Markets Live chat transcript for the chat ending at 12:17 on 27 Jan 2010. Participants in this chat were: Neil Hume, FT Bryce Elder
NH
good morning
NH
and welcome to markets live
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FT Alphaville’s daily markets discussion
NH
late this morning
NH
11.04
NH
whoops
NH
Bryce is here
BE
Hello
BE
So the sell off continues
NH
indeed it is does
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NH
FTSE down another 45 points to 5,231
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which is actually a little recovery
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was off 75 points earlier
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the usual combination of fears driving us lower
BE
NH
China tightening fears
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NH
worries about bank capital
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NH
Obama’s State of the Union address
BE
NH
possibility for more bank bashing
BE
NH
and the possibility to unsettle the bond market if he does not say something sensible about the deficit
BE
NH
on top of that
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most of the press seem to think the UK could easily tip back into recession
BE
(you get the idea)
NH
have I missed anything?
BE
A few things
BE
Rusal IPO = epic fail
BE
down something like 10%
NH
ouch
NH
NH
geared play on China
BE
poor results from BBVA
NH
yep, off 6% last time I looked
BE
but other than that
BE
you have just about nailed it
BE
tin hats all round
NH
oh yes
NH
NH
chin strap
NH
2 or 3??
BE
I’m at three notches.
NH
Ok
NH
three it is?
NH
what’s the maximum
BE
Five. But that requires to to shave your hair off first.
NH
the tin equivalent of Defcon
NH
that’s what the notches are
BE
So we’re at Notchstrap Three, on review for upgrade.
11:09AM
NH
So
NH
the perfect backdrop then
NH
to launch the biggest
NH
E&P secondary fund raising of all time
NH
in the UK
BE
Quite.
BE
We are, of course, referring to Tullow Oil.
NH
indeed
NH
hearing the placing has been done at £11.50
NH
has that been confirmed yet?
BE
Not yet.
Tullow Oil (TLW:LSE): Last: 1,159, down 57 (-4.69%), High: 1,170, Low: 1,148, Volume: 7.77m
NH
shares hovering just about
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Tullow are looking to raise £1bn
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to help develop Uganda
NH
although I am a we bit puzzled by this
NH
let’s assume they buy out Heritage
NH
then I though the plan was to farm out
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half the assets
NH
so what’s the cash really needed for
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to prove to the Ugandian govt
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that they are a serious player
NH
not some tin pot E&P company listed on Aim
BE
That could be it I guess.
NH
annoyed we missed this
NH
stock was rubbish yesterday afternoon
NH
they must have started to market it
NH
yet no one seemed to have heard anything
NH
everyone was banging on about Tate & Lyle
NH
and how Harbinger
NH
were rumoured to have appointed UBS
NH
to sell their holding
NH
alongside tomorrow’s figures
BE
There were vague whispers very late last night.
Tate and Lyle (TATE:LSE): Last: 406.00, down 0.9 (-0.22%), High: 406.80, Low: 401.00, Volume: 356.46k
BE
Which were no use to anyone.
NH
so it was a late one then
BE
Yup.
NH
Got any comment on this?
BE
Yeah – a few bits. Starting with Citigroup
BE
Ops. update – 2009 working interest production of 58.3kboepd was in line with
guidance/expectations while capex spend of £690m was below our forecast of
£775m. Net debt at end-09 was c£720m. First oil at the Jubilee development
offshore Ghana remains on track for Q4 2010 while the 2010 exploration and
appraisal campaign appears more busy than expected albeit skewed to 2H.
guidance/expectations while capex spend of £690m was below our forecast of
£775m. Net debt at end-09 was c£720m. First oil at the Jubilee development
offshore Ghana remains on track for Q4 2010 while the 2010 exploration and
appraisal campaign appears more busy than expected albeit skewed to 2H.
BE
Placing – Tullow intends to place up to 80m new shares representing 10% of the
existing share count which we believe could raise up to c$1.6bn. Tullow recently
exercised its rights of pre-emption in respect of the proposed sale by Heritage of
its 50% interest in Blocks 1 and 3A to Eni for $1.5bn. The funds from the placing
will be used to facilitate the Ugandan acquisition and, together with the proceeds
from their anticipated farm-down in the country, to provide Tullow with a more
appropriate capital structure for the medium term – likely spend includes a
minimum $500m/yr expl. spend, accelerated Ugandan dev’t spend and additional
appraisal and development in Ghana.
existing share count which we believe could raise up to c$1.6bn. Tullow recently
exercised its rights of pre-emption in respect of the proposed sale by Heritage of
its 50% interest in Blocks 1 and 3A to Eni for $1.5bn. The funds from the placing
will be used to facilitate the Ugandan acquisition and, together with the proceeds
from their anticipated farm-down in the country, to provide Tullow with a more
appropriate capital structure for the medium term – likely spend includes a
minimum $500m/yr expl. spend, accelerated Ugandan dev’t spend and additional
appraisal and development in Ghana.
BE
Uganda – The 1st phase of development in Uganda Block 2 (100% WI) has been
initiated with Tullow increasingly committed as a long-term investor in Uganda. In
parallel with the exercise of its pre-emption rights over Heritage’s assets, Tullow
has been conducting its own farm-out process with potential partners supportive
of Tullow’s decision to pre-empt. Tullow has guided to end-Feb for completion of
their own farm-down process with recent reports in the FT naming potential
partners as CNOOC and Total. A 6-well exploration campaign in Block 1 is
expected to recommence in April 2010.
initiated with Tullow increasingly committed as a long-term investor in Uganda. In
parallel with the exercise of its pre-emption rights over Heritage’s assets, Tullow
has been conducting its own farm-out process with potential partners supportive
of Tullow’s decision to pre-empt. Tullow has guided to end-Feb for completion of
their own farm-down process with recent reports in the FT naming potential
partners as CNOOC and Total. A 6-well exploration campaign in Block 1 is
expected to recommence in April 2010.
BE
Ghana – Phase 1 of the offshore Jubilee development remains on schedule for 1st
oil in Q4 2010 with all the planned development wells now drilled. The
accelerated 2010 exploration and appraisal campaign in Ghana includes 7 wells
including additional drilling at Tweneboa and Mahogany.
oil in Q4 2010 with all the planned development wells now drilled. The
accelerated 2010 exploration and appraisal campaign in Ghana includes 7 wells
including additional drilling at Tweneboa and Mahogany.
BE
Transform Margin – Tullow has provisionally guided to 2 wells in Sierra Leone and
1 well in Liberia in 2H 2010. The company also plans on drilling prospects along
the Latin America Transform Margin in French Guiana and Guyana in 4Q 2010.
1 well in Liberia in 2H 2010. The company also plans on drilling prospects along
the Latin America Transform Margin in French Guiana and Guyana in 4Q 2010.
