Government Policies Drive Ashtead's Departure from the FTSE

 

The recent announcement that Ashtead Group, one of the UK's leading blue-chip companies, is set to leave the FTSE 100 and shift its primary listing to the US is a damning indictment of the current government's economic policies. This move, which deals a significant blow to the London Stock Exchange, underscores the failure of the government's approach to maintaining a competitive and attractive business environment.

A Major Loss for the UK Market

Ashtead's decision to relocate its primary listing to New York is a stark reminder of the growing disillusionment among major corporations with the UK's economic landscape. The company, which generates 98% of its profits from North America, cited the deeper US capital markets and better access to American investors as key reasons for the move. This shift highlights the inadequacies of the UK's financial markets and the government's inability to retain its most valuable companies.

Impact on the Economy

The departure of Ashtead, with its £27 billion market cap, is a significant loss for the FTSE 100 and the broader UK economy. This move not only diminishes the prestige of the London Stock Exchange but also reduces the pool of capital available for investment in the UK. The loss of such a major player will have a ripple effect, potentially leading to further exits and a decline in investor confidence.

Government Policies to Blame

The government's policies have created an environment that is increasingly hostile to business. High taxes, burdensome regulations, and a lack of support for innovation have driven companies to seek more favorable conditions elsewhere. The decision by Ashtead to move its listing is a direct consequence of these misguided policies. Instead of fostering a competitive and dynamic business environment, the government has stifled growth and driven away key players.

Conclusion

Ashtead's departure from the FTSE 100 is a clear signal that the government's economic policies are failing. The loss of such a significant company underscores the urgent need for a reassessment of the UK's approach to business and investment. Without immediate and decisive action to create a more favorable business environment, the UK risks further erosion of its economic standing and the continued exodus of its most valuable companies.

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The Spectre of War Drags Down FTSE

More than £54bn was wiped from London’s top 350 companies this morning as growing fears of war between Russia and Ukraine spooked investors.

The FTSE 100 fell 1.9pc, while the FTSE 250 dropped 2.3pc. Meanwhile, oil and gas prices both soared as traders geared up for a conflict.

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Markets Relaxed About Lockdown Extension

The FTSE 100 shrugged off worries about the lockdown extension, and has risen by 35 points this morning. 

The extension has already been priced in, what matters now is no reversal or a return to start/stop restrictions.

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FTSE Falls 2%

The FTSE fell below the 7,000 threshold this morning, by over 2%, as a result of inflation fears in the USA and China.

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FTSE Falls Below 7,000

The FTSE 100 has fallen back below 7,000 after mixed trading in Asia and a fall in the US as tech stocks slumped.

It is a case of investors wondering exactly where the world is wrt Covid, thus there are upswings of optimism tempered by downswings of pessimism.

As the summer approaches, the Covid vaccination programme will be seen to be successful and will be rolled out in more countries; thus the mood will lighten, and the markets will rise more steadily.

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The Brexit Bounce

Following today's High Court ruling stating the MPs must trigger Article 50, both Sterling and the FTSE have bounced.

All very well and jolly in the short term, maybe. However, this suckers' bounce ignores the fact that this ruling has muddied the waters and created more uncertainty over Brexit.

Markets hate uncertainty!

Markets Falling - So What?

The Telegraph reports that more than £46 billion was wiped off the stock market on Wednesday, as the FTSE 100 fell 181 points (2.8%) to 6212.

Other markets around the world are also falling, indeed at one point the Dow Jones fell by 3% overnight.

For why are the market falling?

Fear, greed, profit taking mixed with (according to the Telegraph) the following:

- fears over the stability of the Greek government and its bail-out plans. Hardly new news, and one that would have been factored into the markets many months ago.

- poor retail figures and a slowdown in manufacturing from the US.

- ebola

- the ongoing eurozone crisis

etc.

Basically fear and greed as per usual!

The markets will rise again, volatility and market upswings/downswings are how people make money.

FTSE Hits Level Last Seen In 2000

The Telegraph reports that FTSE 100 jumped as much as 1% to 6898.62, on Wednesday, the highest level since the dotcom bubble burst at the start of 2000.

As I have noted many times before money is made out of volatility, never assume that momentum (in whatever direction) is the new norm.

Upsy Downsy

The FTSE is "enjoying" an up and down day, flirting with being a bear and now staging a modest recovery.

It appears that there are rumours of further quantitative easing ahead.

Dubai's Dead Cat Bounce

It seems that the fear and panic, that the media would have us believe was going to envelop the world this week (when the Dubai markets opened again) hasn't happened yet.

