Brian Bollen's Blog

UK PE BOs Up 38%: CMBOR

The UK private equity buyout market was resilient in the first half of 2012, totalling £8.0bn buyouts, and representing a 38% increase on the second half of 2011 (£5.8bn), according to the latest data published by the Centre for Management Buyout Research (CMBOR), sponsored by Equistone Partners Europe Limited and Ernst & Young.

Highlights include the following.

The Dangers Of Sharing A Name With A Bad Dog

Peter Moore, Head of Regulation at the IMS Group, on AIFMD and its failure to make distinctions in the European alternative asset management industry

In 1991 the UK’s Parliament passed The Dangerous Dogs Act (DDA) in response to a sudden increase in the number of serious dog attacks reported by the UK media. Nowadays, it is often cited as the prime example of a rushed piece of legislation introduced as an overreaction to transient public mood.

Such a phenomenon will be familiar to participants in capital markets, many of whom will have detected how politician-induced overregulation of markets and their participants follows a period of ‘enlightened’ deregulation, as inevitably as bust follows boom.

Hullo Silvio, how was your break?

Bill Blain’s Morning Porridge – June 28 2012

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

No longer the least likely thing Merkel will ever say: Hullo Silvio, how was your break?

The press is full of sanctimonious outrage this morning. Bloody bankers stealing from poor folk again by fixing LIBOR interest rates. Fetch the torches and pitchforks.. let’s burn down the castle before they roast and eat the children! Please… it’s a dream story for hysterical press and politicians desperate to outdo each other in fulminating anger!

Unfortunately, the Libor scandal is shaping up as another massive own goal for the banking business – but the wildly speculative charges in the press about bankers stealing billions from the public are nonsense numbers.

Whatever the degree of collusion there was between swaps traders and the treasury cash teams setting the number, the actual effect of 20 or so banks contributing rates to the fix means on any given day some were likely to hi-ball the rate, while as many others would low-ball it.

EMU Mark 2?

Darren Williams, European Economist, at AllianceBernstein, looks ahead to today's EU summit

Thursday’s EU summit has been billed as another pivotal point in the sovereign-debt crisis. Top of the agenda will be a discussion of a roadmap towards a more deeply integrated economic and monetary union—or EMU Mark 2. This is an essential step if the Euro is to survive over the longer term.

But there are still glaring differences between national governments, and these will take many months to resolve. Moreover, while a credible roadmap would help shape investor expectations and act as an important anchor in the crisis, it will do little on its own to address near-term funding concerns, ease the burden of fiscal adjustment on the periphery or help realign competitive positions.

A prototype for the roadmap towards EMU Mark 2 was outlined in a report published yesterday by the President of the European Council, Herman van Rompuy, entitled Towards a Genuine Economic and Monetary Union. Prepared in conjunction with the Presidents of the European Commission, the ECB and the Eurogroup, the van Rompuy report admits that the economic and monetary union envisaged in the Maastricht Treaty has failed and that a quantum leap forward is now vital.

It highlights four essential building blocks: a banking union, a fiscal union (possibly including 'phased' joint-bond issuance), an integrated economic policy framework to promote sustainable long-term growth and much greater democratic legitimacy.

Mindful of the controversial nature of these topics, the van Rompuy report is not overly prescriptive or particularly detailed—that is a task for democratically elected governments. But it does call for governments to reach a 'common understanding' at this week's summit and for the formation of a working group to prepare detailed proposals for 'a stage-based process towards a genuine Economic and Monetary Union' in December (with an interim report in October).

To some extent, the van Rompuy report can be seen as the 2012 equivalent of 1988’s Delors report which kick started the drive towards EMU mark 1. (Note, though, that it took until December 1991 to sign the Maastricht Treaty, January 1999 to start the monetary union—the January 1997 start date having been missed.

The debate on a roadmap towards a better-functioning economic and monetary union is likely to highlight one of the most important contradictions at the heart of the European project. Germany and its allies think that burden sharing (i.e. joint deposit guarantees, joint bond issuance) should come at the end of the integration process (if at all), after countries have submitted themselves to far greater centralised financial oversight and control. But France and its allies remain reluctant to pool more national sovereignty.

Given these differences and the controversial nature of the topics involved, the debate on the future shape of the euro area is likely to be long and arduous—it is clearly not going to be resolved at this week’s summit. Moreover, deep investor scepticism means that even credible steps forward in this area are unlikely, on their own, to stabilise sovereign-debt and bank-funding markets in the periphery. For that, any long-term vision agreed at this week’s summit will need to be backed by more aggressive short-term stabilisation measures.

