TODAY’S FAYRE – Sunday, 15th May 2016
“Late August, given heavy rain and sun
For a full week, the blackberries would ripen.
At first, just one, a glossy purple clot
Among others, red, green, hard as a knot.
You ate that first one and its flesh was sweet
Like thickened wine: summer’s blood was in it
Leaving stains upon the tongue and lust for
Picking. Then red ones inked up and that hunger
Sent us out with milk cans, pea tins, jam-pots
Where briars scratched and wet grass bleached our boots.
Round hayfields, cornfields and potato-drills
We trekked and picked until the cans were full
Until the tinkling bottom had been covered
With green ones, and on top big dark blobs burned
Like a plate of eyes. Our hands were peppered
With thorn pricks, our palms sticky as Bluebeard’s.
We hoarded the fresh berries in the byre.
But when the bath was filled we found a fur,
A rat-grey fungus, glutting on our cache.
The juice was stinking too. Once off the bush
The fruit fermented, the sweet flesh would turn sour.
I always felt like crying. It wasn’t fair
That all the lovely canfuls smelt of rot.
Each year I hoped they’d keep, knew they would not.”
Seamus Heaney – poet – 1939-2013
If the truth be told, I don’t think PM David Cameron ever thought his bluff would be called, forcing him to hold a referendum on membership of the EU. I think he felt another coalition government would be formed last May, thus enabling him to shelve the idea, as the Lib-Dems would never have countenanced it, nor would Labour. So I think he was wrong-footed. What was regrettable was that he came back from his endeavours in Brussels almost empty handed in terms of tangible achievements.
So now we have a really unpleasant bad-tempered campaign on our hands, with government ministers at each other’s throats in a manner that will not be conducive for harmony required to govern a country efficiently and well.
Messrs Cameron and Osborne have to win for ‘Remain’ or their authority to govern in the future, will be in tatters. That I understand – hence vigorous evidence of the government enlisting the help of August independent bodies to post fanciful forecasts and dire warnings as to the damage that BREXIT would have on the UK economy. You couldn’t get a stronger ‘batting line-up’ of the President of USA, the BOE, the Treasury, the IMF, the OECD, the CBI, the BCC and the NIESR, if you tried. These contributors, which conveniently support the Government’s case suggests collusion. This has of course, been ferociously denied by all parties. Isn’t it strange that Mme Lagarde was appointed CEO of IMF thanks to UK’s support? The office is up for grabs again in July? She said support for “Remain” was not political! No one is doubting anyone’s integrity; this is politics, dear boy, politics! If I were the PM and the Chancellor, I would have adopted exactly the same ruthless stance. However there is a price to pay by attempting to insult people’s intelligence. It was folly to do so!
The ‘Vote Leave’ protagonists have been lined up against the wall and trust me, they will fight back. The average person in the street does not like being bullied, particularly by people and bodies unconnected with daily life here in Old Blighty. Here, we have the establishment against the plebs or the troglodytes. Most were hoping that robust exchanges on trading opportunities and the UK’s ability to decide its own destiny would be sufficient fuel to chuck on the fire of debate. Sadly this is not the case and it will get worse as we head towards 23rd June. I have this sinking feeling in my stomach that the EU immigration crisis will bring significant influence to bear on the outcome to this Referendum, such is the unpleasant undertone to the campaign. That is a great pity! But at the moment it is ‘dog eat dog’ out there!
We understand that the IMF will come out with a very downbeat and toxic report on ‘HAMMER BREXIT’ a week before the referendum. The ‘OUT’ brigade will no doubt counter these findings with visceral comments on the implosion of immigration! The debate temperature will reach boiling point! Finally the irony me for me is that a few months ago PM Cameron and Sir John Major said the UK would be OK in the event of BREXIT – now it is only ‘death & destruction!’
Last week was another tumultuous one – not so much from a corporate news or results but more an economic and political perspective. The content of Thursday’s BOE Inflation report, suggesting that rates may have to go up in November to combat rising inflation, triggered by rising petrol prices, paled in to insignificance in comparison to Governor Carney’s controversial intervention in to the EU debate. Despite his protestations Mr Carney came galloping to the Chancellor’s aid, all but promising higher house prices, inflation and a massive drop in growth. The BOE has a duty of care, but fanciful long-term forecasting could be construed as counterproductive. Not surprisingly the ‘Vote Leave’ campaign were galvanised into repudiating these threats. One could be forgiven for thinking the BOE is no longer an independent body. This the third time and probably not the last that Mr Carney has thrown his two-cents worth in to the ring. I suppose I should finish off my comments on the Inflation Report by saying the Governor believes inflation could rise measurably above the accepted 2% threshold by the end of the year.
