TODAY’S FAYRE – Tuesday, 26th July 2016


O, reason not the need! Our basest beggars 
Are in the poorest thing superfluous.
Allow not nature more than nature needs,
Man’s life is cheap as beast’s. Thou art a lady:
If only to go warm were gorgeous,
Why, nature needs not what thou gorgeous wear’st
Which scarcely keeps thee warm. But, for true need-
You heavens, give me that patience, patience I need!
You see me here, you gods, a poor old man,
As full of grief as age; wretched in both.
If it be you that stirs these daughters’ hearts
Against their father, fool me not so much
To bear it tamely; touch me with noble anger,
And let not women’s weapons, water drops,
Stain my man’s cheeks! No, you unnatural hags!
I will have such revenges on you both
That all the world shall- I will do such things-
What they are yet, I know not; but they shall be
The terrors of the earth! You think I’ll weep.
No, I’ll not weep.
I have full cause of weeping, but this heart
Shall break into a hundred thousand flaws
Or ere I’ll weep. O fool, I shall go mad!”


The Tragedy of King Lear


William Shakespeare – poet & playwright – 1564-1616



“Or take the right to vote. In principle, it is a great privilege. In practice, as recent history has repeatedly shown, the right to vote, by itself, is no guarantee of liberty. Therefore, if you wish to avoid dictatorship by referendum, break up modern society’s merely functional collectives into self-governing, voluntarily co-operating groups, capable of functioning outside the bureaucratic systems of Big Business and Big Government.” – Aldous Huxley – author – 1894-1963


The fact that the Bank of England and the IMF reluctantly back-tracked on the damage BREXIT would do to the economy brought a wry smile to my face. Of course the IMF could not resist dropping UK GDP forecasts for 2016 and 2017 and it helped the cause of the prophets of doom, who salivated at the prospect of poor MARKIT PMI on Friday and abysmal CBI manufacturing data yesterday and highlighted their dismay at our exit from the EU in 2 years + time. The way the economy has been talked down by the establishment over the last month+ before the referendum vote, no one can be surprised that these numbers pointed towards the vortex of recession. In 3 months’ time perhaps the outlook will look rosier. 


Despite the adverse economic data the FTSE remained fairly resilient adding 0.92% last week, though it did surrender 0.37% to 6705 yesterday. Admittedly whilst the Dollar remains strong many constituent FTSE 100 stocks should benefit. Ironically, yesterday the FTSE 250 added 0.63%. The current earnings season in the US was solid if not very inspiring but sufficiently encouraging for the S&P 500 to add 0.5% last week, though that was surrendered yesterday. This week the earning season floodgates will burst open in the UK. We started off quietly yesterday, but today BP and others will set the tone together with the banking sector on Thursday with Lloyds Banking Group and Barclays on Friday. However it was HSBC that saw the media draw most blood from courtesy of Messrs Johnson & Scott, two very senior FX trading managers, both of whom look like they will be indicted for foreign exchange manipulation. On 3rd August HSBC is likely to see half year profits fall by 30% to $9.9 billion, triggered by painful regulatory controls and capital requirements. Messrs Flint & Gulliver may well feel very vulnerable. It also appears that Standard Chartered Bank, which also posts results on 5th August may have been bankers to some defrauding of monies belonging to Malayan customers. This will be unwelcome news to CEO Bill Winters. 


The non-performing share prices of UK banks, due to onerous capital requirements, low interest rates, PPI and increased impairment charges and litigation, suggest that their results to be posted this week and next, may not make great reading.  There will be no special dividend from Lloyds on Thursday, as it seems unlikely that the remaining 9% of the bank will be sold to retail shareholders at a 5% discount. However profits may increase from £925m for the first half of last year to £1.7 billion this year over the same period. Though Jes Staley, Barclays CEO, seems more upbeat about life going forward profits from the last 6 months may have fallen from £1.34 billion to £1 billion. Rolls Royce have had currency issues which may have lobbed $2 billion from its profits.  BP, posting numbers this morning, seems still to be involved in litigation from the Deep Water disaster, which could well see profits trimmed by 25%. There are 3 corporate finance deals that have hit the rocks – Deutsche Boerse/LSE, InBev/AB/SAB Miller and SoftBank/ARM holdings. So there is much to keep an eye on this week. 


I think we more than roughly knew what the content of the BIS/Pensions select committees findings were in response to Sir Philip Green’s involvement in the demise of BHS and the potential loss of many of the 11,000 employees’ jobs and a gargantuan £571k pension black hole. It will come as no surprise that the ‘King of Gowns & Blouses’ was castigated and vilified by these Select Committees for milking BHS of copious hundreds of millions in to Lady Tina’s bank account probably in Monaco. BHS was a private company and the owners were entitled to syphon out as much as they liked, had it not brought the retailer to its knees due to lack of investment. What was unforgivable was the black hole of £571 million in BHS’S pension scheme, which was allowed to grow under Sir Philip’s ownership. Also the fact he sold the company to a totally unacceptable steward in Dominic Chappell for £1, which in hindsight he admits, was an appalling lack of judgement. However in all fairness it appears that advice from the likes of Goldman Sachs, PWC and Grant Thornton seems to have been short of the mark. 


SIr Philip can wring his hands for all he likes and scream ‘woe is me for I am undone!’ He must stop blaming everyone one else but himself. We must accept that what happened was not illegal, but it was morally wrong! His behaviour leaves something to be desired – akin to an alley cat.  HIs reputation has been tarnished, despite the many very generous charitable donations he has made over the years. There is only one answer that will prevent Sir Philip from falling permanently from grace and that is to hand over a whacking great cheque for £571 million to fill the pension black hole. I doubt any other act will placate the PM, Parliament or the general public. Also without an act of that magnitude, Sir Philip may only enjoy his gong for a very short time! C’Mon Sir Philip, pay it! You’ll still be a very rich man. 

UK companies posting results this week – Monday – Aberdeen Asset Management, Tuesday – BP, Man Group, Sage Group, Jardine Lloyd Thompson, Unite, P Z Cussons, Wednesday – Tullow, Glaxo Smithkline, Brewin Dolphin, M&B, Marston’s, Shawbrook, Capita, Thursday – Centrica, Sky, Thos Cook, BT Group, Smith & Nephew, Henderson, Astra Zeneca, Rentokil Initial, Just Eat, PayPoint, Genel, Domino Pizza, Lloyds Banking Group, Royal Dutch Shell, Friday – Barclays, Vesuvius, Reckitt Benckiser, Pearson, Foxton’s, Paragon


US companies posting interim results this week – Monday – Sprint, PayPal, Tuesday – Starwood a Hotels, Twitter, 3Ms, KKR, Valero, BJ Restaurants, Apple, Match, Wednesday – Boeing, Mondelez, Nasdaq, Corning, Coca-Cola, Altria, General Dynamics, Goodyear, Comcast, Facebook, Xilinx, Whole Foods, Amgen, Dolby Systems, Thursday – Alphabet (Google), Baker Hughes, Ford Motor, Zimmer, Boston Scientific, Lear, Hershey, Raytheon, CME, Bristol Myers Squibb, ConocoPhillips, Colgate Palmolive, Harley Davidson, Amazon, Pixelworks, Friday – Xerox, Exxon Mobil, Chevron, Cigna


David Buik
Market Commentator – Panmure Gordon & Co
+44 (0)20 7886 2775
Mobile – 0044 7788 144 877

Panmure Gordon & Co

One New Change | London | EC4M 9AF | United Kingdom


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