Where to next?

Haven't posted for a while as I'm considering where next to take the blog. Since starting it has become a bit of a mishmash of ideas and quite general, while trying to avoid getting into tips, if only because I'm not qualified nor want to be a tipster. So, I'm considering where to take things next. One of the problems with a blog is not always knowing how big the readership is. Stats may be improving, but some of them are always likely to be spam, no one might be reading.

So, if anyone has any ideas of what they would like to read about please post a reply below.

Royal Mail, dividend not so attractive now

One of the major attractions of buying Royal Mail shares was the prospect of a 6-7% dividend yield thanks to the Government pricing the company to sell. This would have been nice for the private investor if you could have got more than the 227 share limit, £750 worth at IPO, but once the issue was scaled back it became less attractive as a hold. I made the point in a post a few days ago that because of the small 227 share limit it might not be worth holding on to them given the 30-40% rise in price since then. If you want more, at a less attractive dividend yield, you now have to pay for it. Some in the city seem to feel the same way.

Investors who bought Royal Mail shares for the income should sell their stakes, experts say. Before trading began on Friday, the appeal of the shares had largely been in the likely dividend stream, which seemed attractive at the price. But with the shares having soared in value, the income now looks less appealing by comparison with the instant capital gain available if you sell.

With the shares priced at 475p at the end of trading yesterday the yield works out at about 4.3pc, net of basic-rate tax, which is deducted at source. Before trading began on Friday the yield stood at 6.1pc, representing 20p a share. The yield is now on a par with income stalwarts such as Tesco or Vodafone – which, unlike Royal Mail, do not face a union battle and massive restructuring.  

http://www.telegraph.co.uk/finance/personalfinance/investing/10378410/Royal-Mail-sell-now-investors-urged-as-yield-falls-from-6.1pc-to-4.3pc.html

So, the euphoria around the Royal Mail IPO is beginning to wear off and as the price rises it is becoming less attractive as the market will inevitably focus on the issues facing the company going forward. There is also the question of whether a 4% dividend yield is attractive now when compared with other dividend payers, chances are that the risks are much higher going forward with Royal Mail. For the institutions however, a 3-4% dividend yield will still be attractive so I would expect them to continue to hoover up Royal Mail shares as the small investor sells off  their 227 shares. As an exercise in widening share ownership, if this was the Government's intention, it has largely failed. Most of the shares will end up, eventually, with institutions.

Thursday the 17th, US debt limit day approaches

Last week was a strange one for the markets. At the slightest hint of a possible compromise over the US budget and debt limit being raised the markets showed their euphoric side. However, the Republican proposition to extend the time until December so that further talks can take place was actually loaded with strings attached. These strings were again around ObamaCare, so it shouldn't come as a surprise that it was rejected. What was a surprise was that the market seemed to buy into the possibility that this might work.

If anything, what we saw towards the end of last week was a relief rally. Markets had been falling off for a while and they were prepared to grasp hold of anything that might suggest a deal was just around the corner. They are still living in hope that common sense will prevail and a deal will be done by Thursday, European markets are currently treading water in wait, while the US market is currently predicted to give back some of the gains made towards the end of last week. So far a big sell off has been avoided and the US bond market is closed today.

If you are an investor in shares these are troubling times. Perhaps not so much if you are a trader. Investors perhaps don't want to think too much about liquidating everything before Thursday, but also why would anyone open any new long positions before that date? Traders, especially those with short term time horizons will probably be out and waiting or looking to get out the closer the date approaches. They will also be looking at opportunities to short in the event of no agreement. Longer term investors may also look to hedge against the fall out of share price falls by taking out an index short, the more sophisticated may be using options. Many investors however, will probably just sit tight and hope the worst doesn't happen.

We should be under no illusion as to what a US default, even if it is only technical, actually means.

The stalemate is now damaging confidence and denting the recovery, bankers at a satellite Institute of International Finance meeting in Washington warned.

“It would be utterly catastrophic,” Deutsche Bank co-chairman Anshu Jain, said. “This would be a rapidly spreading fatal disease.”

JP Morgan chief executive Jamie Dimon added: "I think it would ripple across the global economy in ways you couldn’t possibly understand.” 

http://www.telegraph.co.uk/finance/economics/10376058/US-debt-ceiling-Markets-on-edge-as-talks-drag-on.html

The fact is that to a large degree it would be entering unknown territory, but markets do tend to react to such events in a way that is entirely predictable, they go crazy. There is a good chance of a market crash if Thursday comes and goes without a decision, because this is the way markets respond to such news. It's no good trying to be rational about it, it is unlikely the markets would simply respond by staying calm.

The reality is that many of us know that any deal before Thursday does not solve the problems the US face going forward in relation to its budget and debt, it is kicking the can down the road, but this is effectively what an inflationary money system does. The can kicking can go on for a long time, because for long periods it depends on whether you are good at controlling the can as it rolls on. Ultimately issues like debt and the budget have to be resolved, but within our current financial system it will always be relative to other things, like manageable debt. To stop the can kicking in total requires a different financial system, but whether it can ever be changed in a way that isn't destructive in a horrific way until something new replaces it is a much bigger debate.

One final point about the current Republican stance in relation to ObamaCare, is that the politics of this is saying they are doing this for their voters, or middle America, but how will this constituency respond to crashing markets if they push it to the wire? As they see their investments collapse, jobs and pensions in danger, recession or depression and the US name across the world being about as bad as it could get? If they default, who would lend to the US again at such generously low interest rates? Middle America has a lot to lose from a default, which is perhaps one of the main reasons why it is believed unthinkable that Republicans will go that far. They must know what the outcome would be from default?

The market still believes that a default is unthinkable, it is as Warren Buffett recently referred to as the financial market equivalent of using nuclear weapons. Are the US politicians really prepared to do that come Thursday?

Royal Mail, damp squib for private investors?

So, here we are on Day 1 of the grey market trading for Royal Mail shares and as widely predicted the share price is showing a healthy premium already at around 445p. However, as the IPO was so heavily oversubscribed the Government was forced into deciding how many shares the institutions and private investors would get. Both will no doubt be disappointed.

For the private retail investor, an allocation of just 227 shares will go to anyone who asked for £10,000 or less. Over £10,000 you get nothing. Institutions are getting 67% of the issue, with priority apparently being given to pension funds and those with a long term intent.

That's all very well, but for most small investors, especially those that wanted more than the minimum, an allocation of just 227 shares may seem hardly worth keeping. The potential dividend on this might be nice and beats cash on deposit, but it's hardly likely to be a holding factor especially as the shares are currently up around 33%. You might as well take that couple of hundred pounds worth of immediate profit as it represents 5-6 years of potential dividend payments. The point is, if every small investor who had asked for say £5000 or under had got the full allocation, chances are they might be inclined to keep them as that's a chunky dividend worth holding on to. Adding to your 227 shares now will be 30%+ more expensive, thus the dividend yield is lower. Of course, you could wait and hope the price sells off after the initial euphoria, which is a possibility.

All of this would have meant that the institutions got less, but there again if they are serious about wanting the shares they would then have to go into the market and buy them. Chances are that many of the smaller serious investors will simply offload their 227 shares as not really worth keeping and it will be the institutions that hoover these up over the weeks ahead.

Retail trading doesn't begin until next week. Holders in ISA's cannot buy until the official start date of the 15th, because until then they are not classed as an ISA investment. There might be quite a lot of volatility between now and then and it will be interesting to see if the current price holds especially if the small investor decides to get out quick and just bank any profit as quickly as possible once official trading starts.

Royal Mail IPO looks like it will be very popular

With the Royal Mail IPO less than a week away it looks like it will be well oversubscribed and purchases will be scaled back accordingly. Institutions have been looking to get in big time, they want £30 billion's worth.

Institutional investors have placed more than £30bn of orders for Royal Mail shares as the Government puts the finishing touches to the biggest UK privatisation for decades.

Sky News understands that firms from around the world have deluged the investment banks running the postal operator's sell-off on an unprecedented scale, with the initial public offering more than ten times oversubscribed.

Whitehall sources said that the £30bn figure excluded demand from members of the public, with a last-minute rush for shares expected throughout the course of Tuesday.

http://news.sky.com/story/1151723/royal-mail-city-demand-for-shares-tops-30bn

So, if you are small investor the chances are that if you want these long term for income then you may have to wait and hope for a pullback once trading starts as the chances are you won't get the full amount asked for. The Government have said that the retail investor will get their "fair share" when the allocations are finally announced. It's also possible that some institutional buyers will get none. Let's hope so. If the institutions are that desperate to buy they will start hoovering them up from day one.

