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TODAY’S
FAYRE – Monday 9th December 2012
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‘How soon hath Time, the subtle thief of youth,
Stolen on his wing my three and twentieth year!
My hasting days fly on with full career,
But my late spring no bud or blossom shew’th1.
Perhaps my semblance might deceive the truth,
That I to manhood am arrived so near,
And inward ripeness doth much less appear,
That some more timely-happy spirits endu’th
Yet, be it less or more, or soon or slow,
It shall be still in strictest measure even
To that same lot, however mean or high,
Toward which Time leads me, and the will of Heaven;
All is: if I have grace to use it so,
As ever in my great Task-Master’s eye.’
John Milton – poet & author – 1608-1674
Having
taken to my bed on Friday, I felt sufficiently improved in health to make a
brief visit to Sandown Park on Saturday to see the Tingle Creek Chase – for the
uninitiated – it is the first dress rehearsal for the two-mile Queen Mother
Chase at Cheltenham. I think I witnessed a performance by the best 2-mile
chaser I have ever seen in my life, bar none. From ‘Pearlyman’, to ‘Barnbrook
Again’ to ‘Waterloo Boy’ to ‘Viking Flagship’ to ‘Flagship Uberalles’ to
‘Azertioup’ to ‘One Man’ to the imperial ‘Moscow Flyer’ to ‘Kauto Star’ and
finally to ‘Master Minded’; none of them would have stood up to the
closest scrutiny against ‘SPRINTER SACRE!’
This
good-looking dark bay gelding was spring-heeled; he jumped like a buck and his
cruising speed was something to behold in soft ground. He never broke sweat and
won with his head in his chest pulling a train! He won by about 15
lengths, virtually without ever coming off the bridle. The owner Caroline Mould
and her husband, Raymond, were not present to witness this incredible display
of athleticism! They must have had a very, very special engagement to
have missed that astonishing performance!
I
ear-wigged comments made by Paul Nicholls to his jockey, Ruby Walsh about his
runner “Santuaire”, who I think the stable quietly fancied – “Was he not good
enough?” The response was a wilful shake of the head. He was beaten by 20
lengths into third place. That spectacle ranks very highly amongst the
many events I have witnessed live in my life – breathtakingly spectacular!
When one
considers the slew of downbeat economic news which swept through Europe like a
wave of endless despondency last week, it is remarkable that equities kept
their poise. In point of fact, apart from Friday’s Non-Farm Payrolls,
which were far better than expected, with 146k jobs being created in November
against expectations of 85k, bringing the unemployment rate down to 7.7%, who
could have blamed investors for being less than ebullient in their attitude to
some of the US’S economic woes. Michigan consumer confidence took a good
kicking and the deliberations over the ‘Fiscal Cliff’ kept Capitol Hill amused,
thought it tried the patience of the market, with Senate majority leader Harry
Reid continuing to trap off in an unattractive confrontational manner and with
the GOP’s John Boehner’s suave rhetoric being equally irritating.
Everyone seems to believe President Obama, who insists everything will be
alright on the night! Well who are we to argue the toss with the
President?
The news
from Greece has not improved; in fact with 26% unemployment and 54.7% youth
unemployment, it is quite surprising that we have not seen an even higher
octane level of civil unrest. The market really believes that the ECB, and in
particular the huge personality of Mario Draghi, is on top of this debt
crisis. This was endorsed by the fact that 10-year yields on Spanish and
Italian binds slid to 5.34% and 4.53% respectively – to me unfathomable!
Then, of course, it transpired that Germany may well be heading for recession,
as the Bundesbank lowered growth targets for 2012 to 0.4% from 0.7% and down to
1% for 2013 from 1.6%.
Mario Monti submitted his resignation to President Giorgio Napolitano
Saturday night after ousted Prime Minister Silvio Berlusconi attacked the
technocrat's stewardship of the economy and announced his bid for a comeback. A
statement by the president's office said Monti had told the head of state that
without the support of Berlusconi's People of Freedom party, or PDL, "he
cannot further carry out his mandate, and consequently made clear his intention
to resign." It is hard to see much good coming out of this news.
However all an incoming government needs to be able to do is implement the
austerity measures – easier said than done!
UK PMI
data was desperate for last month and Factory output fell by 1.3% in October
and German industrial production fell by 2.1% in the same month. Of
course it’s a pointless exercise comparing the relatively successful recovery
path of the US economy as against the rather anaemic effort of the UK.
