ICAP Share Discussion Threads

[rennes] 01/1/2012 20:20

"The path to overcoming this won't be without setbacks, but at the end of this path, Europe will emerge stronger from the crisis than before," Merkel said in a New Year's television speech that aired yesterday. She said that her government will do "everything" to bring the euro out of the slump.

[rennes] 31/12/2011 10:30

Jeffian,

Indeed I hope your 2012 will by happy but above all prosperous too.

Near the precipice the slightest breeze sets off a panic and this is likely to be seen in the volatility of the share price so a tricky market for Daytraders or those of us who keep an active hand in the Pension fund.
Nice to see ICAP go over 346 on Friday after a wobble or two. CFD set around 3.42. We should get some continuing uptrend positivity in Jan, I feel.

The Euro crisis would certainly have happened. (Your question)
However not with such scale and ferocity without the Financial panic which you will recall all started in 2007, over the pond, and then came to Northern Rock. Since then, progressively, the whole unhealthy pile has unraveled at various speeds, tempered by Government intervention. It is NOT over.

Like companies once the "Going Concern" assumption begins to be questioned, all previous trading norms are in question.
The board./government seek measures to "trade out of the difficulties" with new resolutions in stewardship and new trading models.

Euroland was certainly rife in the South with expensive "infrastructure catch up" projects funded by cheap loans and historical cultural inadequacies that increase society transaction costs ( Government officials on the take , poor judicial systems ).
These undoubtedly have contributed to the deficits but were manageable "leaks" in the Euroland coffers since they could be identified and factored in even as cultural change was introduced ( slowly ) - I saw this in Romania for example where I worked for a while.

However "The banking crisis" was a TSUNAMI whose speed & amplitude introduced a new paradyne and shook the whole foundation of "fractional reserve banking" and unregulated derivative trading putting into question "going concern" valuations etc.

Once the "going concern" assumption is threatened there is a completely different way of considering valuations and exposures....with consequences that cascade down through the economic infrastructure.Banks for example no longer lend to each other - Fear abounds - spiral down!

To recover from this one has to have a forward geopolitical vision that people can grasp and believe in.
I see only one "Big picture Vision" presently . This is Federalism and integration in Europe.
Not saying it is good just noting it exists. The "masses" can grasp this and support it since it is easy to understand and gives benefits to the majority. If nothing else the threat of wars are averted.
Even the Middle East has now an driving Vision - democratisation and building a middle class.

I see nothing in our "Anglo Saxon" world view presently other than negativity and fear.
Tell me where are we heading?
nowhere currently !
Our leaders have us rowing around in circles with one oar- there is no overall POSITIVE objective that sets our heading. Only continued firefighting and disaster mitigation.
We cannot grow, We cannot invest and the foundation for our main GDP contributor - financial services is shaking precariously. ( not sure but this has moved from I think 8% to 30ish % of GDP)

Thus without such an overarching objective ( which in previous times was a war ) we tread water while our Euroland brothers continue to put their foundations in place against a clear direction. Shortermism replaced by longermism, social justice and participation in corporate wealth, mutuality .... I could go on.
Interestingly the Chinese have bought into this vision

Alas This time, without a North Sea Oil to revive us, we will at best enjoy a long period of Stagflation while the markets in Euroland and our European neighbours recover and grow through exports to China and Developing countries. Our manufacturing base is too weak now to compete.

I am betting that the speculative attacks on Euroland you reference will fail since they will be attacking a belief structure that is healthier and in the end will prove resilient.
We shall see.

Anyway on that more postive note - since I shall be moving to France - Bonne Anne 2012

[jeffian] 30/12/2011 19:53

Rennes,

We've rather killed discussion of ICAP haven't we?!

8-)

One more thought and then I'll wish you a happy New Year......

Do you believe that the Euro crisis wouldn't have happened if the banking crisis had never arisen? I'm afraid it was going to happen as soon as the new currency was created 10 years ago without overall political and banking control. I said at the outset that the only two options are a break-up of the Eurozone or the acceptance by Germany that it has to support the whole thing and your vision of "Euroland federalism" is simply my 'Option 2'. My fear is that the market won't give them the time they need to persuade their people and effect it. I think the markets are going to sink their teeth into the Euro early in the New Year and the politicians will be left reacting to events rather than controlling them. 'Interesting times' (in the Chinese sense!)....

...and on that thought - Happy New Year!

[jeffian] 29/12/2011 15:20

I'm not going to say you're wrong in your assessment of the Eurozone, Rennes, but your scenario will take years to work through and the markets are going to be attacking the Euro within weeks! If the Germans and French keep applying short-term sticking-plaster, maybe they can fudge through until your longer-term solutions kick in, but at the cost of Japanese-style stagnation for years.

