WEEKLY FAYRE – Monday, 18th January 2021

January 18, 2021

“A cool small evening shrunk to a dog bark and the clank of a bucket -
And you listening.
A spider's web, tense for the dew's touch.
A pail lifted, still and brimming - mirror
To tempt a first star to a tremor.

Cows are going home in the lane there, looping the hedges with their warm
wreaths of breath -
A dark river of blood, many boulders,
Balancing unspilled milk.
'Moon!' you cry suddenly, 'Moon! Moon!'

The moon has stepped back like an artist gazing amazed at a work
That points at him amazed.

Ted Hughes – Poet Laureate - 1930-1998


Racing lost one of its greatest benefactors this week with the sad death of Prince Khalid Abdullah of Saudi Arabia, aged 85. What an array of broodmares and so many fantastic classic winners including Commander-in-Chief, Warning, Zafonic, Danehill and Arrogate, with probably his two greatest colts in Dancing Brave and Frankel and not forgetting the brilliant mare, Enable, for all racing aficionados to remember. What good news that his family will be carrying on this phenomenal breeding and racing dynasty.

Though a massive enthusiast of England’s cricket, the wickets in Sri Lanka make for very turgid cricket. Take nothing away from Joe Root’s fabulous double century, but the feast of cricket in Australia at the Gabba makes for much better viewing, purely for action and excitement.

Fulham FC – so near yet so far! The Cottagers have improved, but are so far behind after such a poor start. The ‘sending-off’ of Anthonee Robinson against Chelsea was “the straw that broke the camel’s back”! Man Utd next week? – Nil desperandum!


11th January 2021

15th January 2021

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S&P 500




















To the relief of many around the world, the 46th President will be sworn in on Capitol Hill on Wednesday 20th January, with no violence, God willing. President-Elect Biden has agreed, through Congress, a stimulus package of circa $1.9 trillion, which includes $415 billion to fight the virus, $440 billion for small businesses and $1400 for each American. This package was agreed dangerously late in the proceedings, but better than an impasse. The US has never been more divided politically. The Biden administration has a huge challenge on its hands bringing Covid-19 back on the bridle. Some 390,000 people have so far died, with 200,000 people become infected almost daily and the vaccination programme seems to be behind the curve. There is also an uncomfortably large element of people who believe this virulent pandemic is a hoax. Unemployment remains indecently high at 6.7%, with a further 965,000 people claiming benefits last week. This ‘V-shaped’ recovery, which investors have priced in their portfolios, may take longer than many believe to come to fruition. After a massive bounce in 3rd quarter GDP (+33.4%), the 4th quarter GDP is only expected to come in at +7.4%.

The Street of Dreams has posted record levels of gain in January, and frankly these gains have not only defied logic but also gravity. However, last week an element of uncertainty permeated into fund managers’ thoughts, which triggered some risk being taken off the table. There was a feeling that investors would bank some of the huge profits made last year, courtesy of the tech sector (NASDAQ +42%), and buy some cyclical stocks, which had been harshly treated in the spring of 2020. Nonetheless the timing of a sharp recovery seems less obvious. So, there is a danger that investors might just ‘head for the hills’ for some safety, despite the bond market seemingly being a very unattractive alternate asset class. Even though there is a school of thought that thinks the Biden stimulus package could be inflationary, FED Chairman Powell has made it very clear that QE was here to stay for the time being and any hike in rates could be fanciful.

Though UK November 2020 GDP was rather dispiriting (-2.6%), with manufacturing +0.7%, construction by 1.9% and services -3.4%, the vaccine programme is up and running, ahead of the US and EU on a pro-rata basis. Therefore, a measurable recovery in perhaps May or June could be well and truly underway. With over £100 billion of savings having been squirreled way since March, there is plenty of ammunition to trigger a bounce in activity in retail, entertainment, hotels, and travel. So perhaps it is understandable why many investors could be switching some money out of the US in favour of the UK and Japan. BREXIT is experiencing tiresome bureaucratic problems at French and Belgian ports for exporters and importers. Business, industry, commerce, and food must double their efforts to find alternative markets if they cannot get their business done. Even though “hell has a better chance of freezing over” than the UK agreeing a trade deal with the US in the foreseeable future, the UK still enjoys a very healthy balance of payments surplus with the US – circa $100 billion against $70 billion. There is much to be excited about. The UK is currently out of favour in the eyes of President-elect Biden. Many are of the opinion that the US will not take long before it realises that the UK is an important ally, especially in terms of military, climate change and security assistance and support.

Chancellor Sunak was unequivocal in saying that the UK’s economy would get worse before it improved. These sentiments were endorsed by Governor of the Bank of England Andrew Bailey, who warned that the economy faces its darkest hours, as he appears to head off thoughts of negative interest rates. Few think negative rates will persuade the banks to lend money to companies or individuals who simply cannot afford to repay gargantuan debt. The ECB and its president Mme Lagarde spent much of its last meeting prevaricating over how much the Central bank should allocate to the Pandemic Emergency Purchase Programme. UK retail sales for 2020 were the worst for 25 years – down 0.3%. Restaurants, pubs, and bars saw their Yuletide income dive by 72.6%. The Federation of Small businesses warned that 250,000 of them could go out of operation if assistance were not forthcoming.

That said, this could also be a bumper year for the City of London. My broking friends tell me there are some great orders in the pipeline – companies wanting raise capital and debt with many IPOs in the offing. Dr Martens and Moonpig both announced their respective intentions to go public in London, with both operations valued close to £1.5 billion. UK assets are looking very cheap. So, no one should be surprised if M&A activity selects another gear, especially in the second half of the year.