Markets across Europe and Asia have in fact rebounded today.

The intervention by the Central Bank of the United Arab Emirates, to provide an emergency liquidity facility for local lenders, seems to have calmed everyone's jittery nerves for the time being.

As to whether this is will prove to be only a dead cat bounce, remains to be seen.

Seemingly the authorities in Dubai have been tring to remove newspapers, that discuss the crisis, from newsagents. A heavy handed and idiotic attempt to shore up public sentiment, it will backfire.

Either the economy is in good shape, or it isn't.

You can't eat sand, nor should you waste money buidling houses on it.

Rip Off Britain

Selftrade, the online stockbroker, has added its name to the financial services industry hall of shame for ripping customers off.

As from 1 July this year, it will charge its hapless customers an annual management fee of £40. They are taking advantage of the fact that their rules mean in order to transfer stocks some customers could be charged as much as £100, ie their customers are locked in and ripe for being ripped off.

My advice to its customers is to sell your shares before 1 July, and look for a better deal before buying back into the market (if this is financially feasible without losing more than the £40 charge).

Don't let Selftrade get away with it.

Green Shoots, or A Dead Cat Bounce?

The FTSE broke through the 4000 barrier this morning, in response to tentative signs that the economy may be stabilising. House prices rose for the first time in 16 months, and the Bank of England claim that they expect banks to increase lending over the coming months.

These signs augur well.

However, all will be as dust if Merkel and Sarkozy have their way, and bury "unfettered capitalism".

They should remember that "unfettered capitalism" has for the last few centuries been the bedrock on which the growth and development of the European economies has been based.

HSBC Cash Call Drags Market Down

HSBC's record cash call of £12.5BN, aside from causing the collapse of its own shares by 9% today (down by 46p to 445.25p), also dragged the FTSE down by 3% to a six year low of 3700.

Meanwhile, doing the rounds, is this rather amusing take on the banking bailout:

Bailout

L&G Play Ostrich

Legal & General (L&G) have been acting like an ostrich recently, as they have put off telling investors in their structured products backed by Lehman Brothers that they may lose up to 20% of their investment.

L&G finally told 2,300 individuals the "good" news last week. This is of course a tad tardy, as Lehman Brothers went into liquidation three months ago. Indeed, the delay is even more surprising given that other structured products providers such as Meteor, NDFA and Arc warned investors within weeks of Lehmans' failure that their investments were at risk.

Why would L&G put off what was clearly inevitable?

Seemingly, according to some financial advisers, L&G wanted to avoid the negative publicity around Lehman Brothers.

I can't say that has worked, if that really was the reason, given that L&G now look rather foolish to say the least.

The two L&G plans affected are the Protected Capital and Growth Plan four and the Accelerated Growth and Investment Plan two. The plans were backed by Lehman Brothers, Barclays, Yorkshire Building Society, Citigroup Funding and Dresdner Bank.

Investors will now only be able to recover 80% of their capital in July 2011 if, when their plans mature, the FTSE 100 is below the level set when they were launched in July 2005.

I wonder if the FSA will look into this, given that financial markets are meant to be transparent?

Were I an investor in one of these products I most certainly raise this matter with the FSA.

Down Down Down

The FTSE fell 8% this morning, as the UK entered its first recession in 16 years.

Alistair Darling told BBC News:

"It's obvious now that our economy, other economies across the world, are moving into recession.

Yes, it's going to be difficult, yes it's going to be tough, but we can get through it."

Therefore why is the Bank of England still sitting on its hands, and not cutting interest rates more aggressively?

The Dead Cat Bounce II

Lats week I wrote about the rebound in shares, in response to the US bailout of the financial system, being a "dead cat bounce".

It would seem that I was right.

Shares in London and Asia have fallen sharply, as doubts grow about whether the $700BN bailout will work. At the time of writing:

-The FTSE is down 2%
-The CAC down over 1%
-The MSCI index of Asia-Pacific shares (excluding Japan) down 2%
-The Dow down over 3%

The package proposed by Henry Paulson, US Treasury Secretary, is expected to face opposition from members of Congress about how to pay for the plan.

Additionally, other American industries outside Wall Street have begun to ask for similar assistance; eg bans on short-selling have been requested by car and real estate companies.

Senator Richard Shelby, the leading Republican on the Senate Committee on Banking, Housing and Urban Affairs, said in a statement yesterday that the proposal was "neither workable nor comprehensive".

"I am concerned that the Treasury's proposal is neither workable nor comprehensive, despite its enormous price tag. In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted, and may actually cause the Government to revert to an inadequate strategy of ad hoc bailouts.

