TODAY’S FAYRE – Sunday, 28th December 2014


“Nobody heard him, the dead man,

But still he lay moaning:

I was much further out than you thought

And not waving but drowning.


Poor chap, he always loved larking

And now he’s dead It must have been too cold for him his heart gave way,

They said. Oh, no no no, it was too cold always (Still the dead one lay moaning)

I was much too far out all my life And not waving but drowning.”


Stevie Smith – poet – 1902 -1971


Apart from the joy of Christmas festivities and all the indulgence that goes with them, there are also other peripheral bonuses to be lapped up during a period of business and commercial inertia. For me most of them come from sport – football, racing and cricket.


We saw a two real stars on Boxing Day at Kempton – ‘Silviniano Conti’, who ran a high class field of stayers ragged to win the King George V1 chase as he liked and ‘Faugheen’ who won the ‘Christmas Hurdle’ in a hack-canter. You will forgive me for speaking through my pocket, as my love affection, understanding and more to the point my money was on ‘Champagne Fever’ in the King George; frankly, he did not stay the trip. I expect him to do battle with ‘Dynaste’ in the Ryanair at Cheltenham, which is a mouth-watering prospect!


I hope all cricket acolytes were lucky enough to watch New Zealand’s Brendon McCullum bludgeoning his way to an exhilarating 195 against Sri Lanka. Also Australia’s Steve Smith’s 3rd hundred in the series against India was also great theatre. Smith has amassed 1200 runs this calendar year – a fabulous achievement; yet to me he does not look a player in the classic mould. The statistics, however, are warning me I am wrong! There was also much to admire from centuries made by Kohli and Rahane today – world class performances!


Most of this average missive will be about the ‘highs’ and ‘lows’ of 2014, though to start with it would be churlish not to pay some credence to the machinations on Wall Street on Boxing Day, when we are all filling our faces. Superficially it was a somewhat non-descript session with the DOW adding 0.13%, the S&P 500 0.33% and the NASDAQ a very respectable 0.70%. However through this mediocrity some significant land marks were reached. The DOW experienced seven successive positive sessions to reach 18,000. Also the NASDAQ achieved its highest mark for 14 years as it blazed through the 4800 threshold. The Russell small cap index is also flirting with all-time ‘highs.’ With only 3 working days to go until the end of the year the DOW has added 9.1% and the S&P 500 +13%.



Conversely the FTSE 100 is still down 2.2% on the year. The AIM market is down a staggering 19% on the year. It is interesting to note that though there has been a very strong IPO market this year, so many debutantes have failed to bat on after their initial public offering. There is an excellent article in Saturday’s Times by Gary Parkinson and Deirdre Hipwell on the subject. 135 companies were floated in 2014 with 56 coming on the main market – the best since 1999. However as Panmure’s Patric Johnson points out 70% of those companies that came to the market in the first quarter were priced at the top end of the range and by the end of the 2nd quarter 68% at the ‘bottom end!’


There seemed to me to be more disappointments or ‘highs’ than ‘lows’ in 2014. Initially the year offered great prospects for growth and employment but there were far too many geopolitical imponderables as the year unfolded which damaged progress in so many parts of the world. China disappointed with only just a smidgen over 7% growth for the year. The demand for basic raw materials, coal and metals fell sharply. In fact most commodities fell sharply throughout the year. This news took a heavy toll on FTSE 100 mining stocks which shed between 12% and 42% in value. Russia’s intervention in Ukraine triggered a very unpleasant reaction from Western democracies – understandably so! US, UK and EU imposed economic sanctions and naturally there were reprisals from Russia. These will hurt the EU and particularly Germany, which is the engine room of Europe’s economy. Crude oil fell by 45% to circa $60 a barrel during the year. OPEC, with Saudi Arabia having filled their boots at higher levels with sales in the first 6 months of the year abrogated their responsibility by refusing to cut production at the November meeting in Vienna. Saudi denies these allegations and insist that demand has fallen, whilst accusing the US’S self-sufficiency policy for shale and fracking production for helping to undercut the price of crude. Companies such as BP, Royal Dutch Shell, Total and Repsol suffered damaging loss in value between 12% and 20%.


The fall in oil prices will damage Russia’s economy severely possibly sending Russia into recession by as much as -4% in 2015. In isolation who cares, but the world’s economy cares profoundly, as the damaging effects are felt globally. Though there has been a modest rally in the value of the Ruble in the past 10 days, thanks to spurious but unsustainable support for the Russian currency and its banks. Over the weekend it was announced that there had been a $1.9 billion bail-out operation for VTB and Gazprombank. However, during 2014 the Ruble surrendered 40% of its value against the Greenback and 60% against the Euro.


Sadly there has been no measurable growth in the EU this year. As time goes by the EU loses its credibility, with unemployment in double figures. This economic ineptness will be exposed again as early as next month if there is a general election in Greece. The ‘left’ could win this, but no matter; the EU and the Troikas will fudge the issue of austerity by softening its approach as well as accommodating any default problems. In my humble opinion the EU is an undemocratic sham!


Here in Old Blighty it was a ‘toss-up’ between the shameful behaviour of the banks in 2014, which incurred fines in excess of £25 billion for LIBOR, PPI, money laundering and FX manipulation transgressions and the incompetence of Tesco’s management pre the appointment of Dave Lewis. The individual ‘Dunce’s Cap’ should probably be awarded to Rev Flowers, who must have been the worst ever appointment by a financial company of some status. He was wholly unqualified to be chairman of the Cooperative Bank. Tesco’s shareholders saw profits tumble, market share surrendered and worst of all the exposure of some unacceptable creative accountancy, which helped savage its share price by 45% in the past year. Sainsbury also enjoyed a fall from grace, with no visible evidence of skulduggery (-35%). You have to hand it to Justin King. After 30 quarters of increased sales, the CEO’s decision to leave Sainsbury showed impeccable timing.


What of the ‘Highs’ in 2014? In the UK growth at 3% was better than any country in the Western world, with unemployment falling from 8% to 6% in the past 4.5 years. I million people were taken of taxation. Welfare cuts were implemented – most very necessary and some painful. On the equity market front, Whitbread + 38%, RBS +29%, Next +19% and Ashtead +50.7% from the large cap stocks were the pick. Most of the good news emanated from added the US. The indices records are posted above. Apple added 36% with Yahoo! +24% and Facebook +39% making eye-catching performances. Conversely Twitter lost 36% in 2014. However Alibaba’s IPO was the success of the year. Shares were issued at $68 and on Friday closed at $105.95 – up 56% valuing the company at $273 billion.


Happy New Year!

David Buik

Market Commentator


+44 (0)20 7886 2775

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


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