As for the banks, I don't particularly support the 'Anglo-Saxon model' but what happened was a failure of simple banking good practice (and I saw it with my own eyes during takeover activity in the 1990's when they seemed surprised that I asked for details of properties behind an 'income stream' and - Shock! Horror! - actually suggested that I would like to go and have a look at them!). Had we been true to the 'Anglo-Saxon model', we'd have let those who took the bad risks go bust (albeit at considerable pain for their shareholders and customers) which would not only have left the others stronger but also reminded managers that there were consequences to their actions, whereas now they feel 'if we get it right we get a bonus; if we get it wrong the Govt bails us out'! But I'm not sure I agree with your analysis -
"By far the biggest budget black hole in all Eurozone economies that have gone into the "red" is the banking black hole that was not forecast, was not budgetted and for the most part arose from those Euro banks being suckered into taking derivatives and other "hot" products."
Surely the liquidity crisis among European banks results from the fact that the Liquidity Ratios required by Govt regulators force them to hold a certain amount of their assets in cash or Government Bonds and it is the huge question mark which hangs over the value of those Euro Bonds issued by Greece/Italy etc. which is the problem, much more than their dabbling in questionable derivatives?

[jeffian] 29/12/2011 10:35

Rennes,

Again, everything you say may be true but you are not focusing on the central issue which is a sovereign debt crisis. US economist Martin Feldstein has just come out and said the French "don't get" the euro crisis - and neither, apparently, do you!



For all the faults of 'the Anglo-Saxon model', it isn't what is causing the problem in the Eurozone. That is caused very simply by Germany, France and other balanced economies tying themselves to a group of other countries which have structural budget deficits whereby their spending exceeds their income in both good times and bad and they continue to rack up debts they simply can't repay. Regulating the City of London or raising financial transaction taxes doesn't make any difference at all to that problem. The only alternative to default - devaluation - is closed to them by membership of the Euro, so either it implodes or the Germans and French pick up the shortfall. I defer to your knowledge of Germany but, besides the question of whether even the mighty German economy is strong enough to support Greece, Italy, Spain, Portugal etc. indefinitely and without limit, it is not clear how "Germany will hold the course of bending progressively the other Eurozone states to their economic methodology". This was the principle behind the proposed new treaty which Cameron vetoed recently and the idea seemed to be that unless the profligate countries brought their national budgets back into balance within a few years they would be....errrrmmm.....fined! So how does that work? Who's going to pay the 'fine' and how? Borrow it from.......? Nein, danke!

[rennes] 29/12/2011 09:21

Jeffian - Good post with obvious detail knowledge on the issues. My perspective on Europe driven by macro perspective and some knowledge of Germany through business dealings.

Firstly, Germans resolute about integrating Europe so that political spats do not degenerate into more serious country disputes.
Lessons of the past i.e. Hyperinflation and WW very ingrained into the psyche of all the 50 somethings in Deutschland this tax bracket has tremendous influence still on German Politics.
Combine this with the investment in machine tools and manufacturing and the undoubted strength of work ethic and pedantic process following efficiency in all they do, makes me believe that Germany will hold the course of bending progressively the other Eurozone states to their economic methodology even if it means navigating tough waters presently.
They will see this out.
They are focused and persistent and nothing will shake their world view.

Secondly. All of Euroland is horrified by the outcome of the Anglo Saxon money trading model with the exaggeration of derivatives, the polarisation of the haves and havenots, the short termism of the American/British model and the obvious iniquities of the City of London and its role in fiat currency, money laundering and fostering unsustainable values. Retail spending and consumerism will not get us out of the clag this time. We are reaping the outcome of the Thatcher and Reagan years in Britain.
Germans and French hate the hedge fund industry and its speculative role.
Their model is more focused on social justice through adding real value and less on moving "numbers" around and pretending to add value.
This has huge implications for Tax strategy and where the investment incentives go in any economy and that is why Cameron is so petrified that the present hegemony of the City will be undermined......which by the way IT SHOULD BE.

Lest you think I am some disgruntled leftist let me say that I am a staunch conservative BUT believe that Britain has lost its way through this epoch. The Germans, because of their history, have a Vision for real value creation which they will persist with whereas we British have vascillatiing leadership, lack of unity in the class structure and are unwilling to grasp any nettles politically.

For all these reasons I am backing Euroland and Germany.

rant over !