 

Some of this can probably be achieved by governments—finalising a growth compact, preliminary steps towards a banking union and, perhaps also, a decision to forego seniority on EFSF/ESM loans to recapitalise Spanish banks (though the latter may have to wait until after the German parliament ratifies the ESM Treaty on Friday, something which may also explain Angela Merkel’s reluctance to give the green light to EFSF/ESM bond purchases). But radical steps in this area, such as allowing the ESM to directly recapitalise banks or giving the ESM a banking licence, are deeply controversial in some countries and do not appear to be on the near-term agenda.

 

 

Liz Hurley At Luton Airport?

Was that really Liz Hurley at Luton Airport yesterday afternoon (June 26). The head says no, as I can't imagine her having come down so much in the world that she's trespassing on Lorraine Chase's manor (Luton Airport tv ad mid-1970s).

But the heart, and the missus, say yes, most definitely. It sounded very like her. And she WAS wearing dark glasses inside, one of the identifying characteristics of a true celeb, however minor.

She was also spectactularly handless, as we say in central Scotland (well, actually, those who still live there say haunless but I've lived in England for nearly 33 years). She failed to put a cup under the coffee machine in the executive lounge before pressing buttons for coffee. The result was an unholy mess as coffee and milk sprayed everywhere. Her people probably normally do that for her, so she can't be held responsible. Can she?

She then very politely asked my wife if she knew where the sugar was. Neither of us actually knew, it transpired. I thought it must sit with the sticks of coffee, but it turns out it sits in sachets on each individual coffee table. 

Two or three things struck about the woman who might have been La Hurley. If it was her, she's not particularly good looking, IMHO, in the flesh and close to hand and not striking a dramatic Photoshopped pose in full make-up. And she's rather ungainly in the general way she holds herself.

Being a complete gentleman I didn't, of course, venture such an opinion, preferring instead to do what celebs are constantly imploring us to do: not pester them, and allow them to be normal. Actually, everyone in the very busy lounge did exactly that. I'm not sure she wasn't entirely happy...

 

Steady boys, steady. Don’t fire till you see the whites of their eyes…

Bill Blain’s Morning Porridge – June 27 2012

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

A very interesting and important psychological moment yesterday. Did you spot it? As it became increasingly clear there will be no rescue rabbits pulled out the hat at this week’s summit, far from selling off, the markets started to calm and stabilise!

What does that tell us:

a)        Volatility in Euro markets is anticipatory, judgmental and news/event driven. NSS.

b)        Direction can change on relatively small volumes.

c)        Markets still anticipate a long-term Euro solution – otherwise they would have crashed.

Yesterday was a slap in the face for Europe’s self-delusional elites. The Germans, Dutch and Finns made clear Eurobonds and debt mutualisation are no go. Even France declined Van Rumpole’s vision of Brussels getting greater budgetary oversight. When did surrendering sovereignty to faceless Eurocrats become a core pillar of the European dream/nightmare?

It does look like Die Merkel may win a significant victory this weekend – markets are quieter because the message about Germany’s commitment to the goal of a long term stable and sustainable European currency, within a disciplined union, now outweighs the short-term political inspired panic we’re hearing from countries desperate to patch over the gaping flesh wounds in their bond markets.

Merkel’s long game is a much stronger and more believable message than the short-term, ill-considered and unsustainable reactive Euro fixes the markets have repeatedly shown they don’t like. By doing nothing, rejecting the quick fixes and political posturing, Merkel may just have saved the Euro.

She’s forcing the market to judge the long-term likely outcomes – where it remains massively positive for Germany to support the Euro and nurture it. Let others panic and lose their heads. Not Angela.

The good-ship Euro entered this storm a few years ago with weak leadership and an ill-trained crew. Up on the bridge, the gang of four are dithering and shouting irrelevant orders driving further panic! But, down in the steering position, if feels like someone has finally got the wheel. Only time will tell if the great helmsman Merkel can turn around the ship in time to avoid the rocks!

Of course, none of the above lessens the severe pressures various European countries find themselves in. The wind is rising in France, a storm is blowing in Spain, but I suspect the hurricane is about to hit Italy.

