Online gambling one step closer in the USA

Some of the biggest movers in the UK markets this morning have been in the gaming sector on the back of a report from the US that legalized online gambling is one step closer.

Gov. Chris Christie (R-NJ) conditionally vetoed the online gambling bill that would authorize Atlantic City casinos the ability to offer New Jersey residents the ability to play poker, roulette, baccarat, blackjack, craps, big six wheel, slot machines, mini baccarat, red dog, pai gow and sic bo online. Despite the conditional veto tag, proponents of the expansion of online gambling believe this is a big victory for the industry.

According to the New Jersey legislature glossary, a conditional veto is "a veto in which the Governor objects to parts of a bill and proposes amendments that would make it acceptable. If the Legislature re-enacts the bill with the recommended amendments, it is presented again to the Governor for signature."

http://espn.go.com/poker/story/_/id/8925250/new-jersey-internet-gambling-bill-conditionally-vetoed-state-allow-online-gambling

This has had a dramatic effect on some of the UK online players this morning so far.

Bwin.Party up 20%
888 Holdings 17%
Betfair 4%
32Red 3.42%

Even behemoths William Hill and Ladbrokes are up slightly on the back of this news, the former has been positioning itself in the US over the last couple of years for the likelihood that sooner rather than later online gambling will be legalized.

While some investors will probably steer clear of these type of "sin" companies because of objections to gambling, for those that don't have a problem with the industry there is massive potential going forward, especially once countries like the US open their doors and legalize the industry. The sky is potentially the limit if the same were to happen in China, although no one should bet on that happening for some time.

Whoops! Why Everyone Owes Everyone and No One Can Pay

Whoops! Why Everyone Owes Everyone and No One Can Pay is actually a pretty good, easy to read and understand book on the financial crisis.

One of the things that Lanchester looks at is the lack of financial education the average person has and how this creates a conflict between modern financial capitalism and democracy. Those running the banks didn't even know or understand much of what was going on, yet the events of the last few years show which of the two has more power.

However, change may be on the way.

Personal finance education to be compulsory

Financial education will likely become compulsory in schools across England for the first time, following the publication of the new draft curriculum today.

The new curriculum will see financial education embedded in both mathematics and in "citizenship" education.  

Campaigners have fought a long battle for children to be taught the basic skills of how to manage their money.  

http://www.telegraph.co.uk/finance/personalfinance/9855051/Personal-finance-education-to-be-compulsory.html 

AIM market and ISA's, what effect will it have on spreads?

At the last budget a mention was made that consideration was being given to allowing AIM listed shares to be allowed into ISA's (UK tax free individual savings accounts). Currently most AIM shares are not eligible as AIM does not qualify as it is not listed as a "recognised stock exchange". A few that are also listed on a recognised exchange overseas do qualify, but most don't. It is hoped that after the consultation period AIM stocks will be allowed into ISA's, if not from this year than in 2014.

One question that this will raise is the issue of the spread on AIM stocks. Smaller companies, especially those listed on AIM, can have the most ridiculous spreads, 5-10% not being uncommon and often more, which can be quite off-putting especially for smaller investors. One of the main reasons given for these wide spreads is the lack of a market, lack of liquidity.

Unlike the FTSE 100, which uses an order book to create a marketplace where buyers and sellers are matched up depending on the price they are bidding or offering, smaller companies rely upon market makers. Market makers do exactly as their name suggests; they make a market for smaller company shares. Unlike FTSE 100 companies, smaller companies attract very few buyers and sellers and thus need an artificial stimulus to enable investors to buy and sell shares. Market makers are firms which provide this service and there are normally a handful of them per listed company, with the investor being matched up with the best price available.

Market makers do not only make markets, they also make money. They do this by charging buyers a higher price than they pay sellers; this difference is called the spread. For bigger companies the spread is very small (for example the spread on Vodafone is around 0.1%) but since smaller companies attract minimal interest and trading activity, the spread needs to be very, very wide in order for market makers to make a nice little earner. Indeed double digit spreads are par for the course, which means you need the share price to increase by 10%+ just to break even

http://citywire.co.uk/money/smart-investor-scary-facts-about-smaller-companies/a462550

So, one of the main arguments for the wide spreads is this lack of investor and trader interest. In theory, adding AIM stocks to ISA's should potentially lead to greater interest from investors and therefore the excuse for such wide spreads will be difficult to justify, although one suspects that those companies with a small number of shares in issue may find the spreads remain wider. It will be interesting to see if and when AIM stocks are included if it has any effect on the spread.

Links:

Recognised stock exchanges http://www.hmrc.gov.uk/fid/rse.htm

Will Vodafone disappoint?

While the Vodafone share price has recovered a little ground in recent weeks, to some degree on the back of the euphoric start to the year in the FTSE, its results to be announced tomorrow have been awaited with some question marks hanging over what is likely to be reported. Could the downward trend continue if Vodafone comes in lower than expected? It looks like the market is ready to be disappointed.

Vodafone Group is expected to post 'growth deterioration' in its financial results Thursday.

Last month Deutsche bank lowered its recommendation from ‘buy’ to ‘hold’ citing concerns about the telecom company’s worsening cash returns.

"We forecast growth deterioration through calendar 2013 with the outlook for financial FY14 set to confirm declining free cash flow (FCF), no further dividend-per-share (DPS) growth and a scaled down buyback to avoid increased leverage."

Deutsche Bank said it anticipates organic service revenues to falter further this year, with a return to positive growth unlikely until 2014.

It also reduced its target price for the shares from 225p to 175p.

http://www.digitallook.com/news/20674165/Thursday_preview_Vodafone_Group_to_report_growth_deterioation.html?username=&ac=

"Growth deterioration" doesn't sound good, but a lot will depend on how much deterioration and it does have its Verizon Wireless investment to help it out, although it appears to be talk around a possible Verizon buyout of Vodafone that seemed to be helping the share price recently. Would Verizon seriously consider a bid for Vodafone? Can Verizon afford it?

A better than expected report tomorrow could see Vodafone continue to recover from its lows in the 150's, worse than expected and we may see 155 tested again over the next few weeks. It will be interesting to see what the charts look like by the end of tomorrow.

Vodafone chart before recent recovery below.

http://sevenpillarstrading.blogspot.co.uk/2012/12/no-christmas-love-for-vodafone.html

Video market round up for the week ending 1st February 2013

A week ending round up of the markets from Steve Briggs YouTube channel. Included this week is a look at the UK mining and construction sectors.

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 or gambling? The risk addicts.

Pretty good article in the Financial Times this weekend about trading and gambling that is well worth a read.

http://www.ft.com/cms/s/2/788c1930-6b3a-11e2-9670-00144feab49a.html

FTSE100 - A look at the daily chart

The movement on the FTSE100 daily chart suggests that a long awaited pullback could be underway. However, the recent run up has left plenty of room for a minor pullback before the upward trend continues. The MACD indicator has turned negative, but is quite a way from the zero line, a crossover at that point being bearish. Even if it falls that far it doesn't necessary indicate that we are in a sustained bearish move. That would take a downtrend with some lower highs coming in and new support points not holding. For now, the FTSE could fall to around 6100, an old area of resistance from 2011 and now potential support, and still be in an uptrend.

FTSE100