| | Thursday 4 October 2012 THOUGHT FOR THE DAY  Hello Share Fiends,
Well, there is still not much action on the old stock markets as uncertainty stalks the corridors of big money. We have been uncertain for so long now, that nobody is sure of any kind of view any more.
The Big City experts say one thing on Monday and change their minds on Tuesday. As usual the economists can't agree on much. If they were in another science - astronomy, say - where would the study of outer space be. A science can't be a science if nobody agrees much on anything, can it?
Never mind. How can any economist tell the future. And future-telling would make billionaires of us all. And most of us are not making much money now, so successful fortune telling is as likely as pigs on pogo sticks.
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Paper round BAE, Gold, Corporate bonds
Alistair Darling has made a forceful intervention in the plans by EADS to combine with BAE Systems, saying British interests were bound to suffer because the UK government would have no equity stake in the enlarged group. The former chancellor of the exchequer told the Financial Times he saw the logic for a new European civil aerospace and defence giant to compete with Boeing of the US. But he said it was "totally unacceptable" that the French and German governments were pushing to have equity stakes while Britain would not.
Gold could hit an all-time high of $2,400 by next summer, driven up by a third round of quantitative easing in the US. The first round of QE in February 2009 caused the gold price to increase rapidly from a base of $900/oz - from which it has never looked back. BlackRock fund manager Evy Hambro who invests in the precious metal and gold equities, predicted that QE3 could result in the gold price hitting US$2,400/oz by the middle of next summer. In his gold report this week he said: "The gold chart has turned decidedly bullish with the 50-day moving average rising above the 200-day moving average. The last time this happened was in February 2009, which interestingly was shortly after the implementation of QE1. Then, gold was $900/oz and never looked back. Should we witness a similar rally, prices would be taken to $2,400/oz by midsummer next year - and $1,760/oz would be the new floor," The Telegraph reports.
Private equity firms are set to take billions of pounds out of UK companies in a refinancing glut that has raised fears of a new credit bubble. Dozens of private equity-backed companies from the RAC to Formula One and Birds Eye owner Iglo are lining up to take advantage of the buoyant corporate bond market. In many cases, buy-out groups are recapitalising the companies in order to pay themselves dividends and return money to their investors. However, industry sources have warned that overloading businesses with too much leverage could threaten growth and damage profitability, especially when interest rates begin to creep up from historic lows. Simon Walker, formerly chief executive of the British Venture Capitalist Association and now head of the Institute of Directors, said: "Private equity needs to be careful because there is no doubt that there are risks. There are a few horrendous examples in the past that shouldn't be repeated. It is very possible to overdo things," The Telegraph writes.
Bank bosses will in future have to put profit growth to one side and make sure they are operating in "the public interest", the country's top financial regulator has warned. Andrew Bailey, head of the Prudential Business Unit at the Financial Services Authority, has said new rules that come into force next year will put "the emphasis on economic well-being as an ultimate goal" of bank regulation. "This public interest can diverge from the private interest of a firm in profit maximisation," he said. "One of the biggest lessons I take from the financial crisis is the need to ensure that the boards and management of firms appreciate and act consistent with the public interest." Mr Bailey's comments will unsettle bank executives who already fear that the regulators are being too interventionist, The Telegraph says.
Russia is considering allowing western companies to own oil licences in its Arctic waters, a bold concession that would make the world's second largest crude producer much more attractive to foreign investors. Alexander Novak, energy minister, told the Financial Times that the proposal would allow foreign majors not only to operate offshore projects but "have access to production" and become "co-owners of the licences". This would be a radical break from a longstanding policy of awarding offshore exploration licences only to state-owned groups such as Gazprom and Rosneft . His comments come as interest intensifies from western energy groups in the hydrocarbon riches of the Arctic.
Petroceltic International has been given the go-ahead by the Bulgarian government for the reverse takeover of Edinburgh-based oil and gas producer Melrose Resources, which has major operations in the country. A court hearing to sanction the deal will be held on 9 October and, if the takeover is given the green light, then shares in the enlarged firm will begin trading on 11 October on the Alternative Investment Market. The pair yesterday said: "Petro-celtic and Melrose are pleased to announce that the Bulgarian commission on protection of competition approved the merger without conditions and all regulatory conditions of the merger have now been satisfied or waived." The deal was unveiled in August and will see Robert Adair, executive chairman at Melrose, become non-executive chairman of the new entity, The Scotsman explains.
Profits at Tesco Bank more than doubled in the first half of the year, boosted by a £30m payment as it settled a dispute with a "former business partner". The Edinburgh-based bank, launched in 1997 as a joint venture between the supermarket and Royal Bank of Scotland, refused to give more details on the payment, citing the confidential nature of the settlement. Trading profits at the bank, headed by chief executive Benny Higgins, jumped 114% to £94m, but revenues fell 1.5% to £514m as it held back a marketing push while it switched customer accounts over to new computer systems. The group said: "We are pleased to report that the final transition - of our 2.8m credit card accounts - went smoothly, with all of our six million customer accounts now successfully transferred," The Scotsman explains.
Relief could be on the way for millions of people who suffer itchy eyes and stuffed up noses at the sight of a household cat. A company chaired by Sir Richard Skyes, the former GlaxoSmithKline boss, is to carry out large-scale clinical trials of a potential breakthrough treatment for cat allergies. Circassia, an Oxford-based biotechnology company, intends to test the drug, called ToleroMune, in a phase three study involving 1,200 patients in Europe, the US and Canada after generating £105m from investors in a series of fundraisings. Steve Harris, chief executive of Circassia, said cat allergies cause considerable discomfort and can lead to more serious conditions such as asthma, writes The Times.
Norcros, the tile and shower maker, is one of those benighted companies dwarfed by its own final-salary pension fund. Its market value is just £70m while its pension fund has assets of £360m — as well as a £36m deficit at the last valuation in March 2009. For years to come its fortunes will be tied to its ability to meet pension promises made to 10,200 employees, most of them long since retired, The Times reports.
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BOOK OF THE WEEK  By John Piper
A book review by Aaron Padgham Spread betters will all remember the time when one of their positions fell through its stop-loss, closing out the position by narrowest of margins, only for the price to rocket five minutes later! Cue the binary bet, a trading instrument that can immediately limit down-side risk. In Binary Trading John Piper introduces investors to relatively new concept of binary betting, in which punters can make the most outrageous moves in complete safety. The binary bet allows spread betters to bet on the particular outcome for a market, for example if the FTSE will close up. As the name infers, there can only be two possible outcomes, the FTSE closes up or down, and thus the investor gains or loses a pre-determined amount.
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