BE
Reaction – This morning’s placing is likely to add further credence to the view that
Tullow is committed to Uganda over the long term while also emphasizing the
ongoing exploration potential across its portfolio. There remains much uncertainty
as to the eventual outcome of negotiations in Uganda; however, it would appear
the company’s strategy is beginning to take more of a weighting towards organic
production than the recent past. Trading at less than a 10% discount to our
£14.00 Risked NAV (versus sector at 15%), we believe the risk-reward trade-off
Tullow is committed to Uganda over the long term while also emphasizing the
ongoing exploration potential across its portfolio. There remains much uncertainty
as to the eventual outcome of negotiations in Uganda; however, it would appear
the company’s strategy is beginning to take more of a weighting towards organic
production than the recent past. Trading at less than a 10% discount to our
£14.00 Risked NAV (versus sector at 15%), we believe the risk-reward trade-off
NH
hang on
NH
some more feedback on the Tullow placing
NH
TLW hearing books comfortably covered…books closing 10min
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and as the ROTR note
NH
this is a big placing
NH
big
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in the context of the sector
BE
Speaking of, has the (new) Sector Watcher said anything this morning?
NH
yes
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he has
NH
Tullow Oil – TLW LN
Before going through the trading statement, let’s look at the massive equity raise TLW has launched this morning: 80.4 m shares (10% of current shares outstanding) or £1 bn…the largest equity raise ever done for an E&P. The cash will be used to finance its expanded exploration and development activities, partially because of the group’s intention to retain a larger than previously planned stake in its Ugandan licences. Talking about Uganda, Aidan Heavey confirmed the market rumours that Cnooc and Total were the two majors that will join it as partners. The Ugandan president will have the last word on this matter. Operationally there is little new to report in today’s statement. The focus for the coming months will remain on appraising Uganda and Ghana. Bottom line: TLW remains THE reference in the E&P sector; I think though the placement is opportunistic given TLW’s current rich valuation. There is better value found elsewhere.
Before going through the trading statement, let’s look at the massive equity raise TLW has launched this morning: 80.4 m shares (10% of current shares outstanding) or £1 bn…the largest equity raise ever done for an E&P. The cash will be used to finance its expanded exploration and development activities, partially because of the group’s intention to retain a larger than previously planned stake in its Ugandan licences. Talking about Uganda, Aidan Heavey confirmed the market rumours that Cnooc and Total were the two majors that will join it as partners. The Ugandan president will have the last word on this matter. Operationally there is little new to report in today’s statement. The focus for the coming months will remain on appraising Uganda and Ghana. Bottom line: TLW remains THE reference in the E&P sector; I think though the placement is opportunistic given TLW’s current rich valuation. There is better value found elsewhere.
NH
and
NH
especially for Chopper Bear
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he has some words to say about GKP
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and I promise this will be the only thing
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we say on today’s show about GKP
NH
ulf Keystone Petroleum – GKP LN
Later in the morning yesterday, GKP announced it drew down £4m of its £30m Standby Equity Distribution Agreement, resulting in another 4.5m shares being issued ranking pari parsu with existing common shares. So in total, they drew down £17 m up to date. So let’s look at some numbers… the OOIP for Shaikan ranges between 1.9 bn and 7.4bn bbls with Pmean standing at 4.2 bn bbls. This evaluation covers data from the Cretaceous, Jurassic and Triassic and was performed by Dynamic Global Advisors. Taking the Pmean and applying 25% recovery factor, 75% commercial risk, GKP’s NAV is about 110p but don’t get too excited since there is upcoming dilution. Why? Well, cash in the bank stands at $25m, and financial requirement for the remainder of 2009 is estimated at $16m. However, $15.6m of cash is restricted in Algeria, so there appears to be a funding shortfall for year to come. Bottom line: if you want to play the Kurdistan drill bit, BUY HOIL for the Miran West-2 and Miran East-1 and use GKP and VST CN as sources of fund. SELL GKP
Later in the morning yesterday, GKP announced it drew down £4m of its £30m Standby Equity Distribution Agreement, resulting in another 4.5m shares being issued ranking pari parsu with existing common shares. So in total, they drew down £17 m up to date. So let’s look at some numbers… the OOIP for Shaikan ranges between 1.9 bn and 7.4bn bbls with Pmean standing at 4.2 bn bbls. This evaluation covers data from the Cretaceous, Jurassic and Triassic and was performed by Dynamic Global Advisors. Taking the Pmean and applying 25% recovery factor, 75% commercial risk, GKP’s NAV is about 110p but don’t get too excited since there is upcoming dilution. Why? Well, cash in the bank stands at $25m, and financial requirement for the remainder of 2009 is estimated at $16m. However, $15.6m of cash is restricted in Algeria, so there appears to be a funding shortfall for year to come. Bottom line: if you want to play the Kurdistan drill bit, BUY HOIL for the Miran West-2 and Miran East-1 and use GKP and VST CN as sources of fund. SELL GKP
BE
Oh dear. I’m moving up to Chinstrap Four.
Gulf Keystone Petroleum (GKP:LSE): Last: 89.00, down 1 (-1.11%), High: 91.00, Low: 88.00, Volume: 886.73k
NH
That’s good
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change of Sector Watcher
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but the quality remains the same
BE
And that shareprice just keeps on drifting ……
NH
indeed
NH
right
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enough of that
NH
bored with oil
11:18AM
NH
Where next?
BE
Well, if you’re bored with oil I guess we should push on to banks.
BE
If only to get it out of the way.
BE
Weak. Again.
Royal Bank of Scotland Group (RBS:LSE): Last: 33.29, down 1.51 (-4.34%), High: 34.50, Low: 33.19, Volume: 41.84m
Barclays PLC (BARC:LSE): Last: 268.30, down 7.7 (-2.79%), High: 272.10, Low: 262.45, Volume: 20.64m
Lloyds Banking Group (LLOY:LSE): Last: 51.40, down 0.31 (-0.60%), High: 51.63, Low: 49.98, Volume: 76.77m
HSBC Hldgs (HSBA:LSE): Last: 662.90, down 10.7 (-1.59%), High: 673.00, Low: 658.90, Volume: 10.29m
NH
meh
NH
that’s pretty grim
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I guess
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Basel III is to blame
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more doom and gloom warnings
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about the impact of the new regulations
BE
Yup – Basel III’s the gift that keeps giving.
NH
it is
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every day someone else comes up with scary figure
NH
about what the banks will need to raise
BE
Today’s comes from Morgan Stanley
BE
Here’s Huw van Steenis with the scary numbers
BE
#1 We think the market has underestimated the
impact of Basel proposals on distributions and this,
plus political uncertainty, means dividends will be
very constrained. We cut dividend forecasts for DBK,
CASA, CSG, GLE, BBVA, UCG, ISP, BNP, POP & KBC
impact of Basel proposals on distributions and this,
plus political uncertainty, means dividends will be
very constrained. We cut dividend forecasts for DBK,
CASA, CSG, GLE, BBVA, UCG, ISP, BNP, POP & KBC
BE
#2 Even with what banks view as the “obvious”
amendments (eg minorities) the proposals could
still hit European banks hard – and hence we think
revisions or “national interpretations” are likely.
