TODAY’S FAYRE – Sunday, 14th September 2014

“’Have you news of my boy Jack?’
Not this tide.
‘When dye think that he’ll come back?’
Not with this wind blowing, and this tide.
‘Has anyone else had word of him?’
Not this tide.
For what is sunk will hardly swim,
Not with this wind blowing and this tide.
‘Oh, dear, what comfort can I find?’
None this tide,
Nor any tide,
Except he did not shame his kind-
Not even with that wind blowing, and that tide.
Then hold your head up all the more,
This tide,
And every tide;
Because he was the son you bore,
And gave to that wind blowing and that tide!”

Rudyard Kipling – author & poet – 1865-1936

Our hearts go out to David Haines’s family. His family will be inconsolable. One cannot imagine the pain and unimaginable grief they must be feeling as a result of this act of barbarism. These despots must be brought to justice at all costs. No stone must be left unturned in the free world’s quest to stop the flow of terrorism to and from countries embroiled in religious fanaticism.

On Friday I went to the Brick Lane Music Hall in Canning Town to celebrate dear friends’ 30th wedding anniversary. A beautiful parish church was deconsecrated 22 years ago to accommodate this very talented song/dance/comedy troop. I had not been to a vaudeville music hall event for 40 years, when I was a regular visitor to ‘The Pindar of Wakefield’ on King’s Cross Road. I haven’t enjoyed a belly-laugh like that courtesy of the very basic humour provided by this very talented cockney brigade, since then. It was an absolute joy! What a way to spend an afternoon or evening!

Apart from the foreign exchange market, which has enjoyed some splendid volatility in the last week, which until recently had been very much in the doldrums, other financial markets behaved themselves impeccably, though equities surrendered a modicum of value for an array of reasons from sanctions against Russia, miss-information, undignified and scurrilous behaviour from the Scottish Independent campaign, which currently rages – most of the reprehensible behaviour coming from Messrs Salmond and Sillars. According to the Times nearly £17 billion of UK shares and other financial assets have been dumped by investors as a hedge against possible financial fall-out triggered by a positive vote for independence. According to the Telegraph, 67% of FTSE 100 bosses believe a ‘YES!’ vote could be close to catastrophic for business. Opinion polls have been very tight for contingency plans to be dismissed as unnecessary. Even UKI’s Nigel Farage needed to stick his two cents worth in to support the Unionists. A ‘Yes!’ vote, in his opinion would give impetus to Salmond’s perceived support for Scotland to join the EU. On the EU front PM David Cameron received an olive branch from J-C Juncker, when Lord Jonathan Hill was elected to oversee the financial services sector. That appointment could prove very meaningful.

Towards the end of the week there was also a more ‘hawkish’ tone from the FED towards the possibility of a more immediate programme to hike interest rates in 2015. This perception also rattled the cage of the markets. No doubt we shall have a better idea of what will transpire post Wednesday/Thursday’s FOMC meeting. The housing market has shown more resilience in recent months and certainly the labour market, though there is still some slack, looks quite robust with unemployment falling to 6.1%. At the end of the week the DOW had eased by 0.95%, the FTSE 100 by 0.70%, European stocks by an average of 0.93%, with the NIKKEI bucking the trend in adding 1.78%, thanks to Abenomics winning the battle against economic reality. Many Asian bourses retreated last week though the Shanghai Composite showed a bit of form adding 0.9% on Friday. European 10-year bond yields popped last week remained, though they are still lower than the UK and US – Germany 1.08%, France 1.43%, Spain 2.34%, Italy 3.46%, UK 2.53%, US 2.61%, Portugal 3.21% and Greece 5.60%.

The Street of Dreams was rather short on news last week. Energy stocks suffered. Exxon is starting to feel some pain from its stake in Rosneft, which is now suffering through sanctions. eBay added 5% on rumours that Google may take a stake in the on-line exchange. The $167 billion Alibaba IPO roadshow got off to a cracking start with the issue being covered in 2 days. Another 48 million shares may be issued and there were wild rumours that the spread for the issue price may have to be raised from $60 to $66 such is the demand.

