TODAY’S FAYRE – Sunday 7th March 2015




I must down to the seas again, to the lonely sea and the sky,

And all I ask is a tall ship and a star to steer her by,

And the wheel’s kick and the wind’s song and the white sail’s shaking,

And a grey mist on the sea’s face, and a grey dawn breaking.

I must down to the seas again, for the call of the running tide

Is a wild call and a clear call that may not be denied;

And all I ask is a windy day with the white clouds flying,

And the flung spray and the blown spume, and the sea-gulls crying.

I must down to the seas again, to the vagrant gypsy life,

To the gull’s way and the whale’s way where the wind’s like a whetted knife;

And all I ask is a merry yarn from a laughing fellow-rover

And quiet sleep and a sweet dream when the long trick’s over.”


John Masefield – poet laureate – 1878-1967



After more years than I care to think about, I went as a former player to the 150th anniversary dinner of Hampstead Cricket Club in the Long Room at Lord’s. A visit to cricket’s Mecca is always an uplifting occasion. MCC President Mike Gatting and Middlesex’s chief executive Angus Fraser were the guests of honour. ‘Gatt’ has great charm and it is easy to understand why he was such a popular President. Unbeknown to me the actor Jim Carter – alias Carson from Downton Abbey – is the chairman of the club. It was wonderful that he and his lovely and talented wife, Imelda Staunton should grace this very happy and enjoyable occasion, which allowed me to catch up with old friends.



Looking what happened to global equity indices last week – S&P 500 +0.16%, FTSE 100 +0.61%, Eurofirst 300 +0.81% and the NIKKEI +0.26% – you would be forgiven for thinking that trading conditions were quiet. Well the market was understandably not exactly on fire, due to the fact that there were so many economic, political and corporate imponderables that manifested themselves almost on a daily basis.



In no particularly order of priority there was the ECB meeting on Thursday, which confirmed that that the QE facility of E1.1 trillion could be drawn upon by European banks from 9th March 2015. But there was one rather large proviso. Bunds with a maturity of less than 3 years could not be used as collateral as the yield was less than 0.2%. Therefore it is inevitable that corporate bonds or longer dated securities will have to be sucked in and therefore used to meet the criteria. This is very different to what had been originally expected. On the same day the MPC committee left rates (0.5%) and QE facilities unchanged for the 72 month in succession. If wage inflation rises a hike in rates may be contemplated in the 3rd quarter but it might be folly to hold your breath. The ECB’s Mario Draghi seems determined that the implementation of QE will do the trick for the resurgence of the EU’S economy and consequently announced that he had raised the EU’s growth target for 2015 to 1.5% from 1%! – Allelujah! Though the Euro fell briefly below $1.10, which will help exports particularly for Germany, it is by no means guaranteed that this can sustain growth, particularly if relations with Russia deteriorate. Increasing concern that growth in China is not as robust as was hoped certainly adds to the proliferation of investors’ wrinkled brows, though February’s exports were up 48.9% on the year based on Yuan terms announced on Sunday.


Many investors kept their powder dry awaiting Friday’s Non-Farm Payrolls, which beat expectations thanks to the Labor Department reporting that there were job gains in a number of sectors including construction, health care, and transportation. There were also job gains in food and drinks outlets, professional and business services, and warehousing. 295k jobs were created in February 2015 with the unemployment rate dropping to 5.5%. Wage inflation came in at 2% – adequate progress but not sensational. These numbers were received with a degree of relief as the ADP index on Wednesday told us that only 212k jobs in the private sector had been created in February. Fed Chairman Yellen may signal a hike for the late summer if the economic data remains robust.


There was considerable comment about bonuses at HSBC on Monday post the Swiss taxation debacle, which was followed by RBS’s Ross McEwan announcing that 14,000 investment banking personnel would be made redundant just leaving 4000 in situ. As we all expected UK banks are being converted in to Boring Bank PLC, thanks to an imposed change in culture and a heavy increase in capital requirements. Chancellor George Osborne announced that in hindsight he wished he had imposed for more radical changes at RBS, which would have enabled the bank to have been returned to the private sector more quickly. In my humble opinion this is an incorrect summation. I think everyone underestimates how difficult it was to cut RBS balance sheet down from £2.2 trillion to £1.1 trillion in 5 years and what an outstanding job Stephen Hester did for which he was given insufficient credit. All the furore about last year’s bonuses is completely unwarranted. If RBS is to remain in division one for the sector its key people must be rewarded in a commensurate manner to compete globally.


Then came the exposure of the SFO’S investigation in to bank manipulation of rates, which may have some BOE involvement – reputedly one – even though it may only be knowledge after the fact. The media and the politicians will be dining out on this for months rubbishing all and sundry for the sake of good order, rather than just wait for the findings. I feel particularly sorry for Sir Paul Tucker and Sir John Gieve, who did as well as anyone could expect in the circumstances in dealing with liquidity which had dried up from wholesale markets, particularly as Gordon Brown prevaricated for days from making any decisions of note. In fact their performances and contributions were exemplary. I also have NEVER understood why these investigations take such an unnecessary and inordinate length of time to make a judgement.


On the Street of Dreams there were two major points of issue that captured the imagination last week. Firstly Apple will replace AT&T as one of the constituent stocks in the DOW. This company is valued at $736 billion and its share price has rallied by 21% so far this year and by about 65% since last April when the shares were split with an offer of 7 for 1 ($75 each share value). The second point concerned the drug sector, which has selected another gear in the last 6 months, with ABBvie, which failed to buy Shire Pharmaceuticals last year, beating of Johnson & Johnson to buy Pharmacyclics (maker of leukaemia drugs) in a $21 billion deal (58% cash and the rest in shares). This follows in the wake of Valeant buying Salix for $14 billion, Pfizer buying Hospira for $17 billion and Shire acquiring NPS Pharma for $5.2 billion. Etsy, the on line market for vintage and hand-made goods posted their intention to raise $100 million by way of an IPO.


Here in the UK, Thos Cook sold 5% of its shares to Fuson of China for £91 million with a chance of another 5% heading China’s way. Fuson recently acquired Club Med. Fuson is China’s answer to Warren Buffett. It is a conglomerate put together by 4 Shanghai graduates, who each put in $4k. The company is now worth $7 billion. This Cook’s shares rose by close to 20%. Other shares to do well last week included Betfair – up 17%, Aviva up 7% and Serco up 5.3%. Allied Irish Banks is now back in the black and the Irish government plan to see 25% back to the public this year. BP is making a brave attempt to keep its show on the road by agreeing a $12 billion investment in a West Nile Delta project split with its old adversary at TNK-BP – Mikhail Fridman!


When Morrison’s post numbers on Thursday, many believe the Bradford based supermarket could drop its dividend by 60%. It looks as though retail price wars may have affected employees’ bonuses at John Lewis by as much as a third. Sir Philip Green is said to be mulling over a bid for BHS from a conglomerate that includes an old colleague, Tony, Brown, Apollo and a US private equity company. Angel Trains which owns a third of the UK railways systems may be put up for sale through Citigroup, having been previously parcelled up and sold to international investors by RBS for £3.6 billion. Finally George Osborne is expected to close loopholes for avoiding tax adopted by the likes of Google, Amazon and Starbucks – a tasty electioneering morsel in the Budget on 18th March 2015.






US companies posting interim results – Monday – KORN/FERRY, URBAN OUTFITTERS, Tuesday – BARNES & NOBLE, CASEY’S, Wednesday – KRISPY KREME, ZOE’S KITCHEN, Thursday – MEN’S WEARHOUSE, REVLON, AEROPOSTALE


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


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