Excluding revisions or management action, we calculate
banks may need €83bn extra capital by 2012, or have to
shrink RWAs by 11% (ie €1.0trn). We think banks would
be likely to reprice loans and reduce credit further – we
already model less than 1% loan growth for European
banks in 2010. We think Basel 3 and US proposals
could mean – unless amended – corporates face a
higher cost of credit and need to take on more liquidity
risk, as the banks are asked to shed risk.
amendments (eg minorities) the proposals could
still hit European banks hard – and hence we think
revisions or “national interpretations” are likely.
Excluding revisions or management action, we calculate
banks may need €83bn extra capital by 2012, or have to
shrink RWAs by 11% (ie €1.0trn). We think banks would
be likely to reprice loans and reduce credit further – we
already model less than 1% loan growth for European
banks in 2010. We think Basel 3 and US proposals
could mean – unless amended – corporates face a
higher cost of credit and need to take on more liquidity
risk, as the banks are asked to shed risk.
BE
#3 We think US Volcker proposals would, if enacted,
be another brake on US large cap bank earnings
(3-5% each for large cap US banks). This said, we
think US banks may outperform European, as funding
and capital/dilution concerns should be more intense in
1H, but we see more risk of upgrades from credit
recovery. O/W BAC, JPM, and NTRS.
be another brake on US large cap bank earnings
(3-5% each for large cap US banks). This said, we
think US banks may outperform European, as funding
and capital/dilution concerns should be more intense in
1H, but we see more risk of upgrades from credit
recovery. O/W BAC, JPM, and NTRS.
BE
#4 EM banks stand out as having almost no deficits,
which could reinforce the EM trade. We are
Overweight Garanti, Yapi Kredi, Standard Bank.
which could reinforce the EM trade. We are
Overweight Garanti, Yapi Kredi, Standard Bank.
BE
#5 Long subordinated bank paper – one of our credit
strategists’ key calls – is reinforced by our work.
strategists’ key calls – is reinforced by our work.
BE
#6 Key calls: At ~1.2x 10e TNAV we see value in a
good number of banks, but uncertainty on regulation and
divis is likely to overhang sector performance. Top
picks: KBC, CSG, SAN, BARC, SHB, AIB, Baer. Least
preferred: DX, RI, CBK, SEB. We cut CA to EW as we
think a pragmatic Basel 3 outcome is discounted. We cut
Swedbank to UW as it trades at TBV and we see better
value elsewhere and close our UW on Popular, as our
methodology now reflects normalized 2012 earnings.
good number of banks, but uncertainty on regulation and
divis is likely to overhang sector performance. Top
picks: KBC, CSG, SAN, BARC, SHB, AIB, Baer. Least
preferred: DX, RI, CBK, SEB. We cut CA to EW as we
think a pragmatic Basel 3 outcome is discounted. We cut
Swedbank to UW as it trades at TBV and we see better
value elsewhere and close our UW on Popular, as our
methodology now reflects normalized 2012 earnings.
NH
thanks for that
NH
so EUR83bn
NH
the latest estimate
NH
and no dividends ever again
BE
That’s the gist. But buy Barclays anyway.
NH
(Carlo – we have had an upgrade)
NH
hmmm
NH
still down thought
NH
Varley’s memo is not really helping is it?
BE
Not really. Was reading through that Manus Costello note on Barclays US side yesterday, as it happens.
NH
(Carlo – you get used to it)
BE
Did you know Barc’s US Tier One is 1%?
NH
really
NH
that’s incredible
BE
It is. Us subsidiaries of foreign banks can basically operate with zero capital providing the parent is stable.
BE
For the moment.
BE
However, that may change.
BE
And if Barclays wanted to raise the US core capital ratio to 8%-ish, the same as its peers ….
NH
(Chopper he is not here and pls can we stop talking about tidly diamonds stocks)
BE
it’d have to find nearly $30bn.
NH
wow
BE
Which is a bit of an ask.
BE
Anyway, LR for more details.
11:28AM
NH
Sticking with the banks for a moment
NH
Did you read tracy’s exellent post
NH
the one on the briefing docs
NH
for Volcker’s Rule
BE
You mean this one?
BE
Hang on – can’t find it. Do you have the link?
NH
hang on
NH
anyway
NH
it was pretty long
NH
but what came across
NH
was not the prop stuff
NH
that was squarely
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aimed at Goldman
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to bash them
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what was more interesting and worrying
NH
if you are a bank
NH
was the stuff on too big to fail
NH
basically
NH
the US govt and regulators
NH
are going to look at assets in total
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and compare that with the US GDP
NH
and then decide
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what needs to be done and who shrinks
NH
away
NH
Goldman has been doing some number crunching on that
NH
and comoe up with some pretty interesting conclusions
BE
Ok – can you paste?
NH
Caps on size as a way to limit failure risk
At its core, the US Administration’s most recent proposal on bank reform seeks to deal with too-big-to-fail by calling for size caps and reduced proprietary investing. In this note, we focus on size caps.
At its core, the US Administration’s most recent proposal on bank reform seeks to deal with too-big-to-fail by calling for size caps and reduced proprietary investing. In this note, we focus on size caps.
NH
European banks relatively bigger than US
Capping size is a very difficult lead to follow in Europe, as banks are much larger relative to “home market”
GDP. Consider: (1) The largest banks by market cap in the US (BAC) and the UK (HSBC) have the same
level of total adjusted assets (€1.5 tn). However, these represent 15% of US GDP for BAC and 96% of UK
GDP for HSBC. Cutting HSBC’s assets down to 15% of UK GDP would require a dramatic 81% asset
reduction, or a six-way split.
Capping size is a very difficult lead to follow in Europe, as banks are much larger relative to “home market”
GDP. Consider: (1) The largest banks by market cap in the US (BAC) and the UK (HSBC) have the same
level of total adjusted assets (€1.5 tn). However, these represent 15% of US GDP for BAC and 96% of UK
GDP for HSBC. Cutting HSBC’s assets down to 15% of UK GDP would require a dramatic 81% asset
reduction, or a six-way split.
NH
Now
NH
I will repeat some of that again
NH
The largest banks by market cap in the US (BAC) and the UK (HSBC) have the same
level of total adjusted assets (€1.5 tn). However, these represent 15% of US GDP for BAC and 96% of UK
GDP for HSBC. Cutting HSBC’s assets down to 15% of UK GDP would require a dramatic 81% asset
reduction, or a six-way split.
level of total adjusted assets (€1.5 tn). However, these represent 15% of US GDP for BAC and 96% of UK
GDP for HSBC. Cutting HSBC’s assets down to 15% of UK GDP would require a dramatic 81% asset
reduction, or a six-way split.
