TODAY’S FAYRE – Tuesday, 29th December 2015
Looking up at the stars, I know quite well
That, for all they care, I can go to hell,
But on earth indifference is the least
We have to dread from man or beast.
How should we like it were stars to burn
With a passion for us we could not return?
If equal affection cannot be,
Let the more loving one be me.
Admirer as I think I am
Of stars that do not give a damn,
I cannot, now I see them, say
I missed one terribly all day.
Were all stars to disappear or die,
I should learn to look at an empty sky
And feel its total dark sublime,
Though this might take me a little time.”
WH Auden – poet – 1907-1973
I was given the most wonderful DVD for Christmas – “I believe in Miracles.” It’s the documentary on how Brian Clough, aided and abetted by his assistant Peter Taylor put Nottingham Forest back on the map as a serious football club, back in the late ‘70s. For football fanatics these revelations are a nostalgic must. Forest were languishing mid-table in the 2nd division. Brian Clough and Peter Taylor, after great success at Derby County followed by short ignominious stints at Brighton and Leeds United, galvanised this team with shrewd buys and instilling belief and team spirit, drove Forest out of the 2nd division in 1977 to win the First Division Championship in 1978 and the European Cup in 1979 and again in 1980.
Peter Shilton, Viv Anderson, Frank Clarke, Colin Barratt, David Needham, John McGovern, Larry Lloyd, Ken Burns, Ian Bowyer, John Robertson, Tony Woodcock, Trevor Francis, Gary Birtles, Archie Gemmell, John O’Hare and Martin O’Neill are all names to conjure with. Their success could only be described as modern-day fairy tale. The different qualities required 35 years ago to win multiple cups and competitions and those of today bear little resemblance. Brian Clough sadly passed away in 2004 after a liver transplant followed by cancer aged 69. What a man? He may have been called ‘Bug Head!’ but what an achiever!
Boxing Day’s King George, won by ‘Cue Card’ on the nod from Mullins/Ricci’s ‘Vautour’, who probably did not stay, suggests we may not have seen the winner of the Gold Cup yet. ‘Don Cossack’ fell (he needs better ground) and two strong Irish contenders wait in the wings – ‘Road to Riches’, ‘Don Poli’ and ‘Djakadam’, not forgetting last year’s English bred and trained the brilliant ‘Coneygree’
The ‘Santa rally’ to me is out of all proportion. Large oil companies and a coteries of mining stocks, savagely trashed throughout the year have been the main component beneficiaries of the recent surge in their respective share prices – Shell, BP, Anglo, Glencore, BHP Billiton and Rio to mention the main dramatis personae. Technology, drugs and banks have also made measurable gains. My shrewd colleague, Paul Modlock flagged up Standard Chartered Bank as a stock to lump on and how right he has been – up over 10% in the last 3 weeks. One suspects that if Bill Winters, this banking titan’s CEO has been visceral enough in making management changes, there will certainly be more to come. As examples, since 12th December 2015, provided today forecasted gains don’t run out of steam the FTSE 100 has rallied by 6.62%, the DAX by 4.91% and the DOW by a rather muted and realistic 1.18%.
We have heard the likes of BBC’S Joe Lynam consistently extol the virtues of gargantuan sales on the high street before and after Christmas. Many have posted record levels of activity. However the market and many bear traders have remained cynical, keeping many of the ‘shorts’ on until the main retail operators post trading statements in the first 2 weeks of 2016. Why? There is no food or clothes inflation, thus forcing many of the top brand names to go to war with unrealistically large discounts to shift stock. The high street has had 50% discounts on offer for a month. The consumer has become very savvy and is now always looking for the next bargain. In the first week of 2016 the market will be updated by NEXT, John Lewis, Poundland and M&S. The following week AB Foods (Primark), Burberry, Mothercare and Home Retail step up to the plate. Then there are the efforts over Christmas of Tesco (14th January), Sainsbury (13th January) and Morrison (12th January) to consider. It is interesting to note that following in the wake of Warren Buffett divesting Berkshire Hathaway from its investment in Tesco, Norway’s pension fund recently sold 27 million shares in The UK’S largest supermarket, taking its stake below 6%.
There is such respect for Lord Wolfson and NEXT, that this retail emporium may well escape vituperative treatment, but one would be less than confident that Burberry, Poundland, Mothercare or Home Retail would be immune from the wrath of hedge funds if their efforts do not pass muster.
The uncertainty of interest rate movements, the EU Referendum and the outcome of the General Election accounted for the fact that the IPO market and M&A activity has been very patchy, though some really decent deals did manifest themselves. Though there is still the likelihood that Shell will bed down with BG and that Astra, GSK and Shire could be either on the acquisition trail or be under attack from other predators. Expect media and mobiles to be knocking at the door of opportunity. Also many splendid SMES may well provide the best hunting grounds for corporate activity. There are high expectations that Clydesdale, Yorkshire Bank, Metro Bank, Vue Cinemas, United Biscuits, First Utility and Brakes will be brought to the sacrificial altar of initial public offerings. I was mildly amused that ITV denied all knowledge of having had its lapels tugged by Comcast.
We welcomed Worldpay, Provident Financial and DCC in to the FTSE 100 last week and bid a fond ‘sayonara’ to Wm Morrisom, Meggitt and G4S.The fact that the US only produced a 2% increase on an annualised basis in 4th quarter GDP (down from 2.1%) just before Christmas went almost unnoticed. Investors were surprisingly unconcerned. However here in Old Blighty there were a few cocked eyebrows at the rather indifferent performance of 3rd quarter UK GDP with postings of 0.4%. As the EU referendum muscles its way towards the top of the UK political agenda, the marginally lack-lustre indecisiveness of the outcome may be more damaging for the UK’s economy than many think.
Market Commentator – Panmure Gordon & Co