We’ve been repeatedly warning about Italy – that last year’s Monti coup was unsustainable, and that the lack of tangible reform and dangers of resurgent politics would bring the illusion crashing down. Now the mainstream press has caught up – and notes Monti needs something positive to wave from this week’s summit. He’s not likely to get it.

This morning he’s apparently threatening resignation unless he gets Eurobonds or something tangible from Europe.

Wake up… smell the coffee. Here is an unelected politician who has delivered the square root of zero in terms of domestic improvement, has lost the support of the Vatican zealots who drove the coup, but now threatens Europe with instability if he doesn’t get the support and largesse necessary to keep himself in the style he’s recently become accustomed to. Please… end the Italian madness now! (And of course, yesterday’s bailout of Monte dei Paschi bodes ill… sell Italy banks… we still have selective buyers..)

Meanwhile...is Germany the big short?

Some say yes, some say.. don’t be silly. Egan Jones, the radical ratings agency, downgraded Germany to A+ last night. It said regardless of whether Greece or other members of the Euro leave: Germany will be left with massive, additional, uncollectible receivables. Basically Egan Jones have spotted the rising imbalances in Target 2 (the Euro balance of payments system) and asked…so who pays what when this breaks? Fair question..

What else is happening? Summer approaching. Suspect it's going to be a quiet one. Anyone fancy going sailing? There is a race round Biscay in September that might be interesting….

Out of time..   

 

Give a man a gun and he'll rob a bank. Give a man a bank and he'll rob the world!

Bill Blain’s Morning Porridge – June 26 2012

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected] 

And then there were five. Cyprus and Spain have applied for membership of the bailout club.

From up here in Newedge Towers the European markets look very apprehensive. Stock markets down, bond spreads all weaker. Lots of talk about the susceptibility of the global economy to further Euro shenanigans! Learned articles about how a Euro crisis could bring the global banking system to its knees fill the financial pages. How to hedge redenomination risk tops the worry list for lots of fund managers. Oh dear.

Relax.. Be happy… If it's going to happen… it's going to happen..

Therefore today’s sermon is taken from Blain’s Bumper Book of Markets chapter three: ‘Hope is not a Strategy’.  As a secondary text, we shall take the front page of the HHGTTG: ‘Don’t Panic’.

There seems very little prospect of agreement on market supports at this week’s Euro crisis Summit – which could be a massive problem. The only thing stopping the market crashing is that small hope something may still be done, cobbled together, announced, and fudged in time to continue the Euro-illusion.

Interesting that this morning’s front page of FT has the EU elites circulating a draft plan for Brussels to effectively take over national finance ministries and regulate banks. We think it’s therefore more likely this summit will come out with more talk and ‘commitment’ to fiscal union, stability pact concepts and closer political union. That would play to German demands that debt mutualisation, in the form of Eurobonds, can only follow Fiscal Union.

But words are just words, and we wonder how keen Europe’s politicians really are about subordinating themselves to Brussels.

We doubt the market will be much impressed with meaningless blandishments about closer union. It’s the balance between ‘will they/won’t they’ that’s got everyone still hoping something tangible is in the works. (‘They’ being the Germans.) A German official quoted yesterday that ‘even the most expensive rescue appears to be the lesser evil’ gave the market a bit of a lift. On the other hand, Die Merkel is steadfast in her pledge not to allow further Euro debt socialisation, saying no Eurobonds, Eurobills, bailout funds buying or anything premature like that. She’s got to appear strong ahead of the ESM domestic vote and issues with the constitutional court.

Of course the extreme volatility we are seeing in Spain and Italy bonds isn’t on the back of massive trades – these are scared days, and it’s largely a repatriated market. Relatively small size rolls the markets a great deal. Few real money accounts are willing to play cash distressed sovereigns.

So it’s a pretty binary toss-up. Will this week’s summit agree something that allows Elites/ECB to support markets?

Vote Yes – markets breathe a sigh of relief, but still wobble around current levels.

Vote No – unleash the dogs and watch markets spiral lower. Buy bunds.

Otherwise the wholesale decapitation of the Spanish banking sector continues apace. Last week Oliver Wyman came out with a suspiciously small €62bn bailout cost. Market continues to assume the need will be well North of €100bn. To add insult to injury, Moody’s then slashed Spain’s banks by up to four notches – most of them to junk. Just a few years ago I was pushing Banco Popular as my top European retail bank. Today? Bad pants.