What is interesting about the RM float is that in many respects it couldn't happen at a worse time for the markets with the US budget/debt talks ongoing. It might be one of the few big name shares still going up in price come next week if US politicians can't find common ground to do a deal. However, the fact that the institutions have asked for so much, even though they have done so with the full knowledge that it will be scaled back, suggests there is still an appetite for buying shares despite market fears of wider issues like a US default.

Decision time ahead.

Well, here we are again heading towards a potential crisis point which let's face it was so predictable. Politicians in the US continue to argue and stand their ground on the issue of the budget, the debt limit and of course what appears to be holding it all up, the politics behind "ObamaCare". In the meantime the markets have gone cold, some profits have been taken. They have been falling session after session but no strong message has yet been sent to Washington that if this goes to the wire and beyond, crisis awaits.

According to Obama the votes are there to pass a clean bill, which would mean that they could then argue and negotiate afterwards for as long as it takes. The impasse appears to be that the President won't negotiate under threat and he won't back down on his health initiative, while elements of the Republican opposition see this as their chance to put a line in the sand and get what they want. The end result appears to be stalemate in the face of disaster that awaits elsewhere if an agreement isn't reached in the next week or so.

Chances are it will be a disaster if there is no agreement as history shows that ultimately markets will throw a hissy fit to get what they want, but this goes slightly deeper than what has gone before. If the US were to default, even if it is only a technical default, then trust will go, the chances are the rating agencies will come out with US downgrades and the stock markets will crash. Maybe some on the Republican side can live with this out of principle, but will their voters and what about their financial backers? The Republican Party might be feeling some heat right now from those that back them to get a deal done, otherwise the money that finances them will drain up. Unless of course, you believe in conspiracy and that the financial elite want this crash and the crisis to come to further their ends.

There is a general view that while the markets have been falling recently an agreement is ultimately expected, because the alternative is pretty dire. Sooner or later the politicians, or enough of them, will cobble together some agreement that will stop the immediate crisis, but in reality simply pushes things further down the road. Nevertheless this should be enough to at least placate the markets for now.

In the meantime, hold on to your hats.

Poundland considers IPO in 2014

All the IPO talk at the moment may be about the Royal Mail's debut in the next week or so, but one small quite attractive company is looking at possibly doing the same next year. Poundland has been one of the High Street success stories of recent years and it may look to become a PLC next year.

Poundland, the biggest UK retailer of its kind, is reportedly weighing up whether or not to become a listed company before the mid-point of next year.

Sources "familiar with the situation" told Reuters that the group is considering an initial public offering (IPO) in the early part of 2014 following what it anticipates will be a strong Christmas trading period.

http://www.digitallook.com/news/21194788/Poundland_considering_IPO_next_year_sources_claim.html?&username=&ac=,

The growth of pound or 99p shops has been big business in the UK and has no doubt been helped by austerity, as people look for value for money. I've often wondered whether such a company would make a good investment though, especially if you are a long term investor? The key question here has to be one of inflation. Can pound shops survive long term the pressures that they would be under to consistently source decent products over the years in an inflationary money system?

Poundland as a private company appears to be well run and growing, making decent money, but had it come to market 50 years ago it would probably have had a different name because even back in the 60's a pound could go a long way. The further you go back the more you realise what inflation really means. A pound isn't what it used to be and while people do have a lot more of them these days as the average salary has gone up quite a lot over the years, so have prices. It does make you wonder whether the pound shops have a long term future or perhaps along the way they will have to change their name, Poundland may end up as FiverLand and then TennerLand? It would never have survived in Zimbabwe or Weimar Germany.

Whatever happened to....Part two

So, tapering seems to be taking a back seat for the moment, but markets seemed to go awfully quite on that other big outstanding issue, the US debt ceiling. It is interesting how markets can choose to ignore something as and when they choose to do so, perhaps in part because they want to draw in the unsuspecting before they have a sell off. It isn't as if the debt ceiling issue had gone away or even looked like being resolved, if anything attitudes on both sides seem to have hardened.

It's been a while since we read this sort of news.

A potential shutdown for the U.S. government by Monday weighed on sentiment. Fears the Treasury will hit the debt ceiling by mid-October only added to investor worries. 

Naeem Aslam, chief market analyst at AvaTrade, said traders are “taking the profits from the table.”

“With political opera taking place in Washington, with the government shutdown threat and the Italian political crisis in Italy, volatility in the market is extremely elevated and perhaps sitting on the sidelines could be the best option for traders,” he wrote in a note.

http://www.marketwatch.com/story/stock-futures-sag-on-shutdown-fears-2013-09-27

Given that the poilticians will probably take this down to the wire, it is difficult to feel comfortable going long in the market right now. For those that feel comfortable however, shorting might offer better opportunies, as long as you keep one eye on the prospects for a deal.

Royal Mail Float, is it a buy?

Royal Mail has announced details of its upcoming share offer, anyone interested has 12 days to decide whether to take part in this part sell off. Only partial sell off because the Government will keep 37% - 49.9% for itself, no doubt to sell at some future stage.

My initial reaction upon hearing that it was to be offered to the public for sale was why would anyone want to buy into a company that is in a declining market?  At least I thought their market must be in decline. This was based on who sends letters these days, other than junk mail and banks (especially if they are charging you £25 to £30 for it to tell you that you have gone overdrawn). I can't remember the last time I sent a letter, although having thought about it I think it was about 3-4 years ago. I don't use the Royal Mail for much at all, and it is RM that is being sold off, not the Post Office.

Still, Royal Mail is now profitable.

While the Royal Mail is now highly profitable, it is a recent turnaround and a tumultuous five years leading up to 2011, during which some 50,000 staff were laid off. Its pension fund, which was £8bn in the red three years ago, has now been shifted to taxpayers.

Behind the troubles is a steep decline in the amount of mail delivered to the UK's 29 million postal addresses. At its peak in 2005, the Royal Mail's daily postbag topped 84 million. This number has since fallen to around 58 million, thanks to the internet, email and mobile phones.

However, on the other hand and thanks to the internet, parcel delivery appears to be a growth business.

As the amount of letters sent in the UK has fallen, parcel deliveries have boomed alongside the take–off in online shopping, and now account for half of its business. The parcels and logistics industry is believed to be worth around £75bn in total, although Royal Mail will continue to face competition for its share from firms such as DHL.

http://www.telegraph.co.uk/finance/personalfinance/investing/10338554/Royal-Mail-privatisation-just-12-days-to-buy-into-float.html

Chances are that it will almost certainly be priced to sell, the range indicated being 260p to 330p. There is also talk of a 6-7% dividend yield, so I suspect it will be oversubscribed and the chances are that any IPO purchase could well be diluted as small investors won't get all the shares they want. There is also the little matter of the possibility of a postal strike to come as the postal workers union are going to ballot on industrial action over pay, pension changes and post-privatisation terms and conditions of work. So, even though the postal workers themselves will be offered shares and free as well, they may also vote to strike.

I suspect that as often is the case with many of these high profile IPO's, the share price will initially go up because it will be priced to sell, but once the dust settles the market may start to focus on whether its declining business areas are a real issue or not.

Whatever happened to....

Tapering, the debt time bomb, US debt limit talks, EU crisis, need I go on?

In the US the Fed has been meeting and is due to report today on its latest findings and whether they will taper their bond buying sooner rather than later, or just keep things on hold again awaiting better data. Markets seem to be in hiding, waiting for the latest from Ben Bernanke. Each time he has reported, without giving too much away on what the Fed intends to do, markets have tended to want to sell off a little on the news or rather lack of it. I was reading yesterday that markets might actually be relieved once the Fed starts to taper as at least they would then be doing something. Markets would then no doubt move on to something else that they might worry about.

So, whatever happened to the US debt limit talks?

President Barack Obama won't negotiate with congressional Republicans over the U.S. government's borrowing limit, he said in an interview that aired Sunday.

Obama told ABC News' George Stephanopoulos that he would not cooperate with House Speaker John Boehner's demand for budget cuts in exchange for House Republicans' allowing the government to continue paying its obligations.

"I'm happy to have a conversation with him about how we can deal with the so-called sequester, which is making across-the-board cuts on stuff that we shouldn't be cutting, while continuing tax breaks, for example, for companies that are not helping to grow the economy," Obama said on ABC's "This Week." "What I haven't been willing to negotiate, and I will not negotiate, is on the debt ceiling."

