TODAY’S FAYRE – Sunday, 22nd November 2015


“When I have fears that I may cease to be

Before my pen has glean’d my teeming brain,

Before high-piled books, in charactery,

Hold like rich garners the full ripen’d grain;

When I behold, upon the night’s starr’d face,

Huge cloudy symbols of a high romance,

And think that I may never live to trace

Their shadows, with the magic hand of chance;

And when I feel, fair creature of an hour,

That I shall never look upon thee more,

Never have relish in the faery power

Of unreflecting love;–then on the shore

Of the wide world I stand alone, and think

Till love and fame to nothingness do sink.”


John Keats – poet – 1795-1821


Baroness Thatcher resigned as Prime Minister 25 years ago to the day.


I was very distressed to hear that at the age of 87, ‘Jungle Jimmy Hill’ was suffering so severely from Alzheimer’s. You would probably have to be 50 years of age to appreciate what this very moderate inside forward, who played most of his football at Fulham in ’50s and ’60s, did for the players of his era. As chairman of the PFA in 1959 he introduced the fist £100 a week wage, which his colleague at Fulham, Johnny Haynes, was one of the first beneficiaries. He then put Coventry City on the map as a force in 1st division football by 1967, having taken the ‘Sky Blues’ from 3rd division in 1963. He, then for many years became a highly respected football pundit on BBC’S MOTD!


Much as I have been a huge admirer of Ian Bell over the years and still am, as one of England’s best and most graceful batsmen, Trevor Bayliss, England’s chief coach and the selectors were right to omit him from the forthcoming tour of South Africa. Why? Simply because he does not make the number of runs he used to in the past. The game is about confidence and application. They will return to a player of his undoubted class. When the sun is high over the yard arm in the ‘merry month of May’ 2016, Ian Bell will be there or thereabouts!


Jim Slater, one of the great entrepreneurs and merchant bankers of the ‘60s & ‘70s until Slater Walker folded in 1977, died aged 86 last Thursday. I remember one apocryphal story told by his land agent, when Jim started to get very excited about property and land. Jim expressed an interest to buy a great deal of land just south of his home which, I think at the time was near Cranleigh. When asked how far he should go in increasing his portfolio, Slater suggested it might be time to stop when the sea was reached! – RIP


Last week’s activity in global markets, particularly in equities, seemed too surreal to me. The significant rally in equity valuations seems more based on emotional reactions to the barbarous attacks on the delightful people of Paris by ISIS, rather than economic or business based reality. ‘Go to hell seems to be the cry! You’ll never knock democracy over!’ Yes, there were modest signs of improving economic conditions in China, though Abenomics has still having very little positive effect on Japan’s economy. Global growth seems to be showing some minuscule green shoots of recovery – why I use that idiom, I do not know, as I dislike it intensely. I accept that the FED is almost ‘gung-ho’ about rasping rates in December unless November’s non-farm payroll numbers are disappointing and that I doubt. The ECB’S Mario Draghi seems to be preparing to get his big bazooka out in terms of more ‘QE’ on 3rd December, which I suppose gives succour to equity values. 



Despite all these little nuggets of encouragement, the lack of inflation plus narrowing margins is surely affecting corporate profits. Hence all these gargantuan mergers to maintain shareholder value with greater market penetration coupled with a consistent flow of share buy-backs, which are so necessary to keep momentum for equities on the move. Personally I am concerned about the very mixed messages the US retail sector is sending us. Yes Wal-Mart’s numbers last Wednesday were encouraging, but Target, Macy’s and Nordstrom were way short of the mark. ‘Thanksgiving’ is next weekend; easily the most important weekend in the US retail calendar as well as being the main barometer as to the robustness of the US economy, will be key, as will Black Friday be for the UK. Michael Stewart, Panmure’s talented retail analysts understands that Google Search believes that volumes could be 3.4 times what they were in 2014. One suspects that the likes of Amazon may well be the real barometer of activity rather than any single retailer.


It should not be forgotten, though rarely mentioned in dispatches, concern is building up over the lack of liquidity in the bond market, including gilts and few fixed interest technicians like the idea of interest rate spreads turning negative. Anyway the summation of all these idiosyncrasies, some of them less than positive, which have been manifesting themselves last week resulted in most global indices making measurable gains, few of them down to great corporate results or particularly upbeat company news. The S&P 500 rallied by 3.35% last week, with the FTSE 100 eclipsing that gain – up 3.54%. European stocks rose by an average of 3.23%, with the NIKKEI putting in a solid rather than spectacular performance – +1.44%.


On the Street of Dreams Nike’s shares jumped 4% – the best performing DOW stock last week. Having complained about the US retail sector there were some outstanding performances on Friday – Ross Stores +10%, Foot Locker +7% and Abercrombie & Fitch up a gargantuan 20%. Square made a glitter IPO debut adding 45% on the first days’ trading.


In London, the rally was across the spectrum with oil and mining stocks recovering particularly well, despite there being little evidence of any pick up in raw material prices. Johnson Matthey added 9% thanks to a special dividend. On Thursday Poundland eased by 20% thanks to terrible numbers and Royal Mail, despite profits falling 30% saw its shares add 5% in value thanks to good cost controls and aspirations for a good Christmas. After the terrorist attacks in Paris investors were reluctant to support airlines and the travel sector. As the week progressed easyJet cracked on, thanks to decent numbers. The Sunday Times tells us that there may be predators for the owners of Argos and Homebase – Home a Retail for circa £1 billion.

The banking sector enjoyed a macabre week. In Holland ABN-AMRO roselike the Phoenix from the ashes in an IPO, where the government raised €3 billion by selling of 20% of the bank (28 million shares) at €17.75 per share and took a loss. Many will recall that RBS bought the investment banking operation for €23 billion, whilst the rest of the operation was sold to Fortis Bank and Santander.

On Thursday, after seven years, Sir Andrew Green QC’s report on HBOS was finally posted – about 4 years too late. Though 10 senior HBOS officials, including Lord Stevenson, James Crosby and Andy Hornby may eventually be precluded from being employed in financial employment, few including the government or regulators come out of this debacle with even a modicum of credit. Despite a £5 billion rights issue in the summer of 2008, this irresponsibly led bank was bedded down in Lloyds Bank with indecent haste, which resulted in the merged operation being bailed out by the taxpayer for £25 billion. HBOS’S eventual total loss was £52.6 billion of which £44 billion was credit related and the rest was securities, equity holdings and trading. At that time KPMG were alleged to have been asked to ‘go easy’ on some impairment charges. Also I am gobsmacked the the FSA and HBOS’s board were still talking about acquiring Bradford & Bingley at the end of September 2008 – 2 weeks after Lehman Bros went down. That is a terrible indictment. Thank goodness the FSA today bears no resemblance to the inadequate regulator it was then.

Finally to Wednesday’s Autumn statement, look to Panmure’s Simon French in the early part of next week for his assessment of Chancellor Osborne’s plans. I suspect that the Chancellor will want to cut the deficit by maybe as much as £20 billion, which could include 50k civil service jobs, maybe even some tax breaks for manufacturers and entrepreneurs. The borrowing for the year may overshoot by £10 billion. The figure was supposed to be £69.5 billion but could end up being £80 billion. With health, pensions, income tax and NI ring fenced, the cuts are likely to come from BIS, Defence, Home Office and Justice. We shall see – all will be revealed.



US companies posting interim results – TYSON FOODS, Tuesday – CHICO’S FAS, HORMEL FOODS, FRED’S, TIFFANY’S, DOLLAR TREE, Wednesday – DONALDSON




David Buik


Market Commentator – Panmure Gordon & Co


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