Brian Bollen's Blog

Claranet Acquires £55m Star

Claranet, one of Europe’s leading managed service providers, reports that it has acquired Star, a UK provider of managed technology services (as opposed to mismanaged technology services???). The acquisition creates the largest mid-market provider of integrated hosting and network services in the UK and continental Europe.

Claranet is acquiring STH Limited and its subsidiary, Star Technology Services Limited, in a deal valued at £55m. The trading entities will be maintained and will become wholly owned by Claranet Limited.

Charles Nasser, CEO and Founder of the Claranet Group, stated:

Is Cameron setting course ever more firmly for de facto Brexit?

© Graham Bishop, November 22 2012

The 'final act' of the EU budget negotiations is now underway in Brussels. In economic terms, this is something of a 'hurricane in a teacup', as the spending itself amounts to just 1 per cent of the combined GDP of the EU. But the political nuances may be critical for Britain's future in the EU.

Discussions on the Van Rompuy Final Report 'Towards a Genuine EMU' have virtually halted while the Multi-annual Financial Framework (MFF) dominates attention. Yet the Summit to decide on this far-reaching Report is only three weeks away! In fact, there may not be enough time to have a formal final report, as it would have to be circulated for comment shortly.

The work streams associated with this report illustrate its potential significance:

Next time I say “Let’s go someplace like Bolivia...

Mint – Bill Blain’s Morning Porridge  November 23 2012

Next time I say “Let’s go someplace like Bolivia”, let’s go someplace like Bolivia..

Thanksgiving yesterday. Markets likely to remain thin today. What’s worth commenting on except we think next week could be very interesting as Greece is “solved”? Apparently a deal is so-so close. As a buy-back looks part of the fudgepack, I’m still thinking potential upside there. Got a bunch of other Hellenic ideas that make great sense.

The fact that Argentina is throwing an industrial strength tantrum over being told to pay out holdouts on its “restructured” debt is fascinating – and as noted in innumerable notes and articles… is a game changer in the defaulted debt market. Will come back on this later.

As for Europe.. please.. shoot me.. put me out my terminal boredom with the whole benighted continent. One interesting snippet.. hearing some deep trousered investor bought €3.28bn as sole buyer of a new five-year SPGB. I wonder… is this another accounting exercise by the BOS, or has someone really strapped on a pair? And, in another minor side-note to European financial history, Cyprus in line for a €17bn bailout later today.

Invesco View Of 2013: Zig and Zag, Fiscal Cliff reduction, China to bottom out

John Greenwood, chief economist, Invesco and Nick Mustoe, CIO, Invesco Perpetual provide their global economic outlook

·         The UK economy will continue to zig and zag

·         The Chinese economy looks like it bottomed out at 4-5% growth and is now stabilising

·         Expect to see US fiscal cliff reduced to 1-1.5% of GDP

·         Still a risk that one or more countries could ultimately exit the Eurozone

POST-ELECTION SITUATION IN THE US

Q - What impact will President Obama’s re-election have on monetary and fiscal policy in the US?

JG - On the monetary side, I do not think there are going to be many changes.  Mr Bernanke will continue at the Fed.  You will remember that Mitt Romney had proposed to depose him.  That will not happen.  Bernanke will continue until January 2014.  The Fed is set on quantitative easing (QE) for the foreseeable future, so I do not think there will be much change on the monetary side.  On the fiscal side, first of all, Tim Geithner, the Treasury Secretary, is retiring; second, we have a big debate going on, on the fiscal cliff and the upcoming changes for the US on the budget; but more generally, on a longer-term basis, I think that, under Obama, we are likely to continue to have budget deficits for the foreseeable future, so we are not going to have drastic austerity any time soon.

Q - Is the re-election of President Obama good or bad news for US companies, and what about the US dollar?

Thankgiving is about being happy; or is it?

Mint – Bill Blain’s Morning Porridge  November 22 2012

Thankgiving is about being happy for what you got  rather than what you want.. unless, of course, it’s a new race yacht…

Thanksgiving for what? A hangover from Hades, markets are effectively shut, and I’m wondering how to fill the coming day before I go out and do it all over again tonight. Bit of a funny one yesterday with the lack of a Greek agreement causing a downtick in the morning, followed by a stronger and stronger market through the day.

