TODAY’S FAYRE – Tuesday 8th April 2014

“How stern are the woes of the desolate mourner
As he bends in still grief o’er the hallowed bier,
As enanguished he turns from the laugh of the scorner,
And drops to perfection’s remembrance a tear;
When floods of despair down his pale cheeks are streaming,
When no blissful hope on his bosom is beaming,
Or, if lulled for a while, soon he starts from his dreaming,
And finds torn the soft ties to affection so dear.

Ah, when shall day dawn on the night of the grave,
Or summer succeed to the winter of death?
Rest awhle, hapless victim! and Heaven will save
The spirit that hath faded away with the breath.
Eternity points, in its amaranth bower
Where no clouds of fate o’er the sweet prospect lour,
Unspeakable pleasure, of goodness the dower,
When woe fades away like the mist of the heath.”

Percy Bysshe Shelley – poet – 1792-1822

Thanks to a vital and pulsating innings by Kumar Sangakara, who until his brilliant half century had shown no form in this competition, Sri Lanka won the 20/20 World Cup final in Dacca Bangladesh on Sunday. India’s Kohli showed belligerent brilliance through the tournament, but Sadly Yuvraj Singh got bogged down by some great Sri Lankan bowling, leaving India 20 short of a decent total. I was sorry that MS Dhoni, India’s mercurially talented captain was unable to rewrite the history books by captaining three World Cup winning sides!

There has been so much brouhaha about Maria Miller. It is inexplicable to me how she is still in situ! There must be method in PM Cameron’s madness. Equally disturbing is Margaret Hodge’s pre-eminence in politics. Having been children’s minister in the Blair government, having previously run Islington council during the time there were allegations of gross sexual abuse, the left-wing Oppenheimer heiress admitted that she was shamefully naïve; yet she stands tall in national politics! – Unbelievable!

The US tech sector has taken a battering in the last 3 days – not remotely surprising when one considers that the NASDAQ P/E ratio stands at 31.5 times; almost double the S&P 500 at 17 times. The market has enjoyed unbelievable gains from the likes of Apple, Facebook, Twitter and other less high profile companies in recent years. Expectation is at quite a premium. There is no comparison to 1998/2000 when valuations were insane. IPOS such as the recent Kings Digital Entertainment, whose valuation was challenged by the market, resulting in a fall in the share price, has not helped the NASDAQ’s cause. I think what we are experiencing is a warning shot across the bows. There are plenty of serious investors who will buy the right tech stocks in to any major sell off. The Street of Dreams has now experienced a three day reversal – the largest since 2011. The NASDAQ lost just over 1% yesterday with Apple, and Yahoo! losing 1.6%. We will all wait with considerable bated breath for the Alibaba IPO, valued close to $150 billion +. However this company makes money and does not aspire to!

From S&P 500 Pfizer had a bad day easing by 3%. House builders, particularly DR Horton and KB Homes surrendered 1.5%. Retailers were also under the cosh. The US retail sector has lost 7.8% so far this year, having gained nearly 44% in 2013. By the end of next week we should have a pretty good handle on the quality of the 2nd quarter earnings. Alcoa reports after hours tonight. These numbers are not expected to be very good, but in fairness they won’t be a barometer for the S&P 500.

Back at base in dear Old Blighty, the FTSE had a bad day as it gave back just over 1% 72 points to 6622. Obviously on the back the NASDAQ’s ailments ARM Holdings were given a tiny bit of a slapping – down 2.4%. However the mood was negative in the City, as valuations come under scrutiny. The FED and the ECB have the ability to make the market’s pips squeak! – The former by tapering and the latter by introducing stimulus packages to head off deflation. We are at the crossroads! By Good Friday 18th April, the picture going forward may be clearer, as company results start to pour in. Sports Direct’s Mike Ashley vented his spleen on the market on hearing Sanpower was all but done and dusted in purchasing House of Fraser for £450m. MA loves being a maverick and a deal spoiler. He has made a fair bit of cash ‘ducking and diving’ in Debenhams shares and I doubt very much he will experience penury when he sells his 11% stake in House of Fraser, a brand he really coveted. Meanwhile back at his ranch Mike Ashley is expected to sell 25 million shares in Sports Direct at between 650-870p taking his stake down from 62% to 58% in raising £218 million.

Market observers were dispirited that the Coop Bank failed to post its results yesterday. Many feel that its loss may be nudging £2 billion. Maybe contingency plans concerning the Coop movement’s obligations to provide extra capital is still under discussion. Allegations of bribery involving doctors and pharmacists in Iraq to sell GSK’s drugs hit the media yesterday – just another little irritant just after the hangover of similar allegations in China last year. Such a pity when Sir Andrew Witty’s pharma giant was about to select second gear. It is so important from an optics and credibility standpoint that Glaxo stands tall as a trusted brand in the future.

Finally, top class marks to Barclays for settling its swaps/Libor case with Guardian Care Homes. This TEST case has been gathering momentum for over 3 years and could have ended in a can of worms being opened up, with others jumping on the litigation bandwagon. This case could have called 200 witnesses including Bob Diamond, Rich Ricci and Jerry Del Messier and would not have served any useful purpose for Barclays. £25 million may prove to be cheap at the price in settling a case where Barclays is alleged to have given a loan plus an unnecessary IRS, after which rates fell like a stone. GCH’s debt totals £70 million and Barclays has helped the care home operator reschedule and restructure its debt programme. This is pragmatism at its best.

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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