Much of the federal government will shut down unless Congress passes a budget, or a temporary spending bill, by next month. Not long after that, the U.S. will run out of borrowing authority, with potentially catastrophic consequences for the world economy if the government defaults on its debts. Some Republicans want Obama to gut his own health care law in exchange for a functioning government.

http://www.huffingtonpost.com/2013/09/15/obama-debt-ceiling_n_3930243.html

This is a potential calm before the storm. US politicians have a habit of doing last minute deals, but they are usually dragged along by all sides to get the best political result that suits them. This is not what the markets want to see. So, we could be heading into a period of volatility after a period of relative calm. It's not an easy time to call the markets. US charts look more positive than the UK, but that could change quickly if some of these old fears take hold in the market again and it's been a while since that happened.

Video market round up for the week ending Friday, 13th September 2013

A week ending round up of the markets from Steve Briggs YouTube channel.

Included in this video is a look at the banking and oil and gas sectors. Companies covered include Barclays, BP and Royal Dutch Shell.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/

Trading serious numbers - part 2

In March of this year I wrote a post about a blog that I'd come across called Barefoot Spread Betting detailing Oliver Tomahawk's attempt to double his money. Well, he did a lot better than that going from £30,000 to £105,000 in about seven months. After a quite period away from the summer doldrums in the market he's back, making a significant return to the market opening 18 trades and having £67,359.89 in the market from today. So far he seems to be doing alright judging by his Twitter feed.

His blog can be found below, where all his trades can be found, listed as and when they are made. He's not trying to sell a service, just putting serious money on the line, so for anyone who is serious about trading and serious about trading real numbers, it's well worth following.

http://barefootspreadbetting.blogspot.co.uk/

FTSE100, who's getting demoted?

It's getting around to that time again when the FTSE100 and 250 play relegation and promotion.

Companies that look like dropping to the FTSE 250 include public sector outsourcer Serco, oil services company Wood Group and struggling miner ENRC. Of these, Wood Group is a little surprising as it wasn't that long ago that they were promoted from the 250. Mind you, the share price has been under pressure recently as results have failed to impress.

Going up from the FTSE250 will be Sports Direct International, a UK High Street retailing success during what has been a difficult time, now valued at a touch over £4 billion. They are expected to be joined by packaging company Mondi and a former Greece listed company Coca Cola Hellenic.

Valued at around a £billion, Partnership Assurance is tipped to join the FTSE250.

One AIM company that is hoping to join the FTSE250 this year is Quindell Portfolio (see - Quindell Portfolio, incredibly cheap or crash and burn), the share price of which has recovered from around 5p to currently around 17p after undergoing a short sell attack earlier this year. Doubt they are going to make it this time though, although their ambition is to be FTSE100 eventually.

Vodafone sells Verizon stake

Well, Vodafone finally did the deal and sold its Verizon stake (See from March of this year - Is Vodafone a Screaming Buy?). There are times when the market undervalues a company in a vary obvious way and Vodafone's Verizon stake was one of them.

At completion, Vodafone shareholders are expected to receive all the Verizon shares and $23.9bn (£15.42bn) of cash and all the shares, equivalent to 112p per share and representing 71% of the net proceeds.

Before the announcement analysts at Jefferies were placing a value of 151p per share on the wireless stake post the capital gains tax.

Following on from the above the Board intends to increase the total 2014 financial year dividend per share by 8% to 11p, and intends to grow it annually thereafter.

http://www.digitallook.com/news/21131814/Vodafone_approves_sale_of_key_US_unit_dividend_to_rise_11_per_cent.html?username=,&ac=,

http://www.digitallook.com/news/rns/21131721-10097/VOD-VODAFONE_TO_REALISE_130BN_FOR_45_INTEREST_IN_VZW_html?ac=,&username=,

The company will now have to look for growth in other areas, but with billions to invest they ought to be able to find a few new ventures worth. There must be quite a few smaller companies out there that might be on Vodafone's shopping list.

AIM shares lifted by ISA buying

Well, it has been a few weeks since UK investors could put AIM shares in their tax free ISA's and it looks like this has provided a lift for AIM companies.

Aug 9 (Reuters) - London's beleaguered junior stock market is on track for its best weekly volumes in two months, fuelled by rule changes that prompted investors to snap up stocks, particularly in the beaten-down basic resources sector.

The lurch higher in volumes on AIM, a sub-market of the London Stock Exchange, followed implementation on Monday of a government plan to let people invest in small firms while avoiding tax to help drive economic recovery.

http://uk.reuters.com/article/2013/08/09/europe-stocks-aim-idUKL6N0G92IP20130809

That's a few weeks ago, but anyone following AIM shares cannot help but have noticed that the price on many seems to be up while in general the main market has been going through a will it, won't it, finally correct this summer mood.

In the last month the FTSE AIM all share is up over 4%, compared to -2.7% for the FTSE100 and  + 0.36% for the FTSE250.  Certainly some of the shares that I follow, which tend to be the more liquid AIM companies, do seem to have found a flurry of buying that has resulted in higher prices. This shouldn't be a one way ticket though as these shares still offer more volatility and can surprise big time if they announce something the market doesn't like.

Nasdaq, down and out, for a while at least.

Nasdaq was down for a while today, in the sense of not working at all.

The sudden shutdown of Nasdaq — without any warning or explanation of what was happening — caught everyone by surprise, but it was over or nearly over by the time a lot of investors and money managers became aware of it. It freaked out systems — no bids and offers had options traders wondering if they were rich or broke until they realized what was happening — and traders, but it didn’t have the impact of a Flash Crash or even a rate hint tossed out by the Federal Reserve.

A black squirrel event?

In 1987 and 1994, the Nasdaq was shut down on two occasions when squirrels got a little too adventurous on power lines, forcing a fast flameout on trading until the power grid could be restarted.

It’s going to take the Securities & Exchange Commission days to figure out what happened and months to tell us about it, but don’t bet on the squirrels.

Instead, look at this kind of sudden “black squirrel event” — which would have created a full-blown media frenzy had it happened in panicky October instead of sleepy August — and consider what your reaction to it says about you as an investor.

http://www.marketwatch.com/story/nasdaq-outage-a-black-squirrel-event-2013-08-22

A glitch?  For those with money in the market it might make you wonder what safeguards there are when there's a total blackout, and what if it went on for weeks not hours? Make sure you have good records as a backup.

Silverdell updates the market, remains suspended

The latest Silverdell update to the market may sound like better news for shareholders with confirmation of banking facilities, but the shares remain suspended.

When the suspension is lifted it is most likely to include a fundraising at some point and at least one knowledgeable smaller company analyst has guessed that the share price upon lifting of the suspension could well be in the 4p-6p range, around 50-60% lower than the suspended price.

http://www.stockopedia.co.uk/content/small-cap-value-report-14-aug-sid-qpp-mur-pgb-you-eck-76200/

4p-6p is a lot better than nothing, but it does mean a hefty dilution of the share price for share holders. Despite all this there has been no mention from the company as to who is going to accept blame for what looks like a costly mistake that put part of the company into administration. You might expect that heads would roll. I mean, it is not unreasonable to ask whether the management really is good enough if no one wants to take responsibility for what happened. Who would want to invest in such a company?

A short history of (official) UK inflation

A short history of (official) UK inflation

1900 - 2012: 104.17 per cent / 0.6 per cent per year

1914 – 1918 (WWI): 103.06 per cent / 17.8 per cent per year
1939 – 1945 (WWII): 51.30 per cent / 6.9 per cent per year
1997 – 2012 (Since the Bank of England released from political control): 54.21 per cent / 2.9 per cent per year.
2008 – 2012 (Since the financial crisis): 12.99 per cent / 3.1 per cent per year

Government since 1979.

1979 – 90 (Thatcher government): 122.93 per cent / 1.9 per cent per year
1990 – 1997 (Major government): 24.85 per cent / 3.2 per cent per year
1997 – 2007 (Blair government): 31.23 per cent / 2.7 per cent per year
2007 – 2010 (Brown government): 8.23 per cent / 2.67 per cent per year
2010 – 2012 (Current government): 8.57 per cent / 4.11 per cent per year

Bank of England.

1993 – 2003 (George heading Bank): 28.85 per cent / 2.5 per cent per year
2003 – 2012 (King heading Bank): 33.92 per cent / 3.2 per cent per year

http://www.cityam.com/blog/1376059623/thatcher-only-prime-minister-last-30-years-under-whom-inflation-rose-less-20-cent

Money inflation comparison 1999 and 2009.