How much worse can it get? Bail-ins have been denied by the Spanish government, but there is definitely a whiff of the Irish about this. Anglo Irish was the Irish bad bank that pulled the whole sector down as the scale of it’s losses effectively bankrupted the state.

While the Spaniards have gone to Europe for the necessary banking support, we still aren’t sure exactly what shape the ‘bail-out’ of Spain banks will take. Is there a danger the Spanish will repeat the Great Irish Bank Heist and force holders of Spain sub debt to exchange into equity?

It’s worth noting holders of Bank of Ireland sub debt that took the risk and held out are now sitting very pretty. That’s because Ireland caved on a court-room battle and didn’t follow through legally. Spain may be less picky – if they go down that route. We suspect mass nationalisation of the Caja sector looks on the cards and in such an event, why not make bond holders – perhaps even senior holders – share the pain?

Finally, I’m looking for numbers on just how big the capital flight from Spain and Italy is.. anyone got any recent numbers? And how soon does France come under the cosh?

Out of time…

 

England, Italy Plumb New Depths

I try to keep this largely a business forum, but it's impossible not to comment on the football on display at Euro 2012, and I know that a number of readers find my thoughts on that more enjoyable than the serious articles published here.

The England team last night was the worst English side I have ever seen. Before the return of Rooney, there was a feeling that they were making some progress, however modest. The return of the self-styled Big Man, Wayne Rooney, however, which was supposed to rival The Ascension in terms of world-changing historic events, has disrupted what little rhythm, fluidity and charm that England possessed in their first two games.

Not least because he is patently unfit. What can you expect, though, when he hasn't played in earnest for five or six weeks, and seems to have spent a good deal of that time in a casino in the early hours of the morning? I am going to go out on a limb and suggest that Wayne Rooney's best days are behind him. If the realities of his lifestyle match up to the public perceptions of his lifestyle, it is clear it has caught up with him.

James Milner, too, looked well out of condition, but then, he always does. Theo Walcott, in the immortal words of former England star winger Chris Waddle, does not seem to possess a football brain. He can reach the ball quicker than most, but, like a schoolboy pal of mine, hasn't a clue what to do when he gets there.

Andy Carroll should have frightened the life out of the Italy defence (part of the worst Italian side I have ever seen) but England were playing so deep most of his touches took place on the halfway line, or in his own half.

Ashley Young, after a bright start to the tournament, went missing in action. Of the rest of the side, the England defence, goalkeeper and all, played largely as well as they might have been expected to. Only Steven Gerrard of the midfield trio truly enhanced his reputation. Scott Parker is, I'm sure, a decent chap, but his newly discovered status as an England linchpin underlines the shallowness and narrowness of the England playing gene pool.

The young man who replaced him when he was substituted, Jordan Henderson, barely merited a place in his club side for much of last season, IIRC. Two very mediocre sides, then, with the least mediocre triumphing in the end (if that's an appropriate word to deploy in relation to such dreadful attempts at playing football).

Another limb I'm going out on is to suggest that Spain are on the slide. If I were a betting man, I'd put £10 on Portugal to win the semi-final against their more advanced Iberian cousins (the Portuguese language today is in effect 16th century Spanish, IMHO). And then another £10 on Germany to win the tournament on Sunday. 

Reflecting the fact that I have lived in England since September 1 1979, I literally flew an England flag last night. Reflecting my Italian roots on my mother's side, I wore an Italy replica shirt. I was hedging my bets in the most simple fashion. Why do I feel today that neither won?

Supplemental entry August 6 2012: I'm happy to admit when I am wrong, and I was sooooo wrong about Spain...

Greece Exits Euro – shame it was only football. Germany vs PIS in prospect!

Bill Blain’s Morning Porridge – June 25 2012

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

Greece Exits Euro – shame it was only football. Germany vs PIS in prospect!

Lots to look forward to this week – weakening European data, the looming summit and banks, banks and more banks.  

Yet another European crisis summit later this week, but it's difficult to be optimistic after Merkel dodged Italian, French and Spanish pressure last Friday to open up the bailout funds to buy  Eurozone debt – describing such moves as ‘premature’. Germany tighter while Italy, Spain and credit are wider on the get-go this morning suggests a nervous tone to the week.

Yet, you've got to think that some kind of sop will be offered to the market at this week’s European gab-fest – so expect limited downside as the market factors in yet another Euro-fudge. Keep kicking that can down that road.