NH
here’s a bit more from the note
NH
(2) Nine banks in Europe have higher levels of total assets than the GDP of their home markets. BA/GDP
only falls to US levels if the cumulative EU GDP, rather than that of individual member states, is used as the
denominator.
Europe likely to continue on current path
We see three potential outcomes to the European size debate: (1) Reducing banks’ size in line with home
market GDP. In our view, this could substantially restrict European banks’ scope. (2) Introducing an EU-wide
and EU-funded mechanism for dealing with failed banks; and (3) status quo on size caps for now.
In the near term, the most likely scenario is for Europe to stay on the current path of regulatory change, in our
view – introducing more demanding capital, liquidity and risk.
only falls to US levels if the cumulative EU GDP, rather than that of individual member states, is used as the
denominator.
Europe likely to continue on current path
We see three potential outcomes to the European size debate: (1) Reducing banks’ size in line with home
market GDP. In our view, this could substantially restrict European banks’ scope. (2) Introducing an EU-wide
and EU-funded mechanism for dealing with failed banks; and (3) status quo on size caps for now.
In the near term, the most likely scenario is for Europe to stay on the current path of regulatory change, in our
view – introducing more demanding capital, liquidity and risk.
NH
Improved competitiveness in the US?
Credit Suisse has the largest US presence among European banks, with c.US$400 bn of assets. This is
relatively small compared to US banks and suggests that European banks are unlikely to be affected by any
future size caps, in our view.
Credit Suisse has the largest US presence among European banks, with c.US$400 bn of assets. This is
relatively small compared to US banks and suggests that European banks are unlikely to be affected by any
future size caps, in our view.
BE
More scary stuff re the banks then.
NH
yep
11:33AM
NH
Where now?
BE
Since we’re in the general area, how about Man Group?
NH
Ah yes
NH
weak again todaty
Man Group (EMG:LSE): Last: 252.20, down 10.9 (-4.14%), High: 260.00, Low: 248.60, Volume: 11.45m
NH
what’st the trigger?
BE
That’s after another dreadful performance by AHL
NH
of course
NH
there would have been performance stats
NH
out overnight
BE
Yup – and they showed the fund down 3.6% last week.
NH
ouch
NH
that’s nasty
BE
Its biggest weekly fall since early December.
NH
ouch
BE
Now standing at $34.87, versus a high water mark of $42.59
NH
again
NH
ouch
NH
so what is going on
NH
this is a trend follower
NH
that doesn’t seem to have picked up
NH
any trend in the past year
BE
Quite.
BE
Now one theory is that it’s QE’s fault.
NH
Blame the BoE Then
BE
Yeah – distorting natural market movements with their massive wads of cash.
NH
well that’s true
BE
Kere’s Keith Baird at Oriel, who (perhaps belatedly) moves from “buy” to “hold”
BE
AHL reported overnight that its weekly NAV fell another 3.6% in a continuation of a bad
run.
The company have indicated that the problems of AHL in exploiting trends are most likely
connected with quantitative easing which has been running over the last year during
which AHL is down by 16%.
run.
The company have indicated that the problems of AHL in exploiting trends are most likely
connected with quantitative easing which has been running over the last year during
which AHL is down by 16%.
BE
Their expectation for the future in part depends on whether the stimulus withdrawal
essentially by the Federal Reserve and Bank of England is synchronised or not. It would
be worse if it were synchronised – which looks quite possible. This is what happened in
Q1 2009 and AHL has been suffering.
If true this implies a further period of inadequate returns until QE is withdrawn.
That may well mean further downside in the shares though we continue to expect them to
recover eventually. Current PT 300p.
essentially by the Federal Reserve and Bank of England is synchronised or not. It would
be worse if it were synchronised – which looks quite possible. This is what happened in
Q1 2009 and AHL has been suffering.
If true this implies a further period of inadequate returns until QE is withdrawn.
That may well mean further downside in the shares though we continue to expect them to
recover eventually. Current PT 300p.
NH
(PI – covered twice on main site yesterday)
NH
so
NH
as QE ended yesterday
NH
does that mean
NH
AHL
NH
now starts going on??
NH
sorry
NH
that should up
BE
Well – it’s a theory.
BE
Not one that’s reflected by the market though.
BE
(Fatdaz – 2009 was AHL’s first ever annual decline.)
BE
Anyway, Credit Suisse has cut forecasts as well.
NH
(Lorcan surely they can’t debase the currency even further. can they?)
BE
Will cut and paste.
BE
New forecasts: We are edging down our forecasts for Man group to incorporate guidance given on the conference call
following the recent trading update and the weak AHL returns in the last fortnight. Man group noted on their conference call
that the weak AHL returns in December would result in US$1bn de-leveraging of these funds in January. Moreover in the
last two weeks AHL’s NAV is down 5% and this has a negative impact of around $1bn on group AUM. These drive 6% and
4% downgrades to our March 2010E and March 2011E AUM forecasts to $41.7bn and $49.7bn. We have reduced our
management fee forecasts for the y/e March 2010E by 4% to $472m and y/e March 2011E by 6% to $535m. Our new EPS
forecasts for y/e March 2010E of $0.25 and y/e March 2011E of $0.29 are 4-5% downgrades. Given AHL is now 18% below
its performance fee high watermarks we have assumed that it starts the following financial year below its highs and are
reducing our performance fee forecast for the y/e March 2012E by 28% to $302m and our EPS forecast by 16% to $0.42.
We are reducing our target price to £3 (from £3.2) to reflect our EPS downgrades.
following the recent trading update and the weak AHL returns in the last fortnight. Man group noted on their conference call
that the weak AHL returns in December would result in US$1bn de-leveraging of these funds in January. Moreover in the
last two weeks AHL’s NAV is down 5% and this has a negative impact of around $1bn on group AUM. These drive 6% and
4% downgrades to our March 2010E and March 2011E AUM forecasts to $41.7bn and $49.7bn. We have reduced our
management fee forecasts for the y/e March 2010E by 4% to $472m and y/e March 2011E by 6% to $535m. Our new EPS
forecasts for y/e March 2010E of $0.25 and y/e March 2011E of $0.29 are 4-5% downgrades. Given AHL is now 18% below
its performance fee high watermarks we have assumed that it starts the following financial year below its highs and are
reducing our performance fee forecast for the y/e March 2012E by 28% to $302m and our EPS forecast by 16% to $0.42.
We are reducing our target price to £3 (from £3.2) to reflect our EPS downgrades.
BE
Dividend intact in near-term: Although Man has not given specific guidance we believe the company will hold the dividend
flat at 44 cents in the y/e March 2010E given the cash generation of the business and the strong capital base.
Catalysts: Man will outline the next AUM update in late March.
