Monthly Archives: April 2014

CONTEMPLATING MY OVERSIZED NAVAL

I had time to contemplate my oversized naval at lunchtime today. Volumes in London this year are down about 65%. Apart from a modest correction over valuations – mainly tech – and concerns about China and tapering QE, the underlying sentiment has been quite positive. A fair number of IPOS have gone through. A few retail and tech floatations have gone awry, but on the whole the appetite and response has been positive. Certainly from Panmure’s perspective we have many irons in the fire for SMES. The order book is good. If investors feel that the main indices are fully valued and priced, SMES offer great growth over the years.

As Messrs Obama, Merkel and Cameron start to raise their sanctions game against ‘Uncle Vlad’ for failing to de-escalate the tension in Ukraine, the barbaric behaviour of Assad’s followers with the proliferation of chemical weapons, to which Syria continues to look dumfounded, as if to say – ‘MOI!’ – will either ameliorate or complicate the existing impasse or it will exacerbate the crisis. 3 issues are certain; no one seems to have the stomach for any major military conflict. Secondly if anyone thinks Putin is going to back down, look at his personal ratings – 82%. Finally surely the free world cannot allow Syria to carry on as if nothing is happening to some of their people. The West should be able to persuade Putin that Assad’s behaviour is unacceptable; yes I get the oil and gas pipelines issue, but heinous crimes against humanity; well that’s another thing. However equity markets seem to have kept their poise; but for how long? With volumes remaining derisive there is a chance of a measurable pull back, aided and abetted by the toxic stench of fear generated north of the Black Sea.

Before I fly off to DC for a week, I would like to share a couple of idiosyncratic observations with you. The only time in recent weeks when the market has seen volumes dramatically increase is based round stories. Early in the week the levels of trade in Astra, Shire, GSK, William Hill and Ladbrokes have exploded regularly. Today, thanks to the less draconian than expected regulations on gaming in the high street Hills and Ladbrokes added about 7% each, though Hills were helped by the fact it went ex-dividend today.

If Pfizer is going to be successful acquiring Astra Zeneca, the US drugs titan will have to be quick and generous. Firstly to change tax domicile it is necessary at the moment to own at least 20% of a company to comply with this requirement. This relatively low threshold and is likely to be increased to 50% by the Obama administration before too long. Therefore the cash element to attract shareholder support will need to be significant and very sexy. Investors will not be persuaded to part with their shares for a song. So I venture to suggest that if this deal is to be consummated it will be done rather more quickly than most think and at a very decent premium around £55 a share.

Savvas Neophytou, Panmure’s excellent pharmaceutical analyst made the following comments –

Talking of Tax inversion – one of the key themes remains the rule that in order to achieve the transfer of incorporation, the rule stands on 20% ownership overseas. Clearly something for the courts at a later day but will shares held by the international arm of a (any) large US financial institution count as overseas ownership?

And importantly – not an expert on tax inversion – President Obama is proposing a big move against tax inversions. In his draft 2015 budget – unlikely to pass in its current form; remember last year? – contains a provision designed to prevent inversions from happening by requiring a company to have 50% ownership outside the US to change its incorporation.

So Pfizer will be under some considerable pressure to get this done SOONER rather than later. But it will require a significant element of any deal to remain in paper. People holding AZN paper seems to have the upper hand in this.

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.

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 – Barclays & Coop – Wednesday 30th April 2014

TODAY’S FAYRE – Tuesday 29th April 2014

“Take this kiss upon the brow!
And, in parting from you now,
Thus much let me avow-
You are not wrong, who deem
That my days have been a dream;
Yet if hope has flown away
In a night, or in a day,
In a vision, or in none,
Is it therefore the less gone?
All that we see or seem
Is but a dream within a dream.

I stand amid the roar
Of a surf-tormented shore,
And I hold within my hand
Grains of the golden sand-
How few! yet how they creep
Through my fingers to the deep,
While I weep- while I weep!
O God! can I not grasp
Them with a tighter clasp?
O God! can I not save
One from the pitiless wave?
Is all that we see or seem
But a dream within a dream?

Edgar Allan Poe – poet – 1809-1849

My daughter-in-law Annabel (Bugsy) Buik and two friends have just finished a really innovative and creative ‘labour of love’, publishing a book called “Stumped by Cricket.” This beautifully illustrated book explains very simply all the rules, laws, culture and nuances from the maze of cricket. This book is really a ‘Bible’ for cricket, suitable for all children from 7 years upwards and more to the point, for their Mums, Aunts and cousins. It’s a joy to read and should sit on every family coffee table or children’s playroom. To purchase it – http://www.allaboutboys.co.uk

It is a great pity that many of you were not watching ITV4 on Monday night when Fulham put Chelsea to the sword in the first leg of the FA under 18s Cup Final 3-2 at the Cottage. Let’s hope these amazingly talented youngsters can be used by the club before they are ‘ear-holed’ by the big clubs – Pat Roberts and Moussa Dembele in particular. If, and some might say when, Fulham are relegated they will need these youngsters to put them back in to their rightful place in football society.

The Street of Dreams was not exactly in a mood to fly to the moon during yesterday’s session, but the limited corporate results were positive enough to prevent investors losing their nerve. The only ‘damper’ was Twitter – whose share price dropped by 10% – below the IPO issue price of $39. Concern over forward earnings and valuation was posing a problem and not a little heartache for punters. The M&A melting pot was given plenty of stirs with thoughts that Allegan might have a nibble at Shire Pharmaceutical or will the Botox magnate prefer to get in the sack with Sanofi-Aventis or Johnson & Johnson rather than Valeant – such mind-blowing numbers these days – $40 billion for Botox! Please! Oh and Sanofi-Aventis has served notice to see part of its drug portfolio for $8 billion – probably taking a leaf out of GSK/Novartis’s book. The volumes around the world are so thin, investors must be forgiven for believing that a measurable correction awaits – maybe in mid-May.

Sir Christopher Kelly’s report on the Coop which included evidence from 130 interviews was damning in the extreme, slamming Britannia Building Society’s Neville Richardson for leaving the business in bad shape in 2011 and rather more visceral language was used to describe CEO Peter Marks’s thoroughly inept performance. A compendium of poor management of this mutual triggered its worst loss in its long history. The departure of Euan Sutherland as CEO, who felt the movement was ungovernable, set the tone for Lord Paul Myners open criticism of the way the bank was run. Many of the management appointed were wholly unqualified in many cases to do the job required. The Coop Bank is now left with the thorny problem of whether to stump up £120 million as its share of extra capital required. Many believe that the hedge fund managers, which already own 70% of the bank, should increase their stake and take overall control. The Coop’s retail is the 5th largest in the country, but it must stop trying to take Tesco’s on in its own backyard. The Coop is a huge organisation with 90k employees and 7 million clients. It needs a clean bill of health sooner rather than later. It is interesting to note that Ursula Lidbetter, the Coop’s chairman, has served notice to dispense with KPMG’s services. KPMG were auditors at the time of the Britannia acquisition.

