TODAY’S FAYRE – Markets & Man Utd

TODAY’S FAYRE – Thursday, 29th May 2014

“Now that we’ve done our best and worst, and parted,
I would fill my mind with thoughts that will not rend.
(O heart, I do not dare go empty-hearted)
I’ll think of Love in books, Love without end;
Women with child, content; and old men sleeping;
And wet strong ploughlands, scarred for certain grain;
And babes that weep, and so forget their weeping;
And the young heavens, forgetful after rain;
And evening hush, broken by homing wings;
And Song’s nobility, and Wisdom holy,
That live, we dead. I would think of a thousand things,
Lovely and durable, and taste them slowly,
One after one, like tasting a sweet food.
I have need to busy my heart with quietude.”

Rupert Brooke – poet & soldier – 1887-1915

I cannot say that I am shedding too many tears for the Lib-Dems’ current political meltdown. However who needs enemies when one has friends like Lord Oakeshott?

It’s always sad to hear news of anyone’s death. The death of Malcolm Glazer, who died yesterday aged 85, will be mourned by his family, close contacts at Tampa Bay Buccaneers, Perry Capital, Manchester United executives and his friends. However not many tears will be shed around Old Trafford, the home of the most ardent of all football fans.

Despite Man Utd phenomenal success the fans have resented the fact that the Club has been run as a ‘cash cow’ to service the Glazers’ debt ridden empire. Man Utd’s $1.5 billion IPO in New York in 2012, which left the Glazer family and Perry Capital with the best part of 90% control of the Club, did not go down well with the fans and it left the Glazers in conjunction with Perry Capital virtually omnipotent and impregnable. Yes, the debt has fallen form £700 million to about £385 billion. However this club is not run for any other reason than business. It is the financial hub of the Glazer Empire. Hence, once David Moyes was seen to struggle, the board was merciless in binning him. The Red Devil’s lack of participation in the Champions League and the Europa Cup next year may cost the club £40 million in revenues including all the marketing franchise. So contingency plans were made – out went Moyes and in came Louis Van Gaal. There’s no emotion over this decision! – Just business.

If contingency plans of this nature had not been implemented I suspect the Cub’s bankers would have been all over them like a bad rash on concerns that with so much less income, banking covenants would be in danger of being broken. The Glazers may love their sport but it is of secondary importance when it comes to business and paying the bills. Man Utd share price came off 67 cents yesterday to $16.19 down from $17.40 a month ago.

Yesterday was a really uneventful affair for trading. Most mature markets hardly moved. Deals are underpinning markets. Yesterday GE was forced to improve its offer for Alstom and well as giving further reassurances on employment. Valeant has upped the ‘ante’ for Allegan (botox) to about $42 billion – $166 a share. After hours Apple agreed to pay $3 billion for Beats Music Beats Electronics – makers of sound hardware and an amazing music library. Steve Jobs, God rest his soul, would not have approved. He would have preferred Apple had developed its own facility. Man Group is rumoured to be buying Numeric, a hedge fund from Boston Mass. And finally Weir Group has been rebuffed from a £3.7 billion bid for Finland’s Metso. Deals of this nature seem to be preventing equities from easing. Volumes remain dire – probably 40% down on 2 years ago.

There are plenty of nuggets of news to ruminate over. Serco have landed an £800 million contract for the railways from London to Scotland from 2018. There is a little bit of concern about high street retail sales. 38% are enjoying higher sales than a year ago and 22% thought they were lower. Sales may pick up next month but the level of activity may level off.

Nationwide’s Graham Beale, on the back of excellent results yesterday, warned the Chancellor that his pensioners’ scheme of allowing each one to buy £10,000 of 1 and 3 year bonds yielding 2.8% and 4% respectively could well damage mortgage lenders deposit base.

This morning Severn Trent, Tate & Lyle and Kingfisher posted results much in line with expectation.

US GDP for the first quarter may come in as low as -0.5% having been originally estimated at +0.1%. The appalling weather, which savaged industrial production, manufacturing, retail and exports have been blamed. The US show appears to be back on the road. The FED’s Janet Yellen seemed happy enough to shrug this issue off as just a temporary setback. The ECB’s rate decision next week will be eagerly awaited. The disruptive election results will give Mario Draghi plenty to think about. He may well cut the repo rate and widen the net for buying in bonds to fight off deflation.

Finally with the World Cup upon us Panmure’s Karl Burns make this observation. Gambling shares have been trashed in the past 6 months for a variety of reasons – 888 Holdings -25%, Ladbrokes -20%, William Hill -18% and Betfair -6%. He suggests that some appetite for this sector may return.

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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