Valuation: With the shares off 25% in the last 3 months it looks to us that the new numbers are fully reflected in the share
price. It may however require a recovery on AHL/private client flows for the shares to start outperforming again.
flat at 44 cents in the y/e March 2010E given the cash generation of the business and the strong capital base.
Catalysts: Man will outline the next AUM update in late March.
Valuation: With the shares off 25% in the last 3 months it looks to us that the new numbers are fully reflected in the share
price. It may however require a recovery on AHL/private client flows for the shares to start outperforming again.
NH
ta for that
NH
good subject AHL
11:40AM
NH
Okay
NH
I think we may be having some registration issues today
NH
so if you can’t get on to the site
NH
that will be why
11:41AM
NH
Right
NH
we need to pay a visit to Greece
NH
because bond spreads
NH
are blowing out
BE
RTRS-GREEK/GERMAN 10-YR GOVERNMENT BOND YIELD SPREAD BLOWS OUT TO EURO LIFETIME WIDE OF 328 BPS AFTER GREEK FINMIN CHINA
BE
And ….
BE
RTRS-GREEK FIN MINISTRY SAYS NO MANDATE TO GOLDMAN SACHS TO NEGOTIATE GREEK BOND DEAL WITH CHINA
BE
RTRS-GREEK FIN MINISTRY SAYS FIGURES ON REPORTED GREECE-CHINA BOND DEAL ARE NOT TRUE
NH
So
NH
the China deal is happening
NH
or it isn’t
BE
Um ….. pass.
NH
wires saying no
BE
Greece on Wednesday denied press reports it had mandated Goldman Sachs to sell bonds to China, but its debt chief reiterated a roadshow in Asia was in the pipeline.
The Financial Times and the Wall Street Journal reported that Greece was turning to China to buy up to 25 billion euros of its bonds to help it through its fiscal crisis, with U.S. investment bank Goldman Sachs promoting the deal to Beijing.
The Financial Times and the Wall Street Journal reported that Greece was turning to China to buy up to 25 billion euros of its bonds to help it through its fiscal crisis, with U.S. investment bank Goldman Sachs promoting the deal to Beijing.
NH
hmmm
11:43AM
NH
but hang on a minute
NH
this wasn’t in the script
NH
the market is rallying
NH
Greece in trouble
NH
but we are moving higher
NH
now down just 17.4 points at 5,259
NH
Bryce
BE
Odd.
NH
what’s going on??
BE
Er ……………….
BE
Perhaps Davos has fixed everything?
BE
I’ve no idea.
NH
NH
that must be it
NH
Davos saves the world
BE
US futures look to have had a bit of a squeeze.
BE
Can’t see any kind of trigger though.
NH
nor me
BE
(Sir IM: there is, quite clearly, not a script. It’s a metaphor.)
11:46AM
NH
Okay
NH
on the banks
NH
we forgot to mention BBVA
NH
the rather large Spanish bank
NH
that is really a play on Lat Am
NH
poor figs out today
NH
and stock down almost 6%
BE
Right – what’s the issue here?
NH
looks to be
NH
surprise, surprise
NH
bad loans
NH
in wait for it
NH
property
NH
Spanish bank BBVA’s bad loans ratio rose nearly one percentage point in the fourth quarter from the third mainly due to the impact of Spain’s property crisis.
But the first big European bank to report results described its 2009 bad loans ratio as “near to the peak of the cycle”, saying new bad loan entries slowed in the fourth quarter.
The sharp deterioration in credit quality at Spain’s second largest bank fuelled an increase in provisions which depressed BBVA’s bottom line, particularly in the fourth quarter when the bank’s net profit evaporated to 30 million euros, hit by one-off charges, from 1.38 billion in the third quarter.
But the first big European bank to report results described its 2009 bad loans ratio as “near to the peak of the cycle”, saying new bad loan entries slowed in the fourth quarter.
The sharp deterioration in credit quality at Spain’s second largest bank fuelled an increase in provisions which depressed BBVA’s bottom line, particularly in the fourth quarter when the bank’s net profit evaporated to 30 million euros, hit by one-off charges, from 1.38 billion in the third quarter.
BE
Can cut to some comment on this one, if it’s useful.
BE
Starting with Raymond James
NH
yes
NH
pls do
BE
Highlights: the final quarter was overshadowed by massive provisions (including
EUR705m relating to writedowns in the US). In contrast, interest margin continued to
hold up nicely and costs remained under control. Net profit fell 94%
year-on-year to EUR31m, and much lower than expected (consensus stood at
EUR1.05bn).
• Interest income came to EUR3.6bn (up 16% year-on-year). Resilient despite tough
low-interest rate conditions.
• Retail, Spain/Portugal (49% of earnings): loans at end-2009 (down 1.2%), deposits
(down .3%). Interest margin held up (down 1.2% year-on-year to EUR1.2bn in Q4).
Continued tight grip on costs with the cost/income ratio still low at 35.6% over the
quarter.
EUR705m relating to writedowns in the US). In contrast, interest margin continued to
hold up nicely and costs remained under control. Net profit fell 94%
year-on-year to EUR31m, and much lower than expected (consensus stood at
EUR1.05bn).
• Interest income came to EUR3.6bn (up 16% year-on-year). Resilient despite tough
low-interest rate conditions.
• Retail, Spain/Portugal (49% of earnings): loans at end-2009 (down 1.2%), deposits
(down .3%). Interest margin held up (down 1.2% year-on-year to EUR1.2bn in Q4).
Continued tight grip on costs with the cost/income ratio still low at 35.6% over the
quarter.
BE
Risks: NPL ratio of 4.3%, overshooting the trend seen in recent quarters. Coverage
ratio of 57% at group level, down relative to end-September (68%). The generic
provision buffer stood at EUR3bn at year-end (down 26% versus end-September).
• Solvency: Tier 1 ratio of 9.4%, core Tier 1 of 8.0%. Internal capital generation
amounted to 30bp over Q4, cancelled out by 30bp on China Citic Bank. However, the
group easily topped its full-year target of 80bp.
ratio of 57% at group level, down relative to end-September (68%). The generic
provision buffer stood at EUR3bn at year-end (down 26% versus end-September).
• Solvency: Tier 1 ratio of 9.4%, core Tier 1 of 8.0%. Internal capital generation
amounted to 30bp over Q4, cancelled out by 30bp on China Citic Bank. However, the
group easily topped its full-year target of 80bp.
BE
Conclusion: operating profits held up but the group was hit in Q4 by substantial
provisioning. Trading at a 2011 P/E of 9.0x versus the sector average of 8.5x, the
share is fully valued in our opinion. The group’s relatively strong fundamentals are
priced in. No change to our Fair Value rating (TP EUR13.1) due to a lack of upside.
provisioning. Trading at a 2011 P/E of 9.0x versus the sector average of 8.5x, the
share is fully valued in our opinion. The group’s relatively strong fundamentals are
priced in. No change to our Fair Value rating (TP EUR13.1) due to a lack of upside.
