TODAY’S FAYRE

TODAY’S FAYRE – Sunday, 14th December 2014

 

 Whose woods these are I think I know.

His house is in the village, though;

He will not see me stopping here

To watch his woods fill up with snow.

My little horse must think it queer

To stop without a farmhouse near

Between the woods and frozen lake

The darkest evening of the year.

He gives his harness bells a shake

To ask if there is some mistake.

The only other sound’s the sweep

Of easy wind and downy flake.

The woods are lovely, dark, and deep,

But I have promises to keep, And miles to go before I sleep,

And miles to go before I sleep.” 

 

Robert Frost – poet – 1874-1963

 

 “The social objective of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future.” – John Maynard Keynes – economist – 1883-1946

 

“The difference between stupidity and genius is that genius has its limits.” – Albert Einstein – physicist & philosopher – 1879-1955

 

What a wonderful advertisement the match between Australia and India in Adelaide was for test match cricket. Apart from some childish antics by David Warner, who incidentally made two brilliant centuries, the game was played very positively by both sides with one thought in mind – to win the match! Captain Virat Kohli’s brilliant century on the last day almost saw India home. Australia won by 48 runs, despite the fact that India required 89 to win with 6 wickets in hand! Fantastic stuff!

 

 Post the last OPEC meeting on 29th November in Vienna, which saw the insufferably selfish and enigmatic Saudi oil minister refuse to turn down the supply pipes, resulting in crude oil heading for the $60 a barrel threshold, global equities started to lose not only their poise but also investors’ confidence.


It was convenient for investors to hang their hats on a 40% cut in the price of crude in the last three months to vent their spleens on the equity markets as they set off ‘hot-foot’ on a flight to quality to the sovereign debt market, with yields for 10-years dropping to unrealistically low levels -Germany 0.62%, the virtually bankrupt France to 0.87% and the insolvent Italy to 2.07%. The UK commands a yield of 1.87% and US Treasuries 2.08%.


The world is hugely troubled by many imponderable. The EU hangs in economic rags with little sign of guaranteed QE being introduced after the next ECB meeting in the New Year. Last week the ECB’s stimulus package saw it buy in E129 billion bills – less than an estimated E150 billion. Also Greece could default post its forthcoming election. That distinct possibility could set an ugly and embarrassing precedent. Now to China; its economy is certainly not firing off six cylinders. What about Japan? Many are coming round to the idea of – ‘if you believe in Abenomics, you believe in fairies! Then if you add the threat of damaging sanctions against Russia and their reprisals against the US and the EU plus question marks over the quality of earnings, apart from the US, and all in all that adds up to a toxic cocktail of uncertainty. Frankly cascading oil prices was purely a catalyst to hit the ‘sell’ button!  Investors required little encouragement to take the cream off the top of their respective markets. It was convenient for investors to hang their hats on a 40% cut in the price of crude in the last three months to vent their spleens on the equity markets as they set off! hot-foot to the sovereign debt market, with yields for 10-years dropping to unrealistically low levels -Germany 0.62%, the virtually bankrupt France to 0.87% and the insolvent Italy to 2.07%. The UK commands a yield of 1.87% and US Treasuries 2.08%.

 

 Equity really felt the wheels of pain across their backs. No one appeared to be immune. Us markets suffered their biggest weekly falls – DOW -3.7% since 2012 and the S&P -3.5% since 2011. The FTSE was thumped due to the weighting of energy and mining stocks – -6.5% and European bourses fell by an average of 5.9. Greece had a shocker losing about 15% on the week. I suspect some of these markets were over-sold. We shall see. So far this year the FTSE is down 6.6% and AIM by 19%! To date this year the S&P 500 is up 8.3%! There were a couple of positives that came out of last week’s machination. The Senate voted through a $1.1 billion budget expenditure facility, rather than leave us on a cliff edge as it did last year. Astonishing though it may appear the Lending Club, supported by luminaries such as Larry Summers, Mary Meeker and John Mack saw its IPO add 60% in value to $9.2 billion in early trading. I was extraordinary to see such an appetite for peer to peer lending!

 

 Bank of England Governor Mark Carney’s PR bandwagon was out ‘en-masse’ last week, with plans to increase the level of policy transparency with probably only 8 meetings of the MPC per annum rather than a monthly effort. How effective this change in policy will be remains to be seen. It certainly appears that the current Bank officials are very high class operators and greater in number – Minouche Shafic, Sir John Cunliffe, Andrew Bailey, Andy Haldane and Charlotte Hogg.

 

 I must confess that Baroness Shriti Vadera’s appointment as chairman of Santander UK caught me on the hop. We all know that this irascible peer, not known for her interpersonal skills and warmth of human spirit, was an immensely powerful and influential member of Gordon Brown’s financial team, post the banking crisis. However there is little evidence of her being a ‘mover or shaker’ as a banker at UBS Warburg. I know many who worked there and her name rarely appeared in neon-lights. She, as I understand it, was part of the debt relief and restructuring of some African countries. Clearly Anna Botin knows more than I do! Certainly if Labour are returned to power she will be a commanding figure.

 

The corporate news likely to dominate the headlines next week are as follows – Tesco, with a view to shoring up its balance sheet is likely to raise hundreds of millions by the sale of property, as we await the findings of Deloitte’s independent enquiry . With oil have dropped to less than $60 a barrel, many development projects in the North Sea – some say as many as 32 valued at £55 billion – may be put on hold. Finally we hear that BT is closer to making a decision to buy either 02 involving Telefonica or EE for about £10 billion. That should signal a head to head with Sky and Vodafone, who must surely introduce some new strategic plans.

 

 UK companies posting results – Monday – CARPETWRIGHT, Tuesday – ROCKHOPPER, Wednesday – DIXON CARPHONE, Friday CARNIVAL,

 

Global economic data – Monday – RIGHTMOVE House Prices (NOV EST -1.7%), US EMPIRE STATE MANUFACTURING, Tuesday – UK BANK STRESS TESTS, UK CPI,PPI & RPI, Wednesday – BOE MINUTES, EU CPI, US FOMC, US CPI, Thursday – UK RETAIL SALES (+0.3%), US PHILI-FED, Friday – UK CONSUMER CONFIDENCE.

 David Buik

Market Commentator

 

+44 (0)20 7886 2775

Panmure Gordon & Co  One New Change | London | EC4M 9AF | United Kingdom  www.panmure.com

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