Friday Email: 12 April 2013
Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:
This week was another eventless week on the corporate calendar. The markets have performed pretty well, but for me by far the most important event was the death of Baroness Thatcher. We don't do politics at DividendMax, but I found all of those people dancing on her grave pretty tasteless. No matter what you thought of her policies, she was a true patriot who gave her all for Britain's national interest. I was an investment analyst when the big bang happened and the change was dramatic. To this day, I do not know if it was the right thing to do. i do not know if it contributed to the financial crisis that we are still hurting from now. Even with a degree in economics that is too difficult a conundrum for me to fathom. What I do know is that a checks and balances system had built up over a hundred-odd years. You had a stockjobber who operated from the floor of the London Stock Exchange (now known as a market maker) You had stock brokers who gave advice to clients and used the stockjobber to actually buy the stock. You had merchant bankers who performed corporate activities. You had investment managers who were effectively the clients of the stockbrokers, who invariably also had private client departments as well.
Then, one day in October 1986 (followed by a crash a year later, which I also witnessed) all of a sudden the checks and balance system went away and was largely replaced by what we now call investment banks. Over time, through a series of rapidly executed mergers, the brokers, Jobbers, merchant banks and asset management houses gradually became single giant entities. I could never get my head around how the conflict of interest between the Investment banks and their clients could be resolved, given human nature. However, it was resolved to everybodys satisfaction by the creation of the concept of the Chinese wall. What this means is that the investment Banks Corporate finance department could be working on a deal to take over company A. Meanwhile, the stockbroking arm is telling clients to buy or sell company A and the market making arm (the front book) could be long or short of company A. On top of that, the investment banks would run large proprietary trading arms (the back book) and they could be long or short of company A.....apparently, because of the Chinese wall, none of these people, all working for the same company would talk to each other about the takeover of company A. (I will let you decide on the credibility of that)
That's the bit I have never been comfortable with, but what I am very very comfortable with is the emergence of a large share owning section of our nation that has enabled the emergence of companies like DividendMax to help service these people who have moved into asset management themselves through ISA's and SIPP's. Dealing costs have tumbled through the emergence of companies like Charles Schwab and now you have a large choice and can deal for as little as £6. I recently gave a presentation of DividendMax to the 'serious investor group' and it is great to see this culture thriving. I really could talk about this topic for ever, but this is already my longest Friday email so I am going to stop.
We had a problem with our dividend of the week and had to pull it 45 minutes after publication when we realised thanks to an eagle eyed 'investors intelligence' reader that we had somehow reverted to last years ex-dividend date. Even in 45 minutes, many hundreds of people had already read the article. Our sincere apologies for that.
The Friday email is delivered to over 20,000 subscriber’s every week, and remains a widely read run-down of recent events and what investors can expect in the week ahead written by our chief analyst Mark Riding.
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Read next: 05 April 2013
That was a very quiet week on the corporate front and we have nothing to talk about in terms of dividend declarations because there were none. The equity markets look overbought but you would not bet against continued strength. Personally, I think there is value in the mining sector which has been absolutely hammered and offers up a great long term opportunity to buy into this important sector. There is value across the board in the sector. Next week remains quiet but the second half of the month really picks up with some of the dividend heavyweights reporting including Glaxo Smithkline, B.P, Associated British Foods, Unilever, Royal Dutch Shell and Whitbread.
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