And stands the clock at ten to three, and is there honey still for tea…

Bill Blain’s Morning Porridge – June 22 2012

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

The major global banks took their anticipated spanking from Moody’s last night. It could have been worse. We understand there was very senior lobbying to stop more banks taking a three-notch slash. Many think Morgan Stanley got away lightly, but why was Credit Suisse singled out as worst of breed? Short-term the night of the long knives was largely priced into the market. Among the various takeaways from the agency are keep an eye on the ongoing implicit support from governments to 'Too Big To Fail' institutions (worth up to three notches), and that mistakes (like JP Morgan) will be ruthlessly punished.

But last night’s rating horror is just part of a secular trend. Who would be a bank buyer now? The global banking sector now rates low single A at best, and the number of players left standing are few and far between. The outlook for investment banking looks

Order Of The Boots For Schroders

Boots Pension Scheme has appointed Schroders' property multi-manager team to manage a £135m portfolio. The scheme is seeking a diversified exposure to the UK property market through investing in selected core, value-added and opportunistic property funds, we are told.

Recovery In Sight For Resource Shares, Commodity Prices

Standard Chartered Bank says it expects a recovery in both resource shares and commodity prices in the second half of the year, backed by improved fundamentals, including resilient demand from Asia and a bullish outlook for prices of selective soft commodities and metals.

Its comments come amid a backdrop of continued economic uncertainty in the Eurozone, slower economic growth in the U.S. and policy-induced slowdowns in India and China.

Jeremy Gray, head of global resources equity research at Standard Chartered Bank, said: “We maintain a positive second half outlook and there is the potential for a squeeze in resource shares after the past three months of underperformance. For commodities, we remain bullish on sugar, copper and iron ore prices while crude oil is unlikely to return to demand-destructive levels previously seen.”

Midsummer? My posterior ... it's raining again..!

Bill Blain’s Morning Porridge – June 21 2012

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected] 

Another interesting day’s play in prospect here on a very soggy Euro market wicket. Spain looks certain to dominate play as the Gerber/Wyman deep dive stress tests on Spain banks comes due, and we see short two- and five-year auctions this morning. The debt sales are too small to worry about, so let’s see if the positive momentum continues.

In the states, the Fed extended Twist as a reaction to the slowing economy, and made clear more QE may follow if conditions dictate. Some say it’s pushing on a piece of string, but the Fed is at least making decisions and doing something. Might not be the right things, but hey, the market likes it. Compare and contrast with Europe.

Europe, as usual, is in a dither. Markets are up because they expect something big. Last few days’ rumours and counter-sighs of bailout fund buying rescue are still driving the market. However, Merkel has said she has: 'heard nothing of these things'.

SGSS Strengthens Sales

Societe Generale Securities Services (SGSS) reports that it has strengthened its commercial teama.

It has appointed Michael Le Garignon, as head of sales, head of business development & relationship management, UK, reporting to Mathieu Maurier, global head of sales and relationship management. The appointment took effect on May 1.

Le Garignon joins from J.P. Morgan Ltd, where he was executive director, business development asset managers & insurance companies EMEA. He has spent the past 25 years working within the finance sector, offering an extensive range of banking and financial services to a global institutional & fund client base.

Bustle in The Hedgerow

Can you hear that bustle in the hedgerow? No, it's not a spring clean for the May Queen. It's the sound of the birth pangs of English football hype, which will rise to shrill certainty by the time kick-off comes against Italy on Sunday.

The players, the media and the supporters had just about kept themselves under control, repeating the mantra of 'low expectations' amid the serious doubts about Roy Hodgson's ability to impose his will upon the England side's playing style in just a few games (he could; 'It's just like watching Fulham', one devoted long-time Fulham fan said to me after the second friendly under his stewardship).

Even then, there were mutterings that having 'low expectations' meant they could win this thing (Euro 2012 association football championships, for the non-footballing readers still with us by this point).

Roy Hodgson himself didn't help when he compared Wayne Rooney to Edson Arantes do Nascimento (AKA Pelé) in the run-up to the self-styled Big Man's return to the side against Ukraine yesterday evening. In the event, Rooney more closely resembled Hercules (AKA the Steptoe & Son horse), after a particularly gruelling round.

The truth is that England look a bit less disorganised under Roy Hodgson than previously. They look a lot less indisciplined than previously. They are a mediocre side playing in a very mediocre manner against very mediocre opposition. The key difference this time is one of luck. Good luck. Outrageous good luck. As illustrated in last night's match when the Ukraine defence had three stabs at stopping an average Steven Gerrard cross and fluffed every one, leaving Rooney/Hercules with the most open of open goals.