Average salary £18,396 - £20,900

House prices £73,302 - £163,969

Weekly State pension £66.75 - £95.25

UK consumer debt £656.4 billion - £1457.4 billion

http://www.thisismoney.co.uk/money/bills/article-1633409/Historic-inflation-calculator-value-money-changed-1900.html

And since 1960 that humble meal of fish and chips has risen in price from 6 old pence to around £4.50 today, a rise of 7,400%.

The old saying, if something looks too good to be true....

A couple of weeks ago I noticed a new follower on my Twitter account going by the name of Little Miss DayTrader. I usually don't follow day traders as its not my interest, but having looked at her blog and some of her tweets I decided, more out of curiosity than anything to follow back. I'm not a big Twitter user, don't always follow back if only because the number of tweets can get too much in that you struggle to sort the wheat from the chaff, but something stood out about this new follower that suggested one way or another there was a story here.

First, here was a young woman who supposedly had been an analyst for RBS, who had traded for many years on her own account and who seemed to have a decent enough knowledge about the market. I even re-tweeted one of her early blog articles on trend trading which seemed well written and worth reading.

However, something didn't quite sit right about Miss DayTrader (MDT). From the start she claimed not to really be a day trader, but interested in the bigger market moves. Her "system" seemed to be based around moving averages over different time frames, how price would bounce off these or fail under them. She talked of chop zones and had a thing about how stops of the retail traders would be deliberately taken out before price would then bounce. Fib numbers were also introduced, some charts had indicators on while others didn't and you needed to be able to interpret candles as well. Her system seemed to be a mishmash and not as simple as first suggested. It suggested that anyone trying to copy it might just need some help to get it right. Early on there was no suggestion that the help would come at a price.

As time went on however, most of her trades seemed to be of the day trade, very short term (i.e. a day or less) variety, although she would often have a go at the scalpers and the "let's make 10 points quickly" type trader, even though she seemed to be doing a lot of this herself. Her trades supposedly time stamped, although as she seemed to send out lots of tweets, only her hard core followers that read every one might believe that she was on to something. I didn't read them all, mainly because they were relentless, about a thousand tweets in a few days, I couldn't be bothered. The question was, what was all this leading to, what was the pay off?

After a few days the first cracks began to appear, firstly due to the fact that Twitter suspended her account, apparently for over following or over Tweeting. MDT promptly set up another account and tweeted and followed just as much.

But now we get to what MDT was probably all about. On her blog a post appeared which suggested that she had received many requests to set up an online trading room, where real time trades could be had. She proposed to do this, but could only do so at around £75 a month, but with a full refund for any months when there was a loss. Oh she seemed to suggest that a couple of hundred points a week was easy to make, so losing months weren't likely. However, the original trading room idea was quickly dropped as she said it wouldn't fit in with her life at this time. It would be back to just blogging and Tweeting apparently.

What happened next was the sting in the tail and some well respected people seem to have fallen for it. MDT began contributing a daily market analysis to Spreadbet Magazine's blog on their website. Not only that, she appears to have got an invite to be part of the opening of Zak Mir's new trading cafe which goes live on 14th August. Zak Mir is also the new editor of Spreadbet Magazine and one assumes that he must have been impressed by all the technical analysis that MDT was posting on both Twitter and her blog to have made such an offer. The truth was that MDT wasn't all that she seemed.

Video market round up for the week ending Friday, 2nd August 2013

A week ending round up of the markets from Steve Briggs YouTube channel.

Included in this video is a look at the banking and oil and gas sectors. Companies covered include Lloyds Banking Group, Barclays, BP and Royal Dutch Shell.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/

William Hill delivers results with a surprise

I mentioned William Hill yesterday and the possibility that at the first sign of something bad their share price might take a hit after being a very good momentum play for some time. Well, today appears to be that day.

Shares in William Hill sank sharply on Friday morning as investors gave a cool reaction to the High Street bookie's first-half results.

Even Canaccord Genuity, which labelled the figures as "strong", kept its 'hold' recommendation and 438p target price for the shares, highlighting headwinds for the company in 2015.

The increase in profits in the first half was better than expected, the broker said, though earnings growth was "flattered by a particularly low tax charge".

Retail was boosted by a strong Grand National and a general good run of results, helping to offset a higher Machines tax. Meanwhile, Online delivered strong growth, but this was outweighed by a weaker contribution from Sportingbet.

http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=14283&ac=,&username=,&action=news&story_id=21069911

Shares are down around 7% so far on this news.  It would seem that the major hit came from the UK Government's new machine games tax, first mentioned as a possible drag on the sector here. It's interesting that the market largely overlooked the potential for a negative reaction from the imposition of new taxes, as long as momentum was with William Hill for most of this year, until now that is. The tax itself is not a surprise, but it would appear that William Hill while delivering a decent enough performance was not able to make up in other areas of its business to offset the negative tax in a way that would mean the market would overlook it.

Does this mean the end of the bull run for the company? Possibly, but a look at how the charts develop over the next few weeks will be needed to see whether the upward trend holds. For now, a little froth on the share price has been taken off.

William Hill, Ladbrokes and 32Red, where next?

It's been a while since I looked at the UK gambling sector (for anyone interested in previous posts click on the labels below) and it seems to be a sector that continues to recover, although some companies appear to be hotter and more in favour than others. I came across this analysis today that is worth a read and it does save me the time of going into the fundamentals.

http://bulmerinvestments.com/betting-on-gamblers/

It covers William Hill, Ladbrokes and AIM tiddler 32Red, which was flagged up here some time ago as one of the few potential smaller company takeover targets left in the sector. Naked Trader Robbie Burns seems to have bought it with a view to holding it in the hope of a takeover at some stage.

These three can actually be compared to a three horse race, William Hill being the class of the field, Ladbrokes, the underachiever who promised so much but has failed to deliver and 32Red a complete outsider with bags of potential. Bookies would probably have William Hill as the odds on favorite, with Ladbrokes and 32Red vying for some long shot money.

William Hill's recovery in the last couple of years seems to go on and on. The share price is now heading towards 500p and there is a lot of good news and expectation in that price going forward. They are no longer cheap and it would be easy to imagine a bad set of results hitting the share price hard, but so far the company has delivered.

Ladbrokes is the opposite.  They have everything to prove and will hope that their deal with Playtech leads to an improved bottom line from their online offering. If they are finally putting things right then compared to William Hill they are cheap. The article above makes a case for the upside if Ladbrokes has finally got its act together.

32Red has the attraction of perhaps being an eventual takeover bid from one of the bigger players. In the meantime it is a decent company in its own right and from next Monday as an AIM share it can be put in an ISA. It's more of a gamble than the other two, but if it attracts the interest of a bigger player it won't be sold for its current forward P/E of around 10.

Lloyds PLC pleases market, UK Government finally in profit.

Lloyds Banking Group gave the market and banking sector something to cheer about today as it came in with some decent numbers, but the one stat that stands out today is 73.6p. That is the average price that the UK Government paid for 39% of Lloyds back in the dark days of the credit crunch. The UK Government is now in profit on its "investment", or rather the UK taxpayer is.

Had the Government not intervened back than the chances are that Lloyds would have gone under. Certainly Halifax/HBOS which Lloyds took over after pressure from the last Labour Government in 2009 would have gone under. HBOS was effectively bust, having been one of the major players in handing out questionable mortgages to people they really shouldn't have given money to.

Looking at their charts today, it is difficult to get too enthusiastic about Lloyds hitting 74p as pre-financial crisis it was heading for 600p.  And let's not forget that Halifax/HBOS was also a FTSE100 company back then and in 2007 it hit a high of 1150p. Long term buy and hold investors who hung on have been wiped out, but at least 74p is better than the 20p or so of a few years ago.

Still, the Government may now be thinking that sooner rather than later they may want to cash in their gain? The only problem is how do you sell 39% of a company the size of Lloyds into the market without seeing a big fall in the share price? 39% is a lot of shares to unload and I would have thought that any major buyer may want a discount.  The one thing that isn't likely to happen is a generous sell off to the taxpayers that saved the company.

Video market round up for the week ending Friday, 26th July 2013

A week ending round up of the markets from Steve Briggs YouTube channel.

Included in this video is a look at the FTSE350 index, Oil and Gas producers, Shell, the banking sector and RBS.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/

Silverdell buys a bit of itself to save itself.

Silverdell made a further announcement today following on from its statement of why its shares were suspended on AIM a few weeks ago.

