TODAY’S FAYRE – Sunday, 30th November 2014



“How soon hath Time, the subtle thief of youth,

Stoln on his wing my three and twentieth year!

My hasting days fly on with full career,

But my late spring no bud or blossom shew’th.

Perhaps my semblance might deceive the truth,

That I to manhood am arrived so near,

And inward ripeness doth much less appear,

That some more timely-happy spirits endu’th.

Yet be it less or more, or soon or slow,

It shall be still in strictest measure even

To that same lot, however mean or high,

Toward which Time leads me, and the will of Heaven;

All is, if I have grace to use it so,

As ever in my great Taskmaster’s eye.”   


John Milton – poet – 1608-1674


Away from the normal day to day business, two issues have dumfounded me this week. Firstly Andrew Mitchell’s libel case against the Police. Talk about frothing up a mole hill in to a mountain – just pure hubris and egotism! Absolute madness and frankly neither did the police cover themselves in glory. The whole saga was totally unnecessary.


Secondly the divorce settlement arrangements between Sir Chris Hohn, the multi-million/billion charitable hedge fund manager and his estranged wife Jamie Cooper-Hohn. What an absurd and gross amount of money to settle an unsatisfactory relationship – £337 million. Regardless of the circumstances, surely no one requires that amount of largesse to stay solvent and for that matter for the generations of children to follow. Provision was even asked for the non-existent family dog!


I can’t believe it! PM David Cameron wimped it! The public’s expectations for a ground breaking speech on immigration was virtually stratospheric. With so much at stake at the General Election, many believed that this speech would be a barnstormer telling Chancellor Merkel and her cronies exactly how seriously concerned the UK was that the net inflow of migrants had increased by 260k in a year on year to June 2014 and what he intended to do about it!


But no! He watered his speech down to just saying that it would be harder for European migrants to gain social benefits and they would have to be here in the UK for 4 years to qualify. Mark Field MP told us on Sky News that Chancellor Merkel’s cards have been marked prior to the speech and that she was receptive to the idea of qualification for migrant benefits.


To believe the PM can win round an intransigent EU to his way of thinking even on this lukewarm proposal could take years to be approved and in that event, it is unlikely that the electorate will be very impressed. With only 6 months until the General Election, the UK is starting to look as if it might be ungovernable, with no obvious coalition manifesting itself. How sad it is that this election will be fought on purely emotive subjects such as Europe and immigration – important though they are – rather than the economy. Like or not, the country is passionately fired up about these two issues. PM – you need to grasp this nettle rather more urgently, if you want to be re-elected in May. On Wednesday the Chancellor makes his autumn statement – his last until the General election in May. The inability to cut the budget deficit sufficiently will weigh on many minds, particularly Labour’s. However much has been achieved by this government in cutting unemployment from 8% to 6%, stimulating growth to 3.1% and providing a boost to the housing market. With more austerity required to balance the books, the country is unlikely to be that accommodative in terms of accepting the need, essential though the need for further cuts is. The Chancellor has little room for manoeuvre. There is a belief that the Chancellor may announce major road investments, such is the buoyancy of growth, which may be returning to 2006 level.


This past week was dominated by the OPEC oil meeting, which was preceded by inconclusive clandestine meetings between Russia, Mexico and OPEC members in the hope that there would be a satisfactory agreement over cutting producton levels. No such agreement was reached, culminating in oil prices falling sharply at the end of the week, though much of this fall had been anticipated in many quarters. Nymex fell 10% on Friday to $66.15 and Brent crude by 3.4% to $70.15. Brent has fallen by 16% in November and by nearly 40% since 19th June 2014. Though this sharp reversal may in the long-term be good for growth – some say it could contribute 0.7% to global GDP – it was a devastating blow to energy companies’ share prices and also it may have a negative effect to those countries in the EU staring deflation in the face. I must confess, in concert to thousands of other observers, I was singularly underwhelmed by the monosyllabic approach of Saudi oil minister, Ali-al-Naimi, whose performance in Vienna, frankly, could only be described as very unhelpful. Exxon Mobil fell by 4.2%, Chevron -5.4%, Halliburton -10.9%, BG Group -8.8%, Tullow -8.4%, Premier -13.4%, Cairn -2.8%, BP and Royal Dutch Shell surprisingly little by 1.4% and 1.8% respectively.


There is no doubt that this draconian and politically driven action will put great heat in fracking/shale’s kitchen and on those small exploration companies that are potentially over-leveraged. I am sorry to say but those two energy sectors are having their pips squeezed. The effect on dividend policy for many of these large companies could have an adverse impact on pension funds, if this lower price of oil drops too much farther. Keeping production at 30 million barrels a day OPEC seems hell bent on putting pressures on other producers. It goes without saying that Russia’s economy could suffer quite badly.


Against the background of uncertainty revolving around oil prices plus the fact that investor’s conundrum was further exacerbated by huge economic question marks against the EU, highlighted by dreadful data in France, particularly consumer spending, which fell 0.9% last month, global indices more or less trod water last week. The S&P added 0.4%, the FTSE 100 eased by 0.4%, European indices added a net 0.6%, with Tokyo’s Nikkei also adding 0.6%. US markets may well react quite positively to Thanksgiving and Black Friday sales data. It is estimated that sales will have risen by 4.1% to $616.9 billion – the highest figure since 2011. Some stores will have relied on as much as 20% of their annual sales over this weekend. Wal-Mart, Target, Best Buy and Macy’s have already been singled out as having had a decent response. In the UK the recent advent of getting involved in Black Friday seems to have got off on the wrong foot, with fighting breaking out in Tesco’s and Asda emporiums – inadequately staffed or policed for the occasion. Also Tesco’s on-line service was down for an inordinately long time. Even Majestic wines entered the fray offering 30% discount on some of their wine ranges. Household names such as Selfridges and Harrods declined to take part in the jamboree.


With BT attempting to steal a march on Vodafone and BskyB with a potential tie up with Telefonica/02 or just EE, no one can be surprised that Vodafone was rumoured to be flexing its muscles, firstly by running its ruler over TalkTalk and Tesco’s struggling pay-TV service – Blinx – and then the soothsayers got a little ahead of themselves in suggesting that some sort of betrothal to Liberty Media – John Malone et all including Virgin Media, may be on the cards. There was more than just ‘billing & cooing’ in these so called ideas! We shall see. As for the rest of the week here in Old Blighty, we experienced a horror story as how not to present corporate governance of a public quoted company, when Harriet Green handed over the CEO’s reins of Thos Cook with indecent haste. Informed sources believe that M/S Green’s relationship with Chairman Frank Meysman was very fractious and therefore untenable. M/S Green may well have been handsomely rewarded, but analysts, shareholders and the Street in general require a much better levels of communication for a sensitive handover of that nature to avoid a calamity such as a 17% fall in the share price.


First Group suffered quite badly losing 11% last week having lost the East Coast rail franchise to Stagecoach (+9.7%) and Virgin. Poundland posted decent results 8 months after its IPO with profits up 12% and sales on a like for like basis up by 4.7%. Balfour Beatty may be broken up if John Laing Investment Fund believes the ailing UK construction titan’s portfolio of PFI contracts provides positive value, according to the Sunday Times.






US companies posting interim results – Tuesday – GENERAL MOTORS






David Buik

Market Commentator


+44 (0)20 7886 2775

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


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