BE
And a bit from JPMorgan.
BE
Overall, weaker than expected numbers by BBVA, with more kitchen
sinking than initially anticipated. It is clear the bank has done an exercise
of trying to upfront some of the losses expected for future years, though the
US figure was not expected by the market and hence will probably not be
taken well. Otherwise, a decline of Mexican provisions is not happening
yet (we believe it is more a H1 10E story), so non-domestic units do not
provide in Q4 the necessary momentum to overcome Spanish concerns. All
that said, pre-provision profit came comfortably ahead of expectations,
capital/funding remain solid, and we do not see material downside potential
to our forecasts outside the US, so the long term OW picture remains there.
Short term, numbers will probably lead to additional weakness – we
suggest picking up the stock if the market overreacts.
sinking than initially anticipated. It is clear the bank has done an exercise
of trying to upfront some of the losses expected for future years, though the
US figure was not expected by the market and hence will probably not be
taken well. Otherwise, a decline of Mexican provisions is not happening
yet (we believe it is more a H1 10E story), so non-domestic units do not
provide in Q4 the necessary momentum to overcome Spanish concerns. All
that said, pre-provision profit came comfortably ahead of expectations,
capital/funding remain solid, and we do not see material downside potential
to our forecasts outside the US, so the long term OW picture remains there.
Short term, numbers will probably lead to additional weakness – we
suggest picking up the stock if the market overreacts.
11:49AM
NH
thanks for that
NH
Now DJP
NH
is asking IPR
NH
or
International Power (IPR:LSE): Last: 320.10, up 2.2 (+0.69%), High: 320.50, Low: 315.10, Volume: 3.17m
NH
if you prefer
NH
the stock has rallied
NH
since the talks that never were ended
NH
I guess the reason is
NH
they are defensive
NH
a big dollar earner
NH
annd the expectation that Suez will return
NH
on top of that
NH
there are a couple of bits of news today
BE
Go on
NH
a refinancing of a loan
NH
and a project in Thailand
NH
also small positives I guess
NH
(JP – off)
NH
I have comment on this
NH
Here’s Evo
NH
EVO TAKE – The main financeability issue in the next three years is management of cashflow surrounding repayment of three tranches of debt associated with coal plant where CO2 legislation is being introduced: A$1.1bn bullet Loy Yang B debt due 2012; A$742m amortising Hazelwood debt, now due 2012; and US$800m Coleto Creek debt due 2013. Some level of refinancing is required to manage cashflow, despite IPR’s strong free equity cashflow. This will require CO2 legislation, with associated free CO2 allocations, to be in place by then.
DETAILS – A$445m bullet repayment of debt associated with the Hazelwood brown coal plant, has been rolled into the amortising portion of A$297m, with repayment due June 2012, and margin 400bp. This would fix at 9.2%. The original debt was amortising to 2014, with 185bp margin and locked in at 7.8%. IPR also announced financial close for a 110 MW plant in Thailand.
VALUATION AND RECOMMENDATION – The re-financing issues surrounding debt is sufficiently far out not to weigh on the market. The main current issue is the bid speculation with GDF Suez and how IPR will respond to this. We believe IPR will move to a higher payout ratio.
DETAILS – A$445m bullet repayment of debt associated with the Hazelwood brown coal plant, has been rolled into the amortising portion of A$297m, with repayment due June 2012, and margin 400bp. This would fix at 9.2%. The original debt was amortising to 2014, with 185bp margin and locked in at 7.8%. IPR also announced financial close for a 110 MW plant in Thailand.
VALUATION AND RECOMMENDATION – The re-financing issues surrounding debt is sufficiently far out not to weigh on the market. The main current issue is the bid speculation with GDF Suez and how IPR will respond to this. We believe IPR will move to a higher payout ratio.
NH
and here is Matrix
NH
Deal should remove any lingering refinancing risk that has overshadowed the share in the past
Announcement of closure of a110MW project in Thailand show company still has opportunities to grow
This £415m refinancing following on from the pay down of debt on the US merchant fleet completes a period in which we think International Power has successfully put its balance sheet in order. The shares have persistently shown a discount reflecting a perceived risk that the company would be unable to refinance its various and significant debt tranches. We now think that this risk is past and that any remaining discount should unwind. The margin on this refinancing (strictly speaking it is a restructuring of existing debt) is perhaps a little expensive but the tenor is long enough to clear the obvious uncertainty over the introduction of carbon legislation in Australia whilst being short enough to allow for renegotiation once that legislation is in place. With the uncertainty over whether refinancing was possible at all now gone the company comes off the back foot and can now look forward. The announcement of the financial closure of the 110MW TNP 2 project shows that International Power is already doing that.
Announcement of closure of a110MW project in Thailand show company still has opportunities to grow
This £415m refinancing following on from the pay down of debt on the US merchant fleet completes a period in which we think International Power has successfully put its balance sheet in order. The shares have persistently shown a discount reflecting a perceived risk that the company would be unable to refinance its various and significant debt tranches. We now think that this risk is past and that any remaining discount should unwind. The margin on this refinancing (strictly speaking it is a restructuring of existing debt) is perhaps a little expensive but the tenor is long enough to clear the obvious uncertainty over the introduction of carbon legislation in Australia whilst being short enough to allow for renegotiation once that legislation is in place. With the uncertainty over whether refinancing was possible at all now gone the company comes off the back foot and can now look forward. The announcement of the financial closure of the 110MW TNP 2 project shows that International Power is already doing that.
11:52AM
BE
So it’s nearly midday already
BE
Do you have anything raw to round up with?
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
NH
I do
NH
which is surprising on a down day like this
NH
not sure I would call it a prime cut of RAW
NH
more like an offcut really
NH
but anyway
NH
yesterday there was that rumour about Galiform
BE
Oh yeah. We were not convinced.
NH
well not with the idea that Travis Perkins was the buyer
BE
Hm.
NH
so
NH
the talk today is that private equity is looking at them
NH
and before anyone says
NH
they can’t afford it
NH
did you see this today
NH
Kohlberg Kravis Roberts, the US private equity group, on Wednesday announced the acquisition of Pets at Home in a deal valuing the UK’s leading supplier of dog collars, cat flaps, rabbit hutches and fish tanks at £955m.
The takeover by KKR comes after a highly competitive auction between some of the world’s biggest private equity groups for Pets at Home, which persuaded its owner – Bridgepoint – to ditch plans for an initial public offering.
Bridgepoint is expected to make about an eight-times return on its initial equity investment in the pet accessories retailer, which it bought for £230m in 2005. The price paid by KKR was at the top end of the company’s expected IPO valuation range.
The takeover by KKR comes after a highly competitive auction between some of the world’s biggest private equity groups for Pets at Home, which persuaded its owner – Bridgepoint – to ditch plans for an initial public offering.
