Brian Bollen's Blog

Shale Gas And Investment Opportunities: Impax

At a seminar in London today (October 31 2012), Impax Asset Management highlighted several considerations for the shale gas industry and identified four key investment opportunities. It says that these are across industries that are poised for strong growth from their increasing participation in the improvement of the treatment of water and waste from the shale gas industry, increasing production efficiency and ensuring better compliance in an industry facing much stricter future regulation.

Broadly diversified investors can limit downside risk and pursue upside opportunities and a wide range of new opportunities for investors are emerging. A well balanced portfolio of holdings offers the potential for strong growth in rapidly developing markets.

You hear the door slam and realise there’s nowhere left to run…

Mint – Bill Blain’s Morning Porridge October 31 2012

You hear the door slam and realise there’s nowhere left to run…

Yesterday turned into a risk-on day with indices tightening, a resurgent new issue market and investors very much refocused on markets. The US reopens today, and we’re expecting New Yorkers will find a way to overcome Manhattan’s broken transport system or work from home. It is month end, so perhaps the US closure could magnify some position squaring by compressing it into a single day.

Big economic event was Japan easing – and my colleague Martin Malone fears the market may be underestimating just how aggressive the BoJ has been. He’s recommending a sell bonds buy Japan stocks axis on the basis the balance sheet expansion through QE we’ve seen from global central banks means a new aggressive BOJ easing policy has less to compete with! Watch that space.

Back in Europe, and it’s same old, same old. Greece was saying the negotiations were complete yesterday. This morning EU is saying negotiations are “close to an end”. Really?

Reading, Arsenal, Suspicious Transaction

Reading 5, Arsenal 7. If you took that result to a bank, some might say they would have to report it as a suspicious transaction...

Hurricane Sandy: Disaster Or Stimulus?

Hurrican Sandy: Natural disaster or economic stimulus? Discuss.

A statistical reminder of a world that isn’t there….

Mint – Bill Blain’s Morning Porridge October 30 2012

Hurricane Sandy dominates the headlines this morning. With a major leg of the global financial system shut through today – and perhaps longer as the damage to New York’s infrastructure is assessed and repaired - the challenge is how quickly will markets adapt?

Judging from the number of our contacts red-dotted on Bloomberg this morning it would seem the European markets are taking the view thin illiquid markets are an inevitable consequence of the storm.

So another nothing day in prospect? It really shouldn’t matter NY is closed. There are few assets that can’t trade, although markets will be woefully illiquid for a day or so! The fact global markets are effectively “red-dotted” (not-in) demonstrates the chronic apathy markets are suffering at the moment. Give folk an excuse not to do anything, and they will grab it. If someone says “take it easy”, lazy markets take it twice!

The Perfect Man: By David Waller (Book Review)

Title: The Perfect Man

Author: David Waller

Date Available: Now

Publisher: Victorian Secrets Ltd

ISBN: 978-1-906469-25-2

Type of cover: Paperback

Pages: 283

It can be awkward reviewing a book by a writer one knows. There is, for instance, a feeling of immediate obligation to read the book rather than skim through it (my personal record for writing a review, from opening the cover to saving the finished product is around 10 minutes) so it’s more time-consuming.

David Waller is a former colleague from my days at the Financial Times Group. I hope to think that if he had written a stinker, I’d have had the guts to say so. But The Perfect Man is nothing if not intriguing. It tells a story I had never heard of, that of Prussian-born Eugen Sandow, strongman, music hall sensation and the epitome of male physical perfection (I postponed reading the book several times because I found the near-nude photographic proof of that last statement off-putting).

Even the introduction to the book is unusually readable, opening the story by dragging readers into the middle of an anecdote about the creator of Sherlock Holmes, famous Scotsman Sir Arthur Conan Doyle. Waller quickly sketches out the scene, painting Sandow as a modern gladiator whom society ladies paid good money to access in private after public displays, and as a prefiguring of the kind of brand-building that (Sir) David Beckham and Claudia Schiffer would become well known for.

