Column: The smart money is sitting the Brexit panic out

All over the world financial advisors and brokers are calling clients and urging them to take steps to "make" or "save" money in light of the British vote on EU membership on Thursday. All over the world smart clients and investors are ignoring them.Stop me if you have heard this, but I repeat it because so many obviously haven’t or don’t listen. Neither you nor your advisor know what will happen on Thursday when Britain elects to either leave or remain in the European Union. What’s more your, or her, ability to translate that extremely uncertain knowledge into advantage is very doubtful.The only thing for certain about “Brexit proofing” your portfolio is the transaction costs.On the eve of the critical British referendum on Brexit the polls were reasonably tight, with enough variety to please all sides. Votes for "leave" nosed ahead in two late polls released on Wednesday by one and two percentage points, while the probability as expressed by bets on the Betfair exchange moved to 76 percent for "remain".In either event, it is fair to expect a certain amount of frightening market volatility both during and after the election. There is no avoiding it: a vote to leave would have by far the more damaging short-term impact. British economic output would likely be quite substantially hit and large swaths of its business model would come under threat.The question is not, "Is this an important event?". Surely it is. A better question would be, "Is my outcome likely to be improved by taking decisive action?”And the answer is, probably not. The market moves under both scenarios will be jerky and unpredictable, and this applies not just to sterling assets. The future of the EU is at stake too and the event rises to a level of gravity that central banks around the world, not to mention banks, are preparing for all the contingencies they can think up. Leave them to it.While parts of the financial media and advisory and broking community love to create a sense of hysteria around events like these, the advantages of joining in are dubious.Let's be clear: I am not saying that bad things won’t happen. Your portfolio may get hit badly and it may suffer significant volatility. That's life in the big city.MISSING OUT Many investors clearly think they can play this game. Outflows from UK equity funds were the second highest on record, a net $1.1 billion, in the week to June 15, according to fund tracker EPFR. Lipper data show assets in the UK fund management industry have fallen by almost 20 percent over the past year, down by about $300 billion to $1.35 trillion.But by attempting to dance in and out of markets and assets around an event, you are taking on a substantial and virtually unknowable series of risks. For one thing, you may guess wrong about the direction of markets and miss out on a spectacular up day.A JP Morgan Asset Management study found that an investor who missed out on the ten best days in the S&P 500 stock index between 1993 and 2013 would have seen their annualized return fall to just 5.4 percentage points. That compares to 9.4 percent annualized for those who stayed in the entire time.A University of Michigan study of the 7,802 trading days from 1963 to 1993 found that just 90 days, a bit more than one percent of all days, generated 95 percent of all returns. If you are good at guessing there surely must be easier ways to make money out of it than by guessing firstly about the Brexit vote and then secondly about the markets as a derivative.Again, this is not to say that your investment outlook and allocations should not be informed by political developments.Britain’s decision to remain or leave will have far-reaching impact on the shape and performance of its economy and its publicly-traded companies. Again, though, this is a complex situation, with much to be determined by the steps taken by Britain and its trading partners, or EU partners, in the months and years after the vote.Taking a decision to lighten your allocation to Britain may well be a good and reasonable step. It may have been a good and reasonable step when first having the vote was agreed. The way to do this was slowly and gradually, not by reacting to polls and surges of emotion.On Thursday and Friday, do something British: make a cup of tea, sit back and don’t trade.(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. You can email him at jamessaft@jamessaft.com and find more columns at blogs.reuters.com/james-saft) (James Saft) Read more

