Monthly Archives: February 2015


TODAY’S FAYRE – Saturday 28th February 2015


“There was a sound of revelry by night,

And Belgium’s capital had gathered then

Her beauty and her chivalry, and bright

The lamps shone o’er fair women and brave men.

A thousand hearts beat happily; and when

Music arose with its voluptuous swell,

Soft eyes looked love to eyes which spake again,

And all went merry as a marriage bell;

But hush! hark! a deep sound strikes like a rising knell!


Did ye not hear it? — No; ’twas but the wind,

Or the car rattling o’er the stony street;

On with the dance! let joy be unconfined;

No sleep till morn, when youth and pleasure meet

To chase the glowing hours with flying feet.

But hark! — that heavy sound breaks in once more,

As if the clouds its echo would repeat;

And nearer, clearer, deadlier than before;

Arm! arm! it is — it is — the cannon’s opening roar!


Within a windowed niche of that high hall

Sate Brunswick’s fated chieftain; he did hear

That sound the first amidst the festival,

And caught its tone with death’s prophetic ear;

And when they smiled because he deemed it near,

His heart more truly knew that peal too well

Which stretched his father on a bloody bier,

And roused the vengeance blood alone could quell;

He rushed into the field, and, foremost fighting, fell.


George Gordon, Lord Byron – poet – 1788-1824


The brutal assassination, yesterday, of former Deputy Prime Minister Boris Nemtsov in Moscow is a timely reminder that Russia is no closer to becoming a democracy that it was 53 years ago, when the Bay of Pigs off Cuba was a real threat to nuclear war. We in the UK need to shore up our defences PDQ as does the EU! Also President Obama needs to get off his butt and engage with Russia before there is the ‘mother and father of all accidents’ that is waiting to happen!


I so enjoyed the highlights of AB de Villiers 166 for South Africa v West Indies in 66 balls with only 7 ‘dot’ balls. The 150 was a record in the World Cup. What a talent! Such a pity Chris Gayle was out cheaply, thus preventing any sort of a meaningful contest.


New Zealand’s one wicket win over Australia at Eden Park was a ‘nail-biting’ affair, with New Zealand looking ‘nailed-on’ winners with only 30 runs required with six wickets in hand until Mitchell Starc entered the fray taking 6 for 28! New Zealand got home with one wicket to spare thanks to a six hit by Williamson. Epic stuff!


The events that dominated the financial agenda last week revolved around the bogus negotiations between the EU and Greece, Fed Chairman Janet Yellen’s geek chat to Congress about the US economy, which required a Bletchley Park Code Book to understand the content, some improving economic data from the EU and a proliferation of banking news in the UK. The only people who seemed uncertain whether a deal would be struck between Greece and the Troika were the two leading dramatis personae. Let’s start this week’s missive with EU economic data supplied by Panmure’s Simon French –


   “Despite my negative outlook for the Eurozone economy longer term (driven by poor demographics and an inappropriate monetary regime) there is now little doubt that the promise of ECB QE, a falling Euro and the falling oil price are together acting to reflate consumer demand – giving the zone a short term boost to growth. Figures out this AM show M3 (money supply) growth at 4.1% YoY – its highest level since June 2009 and a series of business and consumer sentiment data all strengthening – consumer confidence is at an 8-year high. Make hay while the sun shines – as without significant reforms to the supply side of these economies the poor demographics and inflexible economic structures will always win out.” Hopes springs eternal!


   I think Janet Yellen’s appraisal of the US economy was seen as positive and on-going decisions on interest rates will be based on data, especially Labor data, which when Friday’s Non-Farm payrolls are posted, should signal the robust and improving state of the US economy with 250k plus jobs having been created in February. However the FED boss’s stance on interest rates bordered on a cross between neutral and dovish. Few expect any increase until at least the third quarter. There is still a growing wave of opinion that the prosperity in the US may have been inflated by the role the FED played in implementing substantial QE facilities. Also there is a tiny bit of concern that US corporate results in the 3rd and 4th quarter may not be all that buoyant.


   On top of a fair compendium of financial and economic imponderables oil prices made measurable gains. Markets were no too sure what effect that might have on earnings. Nonetheless overall the week was positive for most markets, despite the Chinese New Year holidays. The People’s Bank of China announced Saturday that it was cutting the rate on a one-year loan by commercial banks by 0.25 percentage point to 5.35 percent to shore up economic growth. The interest rate paid on a one-year deposit was lowered by 0.25 point to 2.50 percent.


   The S&P 500 added 0.45% and the FTSE 100 was near enough flat, despite nudging through the 6930 threshold to a new record, which has taken 15 years to reach and improving consumer confidence. European stocks dined off the bogus EU/Greek accord and the effects of QE, which saw the EuroFirst 300 add 2.5% and the NIKKEI benefited from the promise of more stimulus packages thanks in some way to poor domestic consumption data. The Dollar hit an 11-year high against a basket of currencies against a threat of rates hiking in the late summer.


   Much has been written by the media on HSBC, their indifferent results and the negative publicity that surrounds its Swiss Private Banking operation. Douglas Flint and Stuart Gulliver were given a hard time at the Treasury Select Committee’s hearing and I suspect that tax evasion allegations will not be going away for some months. Much of the perception of the wrong doing at HSBC did not take place under Gulliver’s watch. However the managements’s problem is exacerbated by the fact that Mr Gulliver is a lousy communicator with the media and the public. Banking is a service industry. Bankers are not currently held in high esteem; all the more reason why they should be much more communicative.


