When it came to seduction, Del Boy swore by Yugoslav Riesling and pork-scratchings. IBA’s financial equivalent (paper and charm) may yet win the day.

Whilst impressed IBA CEO Mr. Cohen has successfully placed so much equity (conditionally) to finance the takeover (albeit at a steep discount) it is not obvious why iSoft are not able to refinance themselves on similar terms. Yes, confidence in the firm is low but its recovery in operations is undeniable; and it is not as though IBA are bringing a gilt-edged operational reputation or remarkable financial muscle to the table.

Then there is CSC, playing the protective-father-of-the-wooed role. IBA, as has been its wont for months, have simply made media and stock exchange announcements unilaterally. CSC can sink this deal (as they appear to have done those of a few other suitors already) given the change of control clause it enjoys with the lass iSoft. Are IBA trying to apply pressure on them to accept the dowry as is? Or, as Mr. Cohen says, is it merely that the lining up of the funding forced the pronouncements?

The IBA offer is effectively worth 54.7p per iSoft share (not the unadjusted for dilution 58.1p). But that was when IBA shares were sitting at A$1.255. They have risen over 10% overnight from A$1.21 to A$1.335 on the back of some sharp roadshow marketing by Mr. Cohen in the Australian media. Little prevarication, then, Down Under about a possible iSoft carve-up mitigating the attractions of the betrothed.

Meanwhile, back in London, the market in iSoft shares (55p mid) appears confused by the politics of it all. Will CSC block it (there is something bothering them)? Is there more value in the hook up than hitherto thought (probably)? And is another bid coming (doubtful, CSC put most of them off)? Arbing the actual vs the offer price in these competing tides of equity traffic (at least on above board information) looks tricky.

In talking up iSoft’s market in the UK & Eire, Germany, the Netherlands and even the tiny but interesting Spain ops, Mr. Cohen has been downplaying the notion of domestic violence in the new matrimonial home (ie asset sales). Yet the new group's financials suggest that married bliss requires plenty of skill (in timing, execution and working capital management) to carry through to completion the iSoft operational recovery plan.

NB: The scribe owns iSoft equity

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Dexia (DEXB.BT) thoughtfully are watching out for their owners' and clients' blood pressure on this one.

Tijd.be (translation required for non Flemmish/Dutch readers) today reports that despite claiming an initial loss of €108m from fraudulent bond trader activity in 2001 Dexia, the Belgian retail bank, actually bathed to the tune of €300m.

According to Dow Jones Newswires, company spokeswoman Ulrike Pommée said Dexia wished to make no further comment because:

"This is an historic event"

The scribe assumes Mevr. Pommée was not highlighting the bank's prowess at stealthily tripling its losses; so either something was lost in translation or a better form of words is required to explain that Dexia accounted for the losses between 2000 and 2004.

Either way, hardly something worth bothering account holders or equity owners with, is it?

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Is this heaven?

Wednesday, May 09, 2007 | | 1 comments »

No, it's an excerpt from today's Federal Reserve statement:

"Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.

In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected."

Pictorial version:

Poetic version:
"But thoughts, are giv'n, for Actions government,
Where Action ceases, thoughts impertinent"

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Since 1988* this adage has been remarkably useful: it is still true over time that a November to April portfolio outperforms handsomely its May to October rival. And this is especially so for small and mid caps where summertime more frequently means capital losses.

Exhibits 1, 2 & 3: Winter compared to the previous Summer performance on the FTSE 100, S&P500 and the Russell 2000

However, it is noticeable in the US (and across its market caps) that the summer portfolio has turned the tables on the winter for the last 4 years. The historic data marks this as highly unusual; and it is not a trend visible in the UK where markets have split the last 4 years evenly between the seasons (AIM, Techmark, FTSE 250 and FTSE 100).

Exhibits 1, 2 & 3: Winter (NA) minus previous Summer (MO) performances on the FTSE 100, S&P 500 and Russell 2000

Whatever is to be made of these recent US developments (author entirely open to theories), it is often the case that momentum established over biannual/annual frequencies is worth paying attention to (even when not whole heartedly believing in it). And so is divergence between markets traditionally in lock step.

But do not expect everyone to start cutting short summer holidays worrying about it (Ed: Sarkozy or no Sarkozy).

* A starting point chosen mainly because it is the date from which foreign official assets (as measured by the Fed) began to rival those of the US on broadly equal global liquidity terms.