Wall St. pulls back from record; utilities slump

NEW YORK U.S. stocks fell on Tuesday as investors engaged in profit-taking to pull major indexes from record levels, while the trend of modest moves and low volume continued heading into the final trading day of the year.The day's losses were broad, with each of the ten primary S&P 500 sectors in negative territory. Utilities .SPLRCU - 2014's best sector performer - led the decline with a drop of 2.1 percent. Equities have enjoyed a solid rally of late, buoyed by strong economic data and the U.S. Federal Reserve's commitment to be "patient" about raising interest rates. The S&P 500 gained nearly 6 percent over the prior eight sessions and managed to score its 53rd record close of the year on Monday.The speed and scale of the rally provided incentive to take profits, and amplified volatility is possible this week with many market participants out for the holiday, which dampens volume. The stock market will be closed on Thursday for the New Year's holiday."It wasn’t going to take much to prompt the decline, it’s probably more resting than anything else. We’ve had a pretty significant move higher," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco. "We’ve marched straight up from 1,970 or so to about 2,100 so it’s only natural that we are going to get a little bit of a pullback here."The Dow Jones industrial average .DJI fell 55.16 points, or 0.31 percent, to 17,983.07, the S&P 500 .SPX lost 10.22 points, or 0.49 percent, to 2,080.35 and the Nasdaq Composite .IXIC dropped 29.47 points, or 0.61 percent, to 4,777.44.In the latest economic data, consumer confidence rose slightly less than expected in December, while U.S. single-family home price appreciation slowed less than forecast in October. NeuroDerm Ltd (NDRM.O) soared more than 193 percent to $18.14 on heavy volume after it said data from a mid-stage study suggested that a higher dose of its Parkinson's drug could provide an alternative to treatments that require surgery. Civeo Corp (CVEO.N), which provides temporary housing for oilfield workers and miners, late Monday slashed its workforce and forecast revenue could fall by one-third as slumping crude prices force oil producers to cut costs. The stock plunged 52.6 percent to $3.92 on volume of about 56.2 million shares, the most active day in its history. Volume was light, with about 4.42 billion shares traded on U.S. exchanges, well below the 7.06 billion average so far this month, according to data from BATS Global Markets.Declining issues outnumbered advancing ones on the NYSE by 1,806 to 1,262, for a 1.43-to-1 ratio; on the Nasdaq, 1,671 issues fell and 1,031 advanced for a 1.62-to-1 ratio favoring decliners.The benchmark S&P 500 posted 25 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 107 new highs and 39 new lows. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski) Read more

Wall St. pulls back from record; utilities slump

NEW YORK U.S. stocks fell on Tuesday as investors engaged in profit-taking to pull major indexes from record levels, while the trend of modest moves and low volume continued heading into the final trading day of the year.The day's losses were broad, with each of the ten primary S&P 500 sectors in negative territory. Utilities .SPLRCU - 2014's best sector performer - led the decline with a drop of 2.1 percent. Equities have enjoyed a solid rally of late, buoyed by strong economic data and the U.S. Federal Reserve's commitment to be "patient" about raising interest rates. The S&P 500 gained nearly 6 percent over the prior eight sessions and managed to score its 53rd record close of the year on Monday.The speed and scale of the rally provided incentive to take profits, and amplified volatility is possible this week with many market participants out for the holiday, which dampens volume. The stock market will be closed on Thursday for the New Year's holiday."It wasn’t going to take much to prompt the decline, it’s probably more resting than anything else. We’ve had a pretty significant move higher," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco. "We’ve marched straight up from 1,970 or so to about 2,100 so it’s only natural that we are going to get a little bit of a pullback here."The Dow Jones industrial average .DJI fell 55.16 points, or 0.31 percent, to 17,983.07, the S&P 500 .SPX lost 10.22 points, or 0.49 percent, to 2,080.35 and the Nasdaq Composite .IXIC dropped 29.47 points, or 0.61 percent, to 4,777.44.In the latest economic data, consumer confidence rose slightly less than expected in December, while U.S. single-family home price appreciation slowed less than forecast in October. NeuroDerm Ltd (NDRM.O) soared more than 193 percent to $18.14 on heavy volume after it said data from a mid-stage study suggested that a higher dose of its Parkinson's drug could provide an alternative to treatments that require surgery. Civeo Corp (CVEO.N), which provides temporary housing for oilfield workers and miners, late Monday slashed its workforce and forecast revenue could fall by one-third as slumping crude prices force oil producers to cut costs. The stock plunged 52.6 percent to $3.92 on volume of about 56.2 million shares, the most active day in its history. Volume was light, with about 4.42 billion shares traded on U.S. exchanges, well below the 7.06 billion average so far this month, according to data from BATS Global Markets.Declining issues outnumbered advancing ones on the NYSE by 1,806 to 1,262, for a 1.43-to-1 ratio; on the Nasdaq, 1,671 issues fell and 1,031 advanced for a 1.62-to-1 ratio favoring decliners.The benchmark S&P 500 posted 25 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 107 new highs and 39 new lows. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski) Read more

