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Chart of the Week

  • Yield Curves Further evidence this week end of the potential to have a final market run before the debt catches up with us.  When the yield curve inverts historically we have a 2 year run. This happened in 1978, 1989, 1998 and 2006.  Most of those were centered around growth stocks as the price of growth accelerates in the face of low interest rates.  With the plethora of Unicorns lined up to IPO and Loungers Café Bar announcing its intention to IPO this morning perhaps history is starting to repeat itself. This chart suggest we have 2 years to party.

News

  • Canaccord announced at 10 pm last night a restructuring of its capital markets business in London.  This will result in a significant reduction in London based capital markets staff. The company says the objective is to achieve profits from all its businesses on a sustained basis. The exceptional charge is $12m. And Shore Capital completes its acquisition of Stockdale today which will inevitably include some redundancies.

Remuneration

  • I have trawled through 70 remuneration reports in the General Financial sector. A few findings are surprising:
  • Appropriate Incentives ? Only two lenders refer to ROE in their performance targets while a large number refer to growth metrics which can lead to catastrophic outcomes for lenders (Provident comes to mind)
  • Widespread nil priced options Shareholder dilution is being understated in EPS numbers by the widespread use of nil priced options. I note 13 companies where their remuneration committees deem this appropriate.
  • Bargaining power The presence of a significant shareholder tends to result in shareholder friendly incentives while management incentives are more generous where there is no significant shareholder. I would highlight Integrafin where they have no LTIP and boldly state that is because “they drive inadvertent behaviour”
  • Conclusion The full report is available to premium subscribers.  The report may be useful so readers can decide which companies to send their CV to against the companies they should research the investment merits for

jeremy@charltonillingworth.co.uk