You can’t rely on much these days, says David Cowell from Myddleton Croft Investment Managers. Except that the gravy train will keep on rolling somehow or other.

Former FSA boss and ex-Barclays employee Hector Sants has been appointed to lead a review of bank competitiveness in the UK. I do hope that he doesn’t find the job too onerous, as he did at Barclays. Ain’t it marvellous how the same old names seem to crop up on the gravy train?



myddleton croft


Meanwhile at Barclays, the FCA has fined the bank £284.4m for Forex failings – with criminal sanctions to follow – the largest financial penalty ever imposed by the regulator or its predecessor. More is to come from RBS. So who is going to get the money? Doubtless George Osborne. If the money isn’t used to defray the cost of the plethora of regulators, it amounts to an extra tax on an industry responsible for 10 % of the nation’s GDP. At a time when Cameron is saying that he wants to make it easier for industry, it seems that we merely have more weasel words.




Julie and Patrick hit the news again:


After a vicious reversal of a share price surge which had made chairman Li Hejun one of the richest men in China, HTF’s shares were halted on Wednesday at HK$3.91, having opened at HK$7.32. The chairman didn’t turn up for the AGM; virtually unheard of in Chinese circles. The suspension was requested by Hanergy Thin Film pending an announcement. No other information was given. Another example of sound Chinese business practices. Yesterday, the Shanghai index was up nearly 2% whilst the manufacturing PMI went down below 50, i.e. it contracted. Funny old world.

Two men from the council engineers’ department were standing at the base of a flagpole, looking up. A woman walked by and asked what they were doing. “We’re supposed to find the height of the flagpole,” said one, “but we don’t have a ladder.” The woman said, “Hand me that wrench out of your toolbox.” She loosened a few bolts, laid the pole down and took a tape measure from their toolbox. She took a measurement, and announced, “Eighteen feet, six inches,” and walked away. One chap shook his head and laughed. “Ain’t that just like a woman! We ask for the height and she gives us the length.”

The real 10-year US Treasury yield is more than 1.5 standard deviations below its historical average, based on more than 60 years of data. Meanwhile, the stock market’s cycli­cally-adjusted price-earnings ratio (CAPE) is almost one standard devia­tion above its historical average, and would appear even more extended if the late 1990s bubble period was excluded from the calculation. In the past, stocks typically were cheap when bonds were expensive and vice versa. Currently, both markets are over-extended together. How long can it go on? BCA reckons another year but…..



The Fed’s bouts of quantitative easing failed to produce a marked upturn in broad money growth, as high­lighted by the collapse in the money multiplier. Moreover, the broad money (M2) that was created has been circulating at an increasingly slower pace, as shown by the pronounced de­cline in money velocity (nominal GDP divided by M2) from 100 in 2008 to just over 70. Thus, there has been a double whammy with each dollar of narrow money producing less broad money and each dollar of broad money producing less GDP. Below is BCA’s research on annualised returns in the 5 and 10 years following CAPE in given ranges: 


mc chart May 22


Currently, CAPE is at around 28, which goes to prove that my answer to people who ask how to make money in investment: Buy low – sell high, is quite near the mark. Having said that, CAPE hit 48 in 2000 but we know what happened next.


In voting unanimously to preserve the base rate at 0.5 per cent and quantitative easing programmes at £375bn, the MPC maintained a record of unanimity held since the start of 2015. Previously, MPC members Ian (Cats) McCafferty and Martin Weale had been voting to raise the base rate. In minutes of the previous meeting published the day after the ONS confirmed that the UK consumer price index entered deflation, the Bank’s MPC says it now expects productivity will grow more slowly than previously expected, but adds it remains confident this will rebound to pre-crisis averages. Equally, the MPC says while GDP growth dipped in Q1, it is confident the data for the three-month period will be revised upwards in future releases. GDP is set to move closer to historical averages in Q2 supported by the falling cost of food, energy and other prices. What would a bunch of economists know?


Swiss giant UBS will pay $545m (£351m) to US authorities to settle the investigation into alleged foreign exchange benchmark rigging. In a statement released on Wednesday, the bank says the fine includes a $342m Federal Reserve penalty related to forex activities. The bank has also paid a $203m penalty for breaching its Libor agreement, including a pledge not to break any US criminal law.


Doubtless the people in these large, international and well-respected banks had the same mind-set as the New York Mafiosi who said that when he was a kid, he used to pray to God every night for a new bike. He said that he then realised that God didn’t work that way, so he stole a bike and asked God for absolution.


Have a good week!


David Cowell


For and on behalf of Myddleton Croft Investment Managers

1 Woodside Mews

Clayton Wood Close


LS16 6QE

Tel:        0113 274 7700

Fax:       0113 274 7711


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