Pfizer walks away from $118 billion AstraZeneca takeover fight

LONDON/NEW YORK Pfizer abandoned its attempt to buy AstraZeneca for nearly 70 billion pounds ($118 billion) on Monday as a deadline approached without a last-minute change of heart by the British drugmaker.The decision ends a month-long public fight between two of the world's biggest pharmaceutical companies that sparked political concerns on both sides of Atlantic over jobs and corporate tax maneuvers.British rules now require an enforced cooling-off period. AstraZeneca could reach out to Pfizer after three months and Pfizer could take another run at its smaller British rival in six months time, whether it is invited back or not.Pfizer's move came two hours before a 5.00 pm (1200 ET) deadline to make a firm offer or walk away, under UK takeover rules. Its decision to quit the stage, at least for now, had been widely expected after AstraZeneca refused its final offer of 55 pounds a share."Following the AstraZeneca board's rejection of the proposal, Pfizer announces that it does not intend to make an offer for AstraZeneca," Pfizer said in a short news release.The biggest U.S. drugmaker promised it would not go hostile by taking its offer directly to AstraZeneca shareholders, leaving the fate of what would have been the world's largest ever drugs merger in the hands of its target, whose board would have had to make a complete U-turn to get a deal done."We continue to believe that our final proposal was compelling and represented full value for AstraZeneca based on the information that was available to us," said Ian Read, Pfizer's chairman and chief executive.Pfizer's final offer was at a price that many analysts and investors had previously suggested would bring AstraZeneca to the table for serious negotiations. But in rejecting an earlier offer of 53.50 pounds as undervaluing the company, the British group indicated it needed a bid more than 10 percent higher, or at least 58.85 pounds per share, for its board to consider a recommendation.Pfizer had urged AstraZeneca shareholders to agitate for engagement and several expressed disappointment at its intransigence, although others - encouraged by AstraZeneca's promising drug pipeline - backed the firm's standalone strategy.AstraZeneca Chairman Leif Johansson welcomed Pfizer's decision to back down, which he said would allow the British company to focus on its growth potential as an independent company.What happens next will depend upon whether AstraZeneca's share price deteriorates in the coming weeks and how hard its shareholders push for it to revisit a deal with Pfizer. BlackRock, AstraZeneca's biggest shareholder, backed the board's rejection of Pfizer's 55 pounds a share offer, but urged it to talk again in the future.POLITICAL OPPOSITIONThe proposed transaction ran into fierce opposition from politicians in Britain, Sweden - where AstraZeneca has half it roots - and the United States over the likelihood that the marriage would lead to thousands of job cuts.Ultimately, it was price and the lack of room for eleventh-hour maneuvering by Pfizer that killed the deal. Pfizer had several reasons for taking aim at AstraZeneca for what would have been its fourth mega-merger in 14 years.Highest on the list appeared to be Pfizer's desire to take part in a recent trend of so-called tax inversions, under which it could reincorporate in Britain and pay significantly lower corporate tax. Pfizer would also be able to use tens of billions of dollars it has parked overseas, avoiding high U.S. taxes for repatriating the huge cash pile.Pfizer also had its eye on a promising portfolio of drugs in AstraZeneca's developmental pipeline, especially several potentially lucrative cancer medicines.It was this pipeline that AstraZeneca management used to make its case for Pfizer significantly undervaluing the company.Chief Executive Pascal Soriot went as far as making a 10-year forecast for a 75 percent rise in sales by 2023."As we said from the start, the pursuit of this transaction was a potential enhancement to our existing strategy," Pfizer's Read said. "We will continue our focus on the execution of our plans, bringing forth new treatments to meet patients' needs and remaining responsible stewards of our shareholders' capital."The merger would have restored Pfizer as the world's largest drugmaker by sales, a position it relinquished to Swiss-based Novartis when billions of dollars in annual revenue evaporated after its top-selling cholesterol fighter Lipitor began facing generic competition in 2011.(Editing by David Evans and Mark Potter) Read more