For much of the week global equities put in sluggish performances. Despite US Retail sales rising by 1.3% in April, Consumer Confidence reaching its highest level for 11 months and crude oil rallying by 5%+ over the week, the three main indices failed to get themselves out of second gear, apart from a sharp 1%+ spurt on Wednesday. Chinese stocks had little to crow about thanks to anaemic economic data, falling growth, indifferent trading figures and concern about the robustness of its banking sector. Japan returned from its Golden week holiday to some positive effect with the Nikkei adding 1.9%. The S&P added 0.23% last week, with the FTSE improving by much the same +0.21% and European stocks by circa 0.97%. The earning season has not floated many peoples’ boats as the lack of inflation has contribute to the lack of margins and therefore profits. However Eurozone stocks outperformed the FTSE in response to the ECB’S relentless quest to find other stimulus packages. There were a few notable performances in London such as Vedanta Resources from a very over-trashed level and SuperGroup (+9%) on Thursday and on Friday it was good to see Tesco attempting to rise like the phoenix from the ashes.
A year ago Apple’s share price stood at $129. On Friday it closed at $90 and change – down 30.2 %. The drop was attributed to the fall in growth of the Chinese economy and the fact that Apple’s revenues fell for the first time in 51 quarters. Also why were there no news gismos in Tim Cook’s toy box? With a view to rekindling interest in the world’s greatest brand, Apple will be investing $1 billion in the Chinese ride-hailing app, Didi Chuxing. It is hoped that this association will help to build alliances across the tech world particularly in China and the rest of Asia, where its current influence has been waning, as flagged up by Carl Icahn, who has recently sold his holding. It will be interesting to see what the reaction is.
The authorities have had the drains up on the fall from grace of RBS in 2008 They have sieved through 160,000 documents since 2011 and have failed to find sufficient evidence to bring criminal charges against Fred Goodwin and his colleagues. I think we often forget that there is a huge difference between financial incompetence, reckless behaviour driven by light regulation and fraudulent behaviour. Goodwin and his colleagues were very well remunerated but it was in their interest to see that the bank was run in a fit and proper way in order to collect their bonuses. This, of course, they failed to do and I have always felt that the non-executive directors were never vilified enough for the participation in the fall of this gargantuan bank. Many feel that the non-executives drove the management relentlessly to deliver more shareholder value by forcing them to head on down the acquisition trail in an aggressive manner, buying assets they knew little about. Due to IT setbacks concerning the W&G IPO, RBS and its advisors are considering an IPO or sell-off of Nat WEST.
The Sir Philip Green/Dominic Chappell/BHS saga is beginning to unveil and the pension trustees and regulators do not appear to have come out of this financial shambles any better than the dramatis personae. It is early days and I am not sure that any date has been fixed for Sir Philip and Mr Chappell to appear before the two select committees. There are supposedly 7 possible predators to buy BHS. I have my doubts. Perhaps Sports Direct is live and maybe Edinburgh Woollen Mills and Peacock’s former owner, Philip Day may buy part of the emporium. It is understood that Goldman Sachs may be summoned to Portcullis House to explain their role on the £1 sale of BHS to Dominic Chappell’s consortium.
The Tata Steel purchase by Liberty or the management may have been made more attractive by the fact that the government may contribute/underwrite £2.5 billion of the £15 billion pension black hole/liabilities. It is still a big ask when one considers the tortuous and uncertain future for the steel industry. The regulators seem to have put the kibosh on the £10.3 billion acquisition of 02 by Three (Hutchinson) on concerns of the dilution of competition. So much protectionism – why can’t companies charge what the traffic will bear? The Sunday Telegraph believes that Royal Dutch Shell is considering hiving of $40 billion of non-core businesses with a view to cutting its $70 billion incurred in buying BG Group.
UK companies posting results – Monday – BRITISH LAND, LONMIN, Tuesday – VODAFONE, LAND SECURITIES, ENTERPRISE INNS, SPEEDY HIRE, PREMIER FOODS, Wednesday – BURBERRY, SAB MILLER, SSE, Thursday – THOS COOK, ROYAL MAIL, BOOKER, HARGREAVES LANSDOWN, MITCHELLS & BUTLER, 3iii, MERLIN ENTERTAINMENT, NATIONAL GRID
US companies posting interim results – Tuesday – TJK, Wednesday – AMERICAN EAGLE, TARGET, STAPLES, CISCO SYSTEMS, URBAN OUTFITTERS, Thursday – APOLLO, WAL-MART, APPLIED MATERIALS, ROSS STORES, GAP, Friday – FOOT LOCKER
Economic Data – Tuesday – UK CPI, US INDUSTRIAL PRODUCTION, Wednesday – UK EMPLOYMENT DATA, US FOMC MINUTES, Thursday – UK RETAIL SALES, US INITIAL JOBLESS CLAIMS, Friday – US EXISTING HOME SALES
Market Commentator – Panmure Gordon & Co
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