Will Glencore be the new Lastminute.com?

Glencore, a huge secretive partnership that controls much of the world's commodity trade, has had an embarrassing few weeks as it looks to do an IPO that has a sole reason of making its staff billionaires and millionaires. They don't say this, but the IPO papers put together don't have much of a story to tell as to why they need all this external investor money.

Of more interest, is the sell-off in the commodity markets of this week. They had been on a big bull run so these things always correct, but the sell -off is sharp.

One is reminded strongly of former top of the market deals, RBS buying ABN AMRO and Lastminute.com listing in the hype of the internet boom - and this is just UK deals. in the US you have AOL-Time Warner the daddy of all bad deals.

Glencore is yet to hit the market, but the joie de vie is draining fast. Glencore's float will be stage managed (by underselling to tracker funds, the initial price will be at the low end of the range etc) to make it go up on its first day - but when we look back in a year's time - will we see this as the moment of hubris?

The Strange case of GKP, part 2

So exactly a year ago (how time speeds by) I wrote a short article on Gulf Keystone Petroleum, a bizarre small oil stock that was full of a strange mix of shady investors and lots of oil.

It was always a high risk, but interesting investment. A year on and there have been enough twists and turns that it is worthy of an update.

Firstly, the shady investors, ETAMIC were, umm, paid off earlier this year with a big share placing. This was painful at the time as shareholders saw the stock fall, but in the medium term it has proved a big boost. To rid the company of its association with an unknown entity could only be a good thing.

Next the company, having found lots of oil last year, needed to prove it up and start to sell some. Just today it has announced that virtually all its drilling is finding oil in Kurdistan. For a small oil company this is unheard of - other companies like Sterling Energy drilling nearby have not been so lucky.

Also since a second placing in the Company just a few weeks ago there has been more institutional investor involvement which has stopped the shareprice acting like Desire oil and going up or down 10% to 20% per day. A much less heart stopping investment. Even the skeptical press like FT Alphaville (who are always rightly skeptical of small company success stories as most plummet back to Earth) have come around to not quite dissing the company so much.

Finally, there is still a big piece of intrgue in that Iraq has failed to produce a stable Government. Without that there is still lots of risk in GKP not having full control of its own destiny. This accounts for its still not unrealistic valuations.

Personally, I think the future is bright but short for GKP, as soon as the Government of Iraq ratifies its contracts the company will be taken out - I thought this would be pre-Xmas 2010 but this seems optimistic now; That will make CEO Mr Kozel smile beyond his wildest dream. It is an interesting share story, one that happens only once in a while.

Privatise the profits: LLoyds Banking Group

Lloyds Banking Group has had a fairly good couple of weeks on the stock market,. The market has gone up 10% in the last two week, Lloyds has gone up 25% in the same time. Why could this be?

Well for one, the bank has been hinting at making a profit in the second half. As one would expect though, there is more to this than meets the eye, as actually profits are being 'brought forward' (what a great new Labour spin term that is!) to help Lloyds now. Later come the losses when hopefully the economy has recovered.

Secondly, the end of the process of putting loans into the Government's Insurance Scheme is nigh. Here Lloyds have made a huge winning bet. All their worst loans are going into this scheme - so most of HBOS in fact. As taxpayer's we are responsible for 90% of the losses. So the most Lloyds could ever lose is £25 billion, but it is likely to be far short of this, even in worst case models.

Thanks to these two events, even the bearish banking broking community is upgrading Lloyds to a buy at 80p odd. taxpayer's are going to lose their shirts and shareholders are going to to well at his rate; therefore if you want to help mitigate your future tax rises, buy some share in Lloyds or RBS!

The losses are being socialised; go private.

Weekly Outlook : Lots to Barc about

Another week, another crisis?

I hope not. However, I will be interested to see what happens to Barclay's this week. After last weeks share crash - down 66% in a week, there is a limit to how much more the shares can fall.

Normal city trading would suggest a strong rebound is due, but if it really is institutional investors selling out then the day-trading community will have its work cut out trying to find enough cash to engineer the re-bound.

In all of this in normal times you would fully expect the CEO and Chairman to resign, perhaps the finance director too. At least the new boys could then take over and tell the truth with some credibility. We do not live in normal times though. The City is credulous of Barclay's exec's after they tried so hard to win ABN Amro - had they achieved victory they would now all out of jobs like their ex-colleagues at RBS.

The week will be determined by Barc on Monday and Tuesday - if there is stability and a recovery then the next phase of the crisis may be postponed for a few weeks. Certainly RBS is trying to hog the headlines to get some positive press about itself....