| | Monday 16 July 2012 THOUGHT FOR THE DAY  Hello Share Mates.
Well, let's hope or a better week. The last few months have been rather dull and boring. For though the daily swings up or down have been dramatic, the Footsies overall position is static.
This is a normality in the summer. But, as these are not normal times, we might have expected a bit more action. Yet it is almost a certainty now that a falling Footsie for a couple of days will be followed by a rally.
This is because the big traders realise there are bargains out there. These are shown by the number of companies which have comparatively low price to earnings ratios. And though, these should not be seen as a jolly good thing in all circumstances, they do show a bit of hope.
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Sunday Paper Round RBS, Glaxo, National Grid
Two powerful private equity consortiums are secretly planning to bid for Direct Line, the giant insurer owned by Royal Bank of Scotland - a move that would scupper a planned float. RBS is expected to push the button on a London listing of Direct Line in September. Two American buyout giants, Blackstone and Bain Capital, are assembling a pre-emptive bid that would derail the flotation. Another group, comprising Kohlberg Kravis Roberts, Apax and BC Partners, is putting together a rival offer. The emergence of the consortiums sets the scene for the takeover battle of the year. Direct Line is Britain's biggest car insurer by number of policies, and a leading provider of home insurance. Its brands include Churchill and Green Flag, the car breakdown service, The Sunday Times reports.
Britain faces zero economic growth this year and Ministers will struggle to meet their deficit reduction targets, according to a report to be published tomorrow. 'The prospect of a durable recovery remains elusive, dependent upon confidence in financial and business communities, which is likely to take time to rebuild,' the independent Item Club forecasting group will warn. Only the boost to spending power from a fall in inflation, along with the possibility that the Eurozone will finally put its house in order, provide any bright spots in Item's summer forecast. Item economic adviser Professor Peter Spencer of York University said: 'Growth is likely to be flat this year, with output falls in the first half reversed in the second. Exports and investment have been hit for six by the crisis gripping the Eurozone,' The Financial Mail on Sunday reports.
The chief executive of G4S has admitted he is considering his future as head of the company and will not take a bonus after failing to provide enough security guards for the London Olympics. Nick Buckles, the chief executive, has also disclosed that Olympic organisers were late in sending the company final details of where security guards would be needed and in what numbers. In a remarkably frank interview with The Sunday Telegraph, Mr Buckles said the debacle was a "big setback" and his future would ultimately lie in the hands of shareholders. "I have got to make sure we deliver this contract. What happens thereafter is down to others. It's a big setback for us, we are really disappointed with how this has turned out," he said. "I want to stay. I have been here 27 years, I am very committed to staying. It just depends, doesn't it?" Asked if he had considered resigning, he said "of course", The Sunday Telegraph reports.
Glaxo Smith Kline is holding secret talks to agree a $2.6bn (GBP1.7bn) deal to buy Human Genome Sciences, its American partner on a potential blockbuster medicine. The two have been at loggerheads since April, when HGS rejected a $13-per-share hostile bid from Britain's biggest drug company. The Maryland firm began searching for another buyer willing to pay more. Tomorrow is the deadline for bids, but analysts doubt a rival to Glaxo will emerge. "I would be surprised if any other company stepped up and tried to outbid Glaxo," said Cory Kasimov of JP Morgan. Glaxo and HGS have opened negotiations to try to reach a deal. The former may have to raise its offer, branded "inadequate" by HGS, to succeed. Both firms declined to comment, The Sunday Times reports.
National Grid is proposing spending more than GBP21bn on its electricity transmission network in the eight years from 2013 to connect new power plants across England and Wales. It will also spend GBP9bn on gas pipelines. With the announcement imminent, analysts have warned that Ofgem, the energy regulator, is not likely to allow National Grid to charge consumers as much as it would like under "price control" regulation which governs the level of expenditure and rate of return. National Grid has suggested bills could increase by between GBP15 and GBP20. This will raise the prospect of National Grid having to cut its dividend, raise capital or sell off assets to access the funding. National Grid's chief executive, Steve Holliday, faced criticism from investors for his handling of a GBP3.2bn rights issue in 2010, according to The Sunday Telegraph.
