Monday, September 29
Hank Paulson is going to have to come up with something else and the reclacitrant Republicans and Democrats will no doubt be looking for something else more to their liking. Financial Armageddon has been promised of course if the bill was not passed , so we shall see what actually happens.
Friday, September 19
Investing in Stocks and Shares
Here are what I took down of the potted thoughts of Rakesh Shah - Andy Lynch and Ian Morley who have just been discussing the current stockmarket situation on CNBC
Rakesh Shah – shorters now in fear up capitulation to upside – got no ammunition to push prices down – problem is that the LSE system is no longer working – HBOS dropped 50% in auction in 8 minutes because system is broke – auction period should be increased to 30 minutes. It took only £60 million pounds to drive HBOS down 50%
Hedge funds were a lion that had been let out of cage but problem was it turned on the owner. Tail had finally started wagging the dog. The system therefore needs to be changed.
Markets will rally strongly followed by a massive fall – recommending bonds – says reversal will be very strong
Institution generally don’t have a clue how much of their stocks are being lent out for shorting – if they did then it would be an easy matter to stop it.
Andy Lynch – Schroders – economic fundamentals not changed – still difficult – shorters being forced out – middle of next week may start drifting lower
Rally has substance short-term but longer term economy in much worse position than in 2003 – valuations need to come down to around 4400 or 4500 on the FTSE – rout will continue
What should investors do now ? – AS : Ask where is world economy going ? Where will it be in 3 or 6 months time ? What are implications for share prices ?
Banks will need to reduce the supply of credit and their leverage.
Ian Morley – Corazon Capital – prices of financial feel because holders were selling not shorters – they were ridiculously overvalued – this is market manipulation on a grand scale done by regulators – true value and market price bear no relation to each other – fear much more powerful than greed – He bought HBOS last night (well done him ! – although he sold them this morning) because he could not see the logic of HBOS being down when they had agreed a price of 232p i.e. markets had gone nutty and people had no clue what they were doing anymore
At moment people are buying rumour (US rumours) once facts are known prices should come down again.
Banks were using public money in an incorrect way – Hedge funds are private companies which were taking a view on the markets. Hedge funds were actually buying after 9/11 when everyone else was buying.
What needs to change is stability – banks need to lend to each other – liquidity arrangements need to work – until then it is extreme fear and panic driving markets
Says you could buy an index of the banks but be careful – investment banks will be allowed to fail – but not commercial banks – buy index of commercial banks after they drop back a bit
Stock-lending is not the problem. Complete misunderstanding of cause of problem.
Thursday, September 18
The FSA has finally decided to do something too late, after two major banks have gone to the wall.
Short-selling of financial stocks is to be banned in the UK from midnight tonight (Thursday).
The ban will “prevent investors from creating or adding to short positions in all publicly quoted financial companies” and will remain in force until January 19, 2009.
Short-sellers have been widely blamed for driving down share prices in the financial sector.
Hector Sants, CEO of the FSA, said: “While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector.”
The FSA is also tightening up disclosure rules, - this will force investors to disclose all net short positions in excess of 0.25 per cent of a company’s share capital.
The the ban applies to an unspecified list of financial stocks but the FSA said it could be extended to other sectors.
They should have done this years ago of course, but some people have been making very large amounts of money from destroying companies, usually small fringe companies, but now that they have started destroying the very system which they themselves need to continue to function, someboidy has finally woken up and thought it might be useful to do something. Presumably because his own pension was being put at risk.
Wednesday, September 17
Online Stock Trading - HBOS LLOYDS Merger Price to be 232p not 280pThe BBC has just announced at 9 p.m. that the HBOS - Lloyds deal will be done at 232p not 280p as previously thought.
First of all let me (not Robert Peston) just say that IMHO until the authorities stop people selling shares they don't own, haven't borrowed and have no intention of borrowing this sort of mess will continue to happen. Capitalism is after all, all about making money for number 1, so even if n*k*d shorting isn't legal, if people can get away with it then they will continue to do it. It is in fact a logical consequence of the system in place.
The aim being to make money, it is clearly advisable to make money in the easiest way possible. It was inevitable that at some point driving companies to the wall would be seen as the easiest way of making money. For shorters, after all, the ideal result is when a company share price drops to zero and whatever they can do to get it to zero is the logical thing to do. This includes selling stuff they are not entitled to sell, working together in 'packs' as the BBC said, spreading false rumours etc...
Over on his blog Robert Peston has posted, re. the HBOS Lloyds deal:-
- Price will be around 280p in shares (it turns ou t it was 232p) , - terms to be announced tomorrow morning before markets open. (Shorts to lose millions ? One can but hope - Ed.).
- Gordon Brown will cite "national interest" clause in the law that led to the creation of competition authorities. But it may need to use secondary legislation.
- The reason for all this is that people were beginning to withdraw cash from HBOS – so another Northern Rock could not be allowed.
- The new larger group will still be subject to competition law. But a bit of realpolitik forced the government to protect depositors. (Perhaps the shorters were counting on the competition laws to prevent any merger ? – Ed.)
- Scotland will be angry about the deal as the HBOS head office is in Scotland and the deal will relocate an important financial institution to London. But, strangely, Lloyds TSB's registered head office is in Glasgow.
- Eric Daniels will remain CEO the new group. Andy Hornby’s future is not clear.