On this point, I particularly enjoyed the idea that the man who ran personal physical education courses, and developed a chain of licensed fitness training schools, included cigars amongst the products on sale (I smoke cigars regularly myself, and recently completed the Jungfrau Marathon in six hours thirty-one minutes and sixteen seconds at the age of 55, without stopping once, or hitting The Wall).

The introduction also includes a tantalising reference to a Waller family scandal, which of course sent me scurrying straight to the epilogue for details of adulterous love, child abandoment, the Prostitutes’ Padre, loose moral characters, pyjama parties, a clerical defrocking, Skegness Amusement Park, two lions, and the death of the aforementioned padre. Makes you want to read it for yourself, doesn’t it?

Is Europe Turning A Corner?

By Azad Zangana, European Economist, Schroders

Has Europe turned a corner? European equities certainly have.

“Investors could be forgiven for thinking that the crisis in Europe is over. There seems to be an air of calm around the current crisis that has been absent for some time. Despite no new bail-outs, or actual new money being injected by institutions, it seems that the President of the European Central Bank (ECB) Mario Draghi has convinced markets that the ECB will back-stop the system. The 10-year government bond yields in peripheral Europe are tumbling to the lows seen in February, while European bourses have outperformed the S&P500 after severe underperformance earlier in the year. Indeed, the EuroStoxx 50 index has outperformed the S&P500 by 3.4% since the start of August, while growing confidence in peripheral Europe has helped the Spanish IBEX 35 outperform the S&P500 by 12.5%, while the Italian FTSE MIB index also outperformed by 9.1%.

"Since August, we see that most of the political hurdles (the election in the Netherlands and the German constitutional court ruling on that the introduction of the European Stability Mechanism (ESM) was not in violation) have either been cleared, or deemed to be relatively low risk.

"Two issues remain outstanding; Greece and Spain.

EMU Sovereign Spreads Consolidate

EMU Sovereign Spreads Consolidate, Awaiting Clarity on Spain ESM Application

By Myles Bradshaw, EVP, PIMCO

The week ending October 26 saw a market reversal and a widening in eurozone sovereign spreads to Bunds. Ten-year Spanish spreads moved almost 30 basis points (bps) wider, Italy 20 bps wider and France 10 bps wider. This consolidation in risk appetite was also reflected in credit spreads, with the iTraxx Europe main investment grade index seven bps wider. The flip side was a five-basis-point fall in 10-year Bunds on the week.

The consolidation in eurozone sovereign spreads largely reflects technical factors rather than new fundamental information. Ten-year Spanish spreads to Bunds touched six-month lows in mid-October, around 180 bps below their end of August levels. With the good news of Spain’s investment grade confirmation out of the way, and without any greater clarity on Spain’s European Stability Mechanism (ESM) application, it is not surprising that short-term traders are tempted to book profits. The result is that Spanish 10-year Bund spreads are trading back around their September lows.

Pro Footballer In Correct Grammar Shocker!

I was shocked by a quote I saw in The Sun this morning, attributed to a now retired professional footballer, one Gary Neville, of Manchester United and England.

Talking about the perceived propensity to dive of foreign footballers he is reported to have said: “There's a public outcry about diving and we're all calling them cheats, but they're not cheats. They might just be anticipating the challenge.”

If a professional footballer can use the word 'anticipate' correctly, surely anyone can. It is NOT a synonym for 'expect'.

The above was corrected following a message from Joe Gorman

QE No Excuse For Pension Fund Inactivity

 The overall impact of Quantitative Easing (QE) on pension funds has been exaggerated according to global professional services company Towers Watson. It suggests that since the start of the credit crisis in 2007, UK index-linked gilt (ILG) yields have declined only marginally more than comparable government bond yields in other countries, where there has been no QE.

It also notes that the price of risky assets has risen significantly during each period of QE, which has dampened the impact on pension fund balance sheets. In addition, it asserts QE is likely to have averted a bigger economic downturn, and the consequent failure of more pension fund sponsors, and in the process benefited the Pension Protection Fund (PPF) as well as giving pension funds extra time to execute journey plans.

