TODAY’S FAYRE – Tuesday, 19th August 2014

“The anguish of the earth absolves our eyes
Till beauty shines in all that we can see.
War is our scourge; yet war has made us wise,
And, fighting for our freedom, we are free.

Horror of wounds and anger at the foe,
And loss of things desired; all these must pass.
We are the happy legion, for we know
Time’s but a golden wind that shakes the grass.

There was an hour when we were loath to part
From life we longed to share no less than others.
Now, having claimed this heritage of heart,
What need we more, my comrades and my brothers?”

Siegfried Sassoon – soldier & poet – 1886-1967

After wasting millions of Pounds of UK tax payers’ money hiding in London’s Ecuadorean embassy, Julian Assange looks as if he is about to wave the white flag due to ill health. As millions of people have already said if Mr Assange has nothing to hide, he should face the music in Stockholm. If he is cleared of all allegations, then the US will attempt to extradite him. Again if he has done nothing illegal, he has enough support to ensure a fair trial, even though that support may have dwindled due to his unorthodox behaviour.

David Moyes, the 51 year old deposed manager of Manchester United, decided to bare his soul to the Mail on Sunday’s Matt Lawson. There is no doubt that Woodward and the board behaved fairly reprehensibly in the manner they dismissed David Moyes. Let’s take that as read.

However let’s be candid, David Moyes, despite doing a fabulous job at Everton, failed to deliver the goods at Old Trafford, regardless of mitigating circumstances. He is also a very rich man, having earned millions for years! He was the highest paid employee on Everton’s books! He may well have had a severance pay of £5 million. So the general public should not shed too many tears. Mr Moyes’s pride and that of his father and family may have taken a knock. But all of them can ‘take some solace’ from the fact that they will never want for the rest of their natural days – nor will the House of Moyes in perpetuity!

The comments I am about to make about Legoland are not a tip for Merlin Entertainment, but you can deduce from my comments that Legoland a phenomenal ‘Arfur Daley!’ However, if anyone wants a lesson on how 3 adults and two little children can spend £250 without the cost of food and drink in a five hour spin around this fantastic amusement park, Mr & Mrs Buik offer free advice. We had a ball! The whole experience is brilliantly run, with rides and amusements for all ages; but my word it is second mortgage material. By 11.00am there were thousands there – the place was heaving with the car park full!

With many equity markets having regained some poise in recent sessions, one wonders what all the ballyhoo over geopolitical issues and soft economic data was all about. Investors, for the time being seem very comfortable in their coats, even though a ‘pull-back’ surely threatens in the autumn, with valuations in places looking quite rich. There was also an interesting observation made this morning. The main Chinese indices P/E ratio is only 9.5 times earnings; economic slow-down or not, it ventures to suggest that when the time is right China’s stock market has some scope. Maybe I am being unnecessarily hysterical, but I think the situation in Iraq, Ukraine and Gaza is absolutely dire! – Though I acknowledge the lull in Ukraine and Gaza.

Yesterday the Street of Dreams was buzzing. It was given a positive stimulus from the best housing data seen in the US for seven months and a slightly improving climate in Ukraine. Anyway it was enough for investors to get hold of the bit and send the DOW up by 1.01%, the S&P 500 by 0.85% and the NASDAQ by 0.97%. Delta and South-West Airlines selected another gear and DR Horton and Lennar, the house builders both added 2%+. Yahoo was 2.5% to the good and performances by Google and Apple were not shabby. Dollar General, on confirmation that it would buy Family Dollar for $78.50 a share lost 4.9% and the latter added 1.9%. Today Elizabeth Arden, TJX, Medtronic, Home Depot and Dick’s Sporting Goods post results.

Today is the 10th anniversary of Google entry into public ownership. Shares were issued at $80. They now stand at $580. Had you held the shares from the start your investment would be up 1300%. The company is valued at $390 billion. Google is bigger than Microsoft, Intel and Facebook and twice as big as JP Morgan Chase. Sergey Brin and Larry Page, the two instigators of the phenomenon are reputedly worth $31 billion. What a massive success story! Brin & Page were two Stanford University PhD students and they started Google in 1996.

In Asia this morning the markets were happy to bob along in the US’S slipstream. The ASX closed +0.50%, the Hang Seng was +0.67% to the good, the Shanghai Composite was somnolent at +0.01% and the NIKEI became ebullient adding +0.83%. Yesterday Europe enjoyed a great session with the DAX adding 1.68%, the CAC 1.35% and the FTSE 52 points at 6741. The gains were general.

Not for the first time in the last few weeks Mark Carney dominated the headlines yesterday. Folk were digesting his idea flown in the Sunday Times that rates could go up before wage inflation gathers momentum. This comment drew a surprising suggestion from the much respected MP Mark Field, who believes Mark Carney works too closely with Chancellor Osborne and unpleasant innuendos from John Mann MP suggesting the two worked in tandem. This, of course is arrant nonsense. They may the same ideas, but the only measurably decent thing Gordon Brown ever did was to make the BOE independent, when it comes to interest rates – based on the FED’s old model. To suggest that Mr Carney is in cahoots with the Chancellor or the Treasury is just not true. The MPC has the ability to vote for what is required. Lord Mervyn King disliked not getting his own way on the MPC committee but understood democracy, as does Mark Carney. Make no mistake Messrs Weale and McCafferty, the most hawkish MPC members will make themselves heard.

The UK inflation rate fell from 1.9% to 1.6% – more than expected in July as the cost of clothing, footwear, food and non-alcoholic drinks eased back in the month (EST: 1.8% for July).. The ONS said Consumer Price Index (CPI) inflation fell to 1.6% from 1.9% a month earlier. However CPI remains well above average wages which grew by just 0.6% in the three months to June.

There has been a huge dichotomy over house prices. In posting excellent numbers yesterday, the Nationwide announced that its lending in the last 3 months to the end of August had fallen 10% from £6.4 billion to £5.8 billion. This data coincided with Rightmove announcing that London prices had fallen 5.9% in July. So from such news submitted by the UK’s largest building society we take it that the heat is out of the property market. Then this morning Persimmon announces that 1st half profits are up 57%, land banks have increased and demand for housing, admittedly at the lower level is as strong as anything, with the adage that there is a shortage of bricks. So what does all this mean? Nationwide also told the market that it had acquired another 100k current account customers – something like 10% of the UK’s new customer banking register. So of all the so called challenger banks the Post Office and the Nationwide have set their stall down better than most.

We may hear in the next day or two that Standard Chartered Bank may have to settle another law suit with the US authorities of between $200 million to $300 million for failing to review high risk transactions, which they had promised to do 2 years ago. In isolation SC could probably live with that. But surely Peter Sands will feel the heat in the kitchen as this is the 2nd fine – the first being $340 for money laundering allegation to countries like Iran – Standard Chartered have been inflicted with.

This morning there were decent results from Cairn, John Menzies, Persimmon, CRH and Imperial Tobacco. BHP Billiton results were decent but the potential sale of assets into anew operation to be floated. At 10.10am the FTSE 100 was 35 points at 6775.

During the rest of this week the following post numbers –Wednesday – GEM DIAMONDS, Thursday – KAZAKHMYS, WH SMITH, QUINDELL.

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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