   The appointment of Sir Howard Davies to succeed Sir Philip Hampton as chairman of RBS was a smart move. Sir Howard was responsible for bedding down 9 regulatory bodies at the FSA in 2000 for Gordon Brown – such a pity there was an inadequate number of qualified people to do the job. Therefore he is sufficient of a political chameleon to cope any combination of Osborne, Balls, Carney, Bailey, Shafik and Wheatley! Reflecting on RBS figures, the market was slightly disappointed. To have cut the balance sheet from £2.2 trillion to £1.1 trillion in 6 years is a considerable achievement. Investment banking will disappear. RBS will pull out of another 13 countries this year, just leaving a modest presence in 25 countries. Over 30,000 jobs have been lost in the UK in that period.


   Let’s be candid, after the financial debacle the government, politicians in general and the public are only interested in all UK banks being cloned as ‘BORING BANK PLC!’ Sir Howard and Ross McEwan tick those boxes brilliantly, as does Lloyds Banking Group CEO Antonio Horta-Osorio, who preened himself like a peacock in announcing a dividend, a profit and the possibility of another quick fire sale of Lloyds’ shares to investors on top of currently dripping stock out surreptitiously. Though the PPI misdemeanours, which have cost Lloyds £11.5 billion including 32.1 billion this year, came under Eric Daniels’s watch, I still think the whole episode was truly shocking almost worse than investment banking losses and the whole deal has been sort of swept under the carpet. Lloyds appears to have transgressed more than the other banks put together!


   Banking gurus thought the appointment of Bill Winters to replace the battle scarred Peter Sands as CEO of Standard Chartered was inspired. After 22 years with JP Morgan , when he is alleged to have fallen out with Jamie Dimon, and a dozen year in the UK building a reputation in private equity as well as assisting Sir John Vickers with his IBC policies, Mr Winters is obviously very well connected corporately and politically. Therefore scant knowledge of emerging markets is not that important. He will be able to acquaint himself with what is required from good lieutenants around him. Chairman John Peace did well in persuading him to accept the appointment.


We hear from Barclays Bank on Tuesday. Without being too disrespectful it is good for Barclays that Sir David Walker has been replaced by John McFarlane from Aviva as chairman. Sir David was politically acceptable, post the Agius/Diamond dynasty, but was always too old and could never sell the bank, if he tried. Frankly I doubt he could sell ice to the Eskimos. John McFarlane will be very visible and may make Antony Jenkins feel uncomfortable unless he delivers dramatic changes. I suspect that Tushar Moravia, the finance director waits impatiently in the wings.







David Buik – market commentator


Panmure Gordon & Co


+44 (0)20 7886 2775 – mobile – 07788 144 877

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


Having got myself into a frenzy over RBS’s results, which I thought were quite good, stripping out the one off £4 billion write-down for Citizens, until punters decided to take a decent profit, which had manifested itself since the beginning of the month (+11% until yesterday); this saw the shares down 5% at 3.45pm, having been up 2% at first knockings. The FTSE is virtually unchanged at 6935. Conditions are not conducive for trading and those companies that have under-performed in the last quarter have felt the wheels of pain across their back. Miners are virtually unchanged. Oils are mixed with BP nearly flat and Shell +1.5%. From the drug sector Astra is up 1% and GSK just 0.5% to the good with Shire unmoved since the open.


Reed has had a terrific run, but investors expected more from their results. They were underwhelmed and took some profit out of the ring! – -5.5%. Stephen Hester’s efforts at RSA have not really been appreciated in recent weeks – down 6%. Interserve – WOW! Down 8% with only 350k shares traded. It just goes to show how unforgiving investors can be in a quiet market place. Capita another company posting numbers were down 1.8%. Merlin Entertainment, despite an 11% increase in profits saw investors take a little risk off the table – -1.8%. Good old BATS – +1.5%! One cannot beat a good tobacco company! Spirent Communications came with late rattle on the rails this afternoon – +5.5%

The Street of Dreams offered no solace or encouragement – down 10 points at 3.45pm


TODAY’S FAYRE – Thursday 26th February 2015


Start not—nor deem my spirit fled:

In me behold the only skull

From which, unlike a living head,

Whatever flows is never dull.

I lived, I loved, I quaffed like thee;

I died: let earth my bones resign:

Fill up—thou canst not injure me;

The worm hath fouler lips than thine.

Better to hold the sparkling grape

Than nurse the earthworm’s slimy brood,

And circle in the goblet’s shape

The drink of gods than reptile’s food.

Where once my wit, perchance, hath shone, I

n aid of others’ let me shine;

And when, alas! our brains are gone,

What nobler substitute than wine?

Quaff while thou canst; another race,

When thou and thine like me are sped,

May rescue thee from earth’s embrace,

And rhyme and revel with the dead.

Why not—since through life’s little day

Our heads such sad effects produce?

Redeemed from worms and wasting clay,

This chance is theirs to be of use.” 


George Gordon, Lord Byron – poet – 1788-1824 


Only 12 days to go to the Cheltenham Festival, which most NH racing acolytes are already salivating over. The prospect of seeing some wonderful horses win or retain the crown for their specific championship race is mouth-watering – ‘Hurricane Fly’, ‘Faugheen’, ‘The New One’, ‘Sprinter Sacre’, ‘Sire de Gruchy’, ‘Lord Windermere’, ‘Bob’s Worth’ and ‘Rags to Riches.’ What I want to see in his final appearance at the Festival is a big winner for AP McCoy in front of 50,000 adoring fans and a million plus viewers. This would be an accolade he would richly deserve, finally giving PM Cameron the final nudge to recommend ‘AP’ for a knighthood, which is long overdue! – 20 years NH champion! How brave is that!