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Thursday, May 03, 2007 | | 0 comments »

Games Workshop plc notes, 5 Jan ‘07: Not convinced by eps estimates. Sales (4%) at the half. Divi levels imprudent, outlook overly optimistic, Kirby trading some credibility. Fad vs hobby debate gathers pace.

The Warhammer Giant by Games Workshop. Now available for hire as a Dog of War, if you've the cash

Games Workshop plc, an interesting retailer of some previous strength warned today not, surprisingly for retail bears, on the back of UK performance but on that of Germany and France. A cost reduction programme is to be implemented (itself costing £6m this year). The shares closed yesterday at 327p and currently trade at 255p having briefly lost 44% of their value (at 180p) this am.
Games Workshop have now abandoned the final dividend which, if paid, would have caused a cash outflow of circa £4.3m. Cash and equivalents were £(2.7)m at the half reported back in January which, in a world of common sense, should have seen the company slash the even then fractionally covered dividend until further notice. But good intentions brought delay (the interim divi was paid).
Give Chairman Kirby his due. In November he put his money where his optimism (and some of his credibility) was and laid out £497,000 to bring his holding to 6.6%. That said, another board member made a sale of £2.6m of shares (then 350p) on 12 April. But given this was a non-exec perhaps it should be judged more fortuitous than informed. But it does look bad.
The outlook demands not simply that the board be as operationally firm and hard as some of the characters in its products. It also needs to be timely.

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Given that no knockout blows were delivered and no amazing new policy pronouncements uttered in tonight's French Presidential debate the chance of French voters changing the election course forecast by the polls (53% Sarkozy)is about as likely as Battersea Park serving as a pick up joint for lonely FTSE 100 CEOs.

Mme Royale came in knowing she had to take wavering voters both sides of center. Yet she adhered fast to socialist dogma rather than setting out an accommodating stall. At times appearing impervious to logic she stuck out for a refusal to answer direct questions until she was compelled by her own pronouncements to do so (eg nuclear power would be maintained despite her promoting the necessity of greener alternatives). She announced a capital gains tax increase but would not say how large (“it will be of the necessary size”). She kicked all awkward questions into the long grass of “that has to be discussed with all the social partners”. She ring-fenced public sector jobs as untouchable.

Which in sum meant she frequently did not appear mistress of her brief, frank, decisive or politically savvy.

She did aim (though not always land) flurries of blows, notably labeling M Sarkozy a liar and immoral on a basis not entirely clear (allegedly for voting down legislation easing the attendance of the physically disabled in schools and then saying what a fine idea it was during the debate). But as with most of her attacks she appeared shrill, emotionally manufactured (indignation in this case) and dependent on the moral-high-ground approach, couching personal slurs in the language of “social justice”.

Strategically, her side must count the cost of this line of attack: is there really mileage enough in anti-Sakozyism to bulk swing the wavering center Bayrou voters her way? She faces a 6 percentage point gap in the polls; and the 9% to 19% (depends which poll is consulted) who declared a firm intention to vote but refused to say how are not, this scribe would suggest, her natural constituency. As with far right voters they are (mostly) more likely not to want to be identified as pseudo fascists in the way Sarkozy has been demonized.

No, Mme Royale spent 72 minutes and twenty seconds preaching to the converted instead of proselytizing. By appearing evasive (on nuclear power and the new capital gains tax), pedantic (“flattening” the Fillon legislation is not the same as dismantling it) and reluctant to simply state her position (cf those social partners discussions) she seemed fearful of defending or laying out detailed positions. Instead recourse was made to broad visions of upholding the most general principles of social equality upon which the entire political spectrum is broadly in consensus; and to personal attacks on her opponent's integrity that certainly play well with her hard core support but may backfire in the quest for the undecided.

In sum, it is extremely difficult to see how this timid approach combined with a relatively discourteous and impolite attitude to her opponent might have convinced waverers that they were watching gravitas in action.

M Sarkozy may be too Hollywood for many voters’ tastes. He may attract venom for suggesting people do not work enough; he may use the immigration issue for Machiavellian political ends (he did subtly enough during the debate to allay the fears of hard right and middle); he questionably taps a popular xenophobia by rejecting out of hand the notion of a Turkey within the EU; and so on. But he has a direct take it or leave it quality that appeals to the French love of frankness. His own dogma is well mixed with pragmatism; his delivery style is relaxed; and he took personal attacks graciously without returning same fire.

We will never know which will administer more skilfully. But it is clear which campaign strategy is superior. M Sarkozy is likely to beat the point spread come Sunday.

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