Sunday, 23 October 2016

Stories we should be thinking about

Ahead of the new working week here are a few finance and related stories to be thinking about.

Macro matters:

A surprisingly good market (in local FX terms) last week given the rise in value of the US dollar...

...but the dollar trade weighted index getting nearer 100 does concern me regarding global risk appetite: 

Back to a few other concerns...and of course we have to start with Brexit.  Can we be that surprised that the UK is starting to be sidelined?

'In reality, say British lawmakers and officials in Brussels - some of whom were offered trauma counselling by employers after the Brexit referendum four months ago to the day - they are already being sidelined, and expect further isolation' (link here).

Of course how this impacts the financial sector is all-critical given its importance in the UK economy.  Going to be a big few months for this sector:

'Britain’s biggest banks are preparing to relocate out of the UK in the first few months of 2017 amid growing fears over the impending Brexit negotiations, while smaller banks are making plans to get out before Christmas. The dramatic claim is made in the Observer by the chief executive of the British Bankers’ Association, Anthony Browne, who warns “the public and political debate at the moment is taking us in the wrong direction” ' (link here)

A potential risk for the services surplus which is the only aspect holding up the overall UK balance of payments:

So what do you do if you are in the UK government?  Cut corporation tax?

'Theresa May is reportedly considering a dramatic reduction in corporation tax if she is faced with a “brutal Brexit” in talks with the EU. According to the Sunday Times, May could slash the tax rate from 20 per cent down to just 10 per cent if the UK can't secure passporting rights for financial services or a free trade deal. The move would be positioned as a reassurance to businesses that the UK remains a desirable location, in spite of any harsh terms' (link here)

Or look to ratchet up savings?  It is noteworthy that one of the UK's most popular papers is calling for '...a three-point cash savers’ ‘rescue’ plan that Philip Hammond, Chancellor of the Exchequer, should implement when he stands up in the House of Commons and delivers his inaugural Autumn Statement on November 23. It’s not radical, it would not be costly to put in place BUT it would make cash savers feel a little more loved than they currently are' (link here)

Of course if you look to save more...then you will spend less...and this has been a major source of growth for the UK economy as nicely observed below:

(h/t @AlastairWinter)

On a not completely unrelated issue you can read here in my latest Yahoo Finance column what I believe is the most important matter investors should be thinking about today.  This chart nicely illustrates the core underlying issue...

...or even this via @VrntPerception nicely observing the highest proportional central bank accumulation of gold in 50 years (link here). 

Staying with European issues and a critical trade issue, '...the European Union has given Belgium until late on Monday to overcome opposition to a free trade deal with Canada from its French-speaking region or a summit to sign the pact that could boost both economies is off, EU sources said on Sunday' (link here).

Trade disruption/breakdown is the economic factor I worry about the most re global growth.

We talked about the issues of saving above.  I thought this was a super piece about China which noted:

'And even with an extraordinary high level of domestic investment, China’s economy still, on net, relies on demand from the rest of the world to operate at full capacity. That is what differentiates China from most countries that experience a credit and investment boom. An alternative frame would start with the argument that China saves too much'.

(h/t @Brad_Setser)

I still believe that the rise and rise of the Chinese consumer remains one of the most (if not the most compelling global investment theme). And certainly China is the only country at the moment potentially over investing: 

Turning to US politics and better the devil you know?!  Fascinating to see that '57 percent of Americans believe the current president is doing a good job – his best marks since just after his 2012 re-election' (link here).  On a related issue I liked this via @wu_tang_finance:

What an interesting read: 'Beyond Google’s Cute Car: The Time to Think through the Impact of Self-Driving Vehicles on Architecture and City Planning is Now' (link here).  Check out some of these headlines: 

The safety of autonomous cars will turn cul-de sacs into Sunday Streets all week. Autonomous cars will not run over five year olds on bikes. 

[D]istances will become less of an obstacle as our autonomous vehicles promise media-saturated interiors that smoothly deliver us from walkable bubble to walkable bubble

As less and less parking is needed, parking garages will need to be re-purposed.

Great infographic via @VisualCap on robo advice: 

Certainly a growth area...

Sector and companies: 

Whilst results season hits high gear...

(h/t @Callum_Thomas)

...with results generally above hopes (usual earnings season dance)...
...and the typical hopes of double digit earnings growth next year (rarely achieved!):

The big weekend news was the AT&T/Time Warner deal.  Nice Seeking Alpha summary here:

'The deal is expected to be accretive in year one to T's adjusted EPS and free cash flow, and improve the dividend coverage. The company sees $1B in annual run rate cost synergies within three years of closing. Terms: Time Warner owners will receive $107.50 per share comprised of $53.75 of cash and $53.75 in AT&T stock. A collar is involved, meaning TWX shareholders get 1.437 shares of AT&T should its average stock price be below $37.411 at closing, and 1.3 shares of AT&T should it be above $41.349 (Friday's close for T was $37.49, and for TWX $89.48)'

CompanySalesEarningsFree Cash Flow
AT&T$162.3 billion$14.2 billion$16.7 billion
Time Warner$27.9 billion$4.1 billion$3.6 billion
AT&T + Time Warner$190.2 billion$18.3 billion$20.3 billion

CompanyShares OutstandingEPS (Post 10% Synergy)FCF/Share (Post 10% Synergy)
AT&T6.195 billion$2.29$2.70
Time Warner808 million$5.02$4.44
AT&T + Time Warner8.552 billion$2.35$2.61

My own view will be established after tomorrow's AT&T conference call (8.30ET).  Certainly a huge deal...and at a time of such change in the media backdrop and viewing habits as shown below even in the historically highly sticky live sports.  I guess you can understand why TMT companies want to go quad play as a defensive move...