I would very much like to know what the FT means by a ‘bad bank’, referring to Barclays. I was of the opinion that Barclays was not bailed out and sought fresh capital. It has been profitable. Its bonus structure may have been distasteful – at times full of avarice and greed and disproportionate to shareholder value. ‘Bad bank’ seems rather harsh to me. Maybe it means hiving off Barclays Capital. Skip McGee, an essentially clever acquisition from the smouldering remnants of Lehman Bros 5 years ago i9s to relinquish his post as CEO of Barclays Capital. McGee, who runs Barcap from New York, has decided to cash in his chips, supposedly valued at about £8 million. McGee has probably taken the very sensible decision, being a rich man, not to pit his wits against virulent regulators such as the SEC and the FCA. It makes far more sense for McGee to join private equity, set up his own or join a hedge fund, make money and enjoy himself, without all the grief of savage controls. He might even join Uncle Bob Diamond! The news about the FT’s ‘bad bank’ will no doubt come out in Antony Jenkins’s policy statement next week. It has become clear that investment banking was likely to pay a more subservient role than before, but I suspect Jenkins did not expect McGee to quit! Joe Gold takes over.

This morning saw another rather nebulous session in Asia. The market was not surprised that WH Group has abandoned plans for the time being for its IPO in HK due to deteriorating conditions. In London at 9.00am the FTSE 100 moved in to positive territory – +2 points at 6771. There were a slew of results which included Royal Dutch Shell, Home Retail, Standard Life, Pendragon, Ladbrokes, BATS and many others. Most were reasonable and had travelled and arrived. The exception was Shell, whose profit was down 45% for the same period last year at $4.5 billion with narrowing margins. Analysts clearly saw more than I did for the future – +4.25%. GSK posts numbers later this morning.

Alstom formally re-opened today – up 11%. Negotiations started formally with GE, though Siemens wants plenty of time to look at the books before parting with $13.5 billion. Hollande says he comfortable with GE as an acquirer; however I suspect there would be more comfort from unison with the German industrial titan.

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.

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 – Tuesday 29th April 2014

TODAY’S FAYRE – Tuesday 29th April 2014

“The wild bee reels from bough to bough
With his furry coat and his gauzy wing,
Now in a lily-cup, and now
Setting a jacinth bell a-swing,
In his wandering;
Sit closer love: it was here I trow
I made that vow,
Swore that two lives should be like one
As long as the sea-gull loved the sea,
As long as the sunflower sought the sun,-
It shall be, I said, for eternity
‘Twixt you and me!
Dear friend, those times are over and done;
Love’s web is spun.
Look upward where the poplar trees
Sway and sway in the summer air,
Here in the valley never a breeze
Scatters the thistledown, but there
Great winds blow fair
From the mighty murmuring mystical seas,
And the wave-lashed leas.
Look upward where the white gull screams,
What does it see that we do not see?
Is that a star? or the lamp that gleams
On some outward voyaging argosy,
Ah! can it be
We have lived our lives in a land of dreams!
How sad it seems.
Sweet, there is nothing left to say
But this, that love is never lost,
Keen winter stabs the breasts of May
Whose crimson roses burst his frost,
Ships tempest-tossed
Will find a harbour in some bay,
And so we may.

And there is nothing left to do
But to kiss once again, and part,
Nay, there is nothing we should rue,
I have my beauty,-you your Art,
Nay, do not start,
One world was not enough for two
Like me and you.”

Oscar Wilde – poet & playwright – 1854-1900

You have to admire people in all walks of life for having the courage of their convictions. There again conviction is one thing and stubbornness is another altogether. David Cameron has encompassed both attributes in spades. To be not worried that UKIP, which is now top of the poll for the Euro elections is tantamount to treating his party supporters with contempt. Of course persuading the EU to change tact using the influential offices of Chancellor Merkel is the most positive course of action. Sadly there is not one visible or confirmed piece of evidence that any action has been taken in this direction so far and the General Election is just one year away. A protest vote can be dismissed, but I fear that tsunami level of support for Nigel Farage and his troops may be something altogether different.

I noted with interest that City UK came out yesterday overwhelmingly in favour of UK remaining in the EU, warning that an exit could wreck financial capital business. One has to respect its findings but I challenge some of the validity of its findings. There’s a great big world out there. The UK needs to embrace it. We scored 40 years ago with the Euro Dollar market; we then scored again with the abolition of exchange controls in 1981. The City, with the resolve required, can do it again!

For the umpteenth time it was Merger ‘Monday Mania’ yesterday, which gave equity markets a boost, despite a background of deteriorating geopolitical discomfort in Ukraine. The US have upped their sanctions game against a few more high profile Russian diplomats and oligarchs. One of them is sadly the chairman of Rosneft, BP’s 20% partner. I understand, though I don’t necessarily respect the execution, the US’S and EU’s stance towards Ukraine, but I was wondering if there is any more hatred and bile the US can tip over BP, aided and abetted by the UK government. I find the choice of that individual astonishing – banal in the extreme – and hugely counter-productive from a business perspective. BP announced its figures this morning with a pre-tax profit of $5.27 billion. BP is chipping away at its problems in the Gulf – no thanks to the state of Louisiana. The total cost of the Gulf ecological disaster remains constant at an astronomical $42.7 billion. BP is producing 3.13 million barrels a day of which about 1 million is produced in conjunction with Rosneft. In the last quarter this only gleaned a profit of $271 million thanks to the decline of the Rouble. The dividend was increased by just over 8%. The market was happy with Bob Dudley’s presentation in the circumstances – shares up 1% at the opening.

Two thirds of US companies that have reported so far have beaten expectations. Yesterday’s session proved to be no exception on the Street of Dreams, though the mood was reflective. The DOW added 0.5%, the S&P 0.3% and the NASDAQ closed near enough flat. Investors pondered over Pfizer’s hostile £60 billion bid for Astra Zeneca. Pascal Soirot told their US predator that its valuation was wholly inadequate. Despite Astra’s narrowing pipeline Pfizer insist there is great synergy particularly with scientific development, cancer & oncology treatment. If that is the case one would hope the number of redundancies would be limited amongst its 7000 workforce. It is also thought that Astra attaches huge credence to tax advantages – UK 20%, 10% only from patents against 37% in the US. I suspect the US government would be horrified to think tax was a key issue. Pfizer has a great track record in acquiring what it wants. So if the bid is upped to between £51 and £54 a share, I suspect Astra will acquiesce, despite strong protestations. Also my diseased ridden mind working overtime allows me to think that cashing in share options at these inflated levels in comparison to £35 a share in January, has great attraction.