No one could possibly guaranty the outcome of the forthcoming election. If this election were based on the improvement in the economy the Conservatives would be a ‘shoo-in.’ However we all know that those living outside London and the South East are less than convinced that the improvement in economic conditions have helped them.


I suspect that it will boil down to ‘Young’ v ‘Old’ – Labour promising the earth to the young on University grants against Tories looking after pensioners. To date older people are more likely to come out and vote, with the young becoming increasingly cynical and reluctant to make their mark on a ballot paper. Whichever party can persuade the young to vote in their throngs could lead the next coalition.  It is becoming less likely that either major party can secure an overall majority. Many now believe that as Election day approaches UKIP’s and the Green’s support will fall away, with perhaps the Tories picking up a fair few UKIP votes with most disaffected Green voters heading back to Labour.  


I listened to some of the evidence given by HSBC’S chairman, Douglas Flint and its CEO Stuart Gulliver to the Treasury Select Committee on tax evasion allegations at their private bank in Geneva.  Neither of them pulled their punches and they were both very upfront in apologising unreservedly for unacceptable behaviour. The Chairman of the Treasury Select Committee Andrew Tyrie would hardly gain a first class honours degree at a serious school of charm, but I suppose that when a litany investigations and transgressions of this nature manifest themselves, the most senior of directors can hardly can hardly expect an that easy ride; and Messrs Gulliver & Flint certainly did not get it.  Douglas Flint acknowledged that it was a ‘terrible list’ of malpractices. 


When asked about blame attribution – much of these issues, which involved about 30,000 clients, took place between 2005 and 2007. Mr Gulliver said 30% was down to the Swiss managers, most of whom still work at HSBC. HMRC said that what it had been given was intelligence rather than evidence.


As for Stuart Gulliver’s bank accounts, he made it crystal clear, that despite the adverse reaction of the public, he had done nothing wrong.  He had lived in HK since 1980.  He was domiciled there, owned property there and would return to live in HK after his tour of duty. The Panama account was purely a personal tool to hide the amount of his bonuses from colleagues and there was no tax saving at all. I thought both were sufficiently sorry and contrite and all in all they gave a good account of themselves.


If I have an issue with many chairman and CEOS from banks it is the fact that they won’t engage on television or with the press in a meaningful manner.  Banking is a service industry. The public has lost faith.  To restore respect senior bank management must communicate with the media. In closing on this subject that was a very cruel photo of Douglas Flint in many papers – ‘Fat Cat’ was the caption! Every picture tells a story. So step up to the plate gentlemen and engage with press and customers alike! I fear that we have not heard the end of this issue, despite HMRC insisting it was presented with intelligence rather than evidence.


I suppose it was too much to expect that the FTSE would crack on yesterday from its new found record of 6949. There was insufficient momentum from a feel-god factor and the session on the Street of Dreams offered little encouragement and analysts, dealers and economist took out their ‘Bletchley Park Code Books’ to decipher FED chairman Janet Yellen’s assessment of the US economy delivered to Congress and guessing when interest rates would be hiked. Her comments seemed to be neutral and dovish. She is beginning to use ‘Greenspan speak!’ Anyway the FTSE was down 14 points at 6935. On the Street of Dreams the DOW closed just above the Plimsoll line =0.08%, the S&P 500 and the NASDAQ just below it – -0.08% and -0.02% respectively. In Asia, the prospect of further Chinese stimulus packages buoyed Shanghai +1.2% and Hang Seng +0.28% at lunchtime and the NIKKEI closed up just over 1%.


Yesterday some astonishing figures were posted by Lego – a 15% increase in profits to £2.8 billion. 85 million people use Lego and only 10% of these sales go to China; so the potential is colossal. In 2000 this company, controlled by Kjeld Kirk Kristiansen, almost went belly up! However, the return on equity is phenomenal – 58% as against 7.3% for HSBC, as announced on Monday. Guy Hands’s Terra Firma announced his intention to sell Odeon Cinemas for £1 billion, which he bought for €650 million in 2004 plus €350 million for the UCI Group. Sales in Odeon recently fell 5% with profits diving by 24%. Terra Firma hopes to sell these groups, now under one roof to private equity or to a buyer in the Americas. As we all know cinemas are not as vogue as they were. Mr Hands will be remembered for the ill-fated purchase of EMI for £2.4 billion in 2007. Any Higginson, the chairman of Morrison duly appointed David Potts – also ex Tesco – as the new CEO of the group, but repudiated the idea that he was reinventing Tesco. He felt Potts was the best retailer he had come across in his distinguished career.


There were solid results from Reed Elsevier and BATS, which is proving to be the best organised tobacco titan about. Reed has had a terrific run so the fact that punters have taken some profit off the table today is not surprising, though the initial 4% seemed a little harsh. Merlin Entertainment saw profits up by 11%. Panmure’s Anna Barnfather maintains her ‘BUY’ recommendation. Capita and Interserve also stepped up to the plate and are not expected to disappoint their acolytes. Ladbrokes looked slightly disappointing to me with profits of £98 million against expectations of £106 million, having taken an £8 million hit on Boxing Day.


