TODAY’S FAYRE – Wednesday 18th June 2014

“Where in this wide world can man find nobility without pride, friendship without envy
or beauty without vanity?
Here, where grace is laced with muscle, and strength by gentleness confined.
He serves without servility; he has fought without enmity.
There is nothing so powerful, nothing less violent, there is nothing so quick, nothing more patient.
England’s past has been borne on his back.
All our history is his industry; we are his heirs, he our inheritance.
The Horse!”

Ronald Duncan – poet – 1914-1982

This being Gold Cup Day at Royal Ascot, I thought it poignant to post this delightful poem! If Her Majesty’s ‘Estimate’ were to win the Ascot Gold Cup for a second time, there won’t be a dry eye on the Berkshire course! I suspect that ‘Leading Light’ might win! I suspect Michael Owen’s ‘Black Panther’ may need that drop of missing rain to get his toe in!

“England expects every man to do his duty!” COYW!

Niall Ferguson: Thatcher Would Have Seen off radical Islam, Obama is the ‘Wobbliest President of Modern Times’

A successful ISIS, encompassing parts of Iraq and Syria will pose a real threat to the security and stability to Turkey, Jordan, Lebanon, and, of course, Israel. These countries would be the first to feel the effect of a takfiri victory. But so would Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE, Oman and Yemen. If ISIS is successful in Iraq, there is little reason to believe they would not want to crack on!

On the advice of many on twitter I took in “Belle” last night rather than suffer Spain v Chile! Gugu Mbatha-Raw as Dido Belle and Tom Wilkinson as Lord Mansfield, Lord Chief Jusctice gave exemplary, powerful and moving performance aided by some delightful cameo roles by Emily Watson, Penelope Wilton and Amanda Richardson. This period piece (Circa 1759) is filmed around Kenwood in Highgate. It is nearly a great film with exquisite costumes and brilliant sets. Unfortunately in places the script is rather trite and schmaltzy! Tom Wilkinson’s performance alone is worth the price of admission.

Janet Yellen’s comments given in her delightful ‘Brooklyn’ lilt at the end of the two-day FOMC meeting was music to the ears of the Street of Dreams, with the S&P 500 only needing to select another tiny gear to hit its all-time record. The FED chairman is happy that the US economy is heading in the right direction. So another $10 billion was lobbed off the QE facility down to $35 billion. Nonetheless the savage winter, which took growth in to negative territory in the first quarter, has adversely affected the growth target for 2014.

The FED has altered its forecast down from 2.9% to 2.1%. It seems that any hike in interest rates remain in the in-tray perhaps until the end of the first quarter of 2015. This was reflected in 10 year Treasury yield dropping from 2.65 yesterday to 2.58% today. Inflation does not seem to be an issue despite consumer prices rising by 0.4% last month. The inflation target of 2% appears to be threatened at the moment. As for unemployment remaining at 6.3%, the FED chairman believes it may take until 2017 before it settles at a satisfactory level.

The MPC posted a 9-0 vote in favour of no change in rates or level of quantitative easing, though Martin Weale seems to have ants in his pants. I suspect that vote may alter to 7-2 next month, threatening a symbolic hike in rates of 0.25%. Martin Weale pointed out that average wage growth may remain low until unemployment is below 5%. There seems to be significant excess capacity. There are so many guesstimates as to when rates will be increased – from the autumn 2014 to March 2015. I suspect later rather than sooner. The recovery is still brittle.

Yesterday’s activity in London was pitiful – waiting for ‘Godoh’ – well the FED! The FTSE closed up 11 points at 6,778.56. Energy shares were perky and there was some interest in Diageo and Smith & Nephew, the latter frothed up by perceived interest from Medtronic. Zoopla made its long awaited debut. Shares were issued at 220p and closed at 236p. Shareholders and DMGT will be very pleased. We were all interested to see that Mike Ashley of Sports Direct fame had filled his bots with a 3!2 million stake in Sir Philip Green’s backed MySale, which did not get off to the most auspicious of starts on Tuesday.

I am embarrassed to say I have never been into a LIDL supermarket. I will rectify that. I was amazed that LIDL was as large as it is. Its current sales are €65 billion across Europe against Carrefour and Tesco at about €80 billion. Lidl is growing at 5% per annum. Tesco and Carrefour are growing at about 2% in you are lucky. By 2018 Lidl may be larger than its two peers!

Jeremy Grime, head of research at Panmure Gordon & Co makes the following telling observations ahead of tomorrow’s TSB IPO! –

“We are all aware that a number of challenger banks that will be coming to market. OneSavings has floated (modestly underwater) and TSB closes tomorrow. Virgin Money, Aldemore, Shawbrook, Metro Bank and Williams & Glyn’s are in some brokers pipelines. After making a modest fuss a week ago about the lack of information for independent analysts on TSB miraculously the IR man from TSB did finally return my voice mails and emails. He promised there would be a meeting for independent analysts but he was too busy to tell me when.

The seven ‘book-runners’ on this seem to be pricing it low and charging more than £30m for their troubles. This amount of largesse is above 10% of the placing.

Yesterday I received an email from One Savings Bank saying they would like an independent analyst meeting in the next 9 days. We are all busy people and that’s not easy for me or others I am sure.

So I looked at their share price and saw it was at 167p versus a float price of 170p. Then, of course, I understand it is a cry for help.

What is our incentive to help when they brief ‘book-runners’ and no one else and will not even tell us “others” when they will brief us other than at 9 days’ notice? As independent analysts we will not get access unless they are in trouble.

In the meantime I take calls about TSB that the company chooses not to brief me on. I know that system has no chance of working as free markets will always win. And it is wrong. What is very worrying is how long it will take for this system of bias to change.

Sorry! It’s just the integrity point I care about. I wish the rest of the market cared as much as I do on this prickly issue.”

I whole-heartedly agree with Jeremy!

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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