Given that markets have recently taken confidence in the prospect of government involvement, I believe Congress must immediately undertake a comprehensive, public examination of the problem and alternative solutions rather than swiftly pass the current plan with minimal changes or discussion. We owe the American taxpayer no less."

That is all very well, but the issue is one of confidence. A lengthy review will sap the confidence and destroy the financial system before any "cure" is discovered.

I noted last week:

"The actions taken may well soften the blow from the fallout of the sub prime crisis. However, the market cannot be bucked. There is a massive repricing of risk being undertaken which will negatively impact the share prices of financial institutions and, by definition, their willingness and ability to take on risk.

No matter what governments do this repricing will happen and the effects will be felt by everyone, from the CEOs of the leading banks to the ordinary man in the street seeking credit to buy a car or home.

The market will not be bucked. The surge in share prices is in effect a dead cat bounce, not a long term rally."

The bailout will not stop shares falling, but it will stop the world wide financial system from collapsing by giving it a much needed boost of confidence.

Testing times require bold measures.

Now is not the time for dithering and navel gazing.

The Dead Cat Bounce

Share prices are surging today on reports of a massive bailout of toxic debt by the US government, coupled with the ban by the FSA on short selling of financial stocks.

At the time of writing, the FTSE is up over 7%, the DAX up by almost 4% and the CAC up by 6%.

Talks are being held between the US Treasury Department and the Federal Reserve to examine proposals to move illiquid toxic assets, backed by mortgage debt into a government backed vehicle; ie they will be taken out of the balance sheets of the banks and financial institutions that created them.

In the event that this this scheme is put into action, this will be the largest bailout in American history.

The actions taken may well soften the blow from the fallout of the sub prime crisis. However, the market cannot be bucked. There is a massive repricing of risk being undertaken which will negatively impact the share prices of financial institutions and, by definition, their willingness and ability to take on risk.

No matter what governments do this repricing will happen and the effects will be felt by everyone, from the CEOs of the leading banks to the ordinary man in the street seeking credit to buy a car or home.

The market will not be bucked. The surge in share prices is in effect a dead cat bounce, not a long term rally.

London's Reputation Tarnished

London's reputation as the world's leading financial centre was further tarnished yesterday when the London Stock Exchange suffered its worst systems failure in eight years, forcing it to suspend trading for seven hours.

To add to the woes of those trying to trade yesterday the crash happened on what would have been one of the busiest days of the year, hot on the heels of the news over the weekend that Fannie Mae and Freddie Mac had been bailed out.

A cynic might argue that the system was deliberately shut down, so as to avoid a massive spike in bank shares occurring.

Reuters quoted one trader as saying:

"We have the biggest takeover in the history of the known world ... and then we can't trade. It's terrible."

Another said:

"This halt today clearly has once again damaged (the LSE's) reputation as a leading exchange, especially on a day like today, highlighting that it may have been unable to handle the volumes this morning."

The LSE have not given an explanation for the crash, traders though are demanding an explanation.

LSE Chief Executive Clara Furse wrote to the FT on Monday, somewhat ironically, and said that the system used by the LSE was "the cutting edge".

This is just one of a string of issues that has tarnished the City's reputation. Other include; the endowment scandal, fat cat bonuses for failed executives, Northern Rock, excess bank and credit card charges, the mortgage drought, mis-selling of mortgages, PPI mis-selling etc.

The great and the good of the City should bear in mind that reputations are hard to earn, but easy to lose.

Pensions Black Hole

As the economic downturn continues, and negatively impacts the FTSE, pension schemes are feeling the effects.

Actuarial consultants Lane Clark & Peacockfell, report that pensions went into a £41BN deficit in mid-July, reversing last year's £12BN surplus.

The effective and efficient management of pensions require a very long term view of market ups and downs. Unfortunately, current pension reporting requirements introduced in 2002 do not take a the long term view and encourage short termism of the worst kind.

A major overhaul of pension reporting is required urgently.

Rock To Be Dropped

In a fresh humiliation to the dying corpse of this once strong and respected institution, Northern Rock is set to be dropped from the FTSE 100.

This should come as no surprise, as the bank has been destroyed by the previous board.

Once kicked out of the FTSE 100, the share price will fall further as investment funds are forced to adjust their books and sell their holdings.

I have warned on numerous occasions that this stock will end up the play thing of speculators, nothing better than Marconi shares. The company is dead, yet to be buried, the sooner the sale is agreed and finalised the better for everyone.