*** Rumours of a Whitbread break-up
*** Barclaycard knocks the sector
*** Which plays to avoid...just what is gold's attraction?...why to avoid investment banks...and more
------------------- – Venture capital groups are said to be swooping down on UK leisure giant Whitbread, in order to launch what analysts are calling a 'dramatic' takeover.
– The rumours emerged yesterday as sources said private equity groups are contemplating potential break-up bids for Whitbread's hotel, pub and gym divisions. That's nonsense, investment bank CSFB responded. No remotely observant venture capital group would bid for Whitbread when the economy is threatened with the consumer downturn. Moreover, Whitbread currently leverages at 2.6 times EBITDA, limiting leveraging up potential.
– Investors weren't convinced: the shares shot up 9%, to close atop the blue chip index.
– The FTSE 100 added 23 points to close at 4,994 on Thursday, ten of which came from the rebounding oil stocks BP and Shell. Both gained over 1% as Nymex oil shot over the $50 a barrel mark – to trade at $51.40 a barrel by London's close. Meantime, the mid-cap 250 index rose 1%, to trade at 7,092 – a new month-high for the index.
– The struggle of the average UK consumer took its toll on Barclays on Thursday as the group confessed to a sharp hike in default among its Barclaycard customers in the first quarter of the year. Yet Barclays only has itself to blame for the consequent 4% share price tumble. The bank had told its shareholders back in February that the consumer downturn would have a minimal effect on its results.
– Barclaycard's struggles also pulled the sector lower, with the Royal Bank of Scotland and Northern Rock's share price stumbling some 3% yesterday.
– London-listed hedge fund outfit Man Group said that despite troubles in the sector, its pre-tax profits rose just under 10%, to $784m. But the firm didn't get off scot-free: one of Man's largest funds, AHL diversified futures fund has fallen 5% so this year. Things could have been worse, investors reckoned, as they pushed the share price up 7% on Thursday, also a top blue chip gainer.
– And the government issued its 50-bonds yesterday...but to rather disappointing demand. Although the government managed to sell £2.5bn of the bonds, they drew bids of just 1.6 times the amount on offer. In comparison, the French showed a much more impressive appetite with the launch of their 50-year bonds: drawing more than three times the amountoffered.
------------------- – So what are the hot plays currently available to investors? Surely that would include making the most of a surging China, rising commodities, and a struggling dollar? You'd be wrong; in fact, these are the things that you should be avoiding, says Dr Steve Sjuggerud in the Investment U E-Letter. Why? Because all these four bets have been losing money for the past two months now.
– Just what is the attraction that gold has held for investors for centuries? The metal can't do half of what copper or iron ore can do in the industry...and moreover, it doesn't pay dividends while investors are charged to even store it. And gold is not money – despite what the gold bugs say. Just go to your nearest supermarket and hand them a few grams of gold dust in exchange for your goods if you don't believe it, says the EdelweissFund team. So why are they hanging on to their gold?
– A combination of a 'wrenching bear market and Eliot Spitzer' could mean that the best days for the investment bank industry might be behind it, says MoneyWeek's Tim Price. Moreover, the cost of compliance has largely 'replaced equity research as an economically valueless barrier to entry' into the sector. And what with hedge funds now becoming mainstream investment vehicles, middle and lower tier investment banks now have 'no realistic way of competing in the war for talent'.
Published in Stock markets
| More articles
by
Heather D'Alton
Related articles
-
By John Stepek, Jan 05, 2009
-
By Dominic Frisby, Dec 10, 2008
-
By John Stepek, Dec 09, 2008
FREE - MoneyWeek's daily investment email
Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.
Sign up FREE to Money Morning here.