Trump, Sanders explore staging unusual presidential debate

BISMARCK, N.D. Republican Donald Trump and Democrat Bernie Sanders on Thursday explored staging an unconventional U.S. presidential debate that would sideline Democratic front-runner Hillary Clinton and create a television spectacle that could attract huge ratings.The two men - a billionaire and a democratic socialist - expressed interest in a one-on-one encounter in California even though Republican and Democratic presidential candidates traditionally do not debate each other until the parties have selected their nominees."I'd love to debate Bernie," Trump told reporters in North Dakota, after he secured enough delegates to clinch the Republican presidential nomination. "I think it would get very high ratings. It would be in a big arena."Basking in his newly sealed nomination at a later campaign rally in Billings, Montana, Trump said he expected to put 15 states in play in the general election, compared with three or four for a traditional Republican. He named California, Washington and Michigan among others. Trump spokeswoman Hope Hicks said in an email there were no formal plans yet for a debate. But Sanders campaign manager Jeff Weaver told CNN there had been "a few discussions" between the campaigns about the details. "We hope that he will not chicken out," Weaver said. "We hope Donald Trump has the courage to get on stage now that he said he would." Sanders, a U.S. senator from Vermont, is running far behind Clinton in the race for the Democratic nomination for the Nov. 8 presidential election. But a nationally televised debate with the presumptive Republican nominee would be a big boost to his chances in the California primary on June 7, when Clinton is likely to clinch the nomination. Trump said a debate with Sanders could raise up to $15 million for charity."I'd love to debate Bernie, but they'll have to pay a lot of money for it," he said. The idea was hatched during an appearance by Trump on ABC's "Jimmy Kimmel Live" late on Wednesday. Kimmel said he asked Trump about the debate at the suggestion of Sanders."Game on," Sanders tweeted. "I look forward to debating Donald Trump in California before the June 7 primary."Sanders himself appeared on Thursday night on the talk show, where he said Kimmel made it possible for a "very interesting debate" between "two guys who look at the world very, very differently."Sanders added that the goal would be to have the debate in a stadium in California. He then had a warning for Trump. If I become the Democratic presidential nomination, he said, "we're going to beat him and beat him bad." 'NOT A SERIOUS DISCUSSION' Clinton, who backed out of an agreement to debate Sanders before the California vote, said she did not think a Trump-Sanders showdown would happen."This doesn’t sound like a serious discussion. I’m looking forward to debating Donald Trump in the general election. I really can’t wait to get on the stage with him," she told CNN in a phone interview.A Fox News spokeswoman confirmed the network was trying to host a forum with Trump and Sanders. Representatives from other networks did not immediately respond to requests for comment. "If it does come to pass, it would generate enormous ratings," said Alan Schroeder, a Northeastern University professor who has written extensively about presidential debates. "They are from two different planets. You have a real personality contrast. It would dominate media coverage."Sanders, who has promised to continue his campaign through the Democratic nominating convention in July, has said he will do everything he can to ensure that Trump does not win the White House. "Smart and bold move by Sanders," Democratic strategist Brad Bannon said. "The Clinton people are furious but Bernie wins points for being so aggressive.”Clinton has tried to woo Sanders supporters as she turns her attention to the general election. But some Democrats worry his supporters - who are largely young, working-class and disillusioned with the Democratic Party establishment - will turn instead to political neophyte Trump, who has championed a populist agenda. The debate would give Trump a national forum to criticize Clinton and try to win over Sanders supporters ahead of an expected Trump-Clinton general election contest, Democratic strategist Chris Kofinis said."I think Sanders should think long and hard about giving Trump a forum," Kofinis said. "It crosses a line, but apparently in this election there is no line." Dale Ranney, 62, a Trump volunteer who has been to 21 of his rallies, said she would be delighted to see Trump and Sanders debate.“I think it’s a great idea, any time you can get more information to the people, absolutely," Ranney said. "Having Trump debate a socialist? Absolutely. Go for it." (Additional reporting by Emily Flitter in New York, Megan Cassella, James Oliphant and Alana Wise in Washington, Lisa Richwine in Los Angeles; Writing by John Whitesides; Editing by Alistair Bell and Peter Cooney) Read more

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