It is further understood that MERCK’s consumer business, valued at $14 billion, may end up in Reckitt Benckiser’s portfolio, if the rumour mill is accurate. I enjoyed President Hollande’s comment that he was not against GE’s bid for Alstom – yeah right! – So long as Siemens can improve theirs! That’s very cynical of me, but Germany’s and France’s track record for protectionism is exemplary and consequently attracts comments of that nature.

At 9.30am many will be disappointed if Q1 GDP of +0.9% is not posted – taking the annualised rate close to 3.2%. The US economy is likely to be at its most robust since 2007, with unemployment below 7% at 6.9% and retail sales last week coming in at +4.2%. The outlook, according to Governor Carney is improving all the time. However I doubt that rates will rise until the autumn of next year.

There were decent results from Petropavlovsk, Redrow, St James’s Place and in Europe Nokia was looking in better shape with a new CEO in Rajee Suri. Deutsche Bank, Santander and Sanofi-Aventis did not disappoint their acolytes with improved performances. However Deutsche Bank may well need an injection of capital before too long. Talking of banks those in the UK are likely to be subjected to much more stringent stress tests, using the assumptions that house prices fall 35% and interest rates rise by 2%.

Finally Whitbread posted a 16% increase in profits to £411 million on a 13% increase in revenues of £2.29 billion with sales increasing on a like-for-like basis by 4.2%. Premier Inns cracked on but it was the Costa Coffee brand that excelled. There are 1700 coffee shops in the UK and Ian Harrison, the CEO is confident that another 300 can be added in the next few years. Their shares were up 2.7% this morning, but many wonder if Whitbread’s goals are not too ambitious.

Asia’s session was rather nebulous, with Tokyo closed for a public holiday. At 9.10am the FTSE 100 was up 32 points at 6732.

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.

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 – Monday 28th April 2014

TODAY’S FAYRE – Monday 28th April 2014

“Believe me, if all those endearing young charms,
Which I gaze on so fondly to-day
Were to change by to-morrow, and fleet in my arms,
Like fairy-gifts fading away,
Thou wouldst still be adored, as this moment thou art,
Let thy loveliness fade as it will,
And around the dear ruin each wish of my heart
Would entwine itself verdantly still.
It is not while beauty and youth are thine own,
And they cheeks unprofaned by a tear,
That the fervor and faith of a soul can be known,
To which time will but make thee more dear;
No, the heart that has truly loved never forgets,
But as truly loves on to the close,
As the sun-flower turns on her god, when he sets,
The same look which she turned when he rose.”

Thomas More – poet – 1779-1852

AP McCoy, who will be 40 years of age next week, was duly crowned ‘Champion National Hunt jockey’ at Sandown Park last Saturday for the 19th year in succession – a record, I think I can say, will never be beaten in my life time and perhaps no one else’s. This is an astonishing achievement of bravery, relentless commitment to be the best in the business for whomever he rides for, for achievement and talent. All those football supporters, cricket, tennis, boxing and petrol-heads who have lauded their champions over the years, resulting in knighthoods and other prestigious awards, for me in terms of longtime achievements they must surely sit in the shade! Let’s hope the Royal ascent becomes evident before too long for this true champion of his sport! An amazing athlete and a fully paid-up member of the human race!

Last week, though the US earnings season was proving to be very satisfactory, the downgrading of Russia by S&P against a background of increased sanctions against the ‘Hammer & Sickle Mob’ for failing to de-escalate tensions in the Ukraine, triggered the removal of some equity froth and momentum towards the end of last week, though most Western bourses remained above the Plimsoll line by Friday night. The S&P 500 gained 0.14%, the FTSE 100 +0.91% and European bourses by an average of 0.31%.

Last week’s initial rally was aided and abetted by further M&A mania. Astra Zeneca was the subject of Pfizer’s attentions, thanks to a bid that was submitted on 5th January – rejected out of hand by Pascal Soirot and his board. The share price for Astra was £35 then. Many analysts and market observers could see the value of this bid if between £46 and £50 a share was tabled, as Astra’s drug pipeline is becoming rather thin on the ground. Apart from the fact that Pfizer has a $70 billion war chest, it was harder to see the synergies. Anyway it Monday Merger Mania and superficially it appears that Pfizer has gone hostile in offering £46.61 in cash and shares. We await developments. If the bid is improved to £50 a share, it would be hard to see it being turned down, despite Soirot remaining wholly ambivalent to Pfizer’s overtures. This deal would value the joint operation at about £120 billion. Astra has 7000 employed in this country and Pfizer 2,400. Astra shareholders would be offered a significant cash element and the joint company would be quoted on the NYSE.

The market was very happy with Glaxo’s plans to interchange oncology with vaccination operations with Switzerland’s Novartis. This looks like good business focusing on strength. Then it was the turn of Canada’s Valeant Pharmaceuticals that owns Bausch & Lomb (gig-lamps and lenses) to make a speculative $40 billion bid for Allergan (BOTOX!), which is likely to be successful. Merck has put up its consumer unit for sale with a price of $14 billion on it.

On Friday night late GE table a speculative bid of $13 billion for the French rail carriage builder Alstom. It seemed to make sense to keep the competition away from China, Japan and the UK/Canada. Siemens gets wind of this and comes storming over the hill with an improved offer, clearly with the tacit approval of President Francois Hollande, who would have been concerned about loss of jobs. I doubt his standing could be lower amongst voters in France than it currently is. Also Siemens made a pathetic excuse about its inability to compete for trains with Alstom being the perfect riposte enabling Alstom to fill that gap. This is EU protectionism at its very worst – another reason why the UK needs to get free from these chains of bondage. Clearly France and Germany do not believe in free markets. I’ll give the market a clue PM Cameron won’t try and find a more suitable UK/EU predator than Pfizer to take over Astra Zeneca.

Finally Premier Oil have rejected Ophir Energy’s overtures to be taken over to form a £3 billion exploration operation. This week the following companies in the UK post results or trading statements – BP, PETROPAVLOVSK, REDROW, WHITBREAD, Wednesday – HOME RETAIL, STANDARD LIFE, GREENE KING, BATS, CSR, GLAXO SMITHKLINE, GREGGS, Thursday – LLOYDS BANKING GROUP, BG GROUP, SMITH & NEPHEW, BSKYB, WOLFSON ELECTRONICS, N BROWN

US – Monday – CORNING, Tuesday – SPRINT, BRISTOL MYERS SQUIBB, VALERO ENERGY, MERK, BOSTON SCIENTIFIC, GOODYEAR, MARRIOTT, EBAY, Wednesday – TIME WARNER, REVLON, PITNEY-BOWES, Thursday – EXXON MOBIL, VIACOM, BJ RESTAURANTS, Friday – CHEVRON

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.

