21st February 2011

Artemis: The Hunters' Tails

Vegas chavs ...

The good news goes on. In Venezuela, for example, president Chávez has been continuing the state’s expropriation of land. But this week he abandoned his promise to seize golf courses on which to build homes for the poor. “I’ve decided I’m not an enemy of golf,” he said.

Just published, this year’s short-list for the Diagram Award (oddest book title of the year) includes Managing a Dental Practice: The Genghis Khan Way; while Silvio Berlusconi is thought likely to favour The Italian’s One-Night Love-Child. Our money, however, is on Versailles: The View From Sweden.

US casino operator Las Vegas Sands has revealed plans to build a €15bn gambling den in Spain that could create as many as 180,000 jobs. “We considered it seriously before the recession,” said Sands’ CEO Sheldon Adelson. “But then we postponed it till the recession was over. Now we are very actively pursuing it.” It’s good to know that the recession is, absolutely, over. Gloriously polymorphic again, capitalism continues.

And equities, meanwhile, grind on up. In a survey, almost 70% of the world’s fund managers who responded (and who between them manage $569 billion) are now overweight in equities. This is the highest level since the survey first asked the question in April 2001. Since the bottom 23 months ago, the US bull run has lasted over 700 days — the 12th longest of the 26 bull markets since 1929. Money is easy, and there’s little to do but sell (government and corporate) bonds and buy stocks. If that’s right, which ones?

Buttonwoods in bloom ...

In his annual report for Income last year, [y]our eminent Adrian Frost said: “M&A is the dog that hasn’t barked this year. It will.” Promote that man. The NYSE, formed under a buttonwood tree in 1792, is to be bought (for $9.5 billion) by Deutsche Börse, creating the world’s largest owner of markets. Anglo-American, which owns Tarmac, has just announced a 50/50 joint venture to combine all the concrete, cement, asphalt and contracting businesses of Tarmac UK and Lafarge UK. Et cetera, et cetera. Ah, this green and pleasant land.

In our portfolios, UK Special Situations is benefitting from LSE’s plans to marry Canada. If you’ve been at one of our recent Evenings with Artemis (in Manchester [though that was lunch], Harrogate, London and Bath: Edinburgh and London II to come) you will have heard of Derek’s and Ruth’s enthusiasm — and relief. They feel similar about the (life) insurance sector, where there is they believe yet more consolidation to come. Their holding of Clive Cowdery’s Resolution is looking prescient and prudent. He is a remarkable man.

In Global Income, Jacob has been buying more CBS (US media). Like his holding in Germany’s ProSieben, CBS is seeing very rapid rises in advertising revenues — a harbinger of spring? After much thought, Jacob’s also buying China Mobile. It has a 4% yield, and is growing — when it’s not buying banks in Shanghai. “There are lots of reasons not to buy into a pretty opaque business which is 75% owned by a pretty inscrutable government,” says Jacob. “But on balance, I like it. Oh, and they’ve promised not to buy another bank.”

For European Growth, Philip Wolstencroft is in fine fettle. His two big positions in unloved banks Soc Gen and BNP are thriving, up 29% and 24% respectively year-to-date. Their SmartGARP^® scores remained high while the market scorned them. Their recent results bode well — and in Global Growth, Peter Saacke owns them too. Meanwhile, Philip goes on fishing. As the Chinese want (and can afford) more protein, among other things the price of salmon is going on up. Philip’s holdings in Norwegian salmon producers Cermaq and Marine Harvest are proving rich. A strong run on the Leardal?

In Strategic Bond, James and Alex have taken a position in ITV; yes for its 5.5% yield, but more because with revenues recovering rapidly the business will cut its debt — and see its bonds re-rated. They’ve applied for some Credit Suisse cocos (though for that issue of $7 billion, $22 billion has already been subscribed.) There will be more of these contingent convertible bonds. In bondland, James and Alex believe, yet more fecund financials will be.

Speakers’ corner ...

“Spain is a politically stable country, with a strong and growing economy, where property assets have always risen in value.”
— Brochure for La Nava estate in Spain; November 2008

“From 2000 to 2007, Moody’s rated nearly 45,000 mortgage-related securities as triple-A. This compares with six private sector companies in the United States that carried this coveted rating in early 2010. In 2006 alone, Moody’s put its triple-A stamp of approval on 30 mortgage-related securities every working day. The results were disastrous: 83% of the mortgage securities rated triple-A that year ultimately were downgraded.”
— Financial Crisis Inquiry Commission Report, January 27, 2011

News of the Week

Footie’s far guineas ...

President Teodoro Obiang Nguema of Equatorial Guineau has left his country’s football side in no doubt as to his expectations of them during the 2012 Africa Cup of Nations. “Not only do we want the national team to display attractive football and sporting values,” the president declared this week. “But as co-host of this tournament we also want them to win the Cup. The trophy must, must remain in Equatorial Guinea.

The team of this tiny central African state, population 700,000, sits 165th in FIFA’s national team rankings and 44th in Africa. Now coached by Frenchman Henri Michel, Equatorial have never qualified for a major football tournament, and owe their first ever participation in 2012 to being one of the hosts. But these facts have not blunted Obiang Nguema’s ambition. “We have the same human qualities as everyone else. Our women have won the Africa Cup of Nations, so why shouldn’t our men?” he added.

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