| | Monday 30 July 2012 THOUGHT FOR THE DAY  Hello Share Fans,
You have probably all heard of price to earnings ratios. It is an indication of how cheap shares are. Because if the price of share is low, compared to the earnings of the company, then you can expect to be on a fairly good thing.
This is not always the case, because price to earnings ratios are of the past and anything might happen to a company in the future. But it is a guide to the value of a share, at least.
Now if you take the price to earnings ratios of companies these days, you will be forgiven for thinking that most shares are cheap. Certainly they are from a historic perspective. Many price to earnings ratios are less that 10 - and 10 has traditionally been taken as a buy signal. (We are talking generally here, not about specific shares which may have their own baggage to cart about.)
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Paper round BoE, German exit, German banks
Bank of England policymakers are likely to hold off on a further stimulus injection on Thursday, despite figures that are expected to show the economy was still flat-lining into the third quarter. The Bank's Monetary Policy Committee is expected to leave interest rates on hold at 0.5 per cent and quantitative easing unchanged at 375bn pounds, even as Britain's hard hit manufacturing and construction sectors suffer further setbacks amid a double-dip recession. The Markit/CIPS manufacturing PMI on Wednesday is expected to show British manufacturing shrank for a third straight month in July, amid weak demand at home and abroad. Economists are forecasting a fall in the headline index to 48.4 in July from 48.6 in June, where anything below 50 signals contraction. The equivalent survey for construction a day later is also expected to show a sector in decline in July, The Telegraph says.
More than half of Germans believe that their country would be better off leaving the euro. The poll in Bild Am Sonntag, which showed that 51% thought it was time to revert to the mark, was published as Angela Merkel and Mario Monti affirmed their willingness to "do everything" to save the single currency. The German and Italian leaders made their pledge in an attempt to maintain the positive momentum triggered by Mario Draghi, President of the European Central Bank, who dramatically pledged last week to "do whatever it takes" to preserve the euro. Mrs Merkel and Mr Monti's statement was a carbon copy of the German Chancellor's joint assurance on Friday with President Hollande of France, according to The Times.
Two of the world's largest technology companies will square off in a courtroom in California today in what has been called the most important corporate trial of the decade. Apple has accused Samsung of stealing its mobile phone designs and infringing technology patents and is seeking damages of more than $2.5bn. Samsung has responded with its own claims, demanding that Apple pay billions of dollars to license technology covered by the South Korean company's own patents. The spat, which will be heard before a jury in San Jose, could determine the direction of the mobile phone market for years to come and could hobble one, or both, of the dominant giants of the technology sector, writes The Times.
Britain's former top civil servant is no longer in the race to become the new chairman of crisis-hit Barclays after senior figures became concerned about his lack of banking experience. Lord O'Donnell of Clapham, who stepped down from his role as Permanent Secretary to the Cabinet Office at the end of last year, was hotly tipped to replace Marcus Agius, who resigned after the fallout over the Libor scandal. However, senior figures at the bank are believed to have felt that a career spent exclusively in the Civil Service made him unsuitable. They also believed that, even if the board had selected Lord O'Donnell, its application to make him chairman would have been vetoed by the Financial Services Authority, writes The Times.
Ladbrokes has fired the director in charge of its botched digital strategy as it heads towards its worse online results in almost a decade. The news that Richard Ames, product director, has left the firm will sink confidence in Britain's second largest bookmaker, which is set to announce further costly delays to its beleaguered technology platform this week. The company has already issued a profit warning about its technology division. But Thursday's half-year results will show delays have eaten even further into the GBP15m of profits expected from digital - which are less than half the GBP31m achieved in the same period last year, according to The Telegraph.
Cross-border lending by German banks to the weaker parts of the Eurozone has dropped by nearly a fifth since January and now stands at the lowest level since 2005, according to new central bank data. Between January and the end of May, German banks cut their net lending to Greece, Ireland, Italy, Portugal and Spain by EURO55bn to a total of EURO241bn, Morgan Stanley's analysis of Bundesbank figures show. German and French banks have been retrenching their cross-border exposures within the Eurozone since the middle of 2010, but the latest data suggests that the homeward bias is accelerating. German banks' net loans to Italy, for example, fell 25% in the five months to June 1, versus a 7% drop for all of 2011, The Financial Times says.
George Osborne, UK chancellor of the exchequer, has ordered that an independent review into the Libor scandal engulfing some of the world's biggest banks be completed within weeks, paving the way for a swift introduction of reforms to the way interbank rates are set. The Treasury will on Monday announce the terms of reference for the review by Martin Wheatley of the Financial Services Authority, who will aim to report by the end of September on recommendations such as whether market abuse relating to Libor or other rates should lead to criminal sanctions. There will be a four-week public consultation starting on August 10. The tight timetable for the review will enable ministers to make legislative changes through the financial services bill, which is in the House of Lords and set to be enacted by the end of the year, The Financial Times reports.
THE LATEST ON THE CRAZY BOARD The top 5 hot company threads on the Bulletin Board: Falkland Oil & Gas Lansdowne Oil & Gas Where have all the retail gone? Falkland Oil & Gas Running trading thread
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BOOK OF THE WEEK  By Peter Lynch and John Rothchild
A book review by Ross Jones From when Lynch took over the management of Fidelity's Magellan Fund in 1977, until his departure in 1990 he delivered his investors an annualised return of 29.2%, outperforming the benchmark US markets by 13.4%, growing funds under management from $18 million to circa $14 billion. This is pretty spectacular and warrants investigation into how this was achieved.
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