Bets in the City / Simon Denham / 17 November 2008 / Leave a comment

Daily View - 17th November 2008

So the G20 troop on home after they have all agreed to cut taxes and boost spending. Therefore giving them all the protection that consensus affords. Having worked for banks for several decades I always assumed that the Credit Committee dept was there just to ensure that no Senior Manager could be blamed, individually, for a debt blowing up. The G20 effectively now doing the same thing for the component parts.

The 'decisions' made do not appear to have made a blind bit of difference on the open this morning with the Dow pretty much unchanged on the Friday close and the FTSE being called some 40 points lower. Commentators mentioned on Friday morning that much of the late burst in the US on Thursday evening was due to fear of some major agreement coming out of this weekend's confab. If that was indeed the case then the prospect for early activity today is not exactly encouraging. Sorry.

Anyway the week ahead looks quite exciting from the corporate point of view with some interesting talking points worth mentioning.

Tuesday

EasyJet's full year results are likely to take a back seat to Sir Stelios' sudden demand for dividend liquidity. Any backtracking form the management would be seen as seriously weakening to the overall, long-term, outlook. Sir Stelios cannot be unaware of the consequences of his actions and so (as with all things) we must look for ulterior motives behind his demand for dosh. EasyJet, for all of the problems of higher fuel costs and impending recession, is still a highly profitable company which might not be the case for the remainder of the 'Easy' franchise. If the cheap and cheerful end of the market is also suffering in the current environment then this would explain the sudden need for funds. With Easy Jet currently at three year lows there is probably not much appetite for selling stock.

Wolseley are due for a trading update and the heavily indebted company is unlikely to say anything particularly encouraging for investors. Housing remains in a dire situation both in the US and over here so the outlook for the next 12 to 18 months must be one of slashing costs and surviving. The stock is under 1/4 of the levels of 2006 (80pc off the highs) which has tempted in the buyers and with rates looking to come even lower at least the cost of servicing the debt burden should be falling slightly it is probably not the worst risk to be taking at the moment. It will take more than a sharp fall in prices to remove the love affair of the Americans and the Brits for owning their own homes.

Premier Foods are likely to be a ray of sunlight for the markets as the purveyors of staple food items are never going to see massive drops in turnover but, again, this is another company that geared up in the good times as the board listened to the financial whizz kids once (or twice) too often. The debt has driven down the stock so much that the company is now a fully paid up member of the 90pc club and it might be of concern that even at these prices the 'big boys' are still liquidating rather than accruing positions.

Also reporting are Enterprise Inns, Burberry (can they continue to outperform), Carphone (in the news again as profits succumb to the downturn and there is Talk Talk of a unit sale) and ICAP (rumoured to be suffering in the downturn of the Off Balance Sheet market)

Wednesday

British Land will be the main focus as analysts ponder the possibility of a full 25pc devaluation of property assets. The stock is trading at 2003 levels having taken a massive battering over the past 20 months and investors must be wondering what has hit them. Yes property has fallen but can things be as bad as all that? Unfortunately the answer is probably yes as the downward revaluation is unlikely to be the last. Analysts are estimating whether the falls to date are enough to cover any further asset falls but his really depends upon your view as to whether anything done to date is likely to turn the super-tanker of the economy from its current path.

Lloyds will reveal the outcome of the HBOS vote and share holders are still in a bit of a pickle. Is the merger good or bad? I wish I knew as if the answer was 'good' I would be busily buying up stock. The fact that nobody seems to be either buying or selling in size (albeit someone pulled the plug last week on a sizeable Lloyds stake) at the moment gives the feeling that not many other people have a really solid idea either.

Thursday sees Halfords pick up the baton and for those who like to see some winners from tough times this company seems to be doing a damn fine impersonation of a 'pig in s**t'. Reducing new (and second hand) car sales means more call for spare parts and the 'new austerity' is also doing great things for the bike trade. Trading is expected to be 'strong' or at least not weak (!).

Also Mothercare report interims and the recent surge in reproduction should be doing the eponymous company no harm at all.

Friday winds down the week with Fullers (the brewers of, purportedly, the biggest selling bitter in the UK, London Pride) reporting interims. Again the stock looks grim but even with the smoking ban it would take an extreme change in the UK national Psyche to stop us all drinking too much.

The Tradefair Spread Betting Team