Carillion: That Northern Rock Moment

Of course, 10 years on we all know why the banks were saved – because that is where the money is. If you have control of money, you have power – to paraphrase Al Pacino in Scarface with the Politically Correct part of his observations.

Saving the banks a decade ago was the equivalent of getting control of the airports and the State Broadcaster in a Banana Republic when staging a coup. Come to think of it, going for Heathrow and the BBC could work quite well in Blighty as well.

However, we were promised that the likes of Northern Rock and HBOS would never happen again, especially the part in which the taxpayer had to bail them out against the barrel of a gun. So far they have not, although in the wake of the Provident Financial meltdown, one imagines that this is only a matter of time.

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Instead, we are looking at a Carillion “liquidation” where there will be bailouts left right and centre.

The incredible thing here with the “facilities management” group a.ka. middle man getting paid for doing nothing, is that it was not even up the ultimate lowly task. In just the space of a few months it has been revealed what a distrous smoke and mirrors idea having so many major public services contracts with one entity is, how weak corporate governance here has been, and what a money wasting gravy train Carillion was.

The irony here, as compared to the banks is that at least then there was the excuse that the collapse was a bolt from the blue delivered from external / foreign sources. Here the only thing the powers that be can say is that this calamity was hidden in plain sight.. Indeed, it is the banks, BHS, Polly Peck, Marconi et al, all rolled into one.

Perhaps though, one can save the worst until last. This is because even though Carillion has been a toxic disaster for at least 6 months, no action was taken to dismantle the house of cards, instead there was a doubling down, with more contracts thrown on the funeral pyre. One would expect the public inquiry here will take at least 5 years – but even this will not be long enough for the Titanic of Outsourcing to be forgotten.

Oh, and as a final sting in the tail, it really might have saved the country billions of Pounds if the hedge funds who knew Carillion was going under even before July’s warning had stepped forward. But then again they would perhaps not have made millions by being short of the shares, so a somewhat rhetorical point there.

What is interesting though, is that despite us being in an age of transparency courtesy of the internet and social media, forensic accounting, The Big Five Auditors” and of course the FCA and SFO, all of these aspects only seem to kick in properly after a ship has gone down.

The only explanation here is that it is the perceived “too big to fail” institutions who are sometimes the most vulnerable to the combined Achilles Heel of poor management, complacency, hubris, and perhaps in this instance, genuine wrongdoing.

The M&A Contenders List: 2018

M&A Markets Blog: January 2 2018

There is no detail at the moment on the list, just the names. Some are new contenders, others like ITV,  are as old as the hills.

However, there will be weekly updates on the M&A Markets blog here at Zakmir.com, with colour and latest developments. If anyone has any further information on the names above, feel free to get in contact. The geographical breakdown is below:

UK

Capital & Counties (CAPC) – Property Development

ITV (ITV) Media

Shire (SHP) – Pharma

Vectura (VEC) – Pharma

 

Europe

Altice (ATC) Netherlands – Telecom

Pernod Ricard (RI) France – Beverages

Temenos Group (TEMN) Switzerland – Software

 

US

Blackhawk Network (HAWK) – Payments

Bunge (BG) – Food

Fortinet (FTNT) U.S.A – Cybersecurity

Global Blood Therapeutics (GBT) U.S.A – Pharma

Juniper Networks (JNPR)  – Producer / Wholesaler

KBR (KBR) – Engineering

Paratek Pharmaceuticals (PRTK) U.S.A – Pharmaceuticals

Vonage Holdings (VG) U.S.A – Telephony

 

The list can essentially be regarded as a what would have been described in the old days as “buy on weakness”, as the constituents are all undervalued situations which can be regarded as attractive to potential corporate buyers.

We look forward to ticking off the targets as they happen over the course of 2018

Disclaimer

Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is  recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

 

The Great Christmas Shire Pharma Bid “Reheat” #SHP

Although for some reason the MSM does not mention this particular website, it is always keen to cite them. In this case  it is The Telegraph of which I am a proud “premium” subscriber.

Yesterday the publication highlighted rumours in the market regarding the possibility of Shire Pharma being taken over. As the article acknowledges, it is the silly season as far as M&A chatter is concerned, especially as anyone with the £45bn likely required to buy Shire has already taken the rest of December and most of January off.

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Nevertheless, with the shares still languishing near the bottom of the multi year trading range at £35, and the stock market at the highs, something has to give soon here. Indeed, shareholders of Shire are paying the price of the anti-business tax inversion episode under the dormant President before Mr Trump. Due to this – the company should have been taken out 3 years ago by AbbVie, the company has been in limbo. Life sciences have boomed and the giants of pharma have consolidated in the meantime, but Shire has wilted.

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At least from a trading view – and even without any further bid froth, one would expect from a price action perspective that while Shire remains above its 50 day moving average at 3,685p there could be an early 2018 rebound back towards the early summer 2017 resistance zone between 4,300p and 4,500p.

Could the “Bitcoin Rush” trigger the next financial crash?

By Zak Mir

A decade since the “global financial crisis” in 2007, everyone from analysts to market commentators (to people who actually know what they’re talking about) have been pondering what will end the QE fuelled rescue package? 

Apart from the moral hazard, the madness of ultra-low interest rates and the injustice of savers receiving next to nothing, it was always known that short-term step back from the abyss was the equivalent of knowingly stepping on a plane with no landing gear. 

Of course, we have also had all the factors which were supposed to deliver the next crash happened as well. These include, in no particular order, ridiculous real estate prices, painfully low wages for the masses, deflation, threats of collapses in the bond market, and even the odd nuclear weapon from North Korea. 