TODAY’S FAYRE – Sunday 27th April 2014 – RBS BONUS CAP

TODAY’S FAYRE – Sunday 27th April 2014

“Love, if I weep it will not matter,
And if you laugh I shall not care;
Foolish am I to think about it,
But it is good to feel you there.

Love, in my sleep I dreamed of waking,
White and awful the moonlight reached
Over the floor, and somewhere, somewhere,
There was a shutter loose, it screeched!

Swung in the wind, and no wind blowing!
I was afraid, and turned to you,
Put out my hand to you for comfort,
And you were gone! Cold, cold as dew,

Under my hand the moonlight lay!
Love, if you laugh I shall not care,
But if I weep it will not matter,
Ah, it is good to feel you there!”

Edna St. Vincent Millay – poet – 1892-1950

The news that came early on Friday morning that the UKFI would not endorse
the RBS’S board proposal to pay some bonuses in excess of 200% of basic salary was greeted with hysterical and gleeful support, with politicians understandably pandering to the electorate, who remain full of contempt and revulsion on this issue and will never be placated, so long as night follows day.

Not for one minute should one condone unacceptable greed in any walk of life and there is evidence that in the past excessive remuneration packages to bankers have been paid – most of it in cash – at unsustainable levels and disproportionate to shareholder benefits and taxpayers’ exposure. What remains frustrating for those who work in the financial sector is that the politicians and some less-enlightened commentators would have us believe that no radical progress had been achieved in the manner bonuses are paid and distributed. Most bonuses now constitute a massive element of share incentive schemes which engenders continuity and loyalty, also allowing a repayment clause, if profits do not materialise.

So for the Chancellor/government to trigger the UKFI’s statement sends a serious warning to the world at large that it is prepared to support the EU and surrender its financial sovereignty, which will eventually mean that the UK will fail to capitalise on its pre-eminent position as the leading financial centre in the world. My diseased ridden mind tells me that this initiative has Dr Cable’s hallmark all over it. In 50 years of following politics, rarely can there have been a more negative business secretary. He appears to detest free enterprise, creation of wealth and clearly he does not understand that wealth creates employment. As far as I can see, thanks to this ill-considered initiative, the taxpayer can kiss goodbye to its money for probably a decade. The likelihood of RBS being able to hold on to or attract quality people in the future to compete globally is distinctly remote.

In this modern age tearing up contracts is not a good idea. It takes time to evolve a much needed fresh remuneration culture. It is the tanker syndrome. You cannot go from “A” to “B” in two minutes flat. Banking is a global business and like it or not it is very competitive. People do not necessarily have to leave these shores to ply their trade elsewhere, but capital can be moved at the click of an iPad.

What is also so frustrating is that Ross McEwan, the CEO, was in the process of unwinding the investment bank, under instruction, probably starting with the sale of Citizens Bank in the summer. So this precipitated interference, YET AGAIN, is unwanted and unwarranted. I am not surprised that Stephen Hester was left in an invidious position and whether he was sacked or left – incapable of doing the job without excessive interference.

In hindsight maybe the Labour Government made a mistake in not splitting RBS back in 2008, when it might have been possible to deal with the good and bad assets in a more incisive manner. However thanks other skeletons, such as technological shortcomings, PPI, LIBOR and almost certainly foreign exchange trading irregularities, being found in the cupboard, since that fateful day Fred Goodwin and his inept colleagues were exposed for incompetence, lofty ambition and a high degree of greed, this is no time for the government to desert the sinking ship and exacerbate the huge problems there are in achieving its recovery, by being unable to attract quality performers. The restoration of RBS and NatWest is essential. It has over 1000 branches despite being forced to offload 431 to Williams & Glyn consortium, with millions of accounts. To all those apoplectically angry people who are incandescent with rage over RBS being in to the taxpayer for £45 billion and being 83% owned by them, yes I do understand how annoying the situation is. I do get it! My pension was trashed and I should not still being working at my advanced age. That’s life; so let’s crack on!

We should be able to stomach the payment of bonuses to people, who are capable of creating profits and consequently jobs and to those able to mitigate massive losses in attempting to sustain recovery. The gravy train may need to be in existence for a few more years, but it will eventually hit the buffers. The culture has changed and will continue to change; Be patient! However this cap imposed by the government is wrong and it is at complete odds with the Treasury’s decision to sue Brussels over bonus caps!

The news from the front that at least 4 large institutions will be suing RBS over its £12 billion rights issue in 2008 to pay for ABN/AMRO, which saw its share price halve in a matter of weeks, further goes to show the parlous state RBS find its self in. In finishing let me point out the obvious – there is a huge difference between incompetence and negligence and fraud.

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.

TODAY’S FAYRE – Barclays, Apple & Facebook – Thursday 24th April 2014

TODAY’S FAYRE – Thursday 24th April 2014

“It is a beauteous evening, calm and free;
The holy time is quiet as a nun
Breathless with adoration; the broad sun
Is sinking down in its tranquility;

The gentleness of heaven is on the sea:
Listen! the mighty Being is awake,
And doth with his eternal motion make
A sound like thunder – everlastingly.

Dear child! dear girl! that walkest with me here,
If thou appear untouched by solemn thought
Thy nature is not therefore less divine:

Thou liest in Abraham’s bosom all the year,
And worshipp’st at the Temple’s inner shrine,
God being with thee when we know it not.”

William Wordsworth – poet – 1770-1850

Answering questions during his press conference with Japan’s Abe-San, President Obama told the gathered throng that 87% of Syria’s chemical weapons had already been removed. I am surprised that this figure has been taken as read – information supplied by the UN or not! I would not have thought that Syria was known for its probity. One could be forgiven for thinking that Syria may on occasions have been economical with the truth.

I must confess to being similarly cynical about figures recently posted, reiterating that serious crimes in the UK are on the downturn. This figure clearly does not include crimes which are not reported and I would suggest this is a measurable figure!

I would love to be a fly on the wall at Barclays’ AGM today. Can you imagine the decibels of harrumphing amongst the minority shareholders like that splendid lady who called the bonus beneficiaries ‘greedy bastards’ – such intemperate language from a lady in her twilight years? These minority shareholders’ gripes are easy to understand with profits falling 10% and dividend payouts down from 34p to 6p, yet bonuses remain resolutely high.

There will be 3 questions which Antony Jenkins and his board will need to answer – justifying this year’s bonus pool up by £200 million – agreeing a remuneration policy for 3 years and finally adopting a policy to get round the EU policy of a 100% of salary cap on bonuses. I make 2 points. Banking is global and the large shareholders know that. So to remain a global player the bonus culture must remain in situ. Also the public must be told that the cash element of bonuses is small and that bonuses are paid over 3 years plus and can be called back in the event of profits turning in to losses. It will be a hairy old meeting but the large shareholders need to be pragmatic. Consequently they may feel that it is ‘Hobson’s Choice’, thus reluctantly supporting the motions. However majority shareholders are taking their responsibilities much more seriously than they have done in the past.