Apparently the Greeks will get more dosh from ECB and Troika on Monday to mount a bond buyback – which explains much of the recent rally in GGBs as buyers scrabble for bonds in anticipation of a premium buyback price. I’m thinking the trade to do is go buy short-dated Greek related bonds like Hellenic Railways and OTE on the basis Greece might be bust, but it ain’t gonna default soon! If you want more thoughts on Greece give me a call.. my typing fingers are so bored they won’t write any more about the Bubbles..

Would you rather?

Would you rather be on an Al Qaida Lockerbie memorial flight dressed in a Stars and Stripes suit and whistling Dixie?

Or the Chelsea manager under the swivel-eyed ownership of Roman Abramovich? I suggest the former has a greater life expectancy...

EU Budget Noisy But Irrelevant: Ashmore

Jan Dehn, co-head of Research at Ashmore Investment Management, on the expected impact of the forthcoming European Union budget summit.

Thursday's two-day European Union budget summit in Belgium may prove noisy, but is largely irrelevant to the fiscal health of its member states.

The broad trend is for more national spending to migrate to the EU as the European Union continues to integrate. Rising EU spending presents specific political challenges for countries such as the UK, whose government is undertaking austerity and does not support closer fiscal integration.

However, the EU budget itself is not the cause of Europe's fiscal problems, which lie squarely with national governments, whose debts are still rising despite efforts to reform. These problems are the result of years of fiscal profligacy.

There are no statues of committees

Mint – Bill Blain’s Morning Porridge  November 21 2012

There are no statues of committees. Except for Rodin’s Burghers of Calais. And that didn’t end well…

I suspect it’s going to be a risk-off day with peripherals down and core up. One of my clients already called to tell me not to bother writing about the failure to agree a Greek restructuring last night, saying: “It’s too boring”. Sure enough, many blogs and comments are dismissing the lack of Bubble agreement as a technical rather than tactical failure..  

As expected the market ignored and got over the French downgrade yesterday, but Greece is a more critical problem that can’t be dismissed as a mere technical blip. (Of course, if you are long up the ying-yang of Euro risk, then of course you going to say Greece doesn’t matter…!) Nope…agreement on the next Greek restructuring is a critical strategic decision for the Euro. Europe’s elites have been sent home to think about what they did, and next Monday they meet again. Some furious behind the scenes deal making will be going on.

To lose one rating is unfortunate, but to lose both sounds like carelessness…

Mint – Bill Blain’s Morning Porridge-Lite November 20 2012

Very quick comment this morning. Yesterday turned positive on the back of constructive dialogue/news/imaginings about Fiscal Cliffs, Greece, Spain.. whatever. News that US housing seems on a growth path might relieve some of the fiscal meltdown tensions. However, today’s Greek debate – will they/won’t they get agreement – could be critical and will depend on lots of factors, while the IMF remains a problem. 

France’s downgrade to Aa1 is far less than the end of the world. A tad embarrassing perhaps. Although France opened a bit wider – most downgrades result in tightening. Lots of negative commentary about France this morning to explain the downgrade:  the economy flat-lining, the lack of competiveness, miserable innovation record, the anti-business rhetoric of the Hollande government etc. (Too many people reading The Economist methinks!)

Wind the speakers all the way up to 11…

Mint – Bill Blain’s Morning Porridge November 19th 2012

The phrase "Constructive Discussions" will have us all pulling our hair out within a few weeks. Markets will be rock and rolled by anything anyone says about the Fiscal Cliff. Get over it - markets tend to over-react. But while the world awaits an outbreak of American common sense, Obama is off to Burma. Yep. Setting the scene for the rest of the week - no doubt we will be hearing more about Fiscal Cliff, Greece, Spain and perhaps a leavening of Italian politics.

Tactical Selection Key To Strong Income

Invesco Real Estate today publishes its H2 2012 Real Estate House View – an in-depth overview of the real estate markets. It promises that the reports explore how markets have performed this year, highlighting that despite a recent slowing in the volume of real estate transactions, there are some bright spots for investment in cities in the United States, Asia Pacific and key gateway cities in Europe.