Silverdell announces that on 23 July 2013 its subsidiary, Euro Dismantling Services Ltd ("EDS") acquired the business and certain assets of Kitsons Environmental Europe Limited (In Administration) (the "Kitsons Business"), thereby keeping the Kitsons Business within the Group. The Kitsons Business will operate as a separate division of EDS, with the objective of maximising cost efficiencies between the existing EDS division and the Kitsons Business and to facilitate a seamless transfer of ongoing customer contracts and relationships to EDS.

The consideration for the acquisition is payable in cash on a deferred basis and is capped at £8 million (subject to downward adjustment (if applicable) following the completion of a valuation of the Kitsons Business by an independent valuer). The deferred consideration is intended to be satisfied from the Group's banking facilities at that time.

http://www.digitallook.com/news/rns/21047864-188986/SID-Acquisition_html?ac=,&username=,

Looks like what has turned out to be a fairly costly mistake has been made somewhere along the line. The company is getting support from its bankers, but it could end up looking to raise more cash at some stage. Shareholders might be wondering what the share price will look like when the suspension is finally lifted, but I suppose they can be thankful that they will still have something rather than nothing which many might have feared a couple of weeks ago.

IQE, trading update in

IQE reported today and perhaps the good news, at least for now, was in the price rise of the last couple of weeks as the shares finished down on the day having been up almost 10% at one stage.

The Board expects first-half performance to be ahead of market expectations, with first-half revenues approaching £63 million, EBITDA in excess of £10 million and net debt below £39m. This represents revenue growth of over 80%, and EBITDA growth of over 150% compared with the first half of 2012.

http://www.digitallook.com/news/rns/21046928-24795/IQE-IQE_plc_H1_trading_update_html?ac=,&username=,

Pretty good release, expected to be ahead of expectations for the first half, but then they end with the belief that the group is on track to meet market expectations for the full year. Qualcomm fears remain and given the effect on the share price since February of what the US giant might be planning, chances are that volatility in IQE's share price won't go away just yet.

IQE, still rising ahead of results

IQE report eagerly awaited results tomorrow that will have both bulls and bears of the stock on the edge of their seats. As reported here, IQE had been until recently under a constant short attack, the share price having fallen from a high of over 37p back in February to a low of around 18p in early July on the back of competition fears from US giant Qualcomm. According to shorttracker.co.uk, BlackRock still holds a 2.7% short position. That's fairly hefty considering the recent pre-result bounce in the share price to 27p today.

A good result tomorrow could easily send the shares higher, but I was slightly mystified by the BlackRock short position given the recent rise unless they are just trading this as a hedge? A check of the major IQE shareholders shows the following.

Blackrock Investment Management 37,076,124 5.74%.

http://www.iqep.com/investors-shareholderdata/

So, BlackRock have over 5% of the shares and are both long and short the stock. BlackRock Investment Management are down as holding 0.90% of that 2.70% short, the rest being held by other parts of the BlackRock empire. Perhaps it is just a hedge on Qualcomm fears?

Truth is no one knows what the company will announce tomorrow as so little has been said in the run up. Expectations are high that results will be in line or exceed expectations, so there is a risk after the recent bounce that there could be a sell off on the news if they disappoint. The results could still be fairly good and yet fall if there is profit taking on the news (trade the rumour, sell the news). Alternatively, it could break out further tomorrow, especially if expectations are exceeded. The IQE daily and weekly charts are looking more positive though, so, everything to play for.

Many brokers are still rating this as a 40-50p plus share, but it won't necessarily get there straight away, and we are still waiting for further details of what Qualcomm intends to do that started off the recent fall in IQE's share price. There could be further volatility ahead once Qualcomm makes up its mind.

http://www.guardian.co.uk/business/marketforceslive/2013/feb/22/iqe-semiconductors-competition-qualcomm

AIM shares in ISA's from 5th August

The date has finally been confirmed when AIM shares can be bought in UK tax free ISA's.

The government has confirmed that risky smaller shares will be allowed in stocks and shares ISAs from 5 August.

From August investors will be able to invest in shares listed on non-traditional stock exchanges, including the Alternative Investment Market (AIM) and lesser-known ICAP Securities and Derivatives Exchange (ISDX).

Investors will also be able to hold shares listed on alternative European stock exchanges.

http://www.citywire.co.uk/money/aim-shares-to-be-allowed-in-isas-from-5-august/a692123

Perhaps the key word here is "risky".  This has both its good and bad side (AIM shares in ISA'S, the dark side and buyer beware) so it's important to understand the level of risk, especially with AIM regulation being so weak.

Silverdell, finally a statement

It's been a couple of weeks since Silverdell announced their suspension of dealings on AIM, finally this morning a company statement has been issued.

The Group announced on 2 July 2013 that it had requested a suspension of trading in Silverdell's shares pending clarification of the Group's financial position. This followed the appointment of administrators to Kitsons Environmental Europe Limited ("Kitsons"), one of the Group's principal trading subsidiaries.

The Board is pleased to confirm that discussions with the Group's bankers, HSBC, have reached a satisfactory outcome. HSBC has confirmed that it remains supportive of the business and will be providing additional short term facilities to the Group.

The Board also confirms that Kitsons is the only Group company which is in administration, and that all other Group companies continue to trade as normal. The Board is extremely grateful to the Group's employees, customers and suppliers for their patience and forbearance.

Further announcements will be issued in due course.

http://www.investegate.co.uk/silverdell-plc--sid-/rns/further-re-suspension-of-dealings/201307160700073973J/

This basically confirms the main rumour that the problem was with with a winding up order against Kitsons and it has clearly taken some time to negotiate with their bankers to continue to support the group. The group says that it is "extremely grateful to the Group's employees, customers and suppliers for their patience and forbearance", which is all very well, but perhaps they should have mentioned shareholders of the company as well who have been kept in the dark for a couple of weeks.

Next will be the lifting of the suspension and the market reaction to events. If there has to be a fund raising, a dilution of the shares, then expect the share price to be lower, perhaps significantly lower.

http://sevenpillarstrading.blogspot.co.uk/2013/07/silverdell-whats-going-on.html

Video market round up for the week ending Friday, 12th July 2013

A week ending round up of the markets from Steve Briggs YouTube channel.

Included in this video is a look at Pearson, Fresnillo, Royal Dutch Shell, Weir group, Salamander Energy and RPS group.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/

IQE, are the shorts closing? Watch for their results later this month

One share that I've been following for quite a while is IQE, a technology company on AIM that calls itself a global leader in advanced semi conductor wafers.

From the company website;

IQE's products are found in many leading-edge consumer, communication, computing and industrial applications, including a complete range of wafer products for the wireless industry, such as mobile handsets and wireless infrastructure, Wi-Fi, WiMAX, base stations, GPS, and satellite communications; optical communications, optical storage (CD, DVD), laser optical mouse, laser printers & photocopiers, thermal imagers, leading-edge medical products, barcode, high efficiency LEDs and a variety of advanced silicon based systems.

The manufacturers of these chips are increasingly seeking to outsource wafer production to specialist foundries such as IQE in order to reduce overall wafer costs and accelerate time to market.

http://www.iqep.com/about/

The share price can be quite volatile, both up and down. It is a blue sky opportunity that has great potential, most of the brokers covering the company have placed a much higher price target for it than its current low of around 18p. Many see 50-65p as the target range.

Silverdell, the silence is deafening.

It's been over a week since the suspension of shares at AIM tiddler Silverdell, yet there has still been no statement from the company.

At the very least this is a poor show as investors in the company have been left in the dark as to what is going on. This has only served to add to rumour of what may or may not have happened.

The worst case scenario here is that the reason for the silence is because whatever the problem was that resulted in suspension is not that easy to clear up. Perhaps it is bigger than first thought? Who knows, but unfortunately the company silence doesn't help in the matter.

Barratt Development, more good news for UK house builders

Barratt Developments share price may be down slightly today, but that is probably more due to the general market being down and the fact that in recent days it went up on the back of other good trading updates from listed UK construction companies, than any bad sentiment towards the company. The share has had an amazingly good run the last 18 months or so, like others in the sector defying bear calls that it is overvalued. 

That run looks set to continue as Barratt follows others by confirming that the Government's Help to Buy scheme is playing its part.

Mark Clare, Group Chief Executive commented,

"As more house buyers return to the market, supported by improved mortgage availability and the Help to Buy scheme, we are in a strong position to continue to grow the value of the business. We are increasing our investment in land whilst reducing debt and have delivered a performance ahead of expectations. Momentum is continuing to build and with forward sales up substantially, we are confident we can improve our performance still further in the year ahead."

http://www.digitallook.com/news/rns/21017935-10120/BDEV-Trading_Statement_html?ac=,&username=,

While valuations of UK house builders are already stretched and there is a lot of good news already baked into their share price cake, don't be surprised if we seeing the still early stages of a bubble in prices for these companies.