BNP Paribas Launches US Local Custody

BNP Paribas Securities Services (BNP Paribas) says it will launch a local custody service in the United States of America, enabling it to provide post-trade services to multi-national banks, brokers and institutional investors in the world’s largest capital market.

BNP Paribas says it will offer local clearing, settlement and custody of all major asset classes listed on NYSE Euronext and NASDAQ OMX, and will connect directly to the US Depository Trust and Clearing Corporation.

Expanding its local custody network is at the core of the bank’s strategy to support its clients’ investment activities in the world’s largest financial centres, it goes on to say. The addition of the US reduces its reliance on external sub-custodians and significantly increases the amount of client assets held entirely within BNP Paribas. This has additional benefits in the current regulatory environment where increasing emphasis is put on end-to-end operational control.

You’re a smart kid and that's a great question

Mint – Bill Blain’s Morning Porridge October 29 2012

You’re a smart kid and that's a great question, but only you and I are clever enough to understand the answer... Next question?

We’ve got another entertaining week in prospect with US elections, weather, and banks at the forefront. The highlight will be Friday's make or break US employment number. Many pundits reckon the US election hangs by it. Politics, politics, politics.. you can’t get away from it.. Wishing US readers good luck with Frankenstorm – looks nasty.

There is a great story in the FT this morning looking at how US investment banks are providing clients with "ready-reckoners" to analyse winners and loser stocks under each potential election result scenario. But would someone just tell me clearly what is going to happen with the debt cliff? I was on a TV show Friday where a financial fundamentalist fulminated about how a massive fiscal shut-off and global recession would cure our ungodly fascination with debt and government spending. Hallelujah brother! and get a life!

Picking Growth Stocks In A Saturated World: Schroders

The shifting investment environment: Picking growth stocks in a “saturated” world

By Virginie Maisonneuve, head of global and international equities, Schroders

"Is the global economy close to reaching a tipping point? The impacts of the key themes in our portfolios -demographics, climate change and the emerging market supercycle - are combining with the ramifications of the global financial crisis to create an environment where growth is reaching a point of “saturation”. In this world, focussing on the sustainability of growth becomes more important than ever. This is important for investors as the global economy painfully adjusts to new realities and follows a rocky path to normalisation.

"The concept of growth saturation does not necessarily equate to zero economic growth, but rather implies that economic growth will be constrained at a lower level. Society, industries and investors must adapt to survive potential shifts from abundance to “scarcity economics” in some areas. In this environment, picking companies with sustainable growth is more crucial than ever, and understanding how sources of such growth might shift is key to building successful equity portfolios.

Emerging Europe Resilient: Schroders

Emerging Europe remains resilient to the Eurozone crisis, says Schroders. Regardless of the well publicised challenges facing the Eurozone and the negative impact on perceived risk assets, the MSCI EM Emerging Europe 10/40 Net (TR) index has increased in value by 11.4% per annum over the last three years.

Thus, despite the relatively close geographical location of some of the smaller markets to the Eurozone such as Hungary, Poland and the Czech Republic (which together stand for approximately 23% of the index), the region on aggregate has delivered strong returns for investors. In fact Emerging Europe has outperformed broader global emerging markets over the past three years.

BNP Paribas Securities Services Takes Teesside Mandate

BNP Paribas Securities Services reports that it has been selected by Middlesbrough Council in the UK to provide global custody, monthly valuation and foreign exchange services to the Teesside Pension Fund (Teesside).

Teesside is a local government occupational pension scheme with £2.5bn in assets including UK and global equities, bonds and direct property. The fund is managed in-house by Middlesbrough Council’s portfolio investment team.

Following a competitive tender, the council selected BNP Paribas based on its safety as a global custodian and its extensive range of services. The bank’s mandate is to provide global custody but there is scope to expand the relationship into securities lending and advanced portfolio monitoring and reporting.

Markets can remain irrational longer than we can remain solvent…

Mint – Bill Blain’s Morning Porridge October 25 2012

Markets can remain irrational longer than we can remain solvent…

There were moments yesterday when it felt we stood at the edge of the abyss preparing to take a giant leap forwards. The morning’s fears were palpable – the lack of market direction and escalating concerns setting us up for a tumultuous slide. By the afternoon everything rosy again! Despite miserable German confidence numbers the feared sell-off has not developed. Fear is still there though! Fed keeping long-term rates low should not be a surprise. In Europe, we’re watching how the news flow develops.