Not genius. Luck.

To compound things, Ukraine then had a perfectly good goal disallowed (let's ignore the red herring of the offside status of the scorer earlier in the move; the referee failed to pick it up, so it's irrelevant). The ball was clearly over the line. Just as clearly as Frank Lampard's shot against Germany was over the line in South Africa two years ago.

But whereas that provoked howls of outrage about the confounded immorality and sheer wrongness of it all from English-biased players, media and fans, last night's affront to footballing justice was mostly greeted with a shrug and a 'What goes around comes around'. Surely John Terry should have held his hands up and said 'No, Mr referee, you are wrong, it was over the line'? Not blooming likely.

So, this morning, in the sports pages and on Radio Five Live, the bustle in the hedgerow starts to grow into the familiar hysteria. Italy were swept aside on the Nicky Campbell show this morning. About five seconds later Germany joined them on the plane home, licking their wounds after a sound thrashing by England, Mighty Mighty England.

Why not just present the trophy now, and book the open-top bus parade for a national tour of England, this England, this sceptred isle (memo to Shakespeare: last time I looked, England was NOT an isle, it has Scotland on one border and Wales on another)?

It would save us all a lot of bother. And national angst on Monday morning when the reality of an early trip home has to be confronted...

China: The World’s Best Opportunity for Asset Managers?

Citi has just released a thought piece entitled China: The World’s Best Opportunity for Asset Managers?, which seems to be pretty much self-explanatory. It describes the paper as the latest instalment of Citi’s emerging market thought leadership programme (well, it actually says 'installment' and 'program' but this website operates on the basis of English English).

In its opening of the three-page executive summary (do modern executives really have the time to read a whole three-page summary?; that must feel like reading Great Expectations), Citi says that this year’s research drills down to focus exclusively on the Chinese market.

Four long-term demand drivers remain in place in the Chinese market:

• The need to fund the retirement system to meet the demographic challenge of a rapidly aging population;
• The convergence between growth in personal wealth and managed assets;
• Institutional investors are diversifying away from direct holdings of sovereign bonds into managed equity and alternative portfolios, in search of higher returns and lower correlations;
• A regime methodically working towards further liberalisation (liberalization corrected).

Given this backdrop, Z-Ben Advisors  (which conducted the survey) says it expects public fund assets under management (AUM) to reach RMB6.8tr ($1tr) by 2015, up from RMB2.2tr ($319bn) as of December, 2011. With additional compelling growth in private funds and institutional channels, China has the potential to become the world’s best opportunity for asset managers.

There's lots more along these lines but (a) I refuse to buy into the whole BRIC schtick (last time I looked all four constituents were facing a range of economic problems of their own) and (b) life's too short to edit a three-page executive summary. I'm sure if you ask nicely, they'll give you a copy all of their own...

 

This looks strangely familiar...Because we’ve been here before!

Bill Blain’s Morning Porridge – June 20 2012

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

This looks strangely familiar...Because we’ve been here before! We’re going round in circles..!

Yesterday was one of the most frustrating days I’ve had in markets. Every trade I tried to close slipped on something. Darn and blast. Underlying the difficulties were a host of destabilising factors, which weren’t helped by my fat fingers keying in some wrong digits.

But this morning it’s a bright glorious day, and the Euromarkets are saved. Again. Really? Unfortunately, we’ve been here before.

Rumours the ECB is about to unleash the monster, the mother of rescue plans, are driving unsustainable expectations! Again. Sources say Germany agreed to G20 demands to allow the bailout funds to buy peripheral govvie debt. Apparently the EU blundership will announce the deal later this week. Phew, we are all saved…

Markets went stratospheric. But, but, but.. If we have learned one thing from the repeated Euro wobbles, it's that markets are thin and few folk play in peripheral debt any more, so we get chronic over-reactive price moves on any positive-sounding news. The impressionable are easily led, hence the illusion of recovery.

Sure enough, it looks like yesterday’s relief rally came too hard, too fast and caught too many by surprise: there were very thin market flows. If markets are set to rally on the latest 'rescue' – how should holders react? It’s a sell window!

Fundamentally, getting the bailout funds rather than ECB to buy tainted government debt is nothing more than robbing Peter to pay Paul.

Actually, it’s worse.

