TODAY’S FAYRE – Sunday, 23rd November 2014



Sigh no more, ladies, sigh nor more;

Men were deceivers ever;

One foot in sea and one on shore,

To one thing constant never;

Then sigh not so,

But let them go,

And be you blithe and bonny;

Converting all your sounds of woe

Into. Hey nonny, nonny.


Sing no more ditties, sing no mo,

Or dumps so dull and heavy;

The fraud of men was ever so,

Since summer first was leavy.

Then sigh not so,

But let them go,

And be you blithe and bonny,

Converting all your sounds of woe

Into. Hey, nonny, nonny.”



William Shakespeare – playwright & poet – 1564-1616


 Some might say that the outcome of the Rochester & Strood by-election could have been worse for the Conservatives. The lost by 2,900 votes to the maverick Mark Reckless of UKIP with a 52% turnout – an 8% margin, when many were predicting a 12-15%! Labour were destroyed with just 7,000 votes, which will disappoint Bob Marshall-Andrews QC, the previous incumbent, who had a solid majority 5 years ago; admittedly boundaries have been slightly altered.


 What strikes the ordinary man in the Street is that come next May, post the General Election, the UK could be almost ungovernable. As matters stand at the moment the Conservatives and Labour are unlikely to command much more than 33% of the vote each, with UKIP, SNP, Lib-Dems and Greens providing useless and tiresome, but influential irritation. No one could possibly predict the outcome at this juncture. It could be any combination to form a toothless tiger of a coalition, totally lacking in conviction.


It is hard to see UKIP going into coalition with David Cameron, since the PM has been so rude and insulting to Nigel Farage on numerous occasions. It is also virtually impossible to see Alex Salmond leading his 30 odd renegade SNP MPs in to coalition with the Tories or Labour. This very bright, politically adroit but thoroughly obnoxious political adversary will just want to be counter-productive to progress on any issue that did not benefit Scotland and the possibility of independence and will thoroughly enjoy spoiling the adoption of legislation for the sake of it. By the time the recess comes next summer we could all wish that Scotland had said ‘yes!’ to rid us of this turbulent and treacherous dissident.


 Looking at stock market data in isolation, last week’s activity looked like plain sailing aided and abetted by some stimulus packages from China, similar activity and help from Abe-San & Kurudo-San in Japan with the added spice of a snap election being called. Perhaps the icing on the cake being provided by Dear Old Mario Draghi coming up with the same old regurgitated phrase on behalf of the ECB that ‘we will do everything in our power to stimulate growth’ short of officially introducing quantitative easing.  Last week saw the S&P 500 breached yet another record adding 1.1% on the week, with the FTSE 100 rallying by 1.5%, European stocks by an average of 3% and the NIKKEI by 0.8%. Oil retrenched closer to $80 a barrel as we head to the OPEC meeting at the end of next week, when oil supplies might be cut, though there is a strong lobby to suggest they won’t be. Gold shot up to $1201.55 an ounce on the back of a stronger Dollar, though the Greenback did see a few profit takers at the end of the week, with the Yen being the major beneficiary – $/Y117.79. Last week we also saw so much in the way of positive data from the US and from the FED and how well the economy is improving, One just hopes that there is no repetition of the dire winter weather conditions experienced in the first quarter of 2014. The current early bout of snow and freezing conditions do not augur well. Remember last year GDP for the first quarter ended up deeply in negative territory – -2.9%.