Slightly disappointing US New Home Sales did their best to ruffle the Street of Dreams’ feathers aided and abetted by Amgen’s (-5.07%) and AT&T’S (-3.07%) quarterly results which did not pass muster, despite the fact that Boeing beat expectations (+2.4%). At the end of the session the DOW closed down -0.08%, the S&P 500 -0.22% and the NASDAQ -0.83%. After hours Apple’s and Facebook’s numbers beat the ‘Street’s’ estimates with a bit to spare. EPS for Apple came in at $11.62 against estimates of $10.77. Revenue for the year was $45.6 billion – up 4%. IPhones sales totaled 43.7 million – up 17%. IPad sales fell 16% to 16.35 million. Margins increased from 37.7% to 39.3%. We are still awaiting news of the introduction of iPhone 6 and a flat screen TV. The arrangement with China Mobile is expected to be very productive. $90 billion will be returned to shareholders and there will be a 7 for 1 split, which will take the share price down from circa $555 to $75 a share, making Apple eligible to join the DOW. The share price added 8% in after-hours trading. Facebook’s shares rose 4% after posting a 70% increase in profits to $642 million on revenues of $2.5 billion (EST: $2.36 billion). Facebook has 1 billion users, resulting in mobile advertising being up 59% at $1.47 billion. Shares traded up 4%.

Yesterday London put in a nebulous sort of session with the FTSE 100 easing by 7 points at 6674. ARM Holdings showed signs of anxiety with profits not looking quite as robust as was thought – shares down 4%. Most of the positive headlines were grabbed by AB Foods – the former Garfield Weston Empire. I had forgotten that apart from Kingsmill and Twinings tea and its depleted sugar operation, it owns Fortnum & Mason, Heal’s and Selfridges, but the jewel in the crown is Primark. Primarks’s profits were up 23% and this fashion house is about to assault the US, starting in Boston, encouraged by the success of Zara and H&M. Bold? Good luck!

This morning Astra Zeneca posted better than expected numbers, though many were considering the M&A options. A deal with Pfizer seems increasingly unlikely. Perhaps a union between Pfizer and Bristol Myers Squibb is a better alternative. Anyway Astra added another 2% to its value in early skirmishes. Unilever posted decent numbers but it was felt that the shares had traveled and arrived – down 1%. Finally Alstom the French train maker 29% owned by Bouygues is purported to be a takeover target for GE of the US with a price tag of $13 billion. Certainly the Paris bourse caught the infectious enthusiasm and added 14% by 8.30am this morning.

AETNA, VERIZON, CATERPILLAR, 3MS, UPS, HERSHEY, ALTRIA, DR HORTON, DUPONT, VISA, NEWMONT MINING, MICROSOFT, & STARBUCKS post interim results today.

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.

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 – Wednesday 23rd April 2014

TODAY’S FAYRE – Wednesday 23rd April 2014

“Helen, thy beauty is to me
Like those Nicean barks of yore
That gently, o’er a perfumed sea,
The weary, way-worn wanderer bore
To his own native shore.

On desperate seas long wont to roam,
Thy hyacinth hair, thy classic face,
Thy Naiad airs have brought me home
To the glory that was Greece,
And the grandeur that was Rome.

Lo, in yon brilliant window-niche
How statue-like I see thee stand,
The agate lamp within thy hand,
Ah! Psyche, from the regions which
Are Holy Land!”

Edgar Allan Poe – poet – 1809-1840

Forget the human side to the Moyes debacle. His appointment ended up being a business horror story, which showed poor judgement on the part of Sir Alex Ferguson, Ed Woodward and Sir Bobby Charlton. David Moyes is a journeyman football manager without that special sparkle needed to drive a great football club on to new aspirational heights.

Failure for the Red Devils is unthinkable. No Champions League next year is failure. It will cost the club £25 million. The Club floated in New York 2 years ago, partly to cut the debt from £700 million down to £380 million. The Glazers still own about 85% of the shares and they need franked income to service the debt of their other US enterprises in Florida. Moyes had to go! Simple as that!

To become manager of Manchester United will involve intense scrutiny from the global media. The candidates will need to have exemplary CVs, with very limited stains on their character. Dear Old Ryan Giggs, who has taken over until the end of the season – well the press are already having the drains up over his private life.

It was a big ‘Purple & Yellow’ day for Nigel Farage yesterday. Now that he has attracted the attention of BBC Nick Robinson, Sky’s Adam Boulton and Faisal Islam and ITV’s Tom Bradby and Chris Ship – all of whom seem looking to give him a hard time – it will be interesting to see how he comes out of these testing weeks.

It really was drug-frenzied Tuesday around the world. The Pfizer/Astra Zeneca deal certainly gained some traction yesterday with Astra’s share price rallying initially by 7% before settling up 4.2% at the close. We know that Pfizer has a $70 billion cash mountain, but it is still hard to see the synergy between these two. If Pfizer come back with an increased bid (£46-£50 a share), then we will know it is for real. Scientific jobs and drug development positions in the UK could well be at risk in centres such as Cambridge. However if a push comes to a shove Panmure’s excellent pharmaceutical analyst Savvas Neophytou thinks it very unlikely that a deal will be consummated.

Conversely GSK shares rallied 5% yesterday in approval of the 3-way deal involving Novartis. Both GSK and Novartis want to focus on what they excel at. Without being disrespectful GSK is probably not top notch in oncology; so GSK will sell is oncology operation to Novartis for $16 billion. In return it will buy Novartis’s vaccination business for $7 billion. GSK is becoming more of a health company and this vaccine business is seen as very complimentary. At the same time Novartis will sell its animal health care business to Eli Lilly of the US for $5.4 billion. Subject to shareholder approval at GSK to this complicated deal, £4 billion will be returned to shareholders.

I had no idea that botox was such a huge global concept. Bill Ackman, the entrepreneur acting in concert with Canada’s Valeant, which owns Bausch & Lomb (contact lenses amongst other products) have had their beady eyes on Allergan, the botox titan for some time. I was absolutely blown away that Allegan is valued at $40 billion – what a gargantuan valuation! Anyway there is every prospect that a deal between these two being concluded, with Valeant tabling an unsolicited $47 a share to Allegan.

The Street of Dreams enjoyed a decent session riding on the coattails of drug M&A, with the DOW & S&P both adding 0.4%. The NASDAQ rallied by 0.97%. Apart from McDonald’s, which just missed the results were good and even after hours, Yum Brands!, owners of KFC beat expectations thanks to a tremendous run in China, though total sales were a smidgen light at $2.72 billion. This morning slightly dispiriting HSBC flash China PMI data saw Asia post mixed efforts with Shanghai and Hang Seng remaining below the Plimsoll line and the NIKKEI closing +1%. Hong Kong has postponed the IPO of WH group until next week, due to less ebullient trading conditions.