More posts on house prices and house builders below:

Help to Buy, the new housing benefit

Bovis Homes update

Taylor Wimpey benefits from Help to Buy

Persimmon reports

Telford Homes update

UK house prices, case of too big to fail.

Help to Buy, the new housing benefit?

Bovis Homes reported today, following on from a number of trading statements towards the end of last week from other house builders and as expected the news was good.

David Ritchie, the Chief Executive of Bovis Homes Group PLC said:

"The Group has performed well in the first half of 2013 with a significant further improvement in housing profit, delivered from the ongoing successful execution of the Group's growth strategy. Trading in the first half of 2013 has been strong and the Group has achieved a 40% increase in private reservations compared to the same period in 2012. Continuing its success in the land market, the Group has added 2,767 new consented plots to the land bank. With the positive progress in executing its growth strategy, the Group is well positioned to deliver higher shareholder returns."

It goes on.

Market conditions

Even though the general economic background remains challenging, the housing market has shown signs of strong improvement. Consumers are increasingly able to access mortgage finance and the launch of the Help to Buy shared equity scheme, replacing FirstBuy, has had a positive effect on customers' confidence to buy a home and their ability to transact. These positive effects are expected to support greater activity in the new homes market, which in turn will provide an impetus to the number of new homes built. The Group continues to view positively the Government's initiatives to support the housebuilding sector.

http://www.digitallook.com/news/rns/21012367-11178/BVS-Trading_update_html

Of course it does.  How can any company not be thankful that the Government is potentially poring billions of pounds in taxpayer money its way? Supposedly this is to kick start a market that hadn't really seen a big fall after the financial crisis set in, but in reality was effectively dying a death from inactivity because of what happened before the financial crash.

FTSE100 Update - Central Bankers to the rescue

With the US closed yesterday, EU and UK Central Bankers took center stage and basically gave the markets what they wanted to hear.  Low IR's, perhaps even lower for some time to come, QE still on tap if needed, the UK market lapped it up almost hitting 200 points for the day. Unlike Bernanke in the US, the ECB's  Draghi effectively said that any exit from this dovish stance is very distant.

Market is up again so far today, but will await the US job numbers. Again we could be in for an interesting day because if the numbers come in weak then markets might actually jump higher on it because the US Fed will have less reason to taper QE. A good jobs number could ironically bring back the old doubt and fear that the easy money policies might be about to end and markets could go the other way on this "good" news.

The jump yesterday effectively took out the lower high possibility that I posted a few days ago. Still not a full bullish turn and we may now be entering into a period of consolidation.

FTSE100 - Daily

AIM shares in ISA'S, the dark side and buyer beware

It was perhaps ironic that after the announcement over the weekend that AIM shares would be allowed in tax free share ISA's from later this year, the market opened up Monday with a couple of its constituents under suspension.

Silverdell and Pursuit Dynamics had their listing suspended, the former has yet to release a statement as to why, while the latter did so yesterday. In the absence of any information there has been much speculation about what has happened to Silverdell. Time will tell, but while there may be celebration that AIM shares can finally be included in ISA's, it is important to understand that many of these companies are high risk and regulation is very light touch.

AIM is a market that has its critics, Tom Winnifrith being one of the most vocal. Here's what he has to say about the decision to allow AIM companies into ISA's.

The crap at the bottom of AIM which is loss making now and always will be cannot attract institutional funding for a good reason. The bottom 450 companies on AIM are just not investment grade material.

Most are resource stocks or investment companies or just plain joke companies. They create no real jobs in the UK and in most cases merely seem to exist to support the same band of directors (who rarely have big stakes in the firms) and to pay fat City advisors fees. They simply DO NOT create very many jobs in the UK. The firms that create most jobs are small private companies. Claims that AIM creates real jobs outside the boardroom and the Square Mile on a meaningful scale are simply false and were part of the spin that financial services companies & City financiers served up to push for this ISA change.

This change will create very few if any real new jobs. Whether it will assist Middle England is saving in a more prudent, careful and measured manner is also something about which I have grave doubts. But the jury is out on that for now.

Will a flood of ISA money revive the Cesspit? Of course not. There will not be a flood of money for the small cap end of the market. For it to recover AIM regulation needs to kick out the miscreants who lie to investors, restore trust in the market and finally to attract a few real companies that make things rather than just more and more cash shells, investment companies and third rate resource exploration plays. Will that happen? I see no signs of it.

http://www.shareprophets.com/views/892/aim-shares-in-isas-misguided-folly-driven-by-city-misinformation
(Registration to site needed to access articles)

Not all AIM companies are bad and things can go wrong at any of them, but anyone buying them needs to be aware that even after you have done your due diligence you might just get a bad one and sometimes you won't know it until it happens.

ShareSoc also exists to look after the interests of UK investors, associate membership is free.

http://www.sharesoc.org/membership.html

FTSE100 Update - A stripped down look at lower highs being formed

So, after a few days of summer relief fear is back on the agenda today, the word Portugal being used a lot to describe the sell off. As we should know by now, when the market needs a reason for a sell off or profit taking it can usually find something. That's not to say that the wider macro issues are not important, but anyone following this blog will know by now that quite often the market turns a blind eye to news, good or bad, just as often as it will take it into account. Usually the news will serve its purpose, whatever the market sentiment is at the time. Often it is just plain old noise.

However, the charts are suggesting a sentiment change. The first of the two FTSE100 charts below is a stripped down version that shows that we seem to be in a wave down pattern. I'm not that proficient at Elliot waves or wave theory and whether they offer us a "scientific" approach to technical analysis, but anyone who looks at charts for any length of time cannot fail to see that markets and individual shares often move in waves, up and down. These waves will often have higher highs in an upward move and lower highs when falling.

The charts below are suggesting lower highs, the market unable or unwilling to sustain any bounce. A wave formation is also emerging that could see more downside as so far it looks like this is only the beginning of a third wave down. MACD also suggests that the daily chart is weakening to further downside. FTSE100 does have support levels below 6000. If the latest fall today continues watch out for what happens on the next bounce, as 6300 is the approximate lower high just achieved. Any bounce that does not clear that and sets another lower high suggests weakness and more downside.

The weekly and Monthly charts, not included here, also suggest weakness, although the latter still offers hope to bulls that the longer term upward trend is still in place.

It's also Summer, and markets can drift on low volume numbers.

For charts click below:

Silverdell, what's going on?

Being a self regulated market AIM can throw up potential nightmare stories for investors from time to time. At face value things can look good with a company, results look impressive, news flow from the company itself positive, but the share price is declining, an investor may wonder why or question whether there is something not quite right going on?

Other than market drift which can often hit smaller company shares in a big way, it's difficult to know sometimes why a share price of a company that may be on reasonable fundamentals is falling. It might be technical, sometimes there's a rumour which often the company will deny. Investors will often blame the market makers, the short sellers, bears of the company, but with AIM companies a bolt out of the blue can happen at any time it would seem. Shareholders are often the last to know.

One company I've been following for a while is Silverdell, in part because although the share price was falling, and other than a rumour that a cash call to aid further growth might be needed - denied by the company, it seemed to have a lot going for it. Then suddenly today its shareholders were presented with this.

Suspension of Dealings

Silverdell has requested a suspension of its shares from trading pending clarification of the Group's financial position.  Further announcements will be made as and when appropriate.

http://www.investegate.co.uk/silverdell-plc--sid-/rns/suspension-of-dealings/201307020730033712I/

Silverdell investors will have woken up to this, I suspect largely unexpected news and wondered to themselves what is going on? After all, the company itself was very bullish if it's own recent statements are anything to go by.

This is what Silverdel's CEO Sean Nutley said in April.

‘We are targeting 15% year-on-year revenue growth over the next three years. The market only has us at 8%,’ he states. ‘At the 8% forecast growth rate, we can support that growth without going out for further funding from a bank or elsewhere. If we want to go to 15% growth, we will need additional financial support.’

http://www.sharesmagazine.co.uk/articles/silverdell-mulls-the-price-of-growth

Then in June.