The general public had hardly digested the enormity of the ‘FX rigging scandal’ by 5 banks, with perhaps Barclays to follow and the gargantuan fines that went with the admittance of these transgressions, when it was confronted with RBS’s fine by the FCA and PBA for inadequate control over its ancient IT system, which collapsed in a heap in June 2012, leaving RBS’S clients without access to their money. This aberration had already cost RBS £70 million in terms of restitution and compensation. That should have been quite enough bad news for a bank in one week; but no! It was not to be. On Friday it transpired that RBS is alleged to have submitted incorrect data to the EU, overstating its financial strength and Tier One capital requirements for the ‘stress test’ by £3.5 billion, due to the addition of tax credits from projected losses, which did not qualify as correct criteria for inclusion. This news meant that RBS had just scraped by with Tier One capital at 5.7%. By comparison Lloyds is 6.2%, HSBC 9.3% and Barclays 7.1%. Mistakes of this magnitude are not good enough and senior heads should role. The final nail in the banking sector’s coffin came last Thursday from Brussels – the dismissal by the EU of the UK’s government’s and the BOE’s protest to stop bankers’ bonuses being capped at 100% or 200% with shareholder approval. So much has already been written on what crass legislation this is for the UK financial markets, any additional criticism from the likes of me would be superfluous to requirement – just insanity personified! Finally in talking of the BOE, let’s hope that Lord Grabiner finds no evidence of staff helping to rig auctions in relation to QE post the 2007/8 banking and credit crisis. Sometimes and perhaps I am naïve, people are looking for skeletons in the cupboard, which are just not there.


 As the 3rd quarter earnings season comes to a satisfactory close, US equities feel on good terms with themselves, aided and abetted by reasonable economic data including falling unemployment, a buoyant housing market and satisfactory retail activity. There is also plenty of M&A activity with Activas completing its acquisition of Allergan for a breath-taking $66 billion. On Friday some results were a little mixed with the following attracting headlines – GAP -5%, GameStop -14%, Hertz+5%, Sotheby’s +10%. Mining stocks and energy stocks lead the way with oil rallying and China’s stimulation package providing encouragement.


Here in Old Blighty, as with US markets, mining and energy held their heads up high. There is still some M&A stimulating aroma permeating around Threadneedle Street and Canary Wharf, which helps to keep momentum pumped up. Aviva stepped up to the plate and declared undying love for Friends Life, for which it is alleged it will pay £5.6 billion to buy. Clive Cowdery, for all his bold actions from his Resolution acquisition trail, may pocket as much as £160 million from the deal – good man! The new company could be valued at £20.1 billion – CEO Mark Wilson and new chairman Sir Ian Montague are expected to remain in situ.



There are those who refuse to believe that embers under Smith & Nephew won’t be rekindled by Stryker’s interest in the UK’s medical component maker. There were also rumours of Vodafone casting a beady eye over TalkTalk. NAB are considering a £2 billion float for Yorkshire Bank! Perhaps there may be a touch of banking IPO indigestion? On Friday Anglo American +6.7% and Tullow +5.8% scrapped over the day’s yellow jersey. Ineos’s chairman Jim Ratcliffe announced proposed plans to spend £640 million on developing fracking and shale which could be of huge employment benefit to Grangemouth. Tiger Global seem to have done a decent demolition job in ‘shorting’ Quindell and other stocks such as Nokia in recent months.


 Chancellor Osborne did not have great news from the ONS on the UK’s borrowing requirements. Public sector net borrowing for last month was similar to the same period last year, within £200m to £7.7bn. As of the end of October 2014, net borrowing is £64.1bn, which compares with £60.5bn the government had borrowed by the same date in 2013. It transpires that government net borrowing is 6.1% higher than last year, compared with the budget forecast, provided by the OBS, which initially suggested that net borrowing would fall by 11.2% in the whole year. Hence comments from the Treasury that borrowing was in line with the budget forecast was a little surprising. The tax receipts in recent months have been very disappointing income tax revenue, with wages not rising as one would expect and a measurable fall in stamp duty from a less active residential property market. Also not surprisingly oil and gas revenues were disappointing. Until real confidence returns to business investment, which would come with political stability, wages are unlikely to select another gear.


 US companies posting results and trading statements this week – Monday – DYCOM INDUSTRIES, Tuesday – HORMEL FOODS, FRED’S, CAMPBELL SOUP, Wednesday – ASTRO-MED





David Buik

Market Commentator


+44 (0)20 7886 2775

Panmure Gordon & Co  One New Change | London | EC4M 9AF | United Kingdom


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