For a start the US has a balanced economy and here in the UK we neglected
manufacturing output and industrial production for a decade from 1997-2007 in
favour of a rather sexy financial services sector, which due to inadequate
regulation and indiscriminate spending by a profligate government blew up in
our faces! So it will take time to redress the balance.
The UK’s
Autumn Statement was austerity personified – 6 more years of unpalatable
medicine – public sector cuts and economies of scale, resulting in the great
British public having less disposable income for an indeterminate period of
time – not popular. It was ‘Hobson’s Choice’ – the Chancellor had no
alternative if the cost of borrowing was not to increase to levels that the
debt could not be serviced without taxes shooting up. Labour’s response
to the budget was pathetic – not helped by Mr Balls constantly portraying the
image of a demented screech-owl – nothing to do with stammering! Yes,
there was a case for considering that the less well-off looked like they were
being clattered. However when the cultural changes of an unfair welfare system
are being balanced and implemented, anomalies are bound to rear their ugly
head. There was plenty to be pleased about for those concerned with
business – Capital allowance thresholds for SMES rising from Pounds 25k to
Pounds 250K; Pounds 5 billion to be spent on infrastructure; corporation tax to
come down to 21% in 2014; the repeal of 3p fuel duty; the bank levy to go up to
maintain an annual income of Pounds 2.5 billion is politically understandable,
but not very pragmatic. Also tax dodgers have been put on notice – Pounds 5
billion may return from Switzerland and international corporations to be forced
to pay their way. Starbucks have started the process by agreeing to pay Pounds
20 million in the next two years. Unruly demonstrations outside and inside
50 of their stores are an unhelpful response. That kind of behaviour in
Mediterranean counties is understandable – it goes with the volatile
temperament; but over here not constructive! It is interesting to note that JP
Morgan Chase is in conversations with HMRC for the bank and its staff to repay
Pounds 500 million.
Against
this background and some help from a slightly improving outlook in Asia,
equities selectively cracked on. The DOW added 1%, the S&P 500 +0.1%,
though the NASDAQ dropped 1% on the week thanks to Apple losing over 8% in
value – investors concerned about their special dividend. Freeport McMoRan lost
over 18% as it announced that it was returning to the oil exploration market.
Banks did well on the Street of Dreams with JPM adding 3.2% and BOA some 7%
last week. In Europe, the FTSE 100 added 0.8% and European stocks circa
1.2%. The NIKKEI remains an enigma adding 0.8%. Gold fell to $1700 an ounce.
Here in Old Blighty M&S was downgraded. Conversely one gets the feeling that
Tesco’s fortunes may change. Though loss of UK market share is true overseas
operations and initiatives may prove productive. California’s Fresh &
Easy may not survive, but expansion in Mumbai and Bangalore could be
exciting. Mining stocks were buzzy, though the market was perplexed about
all the senior Xstrata luminaries hitting the road. We knew about Sir
John Bond and Mick Davis. CFO Trevor Reid followed in short order. That
leaves Glencore’s Ivan Glassenberg as king of the castle. Centrica was on a
roll as the market perceived that regulatory issues would be positive. Deutsche
Bank suffered at the hand of 3 whistleblowers, who insist that derivative
losses of $12 billion were temporarily garaged. These allegations will be
vigorously denied.
BP, for
the time being must watch its new partner Rosneft bed down with Exxon Mobil as
they jointly explore Western Siberia for fresh oil. BP’s time will
come. Aldi’s main shareholder Berthold Albrecht has died aged 58, leaving
a Pounds 11 billion fortune. Diageo may bid for Suntory’s bourbon maker, Jim
Beam – possibly $10 billion!
The
alleged $20 billion bribe to Indonesia Tommy Suharto by Rolls Royce continues
to garb the headlines. RR, under Sir John Rose has tended to stay out of
controversial headlines. Now until this matter is cleared up, may see the
likes of GE and Pratt & Whitney jump on the bandwagon of intrigue. Rumours
abound that Virgin Atlantic may give up control to Delta and Air France.
Over the
weekend Martin Gruenberg of the FDIC and Paul Tucker, deputy governor of the
Bank of England made it clear that shareholders and creditors must pick up the
tab if banks in the US and UK threaten to go the wall. The taxpayer has
already paid its debt to society. It has become apparent that more capital will
be required by the banks. The BIS also expressed its concern that another
credit bubble, such was their concern the explosion of asset prices
again. Astonishingly I found myself agreeing with Dr Vince Cable that
inflation must take a back seat as the government drives for growth. It
is interesting to note that Mark Carney, the BOE Governor elect does not take a
dogmatic approach to inflation and occasionally there is a case for ‘leaning in
to the wind!’
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