A look ahead to the UK bank results season (link here). Going to be an important.  I see The Sunday Times is running a story about 'RBS braced for Brussels to take control of failed branch sale' as just one issue impacting this bank.  And elsewhere, 'Lloyds goes cold on MBNA over mis-selling bill'. Many other issues will come up this week.

Brands perform:
(h/t @thebrandindex) 

Interesting gender divergence

Meanwhile some stories from today's Sunday Times

William Hill boss pays price for 'blunders'...Chairman to go about riling investors with botched Canadian merger

Apple's annual profits are set to fall for the first time since 2013 because of a slide in iPhone sales

Anglo American: £1.2bn mines disposal will lift shares and heap pain on short-sellers

And finally...

Some great facts about the internet of things...

Have a good week 

Saturday, 22 October 2016

"The most important issue for all investors today"

I am really pleased to have started writing a regular column for Yahoo UK/Ireland on finance and the investment markets.  You can find here my latest column titled:

The most important issue for all investors today

My latest appearance on the Vox Markets podcast

I appeared again on the Vox Markets podcast.  You can listen here to my latest appearance where I talked about the big BAT/Reynolds American tobacco deal, appraised the trading statement from Intercontinental Hotels and mused about the Sky Investor Day all of which have been in the news / are at noteworthy share prices.  

Monday, 17 October 2016

What I wrote to new contacts I made at the London Investor Show

This is what I wrote to new contacts I made at the London Investor Show which I attended and presented at last Friday. 

It was a pleasure to meet so many attendees of the London Investor Show last Friday and I hoped you enjoyed the day too. 
You are receiving this email because you indicated that you would like to receive some more information on Financial Orbit's range of content products for individual investors.  
I created Financial Orbit in 2013 after a successful career in global fund management because I wanted to get back to the basics of research, analysis and investment theme interpretation and away from packed meeting schedules and committees with little worth.  You can learn more about my story, my investment philosophy and the creation of Financial Orbit at as well as via an interview I gave which is available at this link
The world today is a complex, confusing place which requires clear sighted interpretations of the torrent of information out there which impact the investments we all hold in our pension funds and ISAs. To help you build both insight and wealth over time you will receive for a trial period until early November free of charge with no obligation two emails five days a week:
Financial Orbit Macro - your one-stop shop for a daily global macro briefing
Financial Orbit Stocks - core and mainstream global direct equities of interest 
Additionally you will have access to a special webinar in early November where I will review not only recent investment trends and talk about some of my current favourite global equities but also have a Q&A facility so you can ask anything you are worried and concerned about. And finally you are always welcome to reach out directly to me on your investment queries and I will give you my best thoughts on a no liability basis.   
Keep in touch too with some free content at including recently a link to my latest column forYahoo Finance titled ‘Care about global shares? Then pray for Europe…’( ).  And if you enjoy listening to the radio you can listen to me on Share Radio talking about finance, economics, companies and politics between 6 and 9am every Tuesday and Wednesday morning (Share Radio's radioplayer for live listening is available here ).
Finally I have attached a copy of the presentation I gave at the London Investor Show about ten major upcoming investment themes for the next year 
**(Chris here - if you are reading this and would like a copy of the presentation document then please email me). **
Thank you again for your interest and I look forward to helping you build your investment knowledge and wealth over time. 
Chris Bailey
Founder, Financial Orbit Limited
Twitter: @financial_orbit

Saturday, 15 October 2016

"Care about global shares? Then pray for Europe"

I am really pleased to have started writing a regular column for Yahoo UK/Ireland on finance and the investment markets.  You can find here my latest column titled:

Care about global shares?  Then pray for Europe

Friday, 14 October 2016

On the Vox Markets podcast talking about Sky, Easyjet, Randgold and Unilever/Tesco

I appeared again on the Vox Markets podcast.  You can listen here to my latest appearance where I talked about Sky, Easyjet, Randgold and Unilever/Tesco all of which have been in the news / are at noteworthy share prices.  

Thursday, 13 October 2016

Final reminder about the free-to-attend London Investor Show on Friday 14th October

**Final reminder!**

Do you want to come and hear for free some thoughts about what investment themes will influence your portfolio in 2017?  Then come along to the London Investor Show on Friday 14th October.

You can read all about the London Investor Show here but there are three key opportunities for you, for free to take specific advantage of. 

First, come and hear me speak just after the show opens at 9.35am

Speaker: Chris Bailey, Financial Orbit

Drawing on his experience of 20 years in the fund management industry, Chris Bailey of Financial Orbit will discuss the ten big global investment themes that will impact your portfolios over the next year.  Covering asset allocation, sector selection and even individual share level insights, Chris will take you on a whistle stop tour of the global financial markets to help you prepare your portfolios for the opportunities and challenges ahead as well as answering your questions and addressing your concerns in a free for all Q&A session.

Second, come and meet me and the rest of the team and talk about your investment concerns at the Financial Orbit stand at the London Investor Show.  Ask about whatever is on your mind...and for everyone who comes to the stand and provides their contact details you can pick up your limited edition free gift

Third, do all of this for free by using the special offer I have negotiated for any readers of this message.  

A really nice infographic with all the details to attend the show can be accessed here

It is going to be a fascinating day on the 14th October - looking forward to see as many of you as possible there!