The FTSE added 56 points to 6681 yesterday thanks again to drugs and despite mining stocks losing some glitter. The DAX closed up 2%. This morning we have seen a decent flurry of earnings. Sports Direct saw sales up 10.3% for the 9 weeks to 30th March 2014. Say what you like about Mike Ashley – he still produces the goods. It also looks as though over 40 people will draw a £100k bonus this year. Sales totalled £336 million and in passing Sports Direct shares have rallied by 1176% in the last 5 years. ARM Holdings saw revenues up 16% for the last trading period with a pre-tax profit of £97 million – up 9%. In the last quarter AB Foods saw profits up by 1% at £497 million. Again it was Primark and not sugar that brought home the bacon. Sales in Primark may have increased in excess of 13%. Panmure’s Graham Jones has upgraded AB Foods to a ‘BUY.’

Ericsson missed its sales target but the mobile operator believes it will be back on course for the year. The £700 million IPO of Card Factory to raise £90 million courtesy of Charterhouse is expected to take place shortly – all part of the online retail flurry! Despite Clinton Cards struggling, Card Factory seems quite ‘gung-ho’ about its prospects.

I cannot be bothered to argue with Vince Cable and his continued bleating about bonuses and remuneration packages. It has nothing to do with him. Shareholders must step up to the plate and assume responsibility. Just arrant nonsense. So much progress has already been made in this area particularly by banks.

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.

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 – Tuesday 22nd April 2014 – ASTRA, GSK & MOYES!

TODAY’S FAYRE – Tuesday 8th April 2014

“From childhood’s hour I have not been
As others were; I have not seen
As others saw; I could not bring
My passions from a common spring.
From the same source I have not taken
My sorrow; I could not awaken
My heart to joy at the same tone;
And all I loved, I loved alone.
Then- in my childhood, in the dawn
Of a most stormy life- was drawn
From every depth of good and ill
The mystery which binds me still:
From the torrent, or the fountain,
From the red cliff of the mountain,
From the sun that round me rolled
In its autumn tint of gold,
From the lightning in the sky
As it passed me flying by,
From the thunder and the storm,
And the cloud that took the form
(When the rest of Heaven was blue)
Of a demon in my view.”

Edgar Allan Poe – poet – 1809-1849

The fact that Manchester United ‘binned’ David Moyes this morning won’t come as any particular surprise; it was always going to be a gargantuan challenge, climbing snuggly in to Sir Alex Ferguson’s boots. From humble beginnings at PNE, David Moyes built a tremendous reputation as a journeyman manager with a very limited budget at Everton, with the parsimonious Bill Kenright keeping a vice-like grip on the purse strings. Within those parameters Moyes did a great job, though Everton never really looked like breaking through in to the big league.
Sir Alex Ferguson surprised many by anointing Moyes as his successor. Unfortunately Moyes does not have Ferguson’s gravitas and charisma. Apart from Juan Mata, Moyes failed to sign a decent world class player! It was a question of David Who? It just goes to show how important over a long period of time Sir Alex and David Gill the CEO, were as a double act!

The Glazers are not exactly known for philanthropy when it comes to Man Utd. The Club is a cash cow for them. They need income to service their debt of their Florida operations. Losing, even for a year, Champions League status is bad news. Van Gal or Klopp step up to the plate please! However sorry we feel David Moyes will be seen blubbing all the way to the bank with a sack-full of loot! His family will never have to worry again! I’d take that!

The Street of Dreams does not do Easter Monday. However it was rather a reflective session with some 2nd quarter results such as Halliburton helping to provide some impetus. The DOW closed up 0.25%, the S&P 500 +0.38% and the NASDAQ cracked on by 0.64%. If Netflix’s encouraging results – profits up 30% from its 48 million members in 40 countries – been posted before the bell, I suspect the NASDAQ would have been even higher. Netflix also added 2.2 million subscribers in the last quarter and they will be increasing their charges. Netflix shares rose by 7% after hours. Ford is rumoured to be replacing Alan Mulally as CEO with Mark Fields at the end of the year. Mulally is accredited for Ford’s dramatic recovery in the last 5 years.

There was a neutral start to the session in Asia, with most bourses making little progress. There was concern that Japan’s trade gap had widened 4 fold last month from Y356 billion to Y145 trillion, thanks to the Yen falling 10% in value against the Greenback in the last year, higher energy prices (petrol 8% & gas 4%). Imports were up 18% in March and exports up a miserly 1.8% in March. Consumer spending has its limitations in Japan due to the small dwellings people live in.

Panmure’s Savvas Neophytou makes poignant comments on Pfizer/Astra Zeneca.

“Weekend press reports on possible bid by Pfizer – To us this is relatively far-fetched, BUT maybe there is something to it as the Sunday Times quotes various unnamed sources. It seems to us that stories of an AZ takeover like this come up once a year. Usually regarding Novartis and/or GSK machinations and given AZ’s imminent descent down its patent cliff and reliance on relatively unproven pipeline for its long-term future, perhaps some shareholders might be tempted to accept £46-50 per share. Pfizer’s motivation is not so clear on the other hand. Cash repatriation sounds too opportunistic a motive and its shareholders will likely take a dim view of such an about turn in strategy. Pfizer has in fact recently been demerging rather than bulking up so not entirely convinced how tangible this interest is. Also press reports point to bid been made when AZ was trading at £30, with only 20% premium on offer so a bid of £50 per share might not be meeting the return criteria for Pfizer shareholders. That said, I would suggest that as AZN is morphing from a pharma/major to a discoverer/producer of niche-busters and its business model is now more biotech-like (particularly with cancer immunotherapies and biological pipelines). This potential approach would be highly opportune and timed right when the company is in the middle of its transformation. Given that major shareholders will be backing management to execute on its business plan and new strategy then shareholders will require a very high price to accept a bid now – certainly more than was trailed in the press over the weekend. Astra’s shares were up 7.5% at 8.30am this morning – TAKE PROFITS!”

There was a much more tangible story from the international drug sector with Switzerland’s Novartis and the UK’s GlaxoSmithKline agreeing to exchange assets and combine their consumer healthcare units. Novartis will acquire GSK’s oncology drugs business for $16bn (£9.5bn) and sell its vaccines division, excluding the flu unit, to GSK for $7.1bn.
In a separate deal, Novartis has agreed to sell its animal health division to Eli Lily for nearly $5.4bn. Novartis seem focused on its key businesses. In recent times growth has been sluggish. Consequently Novartis and GSK, by combining their over-the-counter (OTC) units would help boost the fortunes of both the companies, with total sales of £6.5bn. With my diseased ridden mind working overtime, one wonders if this interaction is a start to a truly flourishing love affair. GSK shares up 3.5%.