Today Nutley tells me that Silverdell no longer needs additional working capital to hit the 15% target. ‘We’ve been able to get the right mix of business and right payment profile to meet our strategic targets,’ he states. Additional money is only needed if the group finds a way to ‘supercharge’ growth beyond the 15% rate, adds the CEO.

http://www.sharesmagazine.co.uk/news/silverdells-communication-challenge

So, have they suspended because they want more funding to "supercharge" at 15%+?  Most unlikely. Shares tend to be suspended for far more serious reasons, although you would be forgiven for wondering where the serious reason is in this case, but there just might be one.

AIM shares become ISA eligible from this autumn

News today confirmed that UK listed companies on AIM can be bought for tax free share ISA's from this autumn.

"Over 1,000 companies listed on the Alternative Investment Market (Aim) will now be eligible for direct Isa investment," the Treasury said. "The changes will provide savers with a tax-efficient way to hold shares traded on SME [small and medium-sized companies] markets."

http://www.telegraph.co.uk/finance/personalfinance/investing/isas/10153431/Birth-of-the-IHT-free-Isa-as-ban-on-Aim-shares-is-lifted.html

 

£100 Billion UK infrastructure spending, which companies will benefit?

Yesterday was a day of cuts to Government spending, today was like a party for infrastructure spending. After yesterday's announcement of around £11.5 billion of further public spending cuts, some might be asking where does the Government find £100 billion for infrastructure spending in a time of austerity? Well, I suppose in a way it comes down to accountancy trickery, in that as capital expenditure it won't show up in the budget for current spending, so a lot of it is off balance sheet.

Anyway, most would probably argue that if the Government is going to spend more money then better to do it on something useful like infrastructure projects, roads, buildings, new energy sources, etc.

Plans for a £100bn modernisation of the UK's infrastructure, including new homes, road repairs and improved flood protection, have been announced.

The package, of which £50bn will come in 2015-16, is also aimed at boosting new sources of energy like shale gas.

Treasury Minister Danny Alexander said the plans put "long-term priorities before short-term political pressures"

http://www.bbc.co.uk/news/uk-politics-23074245

Question is, which companies are likely to benefit from all this additional investment? House building construction companies have already felt the benefit of Government intervention in the housing market with the Help to Buy scheme announced at the last budget, now the wider construction and energy industry get their turn.

Already companies like Drax and Speedy Hire have seen a price rise today which may be down to the extra business this spending may send their way. However, in what has been a good day for the UK market after recent falls, the response to the announcement has been a little muted. It could be worth spending some time looking for companies that will benefit, after all, the £100 billion will spent.

When bad news is good, at least for the market

Markets often work in strange ways and a lot of the time it is pointless trying to be rational or apply logic to their behaviour, because they turn the news to suit their sentiment and hopes. Yesterday was a good example of this.  After a month or so of fears that QE tapering by the Fed and possibly other Central Banks was on the agenda, markets had been falling, yet there was clearly something wrong here.  After all, tapering, which would be data dependent, was only likely to happen if the economy was in recovery mode. In other words, isn't a recovering economy supposed to be good for stock market quoted companies, surely that's what they want? A recovery?

Yesterday however, was another example of this strange market sentiment. The US GDP numbers came in lower than expected and markets went up. Sure, a bounce was due, but they went up because this "bad news" is actually good for what the markets seem to want - more QE.

The advances followed an upbeat finish on Wall Street overnight after U.S. first-quarter GDP growth was revised down to 1.8%, from an earlier estimate of 2.4%.

“The concerns of the market that prompted a selloff in recent weeks appear to have subsided,” said CMC Markets sales trader Miguel Audencial.

“The first-quarter U.S. gross domestic product figures increased [by less] than forecast, which the market read as a signal that the U.S. Fed is likely to step on the brakes at a later date than previously feared,” Audencial said.

http://www.marketwatch.com/story/korean-stocks-lead-asia-gains-amid-fed-hopes-2013-06-26

Sooner or later QE of this magnitude has to come to an end and perhaps we will see for possibly the first time in history economies recovering and bullish and stock markets crashing all over the world because the free money game of QE is coming to an end. Who knows, but don't try to apply logic to it.

FTSE250, worst performers, dominated by the mining sector

It's been pretty bad for quite some while for anyone invested in UK mining shares. Given that the main markets have been fairly bullish for some time, the sell off in mining stocks has been severe. Here are the worst performers.

1 year

African Barrick Gold  -72.45%
Hochschild Mining  -63.27%
Kazakhmys  -62.35%  Recently relegated from FTSE100.
Evraz  -61.04%  Recently relegated from FTSE100.
Centamin  -57.18%

6 Months

African Barrick Gold  -75.89%
Kazakhmys  -66.68%
Hochschild Mining  -65.84%
Evraz -60.74%
Polymetal International  -58.88%

Even in the last 30 day's with the market correction, mining shares have been hit hardest, only Man Group tops them.

Man Group  - 32.03%
Hochschild Mining  -31.82%
Evraz  -31.37%
Polymetal International  -26.18%
Centamin  -23.39%

Looking at the weekly UK mining sector chart suggests that there is still no let up or bottom in site as of yet. Not a good chart for mining investors.

Chart:

Video market round up for the week ending Friday, 21st June 2013

A week ending round up of the markets from Steve Briggs YouTube channel.

Included in this video is a look at the fall in the UK mining sector, including Fresnillo and Randgold Resources.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/

The Onion's take on the financial world, almost like reading the FT

Financial Sector Thinks It’s About Ready To Ruin World Again.

“It’s been about five or six years since we last crippled every major market on the planet, so it seems like the time is right for us to get back out there and start ruining the lives of billions of people again,” said Goldman Sachs CEO Lloyd Blankfein. “We gave it some time and let everyone get a little comfortable, and now we’re looking to get back on the old horse, shatter some consumer confidence, and flat-out kill any optimism for a stable global economy for years to come.”

“People are beginning to feel at ease spending money and investing in their futures again,” Blankfein continued. “That’s the perfect time to step in and do what we do best: rip the heart right out of the world’s economy.”

Surely bankers don't really think and behave like this....I mean, they are really nice guys at heart.

“The other day I actually overheard someone on the sidewalk utter the words ‘I’m saving up for retirement,’ and right away I thought to myself, ‘Well, time to get down to work,’” said Morgan Stanley chairman James P. Gorman, adding that the increasing number of individuals entertaining ideas of starting their own businesses or buying houses was the financial sector’s cue to set off another devastating global recession. “We’re definitely thinking on a huge scale again, because we all really enjoy toying with the livelihoods of millions of people overseas and forcing them to wonder why reckless, split-second decisions made thousands of miles away dictate their whole country’s socioeconomic future.”

“Plus, it’ll be nice to finally wipe out the Euro once and for all this time,” Gorman added.

http://www.theonion.com/articles/financial-sector-thinks-its-about-ready-to-ruin-wo,32865/ 

FTSE100, worst performers.

Fear appears to be back in the market whether it is QE tapering, China growth, China banking system, there's always something to give the markets the excuse to fall once sentiment has changed. It would seem sentiment has changed in the last month or two which is hardly a surprise given the bull run before. Whether this is just a correction that will see markets revert later in the year to their usual seasonal bullishness cycle remains to be seen.

For now, it is worth having a look at the FTSE100 worst performers because despite all the bullishness about some companies and sectors have seen crash level falls.

6 months

Fresnillo  -53%
Antofagasta  -39%
Randgold Resources  -33%
Anglo American  -31%
Rio Tinto  -26%

3 months

Fresnillo  -35%
Randgold Resources  -26%
Anglo American  -24%
Glencore  -24%
G4S  -20%

30 Days

Aberdeen Asset Management  -27%
Arm Holdings  -23%
Severn Trent  -21%
Old Mutual  -20%
Vedanta Resources  -20%

Bernanke speaks, market overreacts, what's new?

Fed Chairman Ben Bernanke just about said everything that he could say to sooth market fears yesterday, but as usual the market reacted in its knee-jerk way with a little sell off, the excuse being that he probably wasn't as certain with his response as they would like him to be and there is still this remarkable fear that tapering will come sooner than the market wants.

However, given the great unknown experiment that is going on with QE and the monthly bond buying, how could he be certain than to say that it is data dependent?

The Fed has said it would keep rates close to zero so long as the jobless rate, now at 7.6%, was above its 6.5% threshold.

And the Fed chairman stressed the bank won't start to hike rates even once its economic targets are met. He said the bank has to be convinced the economic recovery is on a solid upward path before it starts to pull back.

“Our policy is in no way predetermined,” Bernanke said. “Our policies are tied to what’s going on in the economy.”

Indeed, 14 of the 15 Fed members don’t expect the first rate hike until 2015, according to the bank statement.

