The Noos

The table below has news stories that were published within the last 1-3 days. There are of course stories that came out over the week that are important as well. These are some of those older but still important stories.

1. Qualcomm rejects $130Billion takeover offer from Broadcom (FT)
- The bid ($70/sh) is too low for the Board at Qualcomm. Apple is anxious about this merger as well since both these companies are significant suppliers for Apple.

2. Bombardier gets a 61 plane order. (CBC)
- In the continuing saga, Bombardier announced their 3rd quarter earnings last week and with them came this gem. An as yet unnamed European carrier signed a 31 plane order for the C-Series with an option for 30 more. That order increased the total booked orders by 15% for the company and by 30% for the C-Series. This is 2 weeks since the Airbus deal. Somewhere in Brazil, an Embraer executive is having dreams about harming the fools at Boeing for ruining everything.

3. Valeant to return ‘female Viagra’ maker to former owners (FT)
- This is a Canadian Icarus story of a Management Consultant run pharma company that flew too high too fast and burned everyone including itself. The company was at one point worth $120 billion (now: $4 Billion). The story is familiar to other corporate disaster stories. Too much debt, bad planning, shady accounting and scandal. 2 years after the shares hit an all time high of $300/sh (now: $11) the CEO is gone, the new guy is trying to right the ship by selling everything he can to stave off bankruptcy. They still have way too much debt. Fun fact: they own Bausch+Lomb.

4. Trump tells Saudi Aramco to ignore LSE and list in NYC instead (Reuters)
- Our so called special relationship proves as fictitious as Nigel Farage's conscience as Trump tries to lure away the single largest IPO in history. The LSE has been lobbying hard to get the listing as it will bring more trading activity which means more money (and prestige). Even the regulators were ready to bend some rules to facilitate it. I would hate to believe that Trump's backing is going to be decisive since the Chinese have a vested interest against the move but this is Saudi Arabia and this is an oil company and this is the US president. That trio could be decisive.

5. Need help to buy a ship or jet? Credit Suisse looks to lure super-rich (Reuters)
- The Swiss bank's strategy of financing the extravagances of the UHNW (ultra high net worth) set to make some money. The idea was to loan them money to buy their private jets and yachts and it's paying off well. Their private banking business is outpacing the giant of the game (UBS). Can't blame them really. It's not like ordinary folk have much money to spend after rent and food.

Other news:

- The Saudi purge has the oil market spooked.
- The Paradise papers may lead to the creation of an EU blacklist (tax lawyers are going to scramble if this happens)


What does the BoE rate rise mean for you, law firms, banks, the economy?

- The UK Economy: Things don't look good. No matter how Carney tries to spin it, the dissenting voices at the Old Lady of Threadneedle St have it right. Real wages are below their pre-crisis levels. The GDP appears to have growth only on the back of an increase in population. That is unreliable now with Brexit. Carney kept harping on about tighter employment markets which is true. Unemployment is very low. However, at this point anyone hoping for  real wage increases is more likely to end up with sore fingers. Businesses have shown they need not hike wages at all. To back up their belief productivity is flat. I personally think that is because capital costs have risen much faster in the era of low rates and that is keeping wages down more than anything. Remember, productivity includes the productivity of machines (relative to their costs) and machines are imported and in high global demand.

- You: It means you'll be getting slightly higher interest on your savings at the bank. Most banks announced they will increase their rates. The increase won't be the full 0.25% but then again, the banks never lowered it by the same magnitude last year when the BoE got scared

- Law firms: on the face of it not much changes really. However, given the comments made by Mark Carney concerning inflation, growth and prospects and the markets reaction, I would guess that most firms are taking a hard look at compensation, retention and recruitment. If you assume that partners are going to do everything before they take a pay cut then the most likely strategy would be to cull the ranks a but while boosting the valuable fee earners. Mergers would be a close second which of course means lay-offs. This is in addition to the pressure they will be facing in seeing a path to continued growth if their work is domestic. Expect smaller, regional players who do nothing niche to hurt the most. There are pending savings of course from the removal to the LPC in 1.5 years

- Banks: They're laughing. For every £1 Billion in tracker mortgages on their books, they will earn an additional £2.5 Million in income over the next year. Retail banks like Lloyds would benefit the most. Metro bank too. But the poor growth prospects mean they won't be able to rely on mortgages to make money. I expect them to step up their commercial lending business seriously with a particular focus on exporters.

- FTSE 100: A rate hike should hurt the revenues of the FTSE companies since so many of them are British in name only and get their revenue overseas. However, given the weak GBP and the general sentiment of negativity around it, the FTSE 100 should be a perfectly good investment to ride out Brexit.