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
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