TODAY’S FAYRE + SCOTLAND – 9th April 2014

TODAY’S FAYRE – Tuesday 8th 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

Some Scottish people obsessed about Independence seem to have declared war on me through ‘twitter!’ Perhaps, I have asked for it! I have been accused of being ignorant, insulting, a bigot and was even indicted for inciting riot, thanks to a supposition I made that there was a degree of xenophobic hatred/ contempt generated within the younger generation and some of the youth of Scotland towards England, particularly post the Thatcher era, when the Tory vote virtually disappeared from the electoral register. It was a clever move by Salmond to give the vote at the age of 16. The despair created by the Thatcher administration, which brought coal mining and shipbuilding to its knees has captured many of their imaginations. This feeling of revulsion is understandable – so why deny it?

I am in point of fact very neutral about Scotland gaining independence. I think it would make Scotland weaker economically. However let democracy rein! For the avoidance of doubt, I wish Scotland well ‘cum or ex’; let’s do business; let’s visit each other; let’s be friends. All I will say is, if Scotland wants independence; don’t start dictating your terms! If you want out, then you are out! You just cannot demand Sterling, regulation by BOE and access to the gilt market. Sadly life is not philanthropic. Politically it suits be for Scotland to leave the union. The thought of no Labour, Miliband and Balls has some appeal. Oh and finally, when your oil runs out, please knock at the door. There will be a friendly welcome!

In closing I am half Scottish – originally from Broughty Ferry, Dundee!

The tech fall-out last Friday and on Monday took time to filter thorough in London. Yesterday the reality check in regard to valuation knocked at the door and in a particularly pointed way to on-line-retail-magnates. Some were handed their financial backside during the session. Ocado, whose rise in the last year has been meteoric – over 400% – surrendered 10.6% and ASOS the clothes retailer lost a further 6.4% on top of the 15% already lost this year. However, it was the recent tech IPOS that caused the most consternation. Ao.com eased by over 8% and Last week’s public offering of Just-Eat.com, initially valued at £1.4 billion fell below its issue price and dropped in value by 14%. These movements should not pre-suppose that the tech sector love story is over! – Far from it! There are so many good companies coming to market in the UK – many smaller – with great credentials, good business plans with growth opportunities. These pullbacks should be heeded but it’s all about sensible valuations. We have not returned to the dot.com boom. Valuations must be sensible. Many investors and observers have trouble reconciling themselves to Linkedin’s P/E ratio – close to 700X – That is Judy Garland stuff – “Somewhere over the rainbow, way up high!”

The Street of Dreams was probably over sold on Monday. So there was evidence of a bear squeeze rally in the NASDAQ which rose by 0.8%. The DOW and the S&P 500 were less inspiring just adding 0.1% and 0.4% respectively to their value. After hours Alcoa, the first of the 2nd quarter earnings companies to post results, beat expectations and added 2.6%. Amazon, Google, Facebook, eBay and Yahoo! all added between 2-3%, which gave credence to the rally. Asia took comfort from New York’s improved sentiment, apart from Tokyo, who suffered at the hand of a firmer Yen – -2.1%. The Hang Seng was up 0.8% towards its close. Samsung’s apology of a profits warning did little damage as its long term prospects were encouraging.

Though it was splendid hearing the IMF’s Olivier Blanchard upgrading of growth for the world’s economy – 3.6% globally in 2014, 3.9% in 2015, one should not read too much in to it as the IMF has a reputation for being 3-6 months behind the curve. The UK of the mature economies came off best – 2.9% with the US just a pip lower at 2.8%. Germany is not expected to grow by more than 1.7% and Canada by 2.3%.

The rest of the domestic agenda was taken up by retail. Tesco served notice to hose out Matt Atkinson its marketing director in due course – that is the 5th senior director to go in 3 years – not good omens for Phil Clarke. With Lidl and Aldi now grabbing over 3% of the market, it will come as no surprise that Tesco has lost market share dropping from 29.7% to 28.6% in the last year. Next Thursday’s annual numbers may not make great reading with like for like sales down maybe by as much as 1%. I noticed that Zara has opened up a huge flagship shop opposite M&S Marble Arch. That is not for show I fear. ‘We’re after you!’ is the cry and oh yes they are! M&S post a trading statement tomorrow and I fear that Belinda Earl’s influence has made little difference to fashion sales – hence the panic to open 250 shops abroad. A waste of time I fear.

Yesterday Mike Ashley sold 25 million shares at 850p gleaning him over £200 million. Investors took fright and the shares fell by 9% to 832p. I think MA is sending a message to shareholders having rejected his bonus demands – Don’t mess with me I run this company and I am the driving force behind it!

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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