Spain – more of the same. Will they, won’t they take the OMT bailout? Rumours this morning say a limited €60bn is being discussed for the banks and regions, but who knows. Spain has completed 2012 funding – so what’s the rush or the need asks the Spain DMO? Perhaps Spain signing up for reasons of “prudence” could provide the market with the kind of leg up it needs to rejuvenate the rally? 

UK's Inversion Of Values: Tobacco Out, Pornography In

What kind of inverted value society has the UK become? I've just tried to access the website of Davidoff's in St James's Street, an upmarket tobacconist, only to learn that UK law prevents me from entering.

It thus appears that the power of the internet enables UK users to access the most explicit of sexual material, but not to look at a photograph of a cigar, in case you are tempted to light up afterwards. Truly bizarre. And yet more evidence that it is impossible to be a satirist in modern Britain. However crazy you think an idea might be, officialdom beat you to it.

It then occurs to me that social and medical workers and others who are currently working themselves into a lather over the Savile witchhunt will likely be more worried about the exposure of children to his tobacco than to his wandering hands and other body parts. I'd bet a pound to a penny that officialdom is at least one step ahead...

Where next in the hunt for returns?

Mint – Bill Blain’s Morning Porridge October 24 2012

3-yr  US Treasuries yield 0.3%. Brazil 3-yr dollar bonds yield 0.7%. Russia 1%. Where next in the hunt for returns?

Yesterday was a little wobbly. Today is likely to be better.

No surprise Europe remains highly vulnerable to sudden sentiment shifts. How to stablise it? The usual smoke & mirrors are conveying what might or might not be good news on Greece, with the German press saying Greece will get a two-year extension, more time to enact labour reform, and that concessions have been given. It’s all part of the New Normalcy. The fact China ain’t slowing as fast as we feared put a spring back into Asia this morning – so it’s a “phew, buying boots on again” morning.. Or is it? Weak German PMI ain’t great!

The crisis in Europe may be contained, but it clearly isn’t solved. A client yesterday told me: “Europe is like an overweight dinosaur on a crash diet, that’s got really really bad toothache with not a dentist in sight.” Like it and think I understand it! Very clever. (I’m also hearing the two-year concession to Greece comes at the cost of greater European financial oversight and loss of Greek fiscal sovereignty… buy Athenian bottle, rag and petrol futures methinks.)

Meanwhile,

Fight For Peace

I was going to try and write something clever, witty and biting about a report from something called the Laureus Sport for Good Foundation (patron: Saint Nelson Mandela), but it’s impossible to satirise. Georeg (Eric Blair) Orwell argued convincingly in his classic novel 1984 that War is Peace. Laureus seems to be developing the theme, with its thesis that if you encourage would-be criminals to punch and kick fifty shades of excrement out of one another it will reduce crime (presumably because they will be (a) exhausted (b) hospitalised (c) brain dead or even actually dead.

What is it with the middle classes? All problems IN the middle class will be solved if everyone in the family sits down to dinner together at table every evening (try telling THAT to people working in London and living outside, never sure of what day they will return home, let alone the hour).

All problems in the working and underclasses will be solved if a way can be found to encourage them to inflict violence upon one another rather than turn their attention to robbing, mugging and generally frightening everyone else. In many respects, this sounds very much like what one suspects current western government policy is towards the Arab world.

But my editorialising ends here. Read it for yourself and see what you think.

Investing In Emerging Markets: A Primer For UK Pension Schemes

By Jonathan Smith, UK Strategic Solutions, Schroders

At present most defined benefit UK pension schemes have some exposure to emerging markets. This may be via a global equity portfolio, or by investing in companies whose profits partly derive from these markets. Pension scheme trustees are also looking increasingly to add a dedicated emerging markets allocation to their investment strategy.

There are two reasons why a UK pension scheme might invest in emerging markets, either they believe