*** Win-win for Old Mutual and Skandia
*** Mervyn King's hazardous balancing act
*** Don't let the media fool you...serious questions about the global economy...we need more hedge funds...and more
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
--------------------- BP's Thunder Horse platform in the Gulf of Mexico is a little worse for wear following the departure of Hurricane Dennis. The platform is now listing at an estimated 20 or 30 degrees and there's a chance the facility could even sink.
That's not what BP investors want to hear: the group's share price tumbled 2% on Tuesday, even though the price of Nymex crude traded some $2 up at $60.90 a barrel by London's close. Brent Crude also added 2%, to trade at $58.53.
Despite this oil and gas shares accounted for 15 points of the FTSE 100's 25-point fall yesterday. The index closed at 5,217 only the second out of 11 trading days that it has fallen into the red. The FTSE 250 also fell 0.4%, to close at 7,537.
Fund manager Man Group yesterday reported a smaller- than-expected rise in assets under management. According to the group, these assets came to $43.5bn up from $43 at the end of March. Mind you, the fall shouldn't surprise too much: with the credit ratings of both General Motors and Ford being downgraded to junk earlier this year, it's no wonder investors are steering clear of hedge funds. Man's shares tumbled more than 3% on Tuesday.
On the upside, Old Mutual closed as the top blue chip gainer, as the South African insurer's bid for Skandia got the thumbs up from investment bank Merrill Lynch. Old Mutual has offered 4.8bn euro for the whole of Skandia...in a deal that should benefit both the South Africans and the Swedish insurer. Old Mutual's shares rose 3% yesterday.
Just through the Chunnel, French telecom gear provider Alcatel has surprised investors by reporting an 8% rise in sales in comparison to the same quarter last year. The group has consistently struggled over the past few quarters, where sales fell in comparison to rivals such as Ericsson. Alcatel's shares jumped 7% yesterday, and have now surged nearly 20% in two months.
Yet does the sales hike indicate a turnaround for Alcatel? Its shares may be cheap in comparison to its competitors, but there are a number of good reasons to remain wary...
And back in the UK, Bank of England governor Mervyn King's balancing act between ailing consumer spending and rising inflation is becoming increasingly hazardous. Annual inflation has climbed to a new 7-year high last month, hitting the BoE's 2% target. And that's before the $60 a barrel oil price filters through to the petrol pump. Now Mr King will need to balance that inflation threat with the slowdown in household spending at the next interest rate meeting, due next month.
-------------------- Don't know who the fool is? It's probably you: Just what role does the media play in "shaping price discovery and fostering irrationality"? asks MoneyWeek's Tim Price. It selects, it interprets and it creates facts, accumulating information where actually none exists. That's why investors need to be aware of the power of the media specifically in stock-selection. After all, there's always a "fool in the market". If you don't know who it is, "it's you"...
Resilience in a Vulnerable World: The markets may have recovered strongly following the bombings in London on Thursday, but don't confuse such resilience with a well- balanced, strong global economy, says Morgan Stanley economist Stephen Roach. The emergence of America's second major asset bubble in just five years this time in the housing market hardly indicates resilience in either the US or the "US- centric global economy". Moreover, add the shock of oil price hikes and potential anti-China trade laws to the mix, and the strength of the global economy can be drawn into "serious question".
Too many hedge funds? Don't count on it: The media and analysts alike are adamant that there are too many hedge funds...with the bubble- like industry heading straight for a pin. But is this really the case? asks Millennium Wave Investments's John Mauldin. As profits become harder to come by, fewer and fewer hedge funds will be survive to trade in the US equity markets. Yet as more money piles into the industry, we'll soon be desperately in need of some 5,000 new hedge fund managers.