Finally RBS numbers, which were well received and well leaked. A loss for the year of £3.5 billion does not look great, but there is measurable improvement from last year’s loss of £7.5 billion. A one off provision of £4 billion has been made for the disbursement of Citizens Bank in Chicago. Impairment charges are down 52% to £1.2 billion. Shrinking the balance sheet, which started under Stephen Hester, continues with investment banking dissipating and with RBS pulling out of another 13 countries taking their branch exposure down to 25 countries. The balance sheet has been cut from £2.2 trillion to £1.3 trillion.


Tier One Capital has improved from 8.6% to 11.2%. Ross McEwan, the CEO in waiving £1m of his bonus will be seen as decent optics and credibility, but I suspect he will eventually get it back by way of a severance package. The appointment of Sir Howard Davies as chairman to succeed Sir Philip Hampton is canny. He is a very sound politician, respected on both sides of the House, having set up 9 regulatory bodies to make the FSA under Gordon Brown back in 2000. It was a pity there was inadequate staff there to do the job at the time. One suspects that Sir Howard will be even more comfortable dealing with ED Miliband and Ed Balls than he will with George Osborne nad PM Cameron. This is a very sound strategic appointment to bring trust back between clients, the media, the electorate and the trashed reputation of this very important bank.







US companies posting interim results today – KOHL’S, CHICO’S FAS & JC PENNEY.



David Buik – market commentator


Panmure Gordon & Co


+44 (0)20 7886 2775 – mobile – 07788 144 877

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


TODAY’S FAYRE – Wednesday 25th February 2015




Poet of Nature, thou hast wept to know

That things depart which never may return:

Childhood and youth, friendship, and love’s first glow,

Have fled like sweet dreams, leaving thee to mourn.

These common woes I feel.

One loss is mine Which thou too feel’st, yet I alone deplore.

Thou wert as a lone star whose light did shine

On some frail bark in winter’s midnight roar:

Thou hast like to a rock-built refuge stood

Above the blind and battling multitude:

In honoured poverty thy voice did weave

Songs consecrate to truth and liberty.

Deserting these, thou leavest me to grieve,

Thus having been, that thou shouldst cease to be.



Percy Bysshe Shelley – poet – 1830-1886


   A double hundred on a village green in 50 overs would take some getting, but in a World Cup match against Zimbabwe, West Indies Chris Gayle scored 215 in 149 balls including 16 sixes – a world record in this competition. It was quite a spectacle. In full cry Gayle is a sight for sore eyes!


   I sincerely hope that FIFA are not allowed to get away with allowing Qatar to host the World Cup at Christmas in 2020. I hasten to add that I have nothing against Qatar being the host nation – I welcome them! However FIFA is a shambles. It is such a pity that the World Cup cannot become the responsibility of another federation. My colleague and friend, Simon French sets out four good reasons why this decision is a poor one, as far as Europe and the UK is concerned


The Premier League: What happens to the schedule? The rights (worth £5.1bn at the last auction) are sold around the world and are a great British export. These will be disrupted in 2022 and revenues reduced accordingly should the PL have to play games over a tighter period/ without their WC players or during the typical off-season. Club revenues (gate receipts) will also be affected.


       Summer Leisure: The World Cup is associated with spikes in leisure, food and alcohol sales. Pubs will be affected as poorer weather will reduce the propensity to “go out” and certainly to hold outside screenings!


       Productivity: A summer World Cup coincides with a typical lull in productivity as work patterns get disrupted by summer holidays. Putting the WC in a less naturally disrupted period will reduce productivity still further.


     Christmas: Its tough enough getting men off the sofa to do the Xmas shopping. It will be doubly hard in 2022! Retailers will have to innovate – how long before the online retailers’ team up with the bookies to allow you to bet/Christmas shop “in play”?


Investors have nearly drowned in buckets of blood, sweat and tears for 15 years waiting for the 31stDecember 1999 FTSE 100 record of 6930 to be finally eclipsed.  It finally materialised yesterday – to 6949.


A crescendo of frothy and hysterical support for ‘TMT’ stocks such as Pearson, BskyB, BT, Vodafone, LogicaCMG, ARM, Durlacher, Freeserve, ITV, Autonomy and Sage catapulted the FTSE 100 to its record level on 31st December 1999.  Then in 2000 unrealistic valuations started to unnerve analysts and the ‘bubble’ finally burst on the back of the collapse of the NASDAQ and the obliteration of Neuer Markt in Germany, which wiped billions off the value of these speculative stocks.  Other constituent companies that were grossly over-valued at the time were the new banks on the blocks such as Abbey National, Halifax, Woolwich, Alliance Leicester and Northern Rock.


The threat and culmination of war in the Middle East blew in our ears.  Once the bombs started falling on Baghdad in March 2003 the FTSE fell to 3283.  The recovery was sharp and the gradual for 5 years up to 6,550 until the credit crisis took no prisoners amongst the constituent stocks within the FTSE.  The FTSE 100 then fell to 3510.   We were then obliged to pay homage to the Bank of England for introducing quantitative easing on 9th March 2009, which has underwritten the equity recovery, eclipsing 1999’s record of 6930.  We must also be grateful for having interest rates at 0.5% for 71 months, making alternate assets unattractive, with share dividends yielding between 2.5% and 5%.