Bridgepoint is expected to make about an eight-times return on its initial equity investment in the pet accessories retailer, which it bought for £230m in 2005. The price paid by KKR was at the top end of the company’s expected IPO valuation range.
BE
Woof.
NH
Woof indeed
NH
£1bn pet shop
BE
“the UK’s leading supplier of dog collars, cat flaps, rabbit hutches and fish tanks “
NH
Now if someone can buy a pet shop for £1bn
NH
the nation’s biggest supplier of kitches
NH
has to be worth something
NH
Bryce
NH
what have you done with that woof comment
NH
the puns are coming in
BE
Losing discipline at the end of the session again ………
BE
Anyway, what’s Galiform’s price tag these days?
NH
just over £500m
NH
so not that cheap
NH
but a good company
BE
I’ll take your word for that.
11:58AM
NH
A few people noting the S&P close below 1,120
NH
Now what was it Bob the Bear said
NH
three of four consecutive closes below that level
NH
and that’s it
NH
all bets are off
NH
yep
NH
he did say that
NH
just fished the notes out of Notes
NH
In terms of mrkts vs what I wrote on Monday, it may mean that the Q1 peak in risky assets that I was looking for MAY have already been seen this week. It is too soon to be too sure – I need to see 3/4 consec closes below 1120 S&P before I have a very high degree on confidence on this – but the distinct possibility IS there.
IF this does indeed prove to be the case, then I would expect to see a move in S&P thru 1080, 1030 and into the 950/1000 range over the rest of Q1. In this move credit does badly, esp. weaker rated credit, and govvies do well, as does the GBP and the UST. Why? Because the market will be pricing for lower grwth, and tighter money + smaller deficits esp in the UK and US).
Again, IF this is the path we are going to follow, I would be extremely surprised if we did not see at least 1 decent multi-mth counter trend rally, but I also think we see lower highs. So think S&P going form 950/1000 back up to 1080/1120 in Q2. The driver for this counter trend rally will be the mrkt belief that the grwth story can survive even with tighter policy. Lagging grwth indicators and overly optimistic fwd looking ‘subjective’ indicators will support this, + also lower bond yields will provide ‘some’ support.
NH
keep watching that level
11:59AM
NH
Monty
NH
interesting thoughts as ever
NH
any comment on the price
NH
toppy?
NH
reasonable for a pet shop?
NH
a big pet shop admitedly
NH
I note this though
NH
Bridgepoint
NH
have made a lot
NH
Bridgepoint is expected to make about an eight-times return on its initial equity investment in the pet accessories retailer, which it bought for £230m in 2005. The price paid by KKR was at the top end of the company’s expected IPO valuation range.
NH
woof
BE
Hm.
12:01PM
NH
Bryce
NH
anything else you want to look at?
BE
Um …. not much.
BE
Vodafone rallying a bit post decent numbers from Verizon Wireless overnight.
Vodafone Group (VOD:LSE): Last: 135.95, up 1.1 (+0.82%), High: 136.05, Low: 132.25, Volume: 44.75m
NH
also a big media note out from Merrill today
BE
Indeed there is.
BE
You got the details to hand?
NH
yes
NH
one moment
NH
BSkyB
NH
and WPP
NH
are their UK favs
NH
(Thannks Monty)
British Sky Broadcasting (BSY:LSE): Last: 551.50, up 2 (+0.36%), High: 552.50, Low: 542.50, Volume: 952.05k
WPP (WPP:LSE): Last: 589.00, down 0.5 (-0.08%), High: 590.50, Low: 583.50, Volume: 1.11m
NH
Neutral on media but with a strong cyclical bias
We see upside for the media sector in absolute terms, with scope for both a
re-rating and advertising-led upgrades. However, we believe its market
multiple represents fair value on a relative basis. We have a strong cyclical
bias given BofAML macro forecasts are well above the consensus, and our
belief that the cyclicality of advertising has yet to be fully recognised by the
market. Our key Buys are TF1, ProSieben, ITV, JCDecaux, WPP and BSkyB.
Our key Underperforms are Pearson, Lagardere, Mediaset and Telecinco.
We see upside for the media sector in absolute terms, with scope for both a
re-rating and advertising-led upgrades. However, we believe its market
multiple represents fair value on a relative basis. We have a strong cyclical
bias given BofAML macro forecasts are well above the consensus, and our
belief that the cyclicality of advertising has yet to be fully recognised by the
market. Our key Buys are TF1, ProSieben, ITV, JCDecaux, WPP and BSkyB.
Our key Underperforms are Pearson, Lagardere, Mediaset and Telecinco.
Pearson plc is the parent company of the Financial Times, publisher of FT Alphaville.
NH
Advertising recovery to exceed expectations
We expect advertising to recover in 2010 given our economists’ projections of a
stronger than expected macro recovery, easy H1 comparables and quadrennial
benefits. Importantly, we believe the market is underestimating the cyclicality of
advertising and the scope for activity to recover from low levels relative to GDP.
After adjusting for structural pressures and consumer risks, we expect this to
drive stronger than expected growth over the next 3-5 years, even in the event of
a muted economic recovery. We forecast 3.8% European advertising growth in
2010E, rising to 6.8% in 2011E and 6.3% in 2012E, significantly above Zenith
forecasts of -0.5%, 2.8% and 3.9%, respectively. (See page 12).
We expect advertising to recover in 2010 given our economists’ projections of a
stronger than expected macro recovery, easy H1 comparables and quadrennial
benefits. Importantly, we believe the market is underestimating the cyclicality of
advertising and the scope for activity to recover from low levels relative to GDP.
After adjusting for structural pressures and consumer risks, we expect this to
drive stronger than expected growth over the next 3-5 years, even in the event of
a muted economic recovery. We forecast 3.8% European advertising growth in
2010E, rising to 6.8% in 2011E and 6.3% in 2012E, significantly above Zenith
forecasts of -0.5%, 2.8% and 3.9%, respectively. (See page 12).
NH
How to play improving economic momentum
Media owners offer twice the sector’s gearing to a macro recovery, with a 1%
change in GDP adding 6% to average earnings across 2010/11E, and we believe
they are the best way to play BofAML’s expectation of macro upgrades. Based on
our models JCDecaux, ITV, ProSieben and TF1 offer the highest cyclicality in the
sector, and BSkyB, Pearson and Wolters Kluwer the least. (See page 22).
Media owners offer twice the sector’s gearing to a macro recovery, with a 1%
change in GDP adding 6% to average earnings across 2010/11E, and we believe
they are the best way to play BofAML’s expectation of macro upgrades. Based on
our models JCDecaux, ITV, ProSieben and TF1 offer the highest cyclicality in the
sector, and BSkyB, Pearson and Wolters Kluwer the least. (See page 22).