The huge power of sovereign wealth funds is revealed by new analysis showing Norway has amassed GBP25bn of holdings in FTSE 100 companies, or 2% of the UK's benchmark share index. The Norwegian state's buying spree over the past year makes it the biggest state investor in the UK's blue-chip index and the third largest investor overall, a Sunday Telegraph investigation reveals. Its holdings now amount to half of the roughly 4% of the index held by asset manager Legal & General, the biggest investor in the FTSE 100, and place Norway third after BlackRock, the world's largest fund manager. The stakes, revealed by an analysis of Norwegian disclosures, are operated through Norges Bank Investment Management (NBIM), which manages the vast Norwegian oil-revenue fund.
Electricity Bills are set to soar under a new subsidy regime that will lock in generous payouts for offshore wind and biomass power developers for years to come. The controversial scheme, likely to be unveiled this week, has been delayed for several months by bitter disagreements between the Department of Energy and Climate Change, which wants to promote low-carbon investment, and the Treasury, which wants to keep a lid on spending. The dispute is part of a deeper clash at Whitehall. One in five households is "fuel poor" - when more than 10% of its income goes on energy bills - but the government is nonetheless pushing ahead with a radical GBP200bn overhaul of the energy industry that promises to ramp up bills even further, The Sunday Times reports.
Under-24s need more help into the jobs market and a better apprenticeship structure, a new report claims. Charting a path from school or university into the 21st century workplace was already tough for young people even before the Great Recession tore into businesses throughout the country and left more than a million under-24-year-olds unemployed. But a new report, produced jointly by the Chartered Institute of Personnel and Development (CIPD), the TUC and thinktank the Institute for Public Policy Research (IPPR), calls for urgent action to make Britain's complex labour market more "youth friendly", and prevent a generation of young people being trapped in unemployment - particularly those who leave school at 16 or 18. Richard Excell, of the TUC, one of the co-authors of the report, said: "Possibly the key economic task coming out of the crisis is how we create an economic model that has job opportunities for people with less than degree-level skills," The Guardian writes.
Manchester United's US flotation has been thrown into doubt after American investors spoke out against the initial public offering. Since news of the IPO broke, potential institutional investors have voiced doubts about buying shares in the club. "The deal is a strong vanity play in terms of being part of a winning franchise but whether or not that mystique around the team translates to money for shareholders I doubt it," said Jeff Sica, president and chief investment officer of Sica Wealth Management, which manages over $1bn in assets. Fund managers have also been concerned by the fact that the Glazer family - owner of the NFL team Tampa Bay Buccaneers - intend to establish a dual-share structure which investors fear will give them little say in club affairs, The Sunday Telegraph says.
A European directive that will force insurers to hold vast sums of capital of their balance sheet is "50:50" to hit its tight timetable following stalled negotiations in Brussels last week. Top European sources said that everybody involved with thrashing out the details of what is known as Solvency II, now believes that hitting the 2014 implementation deadline is now on a knife-edge. Although insurers such as Prudential have threatened to relocate their businesses away from London to outside of the European Union if Solvency II turns out to be unfairly onerous, many more are simply fed up with the lack of clarity over the new regime. They have poured time and money into developing business and technology models to meet the rigorous systems that are expected to be introduced, explains The Independent on Sunday.
BSkyB, the FTSE 100 satellite television broadcaster, has axed Bank of America Merrill Lynch as its key adviser in the latest blow to the bank's broking division. Merrill has the second biggest franchise of FTSE 100 clients in broking but has suffered a string of high-profile staff departures. A broker essentially acts as a conduit between a company and its investors in the hope of more lucrative work in the future such as mergers and acquisitions. Former co-head of broking Mark Astaire was one of those who left, joining Barclays Capital, which has now taken over the bank's role at BSkyB. Merrill also lost Tullow Oil as a client following the departure of Andrew Osborne, who quit the bank following market abuse allegations, writes The Independent on Sunday.
THE LATEST ON THE CRAZY BOARD The top 5 hot company threads on the Bulletin Board: Rockhopper Falkland Oil & Gas Bloomsbury Publishing IP Group Running trading thread
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BOOK OF THE WEEK  By Wilhelm Hankel and Robert Isaak
A book review by Emanuil Halicioglu of Growth Equities & Company Research Democratic capitalism, one of the greatest civilising forces known to man, has been pushed to the edge of a precipice. A brave new world economy, one not in thrall to a runaway interbank credit system, is struggling to be born, and only the actions of world policymakers, working in concert to make the hard choices, can bring it into being.
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