Since 1999 the constituent stocks of the FTSE has changed out of all recognition.  Banks, technology, telecoms and media have diminished in value. Oil companies have improved slightly – BP, Shell, Cairn and BG Group despite recent setbacks. Tobacco, drugs, utilities and mining have become hugely important, as have some retail stocks such as AB Foods, Next and Burberry.  Some companies have been sold to overseas predators such as ICI, Blue Circle, Cadbury Schweppes and Hanson Trust to name but a few. GE/Marconi was destroyed without trace – Lord Weinstock RIP! Tut Lord George Simpson! Only 60% of the stocks that were in the FTSE 100 in 1999 are there today!What about the future? The UK economy seems in good nick; the US economy definitely is and Europe may be coming back on the bridle, though I don’t share the majority’s optimism on that score. Provided geopolitical problems from Russia and the Middle East don’t become untenable, there may well be more juice in the FTSE’s tank!


On the Street of Dreams yesterday Janet Yellen’s testimony in her Humphrey Hawkins lecture to Congress was dovish and conciliatory enough for market geeks to believe that the FED will not move to put rates up until towards the end of 2015, though she did leave the door slightly ajar, in case employment data looked really robust and inflation headed towards or above the 2% threshold target. Hewlett-Packard disappointed its acolytes by failing to beat guidance – $1.5 billion light on a strong Dollar. The shares fell by 6.9% after hours. At the end of the session the DOW was +0.51%, the S&P was better by 0.28% and the NASDAQ by a parsimonious +0.01%. Asia was mixed with the Hang Seng up 0.43% at lunch with the NIKKEI closing just 0.1% down.


This morning there were strong trading statements or results from Whitbread, TSB, Barratt Development and St James’s Place. Efforts by Petrofac and Hays were satisfactory. It is interesting to note that RBS shares have rallied 11.5% in 4 weeks to 404p. Hope tomorrow’s results are good!


Markets took little notice of Greece agreeing a nonsensically fudged deal with the Troika, kicking the can down the road for another 4 months. How nebulous was this criteria for agreement?


  • Combat tax evasion
  • Tackle corruption
  • Commit not to roll back already introduced privatisations, but review privatisations not yet implemented
  • Introduce collective bargaining, stopping short of raising the minimum wage immediately
  • Tackle Greece’s “humanitarian crisis” with housing guarantees and free medical care for the uninsured unemployed, with no overall public spending increase
  • Reform public sector wages to avoid further wage cuts, without increasing overall wage bill
  • Achieve pensions savings by consolidating funds and eliminating incentives for early retirement – not cutting payments
  • Reduce the number of ministries from 16 to 10, cutting special advisers and fringe benefits for officials 
  • David Buik – market commentatorPanmure Gordon & Co D +44 (0)20 7886 2775 – mobile – 07788 144 877


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


Will it? Won’t it? The FTSE 100 has flirted with investors for 3 days now as to whether it will breach the 6930 threshold. The agreement the Eurozone has secured with Greece to renew the bail-out for 3 months has not provided a scrap of momentum to the FTSE – already priced in governor! The US is waiting with bated breath to hear Janet Yellen’s pearls of wisdom. However the Street is up 50 points at 3.25pm. The FTSE is up 25 at 6937 – We are through, but will it stay there?


Volumes have been derisory. Mining stocks on the back of BHP Billiton +6% has pushed Anglo American and Glencore on by 3% and Rio by1%. Oils are in good shape – +1.25% on average! Just Retirement has the yellow jersey – up 15%. Then Drax has been the next most attractive story – +8% with 6.5 million shares traded against an average of 1.4 million – a stench of M&A, but pure rumour and perception. Persimmon has had a great run – profit taking down 3.5%. Meggitt has suffered much the same -5%. RBS, ahead of Thursday’s numbers was 1% to the good. Provident Financial +0.25% – somnolent!

Panmure’s Simon French’s current views on a Greek Settlement

Indications are that the Eurozone finance ministers will agree to the Greek reform proposals at their 1300 GMT meeting. ASE up 7.5% on this expectation. It pulls back from the brink (until July) but the cost for Syriza may be high domestically as the proposals conflict with much of what they stood for during the election campaign. Greece will struggle to deliver anything of note on the list and we will be back here in the summer but with the Germans challenging the Greeks that they have not delivered on their side of the bargain. The likely outcome will be that Germany will insist that Syriza are replaced by a technocratic “Monti-style” government which in turn will take Greece closer to the exit door. That said EZ equity markets should like the breathing space provided to allow them to enjoy the impact of a weaker Euro and the start of QE. 


TODAY’S FAYRE – Monday 23rd February 2015


“Often and often it came back again

To mind, the day I passed the horizon ridge

To a new country, the path I had to find B

y half-gaps that were stiles once in the hedge,

The pack of scarlet clouds running across

The harvest evening that seemed endless then

And after, and the inn where all were kind,

All were strangers. I did not know my loss

Till one day twelve months later suddenly

I leaned upon my spade and saw it all,

Though far beyond the sky-line.

It became Almost a habit through the year for me

To lean and see it and think to do the same

Again for two days and a night.

Recall Was vain: no more could the restless brook

Ever turn back and climb the waterfall

To the lake that rests and stirs not in its nook,

As in the hollow of the collar-bone

Under the mountain’s head of rush and stone.”


Edward Thomas – poet – 1878-1917


I much enjoyed Sunday Telegraph’s articles by Bill Jamieson and James Titcomb on 20th anniversary of the collapse of Baring Brothers, courtesy of some fraudulent behaviour of Nick Leeson, whilst ‘wheeler- dealing’ Baring’s ever expanding futures operation in Singapore.

Whilst Mr Leeson carried the can for the demise of this celebrated blue-blooded merchant bank to the tune of £827 million pounds in February 1995, which resulted in the residue of the business being sold to ING for £1, perhaps we should remind ourselves of the other dramatis personae who were more than spear carriers in this extraordinary tale.