“The Fed is in no hurry to remove monetary accommodation, but as the downside risk to the U.S. economy and labor market diminish, the rationale for maintaining emergency quantitative-easing measures becomes harder to justify,” said Scott Anderson, chief economist of Bank of the West.

http://www.marketwatch.com/story/fed-much-more-upbeat-about-outlook-2013-06-19

So, basically this gives the market what they wanted. If the economy does improve then QE cannot go on as the risks for real inflation become deeper. Surely the market wants an improved economy? Or does it just want an endless supply of newly printed money every month because that is easier? Fair enough the market had gone up in the 2 previous sessions, so the sell off was probably an excuse for quick profit taking. Sometimes any excuse will do, but sooner or later the market will have to learn to live without the Central Banks intervening in this way and if the economy is supposedly improving then what is the problem for the market?

In the meantime, with the markets going down it doesn't alter the fact that many companies are still producing good results.

FTSE100, oversold bounce due?

The big news this week will probably come when the Fed meets and concludes on Wednesday. Much of the current uncertainty came about when Ben Bernanke talked about the tapering of QE and that it could possibly end sooner as against later. The market seemed to take this as a signal that it would end quickly, all in one go and that it was as good an excuse as any to sell off. If anything the sell off in equities has been stronger outside the US, the UK getting to around 6900 before the latest fall to 6300. It's believed that Bernanke will basically say the same as before, but for the benefit of the trader panic types, it will be made a little clearer on what is likely to happen.

“We suspect that this week Bernanke will continue to say tapering will happen at some point, could happen this year but will be data-dependent, and that we are still a long way off from removing the very easy policy stance the Fed has in place,” said Jim Reid, strategist at Deutsche Bank.

“We still think that the Fed will struggle to taper very much and very early, but the debate is now going to be around for a while,” said Reid.

http://www.marketwatch.com/story/stock-futures-up-sharply-on-fed-clarity-hopes-2013-06-17?link=MW_popular

In other words, same as before, data dependent and nothing likely to happen until the "recovery" is fully in place. Even then it likely will be a slow winding down, gradual, over time. What they will not do is turn it off totally on a specific date.

Whether this relaxes the markets is anyone's guess, but the FTSE100 is showing that it is ready for a bounce after the recent fall. The Daily chart looks set to retrace some of the lost ground of the last month, but would probably need to go through 6600 and then use that as support if recent highs are to be challenged again. If it fails to get to 6600 and it becomes resistance then we could see a second wave down that confirms a downtrend.  The 20dma is just touching the 50dma to a potential downside crossover on daily chart. Weekly chart is also weaker, but the monthly still gives hope to the bull case.

Charts below;

June, the numbers suggest not a good month for equities

Looking at the falls so far in June, especially deep in emerging markets, Japan, Europe and the UK, you would be forgiven for thinking that "Sell in May" is in full swing, but as usual it might not be as simple as that (sell in May, stock market myth or reality). Sell off for June may be more appropriate.

In the last 22 years the FTSE100 has fallen in June 73% of the time, the average performance being -1.4%.

http://www.cityindex.co.uk/market-analysis/trade-statistics/11787652013/ftse-june-infographic/

But as can be seen by some of the "Sell in May" stats, a bad June doesn't always follow through.

June does have a habit of being a bad month for equities though and this year after such an unrelenting bullish start to the year, the pace of which couldn't be maintained, there had to be a sell off at some point. It's almost as if the market was gearing itself up for a correction and June seems to be a good time for it.

The interesting thing about this sell off is that from a news standpoint we have not been going through a particularly bad period of news. If anything the news is mixed, not overly good or bad, but the market sentiment has changed in the last month, so that any good story is now largely ignored, or it's not good enough. Of course, when the market's going up any bad news story gets the same treatment, ignored. However, the "fear" word does appear to be back, even if the fears seem to be more imaginary than having any basis in fact.

I've long taken the view that the stock market is no more than a sentiment market, which will often use fundamentals, or the lack of, news - good or bad, to justify whatever the prevailing sentiment majority opinion in the market happens to be at that moment in time. I've never seen stock markets as particularly efficient either, they always seem to be too bullish or bearish, rarely is a happy medium ever achieved.

It is almost pointless trying to apply logical or rational thinking to why the market behaves the way it does, yet this is what investors are essentially trying to do when picking companies to invest in. We try to come up with systems, analysis, a way of doing things that will pick us a winner, yet the market itself is largely about sentiment. How to balance these? No easy answer to that one.

Severn Trent, bid fails, so is it now cheap?

One of the interesting things about following a bid story is what happens in the immediate aftermath when the bid is turned down and the potential buyers withdraw their offer and walk away. 

The short back-and-forth battle between Severn Trent and LongRiver Partners has come to an abrupt end, with the consortium announcing the withdrawal of its bidding interest for the water group late on Tuesday night.

The result was a sharp drop in Severn Trent's share price on Wednesday morning, down as much as 8.0% early on.

The stock surged to multi-year highs last month after the consortium - comprising Canadian investment group Borealis, the Kuwait Investment Office and Universities Superannuation Scheme Limited - first announced its intention to take over the company, the latest UK utility group to attract the attention of foreign investors.

http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=10090&action=news&story_id=20958376

The bid had been increased to 2200p a share which at the current price of around 1760p means that it is now some way off what the bidders were prepared to pay, and even further away from what Severn Trent themselves seemed to think was fair value. Difficult to say what that figure is, but it looks like it must have been a number that was high enough to make the bidders walk.

However, is the company now worth around 450p less than that bid price? Leaving aside looking at the fundamentals, it is always interesting to see how the market gets hyped when there is a chance of a bid, price gets pushed up to what is thought to be as close to a sale value as possible, often higher, which makes you wonder why it was priced lower in the first place. Euphoria of the bid plays its part, bandwagon jumpers get in hoping for a quick profit, but if someone was prepared to pay 2200p now for Severn Trent does that mean it is a bargain at around 1750?

Things aren't as simple as that as quite often the bidding company over values and pays too much. A few years back, a private bidder was prepared to offer over 200p a share for HMV, a company that in stock market terms went bust and is now privately held, the recent buyer getting it and all its potential future problems on the cheap. Severn Trent isn't HMV. As a utility stock it clearly has a premium value to longer term investors.

Next week the company goes ex-dividend, so anyone buying before the ex-div date will pick up 45.5p a share. By then, given the failed bid and the current state of the markets in general, the share could fall even further. Therein lies the problem, at least in the short term Severn Trent is in a down trend and anyone buying in for the dividend may well see further falls until the dust settles and market sentiment decides it's looking cheap again and their must be other potential bidders out there. One might assume that at some stage in the future, further bids, not necessarily from the same consortium, are likely to be made in what is an attractive sector for takeovers and you have to wonder if 2200p is now the minimum benchmark for anyone interested in Severn Trent.

FTSE shuffle time, Russian miners out, builders to get promoted?

It is perhaps a sign of the times that the quarterly FTSE100 reshuffle due to be announced this week could see a couple of under performing miners drop out, replaced by companies from the bullish construction sector.

Both Evraz, the steelmaker and iron ore producer in which Chelsea FC-owner Roman Abramovich has a major stake, and precious metals miner Polymetal International are expected to be relegated from the main board at this week's FTSE Group quarterly index review.

Buoyed by signs of a recovery in the housing market, which has stoked demand for their shares, analysts say Travis and Persimmon are in line to take their places.

http://www.telegraph.co.uk/finance/markets/10108670/Persimmon-and-Travis-Perkins-head-for-the-FTSE-100.html

Travis shares are up 40%, Persimmon 50% this year, in part driven by the Help to Buy intervention of the UK Government, widely seen as a potentially dangerous prop to the housing market, but the type of policy typically undertaken by the politicians when house prices stop going up.

"The wider construction market obviously remains under pressure but housebuilding is an important component of what Travis does," said Andrew Nussey, an analyst at Peel Hunt. He said the Government's Help to Buy scheme had aided homebuilders, Travis' "principal customer base". and "more activity from the housebuilders translates into more business for Travis".

http://www.telegraph.co.uk/finance/markets/10108670/Persimmon-and-Travis-Perkins-head-for-the-FTSE-100.html

Persimmon currently trades on a P/E of over 20, Travis 16.1, so both have generous valuations, but are clearly in a sector that should benefit for the next 2 to 3 years from Government intervention.

Meanwhile, despite the bullish stock market move since the new year, Evraz is down almost 50% in that time, Polymetal around 35%.