Getting the bailout funds to pucker up and take govvies means they are burdened with sovereign bonds just at the most dangerous moment. Italy and Spain remain vulnerable to massive rescue needs. And isn’t that why banks are so weak – didn’t they use that LTRO cash and buy toxic sovereign debt? Looks like a zero-win game.

Three factors scared me yesterday. The first was the horrendous Spain short auction, near doubling the cost of short-money. That bodes very ill for this week’s long-date auction. That said Spain bonds are back below 7% this morning on the EFSF rescue rumours. Of course the delay in the bank audit, strongly suggesting the Spanish banks are in even worse shape that we feared, did not help.

The second was yesterday’s collapse in bunds – a fascinating moment. Bill Gross was tweeting about a big bund seller, while this morning there is a must-read article in the Financial Times saying hedge funds are shorting Germany on the basis it’s the obvious tumble. { http://www.ft.com/cms/s/0/fcde12c6-ba35-11e1-aa8d-00144feabdc0.html#axzz1yDiYqJaW }

The third are the latest Target 2 'Euro balance of payments' (for lack of a better description) imbalances. Guess what. They are getting worse. Germany is owed more and more and more…

So, if anyone really believes giving the bailout funds power to buy Spanish government bonds will actually fix the lack of competitivity in Spain, create employment, mitigate the bubble-books of the banks, or make an incoherent government competent, please feel free to explain why. I’ll be delighted to publish it. Same for Italy, but even more to fall.

Nope.. this morning’s apparent news is just another Euro lash-up that’s likely to unravel with the same tedious inevitability of all the previous attempts to put sticky plaster over the gaping flesh wound that is the Euro. On the plus side, apparently the EU will scrap the transactions tax idea… so at least one person in Brussels is still thinking.

Meanwhile, I really liked this chart of where banks expect the Euro to go. The title: 'Wall Street has no idea where the Euro is heading' tickled me. No-one has any idea where we going… Not even me.. although I have my suspicions… read it on: http://www.businessinsider.com/chart-wall-street-euro-forecast-2012-6?utm_source=alerts

There were a host of other things I was going to talk about this morning: like why we like Canada, long dated bonds, or the prospects for sustained low interest rates.. but I guess we’ll just spend another day locked in horror, staring at the Euro screens..

Beautiful day in London...it's going to be pouring rain again tomorrow..

Out of time and out of patience…  

 

Grexit Delayed, Not Dodged

by Keith Wade, Chief Economist at Schroders

“It was the result the market wanted, but the relief has been short lived. After an initial rally, equities have fallen back. Greece is now expected to be able to form a government, in the form of a coalition led by New Democracy, and achieve some lightening of th bailout conditions. Progress is unlikely to be straightforward and we would not be surprised to see doubts raised once more about euro membership, particularly as the economy is likely to remain mired in recession and the party with momentum in Greece is the anti-austerity Syriza, which made further gains at the weekend and is now the clear opposition. Furthermore, the troika will also be wary of conceding too much to Greece knowing that Ireland and Portugal will be watching and comparing the terms of their bailouts. However, Greece can be managed in the near term if the political will is there to provide funding.

Jungfrau Marathon Training: Major Milestone Achieved

I passed a major milestone at the weekend in my training for the Jungfrau Marathon. On Saturday morning I ran (albeit slowly, and in two separate chunks) around 18 and a half miles (29.6km).

With just under three months to go till race day on September 8 I'm satisfied with progress to date and that I will be able to complete the Interlaken-Lauterbrunnen leg reasonably comfortably. It's the climb from Lauterbrunnen to Wengen that will separate the men from the boys and the sheep from the goats.

M&A Ups And Downs: Experian

Now available is Experian Corpfin's June 2012 issue of Business Research Monthly Review, apublication that tracks UK, Irish, US, European, and Asia M&A and ECM activity. 
To download click here.

This month's issue contains:

United Kingdom

May saw an upturn in M&A and ECM activity in the UK with a total of 366 deals announced, up by 7.5% month-on-month, driven by a spate of deals in the Mid-Market.

In the Information Technology Consultancy industry, approximately 92% of all businesses in this sector are SMEs.

Republic of Ireland

The Republic of Ireland saw deal volumes increase by 5.88% on the previous month. However, figures were still down on May 2011, with the 18 recorded transactions representing a decrease of 21.74%.

Deal values increased by a huge 2,017% when compared to April 2012, but this figure was skewed by one particular transaction valued at almost €10bn.