This morning in the US the following post numbers for the 2nd quarter – UNITED TECHNOLOGIES, McDONALD’S, HARLEY DAVIUDSON, LOCKHEED MARTIN, AT&T and AMGEN. At 9.10am the FTSE 100 was up 53 points thanks to the drug frenzy at 6628

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.

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.

EASTER MONDAY’S FAYRE – 21st April 2014

TODAY’S FAYRE – Monday 21st April 2014

“I must go down to the seas again, to the lonely sea and the sky,
And all I ask is a tall ship and a star to steer her by,
And the wheel’s kick and the wind’s song and the white sail’s shaking,
And a gray mist on the sea’s face, and a gray dawn breaking.

I must down go to the seas again, for the call of the running tide
Is a wild call and a clear call that may not be denied;
And all I ask is a windy day with the white clouds flying,
And the flung spray and the blown spume, and the sea-gulls crying.

I must go down to the seas again, to the vagrant gypsy life,
To the gull’s way and the whale’s way, where the wind’s like a whetted knife;
And all I ask is a merry yarn from a laughing fellow-rover,
And quiet sleep and a sweet dream when the long trick’s over.”

John Masefield – poet laureate – 1878-1967

The Sunday Telegraph’s opinion poll on party support for European elections on 22nd May does not make surprise reading for most onlookers – The only surprising support is 30% for Labour, which has no obvious policy on EU membership. 27% support for UKIP and 22% for the Tories is perfectly understandable. PM Cameron has been lulled into a sense of false security, knowing he has the support of big business, which is so heavily committed to and drowning in, more out of fear, EU bureaucracy. So committed to trade and sales contracts within the EU, that the business community seems incapable of viewing alternative markets with any sense of balanced thinking. Consequently Mr Cameron has failed to respect or take in to account the views of a large element of Conservative supporters, admittedly the majority of them are over 50 years of age.

Also the PM promised to renegotiate the terms of membership using Chancellor Merkel as an influential leaver; with respect PM, there has been little visible evidence of these negotiations getting underway. So if the Tories get trashed on Election Day no one should whinge why it happened. The country – Mr & Mrs John Doe – are not happy about having so many eggs in one continental basket. Also immigration remains a sensitive issue, which Nigel Farage’s UKIP has capitalised on.

Well at last we received some official comment from Paul Downton, the CEO of the ECB as to why Kevin Pietersen was summarily dismissed with no possibility of re-entry back in to the England team. The strange appointment of Peter Moores – the ‘Lazarus trick’ of picking up his bed and walking again, seems to have worked for the Lancashire coach. Where I come from you never return to the scene of the crime. Anyway, he seems very popular with some and cricket supporters must get right behind him.

However suffice to say Pietersen may well have been, as Downton put it, disengaged from the team and a thorough disruptive influence with the younger team members. However, my point is that the management must have been very weak and lacking in leadership or strength of character, not have been able to pull him “back on to the bit!” I don’t accept that because the team needs to be recharged and motivated with new players, there is no room for your best player, even though he may be odiously obnoxious.

There is still a deafening silence from both Pfizer and Astra Zeneca over rumours of a gargantuan deal valuing Astra at about £60 billion. Does that mean they are talking over the possibility of a deal? Or does it mean that M Pascal Soriot and his co-directors have dismissed Pfizer’s approach with disdain. From my perspective and I am no expert, I fail to see where the synergy is. If Pfizer is prepared to pay £46-47 a share it makes sense for Astra shareholders, particularly as its new drug pipeline is beginning to look a little thin on the ground. Astra cannot rely on the likes of Crestor, Atacand, Onglyza and Seloken from here until eternity figuratively speaking – slight exaggeration on my part, but in all seriousness superficially Astra seems behind the curve with biotechs and the development of new drugs. As for Pfizer, though it is purported to have a $70 billion cash mountain, it should not have to let this surplus cash burn a hole in its pocket unless the synergy is there. No doubt all will be revealed before too long. Astra employs 7000 in the UK, many in Macclesfield and Pfizer have cut their workforce in Kent down to 2,400.

We are all waiting with bated breath for the details on Alibaba’s forthcoming IPO debut on Wall Street – They could come this week. The company could be valued at between $80 and $150 billion. It is so important that the financial advisors don’t price this IPO at a ludicrously high price. However investors will not be asked to pay for expectation in the same manner as they have been for Facebook, Twitter and Linkedin. Alibaba makes money and recently announced a profit $1.4 billion. Using a 100x times multiplier – the same as Facebook and the company is worth about $150 billion. It may also be possible to do just as well by investing, if not already engaged, in Yahoo! and Softbank. It is worth remembering that Amazon has only about 1% of China’s on-line retail business, Alibaba is rampant in this arena. The success of this issue will be down to clever pricing, really positive road shows and sentiment remaining positive without the vagaries of the threat of a tech bubble bursting. Handled sensitively this IPO should be a success.

Next week the 2nd quarter earnings period in the US sees the floodgates open. So far only Google, IBM and JP Morgan have disappointed. The following step up to the plate – HALLIBURTON, NETFLIX, HARLEY-DAVIDSON, McDONALD’S, BONY, YUM BRANDS!, AT&T, OMNICARE, BOEING, GENERAL DYNAMICS, TEXAS INSTRUMENTS, MICROSOFT, FACEBOOK, QUALCOMM, ZYNGA, and APPLE step up to the plate.

In the UK we hear market updates from – Wednesday – AB FOODS, Thursday – AMEC, AFRICAN BARRICK GOLD, ANGLO AMERICAN, ASTRA ZENECA, COBHAM, PACE, PREMIER FOODS, TRAVIS PERKINS and UNILEVER.

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.

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 – Sunday 20th April 2014

TODAY’S FAYRE – Sunday 20th April 2014

“Desperation is a lonely poem
And what I have to say
And have said so many times before
Will not save me
From this situation.

Desperation is a lonely poem
And a helpless poem
And a difficult poem
And a painful poem
And a poem I do not know how to get out of.

Desperation is the silence of all these words
And the nothingness of endless not hearing
When I cry with all my soul aloud.”

Shalom Freedman – poet & author – 1942

I had forgotten what a timeless, beautiful and unspoilt part of the country the north coast of Norfolk is; from Hunstanton to Heacham to Thornham to Brancaster, to Burnham Overy Staithe to Holkham to Wells to Stiffkey to Morston to Blakeney and finally to Cley. There are endless miles of sandy unpopulated beaches. If the weather is fine it is Heaven reincarnated for all ages from 2 to 82! At the end of the day what better than a home-cooked family dinner or just a crab/lobster supper washed down with a glass or two of very decent white burgundy to give everyone a satisfactory glow of healthy tiredness, whilst playing competitive family board games! Bliss!