At the time Peter Baring was chairman of Barings Holdings and Andrew Tuckey of the bank. Up until 1992 Christopher Heath, the flamboyant head of securities at Barings, which was a strong performer in Japanese warrants, was virtually omnipotent as the trading guru.  He and his wife Maggie had a string of jumpers with Oliver Sherwood with more than a few winners at the Festival. This was ample evidence of Heath’s success and lifestyle.


Then it went wrong and Peter Norris was appointed to oversee the investment banking operation. He was well-liked and respected. Barings, which was a bank with a relatively small capital – if I remember £600 million – and it’s directors were desperate for it to play in the big boys league and could see that under an experienced leader this could be achieved by expanding its derivative presence. This task was given to Ron Baker, who was hired from Bankers Trust in 1990. Not only was he considered a ‘mover & shaker’, but he also had a reputation as a man motivator.  Barings investment banking operation exploded relatively speaking with the daily profit and loss account raising a few eyebrows such was the level of volatility.


The demise of the bank and the antics of Mr Leeson have been told in detail by better briefed people than me. In passing I was surprised that Sir David Frost may have chucked in a penny of two in to the making of the film ‘The Rogue Trader’. – Leeson’s story, starring Euan McGregor.


The collapse of Baring Bros, I fear, was totally down to greed, ignorance of derivative products, inadequate accounting procedures and naive regulatory controls. Messrs Baring, Tuckey, Norris and Baker were not on top of their game. 1995 was the time credit officers suddenly became the most ‘key’ appointments whilst tighter regulatory control were implemented by Eddie George, the then Governor at the Bank of England and Rupert Pennant-Rea. Peter Baring upon his resignation never worked again and Peter Norris, having served a 4-year ban from the City was appointed chairman of Virgin Group in 2009.


 The Sunday Times’s Oliver Shah wrote a magnificent valedictory piece on the occasion of the retirement of Chris Gibson-Smith as chairman of the London Stock Exchange after 12 years at the age of 69. He was also appointed chairman of British Land in 2007. The business world has always told us that Mr Gibson-Smith has a massive intellect but when Dame Clara Furse, the CEO of the LSE endorsed his appointment as chairman– very few had ever heard of him. We knew that he was a senior appointee from BP’s treasury operation, but his name had never appeared in neon lights.


 Together with Dame Clara they doggedly rejected 5 takeover bid from Deutsche Boerse to the NYSE, which saw the share price rattle up from about £3.50 in 2003 to £18 in 2007 – fantastic for the shareholders but in the meantime the business was losing ground rapidly for a number of reasons. They bought a tiny Italian Borsa Italiana – not very inspiring or competitive in the grand scheme of things. Both Gibson-Smith and Furse failed to bring the rest of the world to London or take London to the rest of the world. Dame Clara also failed to land LIFFE, having carped over the price, losing out to Deutsche Boerse. This automatically disadvantaged the LSE, as futures were integral for expansion. The LSE also charged too much for execution of trades and its contact with its members was minimal – hence screen based trading platforms grabbed market share from the LSE. At one point Chi-Ex had 17% of the markets before being bought by BATS. Xavier Rolet was an inspirational appointment as CEO in May 2009, when equities were very depressed, with the LSE’s share price standing at 350p. Rolet has always been very innovative and progressive with international IPO business, bond business and excellent technology. He deserves great credit in contributing to the shares rallying to the best part of £25.08! I hardly think that Mr Gibson-Smith was the leading light over the LSE rising like the Phoenix from the ashes. Anyway I hope he enjoys his share option scheme in his retirement.


More on HSBC’s slightly disappointing results tomorrow – shares down 4.87% at 575p. Bovis posted a 46% increase in sales this year (unch at 950p) and AB Foods expect Primark sales to increase by 16% – up 1% at 3066p.





US companies posting interim results – Monday – TENET HEALTHCARE, Tuesday – TOLL BROTHERS, HOME DEPOT, DYNERGY, Wednesday – LIBERTY MEDIA, TJX, Thursday – KOHL’S, CHICO’S FAS & JC PENNEY.



David Buik – market commentator


Panmure Gordon & Co


+44 (0)20 7886 2775 – mobile – 07788 144 877

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


TODAY’S FAYRE – Sunday 22nd February 2015


I shut my eyes and all the world drops dead;

I lift my lids and all is born again.

(I think I made you up inside my head.)

The stars go waltzing out in blue and red,

And arbitrary blackness gallops in:

I shut my eyes and all the world drops dead.


I dreamed that you bewitched me into bed

And sung me moon-struck, kissed me quite insane.

(I think I made you up inside my head.)

God topples from the sky, hell’s fires fade:

Exit seraphim and Satan’s men:

I shut my eyes and all the world drops dead.

I fancied you’d return the way you said,

But I grow old and I forget your name.


(I think I made you up inside my head.)

I should have loved a thunderbird instead;

At least when spring comes they roar back again.

I shut my eyes and all the world drops dead.

(I think I made you up inside my head.)”




Sylvia Plath – poet – 1932-1963



   It was an absolute privilege to listen to Air Chief Marshall Sir Michael Graydon and Sir Andrew Wood the former British ambassador to Moscow being interviewed on BBC Today on Friday on the UK’S inadequate and depleted defence capabilities. It appears that the number of fighter aircraft in service has halved in the last 5 years.