In the UK, AB Foods lost ground, despite encouraging efforts from Primark. Ocado may post a profit this year. Its shares responded adding 3%. There is concern that margins from Whitbread’s hotels may be under attack; shares slipped by 1.8% on Friday. Morrison’s sales were slightly less awful than expected – sales for the last 6 months were down 7.4% from -1.6% a year earlier – up 3%.

Today’s missive will be dominated by frenetic activity in the banking sector. Firstly I am further dismayed by the relentless quest by the banks to hang its hat almost exclusively on technology and on-line banking. Until the banks attach similar, if not greater importance, to customer relations employing sufficient managers to make sure they see EACH customer at least twice a year, banks will have an uphill struggle restoring the public’s respect and its confidence. Frankly the FCA should bring their influence to bear, particularly as there are still outstanding issues such as PPI, LIBOR litigation and FX rate fixing to deal and contend with.

What an inspired choice the 67 year old John McFarlane was to succeed Sir David Walker as chairman of Barclays next year, after a hugely successful period as chairman of AVIVA, whose share price has virtually doubled in recent years post Andrew Moss’s stewardship, having previously had measurable success in a senior capacity at RBS, Standard Chartered Bank and ANZ.

Sir David was a necessary political appointment three years ago. However, with respect, he is a BOE economist with the necessary with support in the corridors of power in Whitehall and Threadneedle Street, which was a pre-requisite at the time, replacing Marcus Agius post the Diamond dynasty. What Barclays needs is a chairman, who will not only see the transition to a more ethical culture, as promised by Antony Jenkins, the CEO, rather unsuccessfully to date, but also a dynamic chairman with commercial savvy, with an enormous address book of contacts to cultivate. John McFarlane has these assets and attributes in spades. As I understand it, even when Sir David was chairman of Morgan Stanley UK under Philip Purcell, he brought nothing to the party in terms of commercial prowess. So John McFarlane’s pending move will be very well received. It would be madness to allow Barclays ability to earn pure investment banking fees to dissipate.

It was brought to our attention that the UK Cabinet Office head honcho Sir Jeremy Heywood had leaked the fact that RBS’s head office would move South in the event of Scottish Independence being achieved rather than the chairman and directors adopting a more traditional manner to announce such fundamental changes. First and foremost, whether Alex Salmond likes it or not, the taxpayer still owns 83% of RBS. Consequently the Treasury/UK investments would be in dereliction of its duty if it did not have proper contingency plans were there to be a ‘YES!’ Vote. The normal procedure would be to get Sir Philip Hampton and Ross McEwan to make a statement before any government backed comment. However the circumstances are extenuating; hence the Treasury’s proactive comments. I would be surprised if Hampton & McEwan were not already in the loop and approved of the initiative. There is also the question of RBS’S pension crisis. A £5.6 billion pension hole would need to be plugged in the event of independence.

The ‘YES!’ Mob are denial. Failure to make contingency plans could leave this bank – RBS and Lloyds, TSB and Clydesdale – and its Scottish customers/ mortgagees vulnerable to a huge devaluation of a news Scottish currency! This bank is not out of the woods by any stretch of the imagination. Remember we have FX fixing to deal with in the months to come as well as nursing the bank’s balance sheet back to health and an IPO for Citizens Bank for $14 billion! Finally on the banking front it came as no surprise, nepotism or not, that Ana Patricia Botin will succeed her father Emilio as head of Santander on merit and may believe that Nathan Bostock will run Santander UK.



These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom – The information in this e-mail and any attachments is confidential and may be legally privileged. It is intended solely for the addressee(s). If you are not an intended recipient, please delete the message and any attachments and notify the sender of miss-delivery: any use or disclosure of the contents of either is unauthorised and may be unlawful.

David Buik
Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom


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