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.