During a working week it is very easy to miss the presentational mistakes and any signs of negative body language from speeches by world leaders or politicians. Last Thursday, whilst on holiday I watched President Obama. He looked tired, his confidence was shot to ribbons; he was hesitant and rudderless in presenting his comments. Where was the world’s great hope that the free world believed in to get the 21st century off to a really positive start post the disastrous George Dubya dynasty.

What a disappointment! Once Obama ‘bottled’ Syria, Putin was always going to have him on toast, as no one, understandably wants to go to war! The sanctions process is a waste of time and effort and the world stands to lose more than Russia does. As far as UK PLC look no further than BP for the first potential financial disaster! When the curtain comes down on his Presidency in 2016, what will Barack Hussein Obama be remembered for? – A botched and badly presented healthcare plan?

Sentiment surrounding the Ukraine crisis bounced around the world like a cork in a bath last week – net, net on the week, after a semblance of agreement, it ended just above the Plimsoll line but I would not be about to hold my breath that a decent workable settlement could be negotiated. Secretary Kerry fills me with zero confidence and like it or not Putin is running away with this current ‘pot boiler!’ And in the name of all that is wise and wonderful why does Baroness Ashton hold such a pre-eminent position. I suspect she know no more about foreign affairs than I do! Tech stocks rallied sharply from last week’s sell off, aided and abetted by decent numbers from Yahoo!, which also has a healthy stake in Alibaba, which is coming to the market soon.

The initial slew of 2nd quarter earnings were very acceptable with GE, Citigroup, Morgan Stanley, Coca-Cola and Johnson & Johnson showing the way. Only Google and IBM disappointed. At the end of a shortened Easter week the S&P 500 was up 2.7%, the NASDAQ by 4.2%, the FTSE by 1%, European stocks by 1.2% and Japan’s Nikkei by 4%. Equities were also given a boost by comments made by Fed chairman Janet Yelled which would have dispirited interest rate hawks. She implied that employment data was far from good enough to send a signal for rates to rise after tapering QE has finished. Clearly equity geeks too heart, marking stocks up ahead of the holiday break.

In London there were 3 main stories for me – TESCO, COOP and ANGLO-IRISH BANKS – plus a compendium of corporate and economic issues, all of which brought something to the week’s fayre. Tesco’s Phil Clarke just about got away with what looked like a plan full of platitudes and excuses, when he presented a woeful set of numbers last Wednesday with profits down 7% and like for like sales easier by 1.4%. Shareholders were under-whelmed that Tesco’s share price had risen only 32p in the last decade up to the close of business on Tuesday. After the results the shares rallied 4% but by Thursday evening 2% had been surrendered. The confidence in a rapid recovery was not there. When in a relatively short period stalwarts such as Higginson, Brasher, Potts, McIlwee and Atkinson are shown the door, as an observer you should be forgiven for thinking leaders of this quality are rarely replaced quickly. Mr Clarke lives to fight another day, but fund managers will be watching his movements like a hawk.

The financial world owes a great debt of gratitude to Lord Paul Myners, who in his capacity as a recently appointed chairman of the Coop Bank, acted for the good of the whole movement which employs 90,000 and serves 7 million customers/members, when he became a very vociferous whistle-‘blower’ over corporate governance issues. He subsequently resigned. He did not pull his punches in supporting many of the views of the Coop’s recently departed CEO Euan Sutherland, by stating that the Coop was run by too many people ill-qualified to do the jobs they had been given, implying that the Rev Flowers was just one of many and that many changes would need to be made to comply not only with regulatory requirements but also to satisfy this mutual’s supporters that its operations were being run as professionally and efficiently as possible.

Richard Pennycook, the acting CEO, when presenting the not unexpected loss of £2.5 billion last Wednesday, much of it down to the bank’s incompetence in buying the Britannia Building Society at the wrong price plus a write-down of £226 million for the purchase of Somerfield and an operating loss of £148 million, did not pull any punches. Without actually naming Peter Marks, the previous CEO to Sutherland, he was unequivocal in laying the reckless blame at the door of the previous management regime. The ramifications for not saving the Coop are too great! Too many people’s jobs and assets are tied up in this monolithic operation. In future Labour party ‘jobs for the boys’ can only be given to those who tick all the professional boxes. Hedge fund managers now have their clammy paws on the controls of the bank with 70% ownership. However there is a capital shortfall of about £400 million, the original £1.5 billion having been largely dealt with by the US hedge funds. 30% of this will need to come from its members or reserves. This is a sorry tale, with a terrible story in the middle. Let’s hope the ending makes better reading. If Lord Myners’s advice is listened to, ‘hope could spring eternal!’ It is interesting to note that RBS has parachuted Bob Hedger, a well-respected corporate banker to oversee loans made by RBS to Coop. Mr Hedger is tougher than teak and will take no prisoners until the problem in hand is dealt with to his satisfaction. There will be no white-washing, of that we can be sure.

When the jury found former CEO, Sean Fitzpatrick not guilty of fraudulently making loans on behalf of Anglo-Irish Banks, which eventually brought the bank and eventually Ireland’s economy to its knees to the tune of E30 billion and $62 billion respectively, the world was astonished. However it just goes to prove that the perception of financial incompetence and proving criminal fraud are very hard to separate – a la Fred Goodwin. The loans in question were part of a move to unwind a large position taken in the bank by the Fermanagh businessman Sean Quinn, who through sophisticated financial engineering in a roundabout manner ended up owning 25% of the bank! Co-defendants, Pat Whelan, 51, and Willie McAteer, 63, were accused and eventually found guilty of making loans designed to illegally prop up the bank’s share price. Both could end up with custodial sentences. Though the property game in Ireland for over a decade seemed like money for old rope to the banking fraternity, it is astonishing that a Mickey Mouse operation such as Anglo-Irish Banks could go down the ‘Sewanee’ for such a gargantuan sum of money without the Irish Government being held to account. It is almost as absurd as the amount of money RBS lost. At least RBS was supposedly a substantial bank.

The UK had some good news on the economic from with inflation down to 1.6% in March and unemployment dropping to 6.9%. The government can preen itself like a peacock, but it will not need reminding that growth has only just reached 2008 levels. There are mountains to climb. RSA’s Stephen Hester is about to wield his axe in terms of cost cutting as he seeks to raise £750 million rights issue. RSA also intends to sell its Baltic and Polish operations.

Because of Easter, it won’t be ‘Merger Monday’ next week. However it could be ‘Merger Tuesday’ if there is any substance to the idle gossip that Pfizer, the US drug giant, is about to table an offer for Astra Zeneca, the Anglo/Swedish drug titan. This deal could value Astra Zeneca at £60 billion. It is thought that this suggestion has fallen on Astra’s deaf ears. Any initial offer may be rejected. Pfizer has a cash mountain of about $70 billion. Some of its patents are coming to maturity; so Pfizer, the maker of Viagra is looking to be pro-active. Pfizer and Astra have already collaborated with each other on cancer drugs for the treatment of lungs.

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.

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.