be taken by the ECB to prevent such a problem.
Finally Chancellor Osborne posts his penultimate budget on Wednesday at noon. We are told it will be a budget for business with NI possibly being scrapped for those being employed under 25 years of age, which could take 1.5 million out of tax. GDP could well be upgraded in excess of 2.5%. However the government’s borrowing is still gargantuan, though it is hoped that the figure will drop by about £6 billion below the OBR’s £111 billion. As well as being a budget for business, innovative ideas for not hammering middle of the road earners from the iniquitous 40% tax threshold needs to be found to attract votes to the Tories in May 2015. More during the week.
UK Companies posting results – Tuesday – ASOS, IG GROUP, CAIRN ENERGY, J SAINSBURY, SPIRIT PUB COMPANY, ANTOFAGASTA, BERKELEY GROUP, Wednesday – PARTNERSHIP, SMITHS GROUP, Thursday – NEXT, TED BAKER, PREMIER FARNELL, Friday – SKYE PHARMACEUTICALS
These are David Buik personal views
Twitter – @truemagic68
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.