[rennes] 23/12/2011 19:21

My bet is that the Germans will pick up the tab.
The Eurozone is politically rather than economically driven. I can't see Germany turning down the chance to effectively dictate the budgets for the rest of Euroland.Through this process they will achieve that which they were unable to achieve with two WWs, dominatination of Europe. They will swallow the bill for this like they did with the reunification bill.

[jeffian] 23/12/2011 10:29

Why do you "see the EU debt situation becoming slightly less of an issue into the New Year"? The proposed EU treaty which Cameron vetoed doesn't even begin to address the short-term problems of the Euro. It may stagger on from fudge to fudge but I would have thought that it's evens that there will be a messy break-up. The crunch will come when Greece can't pay its interest bill and Greece, Spain, Italy and Portugal can't refinance their bonds as they become payable. At that point, the Germans will have to decide whether they are going to pick up the tab to keep the Eurozone intact, or let the weakest default. I fear the Euro will very much be an issue in the New Year!

[rennes] 23/12/2011 10:04

Ronjen,

I have just taken a CFD out on ICAP basically betting that we are now in a 3 month uptrend.This has come off a chartist's view that there is a support level around 320 and a decreasing resistance level ( 3 month projection ) at around 375. I have a stop at 307.
Without your comprehensive understanding of the particulars of these shares I see the EU debt situation becoming slightly less of an issue into the New Year and therefore some of the perceived risks around this share dissipating with the attendant upswing in price?
Only my view-we shall see.

I am interested to know what your average share price is for your holding?

[highlands] 11/12/2011 17:07

Ronjen,

Thanks for your views.

It is always nice to hear from someone with your understanding of the business / markets and I'm sure you are still in touch with people in the broking / banking world.

I added several times recently.

[ronjen] 10/12/2011 22:11

Highlands
My basic thoughts are that ICAP is oversold
· As part of the wider financial sector, they has suffered from being lumped in with the banks, and all their well publicised woes, but Icap is not a bank, and runs a widely different business.
· Concerns re the potential financial transaction tax will, of course have an effect on business, but I believe this is already in the price
· In the broking world, market direction doesn't matter, up or down, volatility is king, because it creates volume/turnover/commission, and I don't see the current jitters ending anytime soon
· Still a potential take-over target, but personally I feel the chances are slim, at least in the short term
· In the medium/long term, the outlook is reasonably good and at present levels I think they will prove to be cheap.

NOTE: I should declare that I am a retired Icap divisional director, and was in the broking market for 26 years, having previously been a banker/trader for 6 years, so I know the business reasonably well.
My particular expertise was in various off-balance sheet products; Interest Rate and Forex Swaps, caps, floors, etc. Clients were international banks in London and overseas, building societies, etc.
(I packed it all in while still young enough to enjoy life nearly 14 years ago, so you can't blame me for the current mess!!)

My Icap shares are mainly the result of various option schemes over the years, and although I have also dipped in and out, I am a basically a long-term holder, and intend to remain so.

[highlands] 07/12/2011 12:33

What is your view Ronjen?

[ronjen] 07/12/2011 10:05

STOCKS NEWS EUROPE
ICAP knocked by broker downgrade
Wed Dec 7, 2011 9:20am GMT
Shares in ICAP drop 4.0 percent, by far the biggest FTSE 100 faller, with the index up 0.9 percent, as traders cite the impact of a downgrade in rating of the inter-dealer broker by Morgan Stanley to "equal-weight" from "overweight".
Traders say the downgrade is part of a major 2012 outlook of the European banking sector in which it has reduced sector earnings by 7-9 percent for 2012-13 to reflect the impact of further de-leveraging and weaker underlying macro.
Traders say Morgan Stanley thinks a balance sheet retrenchment by the European banks will have an impact on the inter-dealer broker.

[uhound] 01/12/2011 12:30

I agree with the recent comments and have taken a position on today's share price weakness.

I think the markets have held up well in recent months even with plenty of negative news - which always bodes well for a move higher.

[dapper don] 01/12/2011 11:28

£3.46 NOW
To me it matters not wether its 3.20 3.55 short term you will be up
results were fine and as we stand well undervalued imho .
I have been buying and holding these a long time buying on big dips like these .
I see no reason to change now .

[jeffian] 30/11/2011 17:52

If you got 'em at 3.55p, you have done well!

[contrarian2investor] 30/11/2011 17:40

With all the liquidity being pumped into markets, I have opted for a radical play by buying ICAP today @3.55p.

[cardiffian] 18/11/2011 07:55

I think for working out one's personal percentage holding, the total number 'in issue' is used. Those held by the company in treasury are therefore excluded until e.g. they reissue them to satisfy bonuses et al. I could be wrong ofcourse.