The report suggests that the most favourable outlook for real estate in the coming year is in the US and Australia.  While performance will vary region to region, many US cities have recently performed well and are expected to continue to deliver strong returns in 2013-2015. Beyond this, growth cities in the Asia Pacific region and European gateway cities are also expected to continue to outperform in their individual regions and, in turn, account for a large proportion of real estate transaction volumes.

Stand-up Update: Mission Accomplished

After weeks of preparation and mounting trepidation, the debut stand-up comedy gig that Margaret and I took part in last night at the Cruck Barn, Bradwell Abbey, Milton Keynes, proved very enjoyable. Everyone performed well to a sell-out audience (that's an audience that accounts for 100% of the tickets available rather than an audience that has betrayed its folk roots).

I'm sure I'm not the only performer who accidentally left out a bit of his/her set, but slickness was the watchword for the evening.

Trouble is, I enjoyed it so much, I wouldn't mind doing it again. Then again, it's nice not to be worrying about and fretting over writing and rewriting and throwing everything in the bin and starting from scratch all over again. Thanks to everyone who made it possible and supported us all.

What do I do now? asked the wise man to the fool?

Mint – Bill Blain’s Morning Porridge November 16 2012

The US fiscal cliff and Greece are being blamed for the market’s ongoing sullen capitulation yet again. The new China leadership sounds moderate, but analysts say it’s essentially conservative and got a host of problems to overcome – watch that space I think. Meanwhile, the rot in fixed income continues with the autumn “rally” now a distant memory. It feels like markets are caught in the mud of winter trench warfare. 

Don’t be fooled. There is still plenty going on. I am “occasionally” guilty of being overly Eurocentric. Thankfully here at Mint, I’ve got colleagues who do note the wider world out there. They’ve been clobbering me to put Japan in focus. The currency down 5% and the stock market rallying – exactly what my Macro honcho Martin Malone predicted three weeks ago: that the government and BOJ would jump into bed together with an unprecedented effort to get Japan out the mire. It’s having an effect – massive foreign buying of bank and auto stocks! (One colleague who recently joined from a Japanese bank rueing fact the securities firm stock is up 10% in 2 days!) It’s a currency trade first – we see the yen going to 100, and buy the stock market! And yesterday, pensions cut by 2.5% to address future debt issues.

Barclays CoCo

I got a lot of feedback on the recent Barclays CoCo yesterday. Some unkind readers pointing out my mistake in assuming it’s a convertible into stock if it fails the capital test – it’s a simple writedown.. (Sorry, but I’d just stepped off the Vickers Vimys BA uses on its Dubai route and was somewhat sluggish from cold and starvation (a whole other story..…)) Bottom line is none of the institutional accounts we speak to were involved in the CoCo - according to one “it’s evil… pure unmitigated evil..” Harsh.. but interesting response…

Hmm.. If it works it’s a decent coupon. But what does the fact institutional investors have blanked the deal tell you about Barclays being able to sustain its capital levels through the US open season on British Banks? And as suspected, it largely went to retail buyers - explaining some of the subsequent underperformance.

Friday Rant – Don’t believe the Media.

As we all know it’s all about Politics these days. As we learn to trade the dark swirls of political shifts and shadows, it’s well to remember things are not always what they seem. So for today’s Friday rant my sermon is “Beware the Media”.

A couple of recent press and TV stories have me wondering just what the real media agendas are. I get my information from the headlines, from “news” releases, reports and from listening to folk – my clients, my contacts and “expert” sources. It’s striking how much these disagree.

For example: In the FT this morning we have a hagiographical article about Italian technocrat premier Mario Monte’s “reluctance” to stand in coming elections despite the clear love and affection the business community and every right thinking Italian holds him in for saving their country. (Apart from these know-nothing southern benefit-cheats, wastrels and mafia-loving Sicilians! Editor’s note: Careful, Bill, I have relatives just outside Naples). Hmm.. isn’t Monti the chap who fronted the effective coup of the elected premier last year?