13:25 HBOS has just confirmed it is 'advanced merger' talks with Lloyds
Robert Peston of the BBC appears to have a hotline to someone in the know and his most recent update to his blog (12.43 p.m.) goes something like this
I now have more detais about how competition obstacles will be overcome. The government will made a statement saying that "in the interests of financial stability" (no mention of prudence ?) it will legislate to over-ride the powers of the OFT and the Competition Commission which may have blocked the deal.
The formal terms of the takeover will be announced. Both boards are in a meeting "right now" to approve the deal.
It sounds a bit like he is making it up but obviously he isn't.
So if you're short you may wish to reconsider your position. If you're a gambler that you may wish to gamble, I personally can't afford any gambles at the moment.
Investing in Stocks and Shares
After a morning in which HBOS shares slumped 50% at one stage due to market manipulators shorting the stock UK bank Lloyds TSB is said to be in merger talks with HBOS Plc.
Intraday HBOS chart
The actions of the shorters who are, according to the BBC acting in packs to attack banks may also lead to some much needed action from the FSA. If notghing is done they will merely move on to another target.
The BBC also said a deal could be finalised as early as Thursday, with a value for HBOS shares close to last week’s price of 300p. Hopefully this will cause a deal of grief to shorters.
By 0950 GMT HBOS shares were up 2 percent at 186.4 pence, valuing the bank at 10 billion pounds ($17.9 billion), having slumped more than 50 percent earlier to an all-time low of 88p
The talks are being encouraged by the government and the FSA, who obviously do not want another Northern Rock on its hands.
"We are satisfied that HBOS is a well capitalised bank that continues to fund its business in a satisfactory way," the Financial Services Authority said in a statement.
One potential stumbling block says Robert Peston is that the banks are enormous and competition authorities will be concerned but they are said to have some sort of 'ruse' to get around the problem, which he will explain more about later in the day.
Tuesday, September 16
Online Stock Trading
The FED has decided to lend up to $85 bn to AIG. The facility will have a 24-month term. Interest will be charged at 3-month Libor rates plus 850 basis points.
The loan is planned to be repaid from the sale of AIG's assets. The U.S. government will also get a 79.9% equity interest in AIG, with the right to veto the payment of dividends.
Saving AIG has of course saved the Western world a whole load of financial pain, for the time being at least, so markets should be up for tomorrow.
Youhave to wonder however who will be next. Washington Mutual is still not out of the woods and people are still expecting another bank failure at some point. Here in the UK it will be interesting to see what happens to HBOS tomorrow.
Friday, September 5
Online Stock Trades - Investors Chronicle - Tempus - Questor - Share Tips
Buying Stocks and Shares
Buy G4S at 234p
Buy Petrofac at 605p
Buy Advanced Medical Solutions at 30p
Buy Carclo International at 59p
Sell Minerva at 126p
Sell Business Post at 304p
Buy Kenmare Resouces
Amec and MWB Business Exchange high enough
Buy James Fisher -- Delek Global Real Estate -- Carillion -- China Real Estate Opportunities -- K3 Business Technology -- Chime Communications -- Severfield-Rowen -- Ferrexpo -- IMI -- Premier Oil -- Venture Production -- Caledon Resources -- Hardy Underwriting Bermuda -- Hikma Pharmaceuticals -- Chesnara -- Biocompatibles -- Bioquell -- Puricore -- Stadium -- Molins -- Judge's Capital -- Visonic -- Bisichi Mining -- Source Biosciences -- Goldenport - Dechra Pharma -- DRS Data -- Mattioli Woods -- Fortune Oil -- Vindon Healthcare
Sell Premier Foods -- Henderson -- Ark Therapeutics -- Bradford & Bingley -- PartyGaming
Carphone Warehouse may demerge telecoms and retail divisions
Libya's sovereign wealth fund may take 29% stake in Circle Oil
Rumours of bid for Evolution
Portland Gas up on Centrica bid rumours
Avoid Imagination Technologies
Takeover rumours at BG Group
Aggreko up on US bid hopes
Tiddler to watch : Dowgate Capital
Buy SQS Software
Buy Churchill Mining
Counter-offer talk lifts Axon Group
Buy Southern Cross Healthcare
Metrodome a cautious hold
BG Group up on speculation of Exxon interest
Bid talk fires up BG Group shares
Jessops down on fresh fears over trading
Premier Oil regularly touted as a bid target
Thursday, September 4
Buying Stocks and Shares
Shire (SHP) is a pharmaceutical company which now produces a range of speciality drugs, for niche markets.
17 drug launches are scheduled before 2015 and this year, new products will account for up to 45% of sales
Midas' assessment : The share price has dropped from over 1300p to around 900p. They are worth more. Buy.
SHP 3 Month Chart
SHP Ten Year Chart
Vectura (VEC) is a biotech business that specializes in drugs that you inhale, to treat asthma, emphysema and other lung-related diseases.
The market is worth around $28bn worldwide with the main drugs being supplied AstraZeneca and GlaxoSmithKline, but the patents held by these two companies expire between 2011 and 2013, which is when Vectura expects to launch its products.
Midas's assessment - Biotech companies are risky and it is always possible that Vectura's products will not succeed. But the company seems more sensible than many biotech companies and analysts say that at 57p the shares are seriously undervalued.
For investors who don't mind a bit of a gamble. Buy and hold.
Vecture 3 Month Chart
Vectura 4 Year Chart
Personally I think they are both looking a bit toppy at the moment, but that's probably a sign they will shoot further up.