NH
E-books to emerge as new structural threat
We expect E-books to become an important issue for investors in the coming
months given explosive growth in e-reader sales. The music experience suggests
the impact will be at best uncertain, and at worst profound, with downside risks to
forecasts from pricing pressure, the loss of the hardback window, piracy,
disintermediation and the cost of rationalizing physical activities. Consumer
publishing represents 60% of Lagardere’s profits, and 10% for Pearson, and we
would argue for a de-rating until visibility improves. (See page 25).
We expect E-books to become an important issue for investors in the coming
months given explosive growth in e-reader sales. The music experience suggests
the impact will be at best uncertain, and at worst profound, with downside risks to
forecasts from pricing pressure, the loss of the hardback window, piracy,
disintermediation and the cost of rationalizing physical activities. Consumer
publishing represents 60% of Lagardere’s profits, and 10% for Pearson, and we
would argue for a de-rating until visibility improves. (See page 25).
NH
Not sure why ebooks are a threat to Pearson
NH
are you Bryce?
BE
Not entirely, no.
BE
“Explosive” growth in ebook sales are from a zero base.
BE
And largely around Christmas, for people who are difficult to buy presents for.
BE
Very much unproven technology shift at the moment.
NH
want some more on this?
BE
Why not?
NH
The key issue facing the book publishing industry is the migration to digital. While
digitalizing books has been possible for many years, it is only in the past 12
months that the price of e-reading devices has fallen sufficiently to drive mass
adoption. There is now a wide range of e-book readers, capable of holding
hundreds, if not thousands, of titles in ‘digital ink’ form (a non-back-lit screen
technology that resembles the experience of reading a physical book).
digitalizing books has been possible for many years, it is only in the past 12
months that the price of e-reading devices has fallen sufficiently to drive mass
adoption. There is now a wide range of e-book readers, capable of holding
hundreds, if not thousands, of titles in ‘digital ink’ form (a non-back-lit screen
technology that resembles the experience of reading a physical book).
NH
Dual costs and managing the physical decline: Even if book publishers
avoid some of the problems identified, they will have to manage the transition
to digital, during which time they will have both physical and digital costs.
This will be challenging, managing a cultural shift for its workforce and
constantly changing stock requirements, and also the steady downsizing of
physical production and distribution facilities (with associated restructuring
charges).
avoid some of the problems identified, they will have to manage the transition
to digital, during which time they will have both physical and digital costs.
This will be challenging, managing a cultural shift for its workforce and
constantly changing stock requirements, and also the steady downsizing of
physical production and distribution facilities (with associated restructuring
charges).
NH
Publisher disintermediation: In the digital world (without the need for
distribution, stock management, sale or return, pulping and remaindering),
authors may begin to question the role of the publisher. There will still be an
important role for advances, editing, marketing, distribution management etc,
but the simplified business model could allow talent agencies or online
distributors such as Amazon to provide these services. At best, the lower
barriers to entry are likely to constrain publishing margins.
distribution, stock management, sale or return, pulping and remaindering),
authors may begin to question the role of the publisher. There will still be an
important role for advances, editing, marketing, distribution management etc,
but the simplified business model could allow talent agencies or online
distributors such as Amazon to provide these services. At best, the lower
barriers to entry are likely to constrain publishing margins.
NH
We think the greatest risk of disintermediation is for the most profitable,
established authors who already have a strong brand and following. In a
digital world, with the opportunity to go direct to retailers / customers, and
lower publishing costs, authors could demand higher royalties
established authors who already have a strong brand and following. In a
digital world, with the opportunity to go direct to retailers / customers, and
lower publishing costs, authors could demand higher royalties
BE
And, on Apple’s iTablet …..
BE
I have a totally exclusive picture of what it’s going to look like
NH
excellent
NH
thanks for that
12:07PM
NH
OK
NH
it is past midday
NH
so we must wrap things up
NH
Looks like I might have to duck the Stock Marketer Reporter annual lunch tomorrow
BE
Really? Why? It’s usually a three-line whip event.
NH
My bear of the year
NH
it has gone wrong
NH
badly wrong
BE
Join the club.
NH
I mean super spectacular wrong
NH
and Murph
NH
did not even give me the tip
NH
it could be up 300%
BE
Ouch.
BE
What is it?
BE
Gulf Keystone?
NH
no, that’s this year’s one
NH
Vialogy
NH
I think we were looking at this time last year
NH
because we thought the technology was rubbish
NH
they were 2p
NH
now 7p I think
BE
Hm.
NH
So
NH
I think when tomorrow’s lunch comes around
NH
I might be ill
NH
but then again
BE
My 
of the year was Uniq, which has about doubled
of the year was Uniq, which has about doubledNH
but hey
BE
And my 
has gone down.
has gone down.NH
2009 was not a year for the bears
NH
and my bull is up
NH
18%
NH
so it underperformed
NH
no champagne for us tomorrow
NH
(IMP of course)
NH
(DJP – position is now closed)
BE
Doubt it
NH
anyway
NH
that’s it for today
NH
FTSE has sold off a bit since last mentioned
NH
now down 32 points at 5,244
NH
that’s more like it
BE
Actually – our 2009 Footsie predictions will also look a tad bearish versus events.
NH
yes
NH
I can imagine
NH
gawd
NH
day of shame
NH
before we go
NH
some Davos stuff for you
NH
Diamond lashes out at Obama bank plans
Diamond lashes out at Obama bank plans
BE
Really? Is that from DavosDeville?
NH
The president of Barclays has lashed out at US moves to cut banks down in size, or split them up, arguing it would do nothing to make the financial world a safer place.
“If you say that large is bad and we move to narrow banks the impact on jobs and the global economy will be very negative,” said Bob Diamond, who also heads Barclays Capital, the group’s booming investment banking arm.
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How can he argue that?
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“I have seen no evidence to suggest that shrinking banks and making banks smaller and more narrow [will help]”.
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Mr Diamond, who described himself as “incredibly proud” that Barclays had survived the crisis without direct bail-out money, also lambasted the unfairness of a regulatory crackdown that punished successful, well-managed banks as much as failed ones. “I am angry at banks that had poor management and poor regulation,” he said.
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He added: “We have an opportunity to have real co-ordinated action. But we are seeing elections in the UK and US which is a step back, since elections are national … but markets are global. This is a time when isolated action in the US and UK is not beneficial … we need a level playing field.”
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Bob still fighting the good fight for the banks
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and he loves a bit of Davos doesn’t he
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And for extensive and individual coverage of Wafflestock …..
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You can follow FT Alphaville’s own correspondent via The Twitter
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Yes
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Regular updates whenever she sobers up.
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we really do have someone on the ground
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Quite literally.
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Anyway, let’s wrap this up for the day.
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yes
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thanks for logging in
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see you all tomorrow
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for another edition of….
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MARKETS LIVE
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goodbye
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Bye.