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But each of these instances only appeared to underpin the bull run, with record highs especially for Wall Street and the so-called FANG stocks. Of course, last year offered the one event which was the ultimate ‘Black Swan’ (if you are one of the liberal metropolitan elite) which was supposed to crash the financial system: the appearance of Donald Trump in the White House. Ironically, even the mighty hedge fund legend George Soros lost money in betting against Trump and the US stock market. 

However, many of the imbalances caused by QE, ultra-low interest rates and the expansion of personal and sovereign debt not only remain, but have accelerated with all the metrics going into overdrive. The pending disaster has been even worse the most pessimistic of observers might have anticipated – yet the day of reckoning has stubbornly refused to dawn.  

But perhaps, as we wait for the inevitable – the collapse of the banking system again – who is the culprit? cryptocurrency of course. Although cryptocurrency/Internet cash has been around for much of the post-global financial crash period, it has only been in the last year that it has captured the imagination. 

Indeed, one could argue it has “come of age” due to fiat money becoming exactly the kind of (central bank printed) “funny money” that Bitcoin is accused of being by its detractors. The reality is, that central banks are increasingly draconian in terms of attempting to control money supply (especially cash) while Bitcoin, and its cousins are valued by market forces at their most pure. 

They say that you do not hear the bullet that kills you. But as far as Bitcoin and its crypto cousins, we have seen fiat currency being exchanged for this new form of money, at such a pace that it is difficult to imagine if anything in the financial markets will ever be the same again. It is not just peer-to-peer transfer money in an anonymous way which is revolutionary.  

At one stroke, there is a new asset class which is an easily divisible store of value – taking the crown from Gold, and can be moved around at the click of a mouse. Perhaps most of all, these new currencies are regarded as long-term investments, as genuine as buying a house or an equity portfolio. 

Against such a “tsunami”, and given the sheer weight of money, one would expect repercussions.  

Even without the blockchain phenomenon, there were bound to be the kind of upheavals which could lead to a crash in the markets. Bitcoin and cohorts could very well be trigger that sends us over the edge. 

 

Bitcoin And The Biggest Economic Bubbles In History

By Zak Mir

The cryptocurrency, Bitcoin may be the “phenomenon of the moment” or indeed in a “league of its own” in terms of performance in 2017.

But the question for many, is whether we are looking at a cryptocurrency which is a “fraud”, according to JP Morgan’s Jamie Dimon or a new way of selling apartments, if you are lingerie Baroness Michelle Mone.

Perhaps as much as anything else, these two examples of attitude towards Bitcoin represents the way “internet cash” has divided opinion.

The clue though, comes from what the individual commentator stands to gain or lose from what has been described as a bubble, alongside the “greats” of history such as the “Tulip”, or of course more recently, the “Dotcom Bubble”.

Biggest

 

SOURCE: ETX Capital (http://www.etxcapital.co.uk/indices-trading)

However, delving below the surface, investment banks have everything to lose from peer-to-peer secure money transfer, and entrepreneurs getting on the Bitcoin bandwagon, everything to gain. The latter, if only on the basis that there is an element of being on the Zeitgeist and being savvy, if you are familiar with the likes of Dash, Ripple and Iota.

The irony of the whole Blockchain explosion of which Bitcoin is the “poster child” is that it has been so quick in its rise that those attempting to work out whether it is genuine or here to stay have been caught on the hop for no more serious an error than doing due diligence.

The journey to break the equivalent price of gold an ounce (oz) around $1,300 was conquered as early at the Spring this year, while as we head for the end of 2017 the move from $10,000 to $1,500, it has been a matter of just a few days.

The reason for the positive momentum, apart from the massive media coverage and the “fear of missing out” (FOMO), is that while there has clearly been a massive move higher for the asset class. But it could very well be that on a bigger picture scale this is only just getting under way.

For instance, the market cap of less than $400bn for Bitcoin only puts in the league of say an average Dow or Nasdaq blue chip.

Given that the best of the tech giants like Facebook or Apple are up at the $1 trillion level then a doubling or a tripling of Bitcoin from $15,000 could still be on the cards.

For those who are concerned that we may be nearing “peak” Bitcoin though, there are plenty of factors which could mean that the journey higher is set to continue.

Bears like Jamie Dimon have been hurt by the way that the main US trading exchanges, the CME and CBOE have announced they are to offer Bitcoin futures (https://www.ft.com/content/5ee5fda2-daa7-11e7-a039-c64b1c09b482).

This should be the first step on the way for cryptocurrencies to gain respectability, rather than being thought of as a haven for money launderers and tax evaders. Perhaps, most satisfying of all for those owning or trading Bitcoin, is that its latest rise has beaten the market cap of JP Morgan itself, with the $370bn it currently stands at.

To add insult to injury, as far as Mr Dimon is concerned, analysts at JP Morgan have suggested that Bitcoin could become the “new gold”. Perhaps, given the way that Bitcoin has in just a few months been able to go from $1,300 to over ten time the value of an ounce of gold, this is a good example of rear view mirror analysis?

In fact, it could very well be that the only real threat to the rise and rise of the cryptocurrencies is what could be termed a threat from within.

With the technology behind the blockchain changing very quickly, we could find that Bitcoin becomes a Betamax, Ethereum a VHS, and perhaps Iota the DVD. This side of the equation is always going to be difficult to anticipate, with a chance that when a change occurs, investors and traders may inadvertently be “backing the wrong horse”. Whatever happens though, we are looking at a fluid, exciting, area, one which – bubble or not, is set to dominate the financial markets for years to come.

DISCLAIMER: All trading involves risk. Losses can exceed deposits.

Bulletin Board Heroes: December 6 #BLU #EVG #MSG #MYN #PXOG #UOG

A charting look at some of the current private investor favourites, with potential support levels and targets.

Disclaimer

Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice and absolutely no interest in speculating in the companies mentioned. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.