Read the FT story and you’d think Italy is saved: Monti is credited with “injecting reason into the political process”, tackling the economy’s structural flaws, restoring international confidence, and “reviving Italy’s reputation as a serious country”! Really??? My contacts in the Italian underground remind me the political scene remains very fragmented (with anything but a consensus emerging around Monti), that growth remains wholly invisible, productivity remains a joke, and fundamentals are all negative. A highly respected Italian economist recently told me “This is a game of smoke and mirrors, projecting a reality at home and abroad which simple does not exist!” (Editor’s note: my suggestion for an insight into the way Italy is run today is to watch the television series Rome on boxset, night after night; it was ever thus).

The thing about politics is there is seldom a simple truth. Maybe Monti has uniquely been “the right man at the right time” for Italy. Or maybe he was just the best alternative before the clown-prince Berlusconi utterly destroyed the country’s credibility. Bottom line is Italy ain’t really changed.. perhaps its just less in the focus because Spain’s Rajoy has been making his play for Berlusconi’s Europe’s least self-aware politician?

And it ain’t just the published press. Once the camera never lied, but now we know Photoshop is a bigger scoundrel than a politician with a fresh briefcase stashed with cash. It might be time to be more suspicious of what we read and believe we see. The footage from Europe the other day gave the impression of massive strikes, European cities completely blocked, economies utterly seized up, and unprecedented violence on the street….

Or perhaps not. I got two emails from porridge readers from Madrid and Lisbon both saying the same thing: that the scale of the anti-austerity riots were greatly over-stated by media.

From Madrid I was told the strikes were significant, but composed largely of non-workers – professional strikers, government drones that had already been made redundant, and welfare claimants protesting declining handouts. Violence there was, but far more limited than the press showed – only 70 casualties and mainly police. Meanwhile, most of Madrid’s offices remained open (albeit with the lights off lest they attracted the attention of strikers).

From Lisbon I was told much the same, and that far from support for unions, much of working population is far more concerned with holding the remaining jobs.

I remember a few years back on the streets of London watching three balaclava-clad “anti-capitalism” trendies throwing (very girlie throws actually) things at the police surrounded by a least 20 cameramen egging them on.

Youth employment and job losses are tragic, but the story we hear of imminent social upheaval across Europe may be considerably overegged by the press. Folk like to assume the worst – look at the way markets so typically over-react to news! The Euro crisis has spawned some magnificent political and economic debate and excellent writing on the subject (for instance Philip Stephens in the FT this morning: “Merkel has decided to pay up for the euro”), but stay detached. The trick is shift the truth from the chaff, but also remember it’s the chaff that Europe’s electorates want to believe. Next year be very sceptical of political predictions – especially on critical European elections. Listen carefully to whatever aria the Fat Lady is singing…

Anyway… out of time and have a great weekend..  

BB

0207 786 3877

[email protected]

[email protected]

 

China: More Of The Same

Warwick Business School has just sent us a short think piece based on the thoughts of China expert Professor Qing Wang. She says China’s new leader has a lot of emerging political and social problems to deal with, but he will not make radical changes to the country.

Xi Jinping was anointed as the new leader of the Communist Party of China and named chairman of the party’s military commission on Thursday, handing him a strong mandate to rule the world’s most populous country for the next decade.

Professor Wang, who has advised the Chinese Government on how to stimulate their domestic consumption, is visiting professor at Tsinghua University from which Xi once graduated, says the changing demographics put greater pressure on the Government to justify the legitimacy of the one party system in terms of its ability to represent an increasingly diverse and potentially conflicting range of interests (Editor’s note: that sentence is FAR too long). “China is very different economically and politically now than it was ten years ago” says Wang, who is Professor of Marketing and Innovation at Warwick Business School and Director of MICEE (Marketing, Innovation and the Chinese and Emerging Economy).

China: New Leaders, Same Hands On Tiller

From the blog of Anthony Chan, Asian Sovereign Strategist at AllianceBernstein most recent blog entitled China: New Leaders, Same Steady Hand on the Chinese Economic Tiller:

The media spotlight on the 18^th congress of the Chinese Communist Party has shone mainly on the appointment of the new president Xi Jinping. But almost more important for investors will be Li Keqiang, the new premier, who will be responsible for combating the country’s slowing economic growth and, with it, potentially the fate of the world’s economy.