Russia looks to be more threatening as a force of unreasonable aggression than at any time since the Bay of Pigs in 1962. Europe and the UK in particularly are hopelessly inadequately equipped against the might of a surprise Russian attack which might be geared to a military build-up in the Balkans. So much importance has been attached to Trident as a nuclear deterrent. Its value appears to have dissipated. As suggested by these two very articulate representatives from the military and diplomacy the government seems to have taken its eye off the ball and as for a President Obama’s arrogance in refusing to engage in a conversation with the tyrannical Russian leader – very short sighted!


It has become noticeable that the men of the cloth are becoming increasingly more involved and influential in political issues rather than their pastoral duties much to the chagrin of those who feel that politics is not the clergy’s role in society. In my long life I can never remember Church of England Bishops offering unqualified written advice to vote Labour at a forthcoming General Election – appalling!  The COE should not EVER discriminate politically!


It’s ‘Oscar’ night to tonight! Can I pick the winners from the ‘glitzy do’ at the Kodak Center? – Eddie Redmayne best actor, Juliana Moore best actress, ‘Birdman’ best film, Patricia Arquette best supporting actress, JK Simmons, best supporting actor. Mind you The Academy is a law unto itself. Anything can happen – very political!


The Greek/EU negotiations on Friday of renewing the bail-out facility for another 4 months; what a shambles! Well there was little evidence of negotiations. Germany’s Schauble gave an inch and Greece’s Varoufakis gave 10 miles! That was hardly what the electorate voted Syriza in to power for. The EU Dutch finance minister Jeroen Dijsselbloem muttered arrogantly about ‘trust’ being a vital ingredient for negotiation. Is that what he calls it? I call it bullying! Why does the EU/ECB/IMF have the propensity to use an economic sledge hammer to crack a financial peanut!

We know the Greeks don’t pay tax. They seem to have a revulsion towards the word. Notwithstanding that fact, so long as night follows day or we breathe air through our nostrils, Greece, a country of 11 million people, with insufficient industry and commerce to support a major economic recovery, will never ever be in a position to repay €240 billion of debt. So unless the EU is prepared to restructure the debt over a protracted period of time with something akin to a zero coupon, the current policy is just postponing the agony. Wake up EU! Smell the coffee. It’s time to facilitate an organised and assisted exit!


Last week was an odd one. With Putin remaining in a thoroughly bellicose frame of mind and seemingly offering little in the way of help to maintain the ceasefire in Ukraine, we should have been forgiven for thinking that markets might well have become more nervous than they did. Investors were also unfazed by the charades being played out by the EU and Greece. We always knew that some nonsense fudged rubbish would be cobbled together – totally unsustainable. Then there were signs of some growth in parts of the EU as well as the fact that France was coming out of its economic torpor on Friday with better than expected PPI data to put investors off the scent. So on the whole indices prospered with the S&P 500 and the NASDAQ reaching record levels before a small pull back. The FTSE 100 fell just 15 points short of an all-time record of 6930 at 6915.


Many believe that next week could be the week for the record to fall. The banking results from HSBC on Monday, RBS on Thursday and Lloyds Banking Group on Friday should not spoil the party. However the level of bonus distribution will cause further furore, particularly with Stuart Gulliver likely to take £7.2 million out of the ring in the wake of the Swiss tax crisis, with maybe £2.2 billion going to the global members of staff. . If the profits have been made why shouldn’t he? None of these issues were of his making! Antonio Horta-Osorio is likely to fill his boots with a similar amount from the Lloyds kitty, as LLOYDS is expected to post a profit of £7.5 billion up from £6.2 billion last year. It is thought that £30 million will be distributed to executives – the bank is still 25% owned by the taxpayer. What everyone wants to know is whether Lloyds will pay a dividend of £700 million to its patient shareholders. Let’s hope so. £175 million is expected to go back to the taxpayer.


As for RBS there may be a £4 billion write-down on the sale of Citizens Bank, but CEO Ross McEwan is expected to confirm that the bank is on a real course to recovery. He is expected to trouser an agreed £1 million. Bonuses in total for all the major banks may reach £3 billion – 15% lower than last year. Clearly salary compensations have been implemented.


Looking forward with so much political uncertainty to contend with including the run in to our general election, it would come as no surprise if markets eventually became even more volatile, resulting in a pull-back. Time alone will tell. The price of oil continues to bob around like a cork in a bath settling down at Nymex $51 and Brent $60 a barrel.


Last week the S&P 500 surrendered a modest 0.08%, the FTSE 100 rallied by 0.61%, the European bourses by an average of 1.49% and Tokyo’s Nikkei by 2.34% thanks to better export data and the promise that further stimulus packages, which will be implemented if the recovery continues to remain fragile. At the end of the week on the Street of Dreams Newmont Mining shone like a beacon in adding 6% in value despite gold prices falling sharply in the last year. Norsdtrom from retail was 2% to the good. In London Bank of Georgia missed and its shares were clattered by 11.2%. Kingfisher was the subject of a downgrade -1.9% and Serco’s lot in life continues to improve – +5.9%. Standard Life posted good numbers on Friday – +2%. All insurance companies seem to be riding the crest of a wave at present – stock markets have been buoyant.


It was a good week for Tesco with John Allan of Dixons Carphone being appointed the new chairman. It must have been a close run thing between Mr Allan and Archie Norman. Andy Higginson, having done a brilliant job at Poundland since leaving Tesco 2 years ago and having surprisingly missed out in having his group approved to run TSB will shortly start as Chairman of Morrison’s. He may look to a former Tesco executive to become CEO in place of Dalton Phillips – David Potts aged 57, who started life at Tesco as a shelf stacker age





US companies posting interim results – Monday – TENET HEALTHCARE, Tuesday – TOLL BROTHERS, HOME DEPOT, DYNERGY, Wednesday – LIBERTY MEDIA, TJX, Thursday – KOHL’S, CHICO’S FAS & JC PENNEY.



