TODAY’S FAYRE – Tuesday, 15th December 2014

“APRIL is the cruellest month, breeding
Lilacs out of the dead land, mixing
Memory and desire, stirring
Dull roots with spring rain.
Winter kept us warm, covering
Earth in forgetful snow, feeding
A little life with dried tubers.
Summer surprised us, coming over the Starnbergersee
With a shower of rain; we stopped in the colonnade,
And went on in sunlight, into the Hofgarten,
And drank coffee, and talked for an hour.
Bin gar keine Russin, stamm’ aus Litauen, echt deutsch.
And when we were children, staying at the archduke’s,
My cousin’s, he took me out on a sled,
And I was frightened. He said, Marie,
Marie, hold on tight. And down we went.
In the mountains, there you feel free.
I read, much of the night, and go south in the winter.”

TS Eliot – poet – 1888-1965


I found it hard to comprehend the margin of votes over Rory McIlroy Lewis Hamilton managed to have pledged to win the BBC SPOTY – 120,000! I am not a petrol head, but I acknowledge Hamilton’s achievement in what was a fairly poor year for sport. Talent is an essential ingredient and Hamilton clearly has it in spades.


However I find myself in total agreement with Ian Poulter. Hamilton had serious competition from one bloke, thanks to Mercedes’s supremacy. In the case of McIlroy he saw off the world, winning two majors, as well as being a key contributor to UK’s and EU’s Ryder Cup success. Sometimes I feel that some people don’t think their decision out. I am not a particular golf fan but Rory’s achievement is phenomenal. Special praise should go to Jo Pavey – 40 years old! Well done


Hats off the Australian Government for taking positive action after the Café siege! So sad that two immensely brave people died. However had there been a bomb, so many more could have died!



Note from Panmure’s Colin Smith on oil – incisive and frightening!


Following the OPEC meeting, the pace of decline in the oil price has increased sharply and it is now falling at the same rate it did in 2008. That puts it on track to be in the low US$ 50 bbl range by YE and the low US$ 30 bbl range by the end of January. We believe the closest parallel is with events in 1998 99 which demonstrate that only OPEC action is likely to alleviate the fall in the short medium term. We continue to expect that OPEC will be forced to call an Extraordinary Meeting in the New Year but there is clearly a risk of a more prolonged stand-off. The stocks are already trading at levels that look below or well below US$60 bbl long term, but as the focus turns increasingly to corporate survivability and a desire by investors to cut equity exposures to the oil and related sectors, the likelihood is that valuations will become even more extreme, we expect.


Santa Rally? – It looks although Christmas has been cancelled altogether. It was a dreadful day for equities across the globe, particularly in Europe yesterday, as oil cascaded down hill – Nymex to $55 a barrel and Brent to $60. Who knows, as Panmure’s Colin Smith indicated, we could be at $40 a barrel by the end of the year. OPEC has an interesting conundrum to deal with. In the case of Saudi Arabia, it is just as well that this country has squirrelled away $500 billion from oil. However, if the price drops to say $40 a barrel that would cost Saudi the best part of $500 million a day, so I am led to believe. That quickly waters down the value of Saudi’s and other Middle East countries’ asset values. So, many expect OPEC to call a meeting in January or February. With many areas of oil exploration now highly leveraged, there is a feeling that since their exertions could be curtailed for a few months, some banks could feel the heat in their kitchen with many loans, perhaps and understandably, not performing.



European stocks were clattered yesterday with mining, energy and some banks leading the charge – FTSE -1.87%, DAX -2.72% and the CAC 2.52%. In the small hours Russia, having seen the Ruble lose 10.7% in value yesterday, its Central bank raised rates from 10.5% to 17%. This is the third hike in a month – 8% to 9%, then 9% to 10.5%. The Ruble has fallen about 64% against the Euro in a year and 43% against the Dollar. This strikes many as a panic measure. I doubt the Ruble will attract much money with oil dropping and sanctions biting. Also Russia will almost certainly remain in recession in 2015 – initial guesstimate -0.8%; the situation could get worse. Asia did not enjoy a happy session, having taken their lead from the US – The Nikkei closed down 2.1% and the Hang Seng was down 1.23% at lunch. To date the FTSE is down 8.7% and AIM is easier by 19%. Conversely the S&P is up7.6% and the NASDAQ by 10.7%. Add in the currency gain and they are up 10.4% and 17% respectively.


In the US House builder confidence was at a9 year high! Industrial production was at its highest monthly level since May 2010. Thoma Brava served notice to buy Riverbed for $3.6 billion – $21 a share. Also BC Partners agreed to buy PetSmart Inc for $8.3 billion – so life is not all doom and gloom.


The Bank of England posted the results of its stress tests. The Coop as was flagged up failed -2.4%. However the rest got through – HSBC 8.7%, Barclays 7.1%, Nationwide 6%, Lloyds 5% and RBS 4.6%. The latter did not leave much margin for error. CPI came out at 9.30am this morning. Panmure’s Simon French believed that inflation will drop to 1.1% this month against consensus of 1.2%, thanks to falling oil, no food or clothes inflation to speak of. In point of fact it came in at 1%, which I think triggers a letter from Governor Carney to the Chancellor as it fell 1% below the 2% guideline for inflation. Interest rates? – I will give you a clue; they ain’t going up!


Finally Gavin Patterson and his board at BT decided that EE was the right partner to expand their fixed lines, broadband mobile and media operations. The price was £12.5 billion, valuing the new company at £44 billion. Deutsche Telekom will own 12% of the new operation and Orange 4%. It may be that BT will need a rights issue of £6.2 billion to pay for the deal. Apparently EE’s 4G facility is the best. This deal could be a regulatory minefield. There will be a certain sadness that there will be no return of the prodigal son – o2! Sky fell 4% yesterday as concerns appeared over future Premiership viewing rights.


The FTSE 100 has experienced a real roller-coaster ride this morning – opening up +30, easing back to -30 then the inflation number came out – +60 and now as I write up just up 15 at 6200. Post stress tests banks have been neutral with just Barclays showing a 1% gain. Stress test or not, the taxpayer is still owed a pot of money – perhaps as much as £60 billion.


David Buik

Market Commentator


+44 (0)20 7886 2775

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


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