The immediate risk facing Mr Li is a prolonged economic downturn if the current stimulus, launched in 2009, runs out of steam. Ironically, one trigger could be the long transition period before the new leadership takes over in March 2013. The accompanying administrative paralysis could cause a further loss of economic momentum, particularly as any new economic policy would not have a real impact until the autumn of 2013.

Japanese Equities - Neglected Gems

From ING Investment Management

The recovery of the Japanese stock market after the Lehman crisis has significantly lagged the recovery in earnings per share (EPS), while other markets around the world have shown stock market recovery in tandem with profit recovery.  As there is no evidence to believe that listed Japanese companies’ earnings will collapse to the level immediately after the financial crisis, the market offers attractive investment opportunities.

Not all companies hurt by strong yen

What is the reason for the decoupling? First, the perception that Japanese corporate earnings are being destroyed by the strong currency is very persistent. The high correlation between the Japanese market and the Korean won demonstrates this point.

To grow or not to grow…. That is the question..

Mint – Bill Blain’s Morning Porridge November 15 2012

I’ve just spent the last few days on a swift trip to the Gulf, and come back with a whole host of new thoughts, ideas and questions about everything from China to bank capital, CDOs and Italian banks. If I ever figure out what Dubai is actually for, I’ll be sure to share it with you all… but it sort of works once you start to understand its somewhat curious basis (which is still something of a mystery.)  The 1 dirham entry fee to the minuscule Dubai museum was best money I spent (that and the Abra fare across the Creek…)

Markets might appear to be caught in the headlights of uncertainty – utterly unsure of what happens next re the US fiscal debt cliff, Europe or the new China faces – but underneath they’re still on fire. Any new issue with a sniff of yield is vastly oversubscribed. Buyers still scrabbling to find elusive bonds. There is a wall of money still to be invested. Every recent price dip has triggered a wall of buyers. I suspect the next few weeks into the New Year run-up will remain fervid in new issues and the search for yield. 

Tocqueville's Hunt: The Sun Also Rises? A Contrarian Take on Japanese Equities

In his latest "Insights" piece, James Hunt, portfolio manager of Tocqueville International Value Fund, explains why Japanese equities, despite the country's poor demographics, huge public debt and weak growth prospects, still harbor some excellent opportunities.

Mr. Hunt writes: “Everyone thinks Japan is sinking into obscurity and this negative sentiment provides us with the opportunity to buy what I consider to be excellent global franchise businesses at knock down valuations.”

He concludes: "As bottom up stock pickers, a contrarian take on a geography or sector is often the starting point for new idea generation; the storm of negative factors combined with the poor market performance in Japan is just of the sort of situation that piques our interest."
 
The full commentary is available from Tocqueville at: http://www.tocqueville.com/insights/sun-also-rises

Investors Lack Influence in MiFID Process: Greenwich

Only 6% of the buy-side respondents to a new Greenwich Market Pulse believe that institutional investors have had a meaningful influence on the legislative process that is working to produce new MiFID II rules.

According to the study of 103 institutional investors by Greenwich Associates completed mid-October, only 11% of respondents thought that sufficient consideration was being given to the needs of pension funds and other beneficiaries of long-term institutional investment in the legislative process surrounding MiFID II / MiFIR.

Equally concerning is that 70% of respondents thought institutional investors have had little or no influence in the process, with only 6% expressing the belief that the buy-side has had a “significant” or even “modest” influence.

Citi Opens Securities Lending Desk In Dublin

Citi reports that has opened a securities lending trading desk in Dublin as part of its commitment to expand its OpenLend capabilities in key cities and regions around the globe. The Dublin desk will form part of an expanded EMEA (Europe, Middle-East and Africa) securities lending trading team that covers global equity lending, global fixed income lending and multi-currency cash reinvestment.

The combined (London and Dublin) EMEA trading desk will continue to be run by Gareth Mitchell, EMEA Head of Securities Finance Trading, who has over 26 years of industry experience. As part of this expansion, Gareth has relocated from London to Dublin.