The 4th quarter US earnings season started in earnest on Friday with three major banks posting their results. JPMorgan Chase’s EPSwere $3.79, beating estimates of $2.62 on revenue of $30.16 billion, whichexceeded the expected $28.70 billion. JPM released $2.9 billion from its pile of cash set aside for expected loan defaults in the quarter, resulting in a $1.9 billion boost after about $1 billion in charge-offs. Citigroup’s fourth-quarter EPS were $2.08 exceeded estimates of $1.34. Revenue of $16.5 billion fell short of the $16.7 billion estimations. Citi released $1.5 billion in reserves for credit losses, a move that was bigger than analysts had expected. That compared with a reserve build of $436 million in the third quarter and $253million a year earlier.  Wells Fargo posted mixed results for the fourth quarter, sending the bank’s stock lower by 4.7%. EPS were 64 cents against estimate of 60 cents per share. Revenues were light at $17.93 billion versus estimates of $18.127 billion. These numbers may not necessarily be a barometer of economic progress in the US. We shall know by the end of next week.

Social media shares such as Facebook and Twitter have come under the cosh last week, as advertising revenues would appear to have dipped by $10 billion, due to lack of corporate governance over unpleasant postings on these platforms. The likes of Microsoft, PayPal, Coca Cola and Nestle have already expressed their displeasure and cut their advertising budgets. Facebook and Twitter saw their shares dip by only 5% last week, which suggests the warning has been heeded.

Retail news dominated most corporate headlines last week. Tesco posted its Christmas trading statement. The UK’s largest supermarket has a new CEO in Ken Murphy who replaced Dave Lewis. Sales over Christmas were up by 8.1%. Tesco took on 35,000 temporary staff over the holiday period and executed 7 million orders. Morrison gave its staff a 9% salary increase by implementing a minimum £10 hourly wage. Boohoo saw sales for the last four months increase by 40%. Sir Brian Leveson is holding another inquiry into working conditions in the Leicester based factories. Conditions have started to improve but do not pass muster yet. Just Eat Takeaway saw order growth increase by 58% in the last quarter and sales grew five-fold in comparison to 2019. ASOS’s sales in the last quarter grew by 23%. Its shares are up 62% in the last year.

In the three months to 2nd January JD Sports’ sales have risen 5% despite the lockdown. The management is still looking at buying key brands from Arcadia. Philip Day has sold Jaeger to M&S and appears to have struck a complicated financial deal with Middle East investors to save Edinburgh Woollen Mills (2500 jobs and 300 units). Kingfisher, under the inspirational management of Thierry Garnier,saw sales in its 1,300 units which include B&Q, Screw-Fix, Castorama and Brico rise 16.9% over the Christmas period. Halfords sawpre-tax profits soar by 101.5% to £55.4m for the six months to 2 October, while revenues climbed 6.7% to £638.9m. There was a 71% increase in electric scooter sales.

It is not all good news on the retail front. Debenhams will be closing 6 shops including its prime Oxford Street store. Whitbread has only had to shed 1,500 jobs from its Premier Inn operation, rather than 6,000. Sales were down 55% in the last trading period. Pizza Express has made a loss of £350 million in the last year and the outlook is bleak.

William Hill lost £30 million this year, attributable to its 2300 betting shops having been in lockdown for much of 2020, though on-line trading is up 12%. Having recently been bought by Caesar Entertainment of £3.7 billion, the outlook for the new global betting conglomerate looks positive.

The Sunday Times informs us that NEXT’s Lord Simon Wolfson, in conjunction with hedge fund Davidson Kempner, is preparing an outrageously bold bid for Sir Philip Green’s Top Shop empire. Developing Top Shop’s online operations has considerable appeal. It is thought bids in excess of £200 million will be submitted for consideration.

Finally, Jaguar Land Rover, Nissan and Vauxhall are being forced to cut production due to pandemic and shortage of spare parts.

UK companies posting interim results this week – Tuesday – Experian, Kier Group, Premier Foods, Rio Tinto, Wednesday – Antofagasta, BHP Billiton, Burberry, Cairn Energy, CMC Markets, Diploma, JD Wetherspoon, WH Smith, Thursday – IG Group, AJ Bell, Close Brothers, Countrywide Properties, Sage, Friday - Computacenter

US Companies posting interim results this week – Monday – Charles Schwab, Tuesday – Bank of America Merrill, Haliburton, Comerica, State Street, Goldman Sachs, Netflix, Wednesday – United Airlines, Alcoa, Bank of New York Mellon, US Bancorp, Citizens Bank, Procter & Gamble, UnitedHealth, Morgan Stanley, Thursday – Baker Hughes, Intel, CSX Corp, Friday - Schlumberger

Economic data to be posted this coming week – Tuesday – EU New Car registrations, BoE Andy Haldane Speech, Wednesday – UK Inflation (EST: -0.1%) – PPI, CPI & RPI, EU Inflation (EST: +0.2%), US MBA Mortgage Applications and NAHB Housing Market index, BoE Governor Bailey Speech, Thursday – BoE Credit Conditions, UK CBI Industrial Trends, ECB Interest rate Meeting, US Building Permits and Housing Starts, US Phili-Fed, US Initial Jobless Claims, Friday – UK GfK Consumer Confidence, UK Retail Sales, UK PSBR, UK, EU, US Markit/CIPS Manufacturing & Services, US existing Home Sales