David Buik – market commentator


Panmure Gordon & Co


+44 (0)20 7886 2775 – mobile – 07788 144 877

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


Wolfgang Schäuble – A bitter man’s last Hurrah?
by Graham Reid &| JR Max Wheel
19 February 2015
The Eurozone is on the brink of disaster as the German Minister of Finance is “standing firm” on what he calls his principles and Greece is asking for “time to pay” which he denies them.
No-one disputes that Greece has overspent and under collected, but how will it serve European and Western economies if the Euro is brought down by such an insignificant problem in the overall context.
Is this an elderly man, who has been rejected for every position he has ever coveted, displaying his vindictiveness by using his last vestiges of power before he takes himself and those who have thwarted him into the abyss.
Maybe Chancellor Merkel will rise above this petty man, rid us of him from the scene and demonstrate her powers of Statesmanship to settle the differences in a mature manner.
Let us remind ourselves of Schäuble’s biography:
In November 1991, Schäuble became the Christian Democrats’ parliamentary floor leader making him Helmut Kohl’s likely heir-apparent as Chancellor. In 1997 Kohl confirmed Schäuble as his desired candidate but did not want to hand over power until 2002 when the European monetary union would be completed with the introduction of the Euro.
The CDU/CSU lost the 1998 election and Schäuble never became Chancellor.
He became Chairman of the CDU but gave up this post in 2000 in the wake of the party financing scandal, over the acceptance of cash donation over DM 100,000 contributed by the arms dealer and lobbyist Karlheinz Schreiber in 1994.
Schäuble’s successor was Angela Merkel.
Next, in 2001, when Eberhard Diepgenfter was voted out as mayor of Berlin, Schäuble was favourite to succeed him but was rejected by the Berlin branch of the CDU.
In 2004, Schäuble was tipped to be a candidate for the office of German President but failed to gain the CDUs party nomination because Merkel would not endorse him.
He became Minister of Finance in 2009.
In 2012, when Jean-Claude Juncker resigned as President of the Eurogroup (Eurozone Finance Ministers), Merkel pressed for Schäuble to replace him. Jeroen Dijsselbloem got the job instead. (Rejected yet again.)
Again, in 2012, he refused calls from the IMF, Lagarde, to give Greece additional time to make the spending cuts to reduce deficits and the Greek President, Papoulias accused him of insulting Greece.
In 2013, Socrates, former Portuguese Prime Minister accused him of placing negative news in the media against Portugal prior to their bailout and called him a “Sly Minister of Finance”.
Are all the other Finance Ministers of Europe so weak that they are are going to stand aside and watch this sad and spent old man destroy so much?


Though the markets are rather somnolent or insipid today, certainly the international and political climates are anything but; they look like minefields!  Certainly news of a scramble to keep Russian aircraft at bay off Cornwall rattled my cage this morning.  One day in the not too distant future, there is going to be an almighty accident, which could have grave consequences. So much for the Ukraine ceasefire!  It shows little signs of holding.  Putin is just messing about with Merkel and Hollande, Obama’s two ‘sirrahs’, as he spends time attempting to regroup.   No Russian leader has ever held the West in such wholesale contempt since the days of Krushchev and Breznhev. We live in dangerous times and it is a great pity, President Obama will not engage in a conversation with the jingoistic Putin.  If he were seen to and it all came to naught, at least he tried.  I have to confess that I am horrified at the perceived ambivalence of Obama and Cameron. We are almost back to the days of the ‘Bay of Pigs’ in Cuba – 1962



My colleague Simon French noticed in today’s ECB minutes, which are more transparent than before that Germany never voted for QE.   This is what he analysed – “Those ECB minutes (actually they are being called “accounts”) show a “large majority”, but not universal support, for the ECB’s QE program. So as expected the Germans were against and Draghi pushed things through on a majority vote. The more interesting element of the accounts says that QE is for investment grade assets and “for countries under EU/IMF adjustment programmes”. Translated this means if Greece leaves the troika program then they will not have their bonds bought. This had been widely touted but now confirmed in the minutes – looks a lot like a German trap. Greek debt yields that have been falling all day in the hope of an agreement are showing signs of life….”



Nonetheless the market is wholly ‘chilled out’ Market activists think there will be fudged agreement with Greece.  Otherwise it is the beginning of the end of the EU or if you prefer the ‘beautiful dream!’ Greece and all members states know that.



Simon French also informs us – “HOWEVER the FT is reporting that the Germans have rejected the bail-out extension terms offered by the Greeks – it confirms that the Germans are not up for a compromise on Greek austerity. I still think a debt deal will be done by next Friday and we are not at the Grexit yet BUT when the Germans are effectively dictating fiscal policy in Athens that is when the end game moves materially closer. What has just happened looks dangerously like that and therefore the most material development since Syriza were elected in my opinion. SYRIZA are being told – YOU MAY NOT BE ABLE TO DECIDE YOUR OWN DESTINY.  What a conundrum for the electorate – 70% want to stay in, but regardless of the terms?”



On the domestic front politically; even though in some of the marginal there is little evidence for a UKIP breakthrough, UKIP support could eventually start to drain away further as we head closer to Election Day. It’s been a good week for the Tories defusing the Lord Fink affair and very good UK macro data.