Written by: Michael Baxter on March 4th 2014

Bull and Bear – an optimistic and pessimistic view of investment news. Today’s stories include: BP stuck between a US Rock and a Russian hard place. Markets sell on Ukrainian crisis – how bad can it get? Re-shoring continues apace. Apple CEO tells climate change sceptics to stick their Apple shares up…

BP stuck between a US Rock and a Russian hard place

Here is your question for the day: if Texas became independent from the US, and then years later, a pocket within Texas, let’s say Dallas, announced it wanted to be part of the US, and was opposed to the direction Texas in which was moving, what would the US government do?

That may be an unfair question, it may be that there is no real comparison with the events in Ukraine, but there is something else that Russia and the US have in common, and that is a love hate relationship with BP.

Right now, in Russia, it is love. Mind you, a few years ago, when Bob Dudley was not even allowed into the country, it was more like hate. That was in the days of BP-TNK, of course, but now that BP is in a friendly embrace with Rosneft things are much more lovey dovey.

They used to say it was risky doing business in Russia; that you were never sure which companies Russia would pick on next. But, according to media reports at the time, Vladmir Putin was upset about the treatment meted out to BP in the US over the Gulf of Mexico oil spill. Poor old Vlad shedding tears over BP an’ all!

The US is of course a much safer place to do business because the rule of law is sacrosanct. Have you ever heard of foreign companies suddenly being confined to the sin bin in the US?

It is just that these days BP is about as popular in the US as, well, as a Russian invasion of Crimea. And now it has lost another appeal. The Fifth Circuit Court has rejected BPs appeal to halt payments relating to that oil spill thing, and has said an injunction stopping payments needs to be lifted.

So where next for BP? It’s hitting a brick wall in the US. But with the Russian/Ukrainian crisis looking nasty, fears are growing about UK companies with exposure to Russia.

What is BP to do?

Maybe it can immerse itself even more tightly into Russia’s embrace and risk upsetting the US, but then, hey, what more damage can the US do?

It may all depend on the kind of sanctions – if indeed there are sanctions – the West puts against Russia. Presumably, it won’t ban imports of Russian oil and gas.

Markets sell on Ukrainian crisis – how bad can it get?

It won’t come as a surprise to anyone to note that yesterday was a bad one for the markets, except that is for gold, some government bonds, and of course the price of oil and gas.

Meanwhile, the Russian media are claiming the crisis in the Ukraine may be good for the Russian economy, as it pushes down the ruble, which helps exports and lifts the price of oil and gas.

But how bad is it from an economic point of view?

Nigel Green, founder and chief executive of deVere Group, which has more than 80,000 clients and $10 billion under advisement, said that he expects volatility over the crisis “to be a short-term phenomenon.”

He said: “I believe that this tumble will be judged by history as a ‘bump in the road’ as markets will recover quickly. I’m not worried that we are about to slump into another global recession as a consequence of the deepening crisis in Ukraine.” He adds: “The situation will perhaps fuel some of the concerns regarding emerging markets, although I expect the problems will, in the most part, be limited mainly to Russia and Ukraine.”

The emerging Europe equities team at Baring Asset Management in London said: As it stands, we believe there are three possible ways in which developments may unfold. In terms of regional stability, the best case scenario would include a post-election political outcome in which Ukraine is governed by a balanced, non-aligned government. The base case scenario would see Crimea remain effectively under Russian influence, while the worst case scenario would see an escalation in military mobilization with further separatism in the eastern part of Ukraine, where there is also a large ethnic Russian population, and sanctions being imposed on Russia.

Neil Shearing, chief emerging markets economist at Capital Economics, said: If and when any sanctions are placed on Russia, they are likely to be targeted on key officials rather than on the wider economy. Europe is too dependent on Russian energy to countenance full-blown trade restrictions. He said: “The immediate fallout of the crisis for Russia’s economy should be manageable.” Mr Shearing has bigger qualms relating to Russia, long term, however and suggested dangers include a massive populist fiscal stimulus, with negative longer implications. In any case, even before the Ukrainian crisis, Russia was slowly eating its way into its massive foreign exchange reserves.

As for the UK, one problem is that a number of FTSE listed companies are in fact Russian. So the FTSE may be more adversely affected by the crisis than other stock exchanges.

It is beginning to feel as if that elusive all-time high of 6930 set by the FTSE 100 on December 30 1999 is a curse. Every time it gets close, something happens – Northern Rock in 2007, fears of US tapering in 2013 and now this.

But surely it is only a matter of weeks before the FTSE 100 does pass the record. Isn’t it?

Re-shoring continues apace

If it wasn’t for what’s going on in the Ukraine, this story would be the main headline today.

According to the manufacturers’ trade organisation EEF, the trend for companies to re-shore into the UK is gathering pace.

The latest EEF/Squire Sanders survey found that one in six companies re-shored production in-house in the last three years. This compares to one in seven companies in 2009. Over the last three years, one in six companies re-shored sourcing to a UK based supplier.

The main reasons for re-shoring are improved quality, closely followed by issues surrounding delivery and minimised logistics costs.

EEF said: The survey also shows this gradual trend is set to continue with 6 per cent of companies saying they are planning to re-shore production in the next three years.

Commenting, EEF’s chief executive Terry Scuoler said: “The trend may be gradual but it is highly encouraging to see more re-shoring continuing. While it will always be two-way traffic, the need to be closer to customers, to have ever greater control of quality and, the continued erosion of low labour costs in some competitor countries means that in many cases it makes increasingly sound business sense.”

Cipriano Beredo, partner and global leader of Squire Sanders’ manufacturing industry group, added: “Companies in both the UK and the US that have previously off-shored low cost production may no longer be reaping the same benefits. While moving any manufacturing across borders is a significant decision for management, the report shows that this is not motivated solely by cost, but often to improve the quality of what is being produced and enhance customer service.”

He added: “In the US re-shoring has been driven by the reduction in energy costs, driven by the boom in shale gas. In addition, the US also benefits from a more flexible labour market than the UK and Europe. However, while energy and labour costs are not currently primary drivers of re-shoring in the UK, many of the other factors driving re-shoring in the US are also compelling reasons to re-shore in the UK. Those factors include improved quality, shorter supply chains and greater control of brand. Ultimately businesses will succeed where there are incentives to innovate and grow and improvements in the business climate will ensure that UK manufacturing continues to compete on a global stage.”

This is good stuff. The trend towards re-shoring is one of the reasons why it has been predicted here of late that the UK economy is going to do better over the next few years than the consensus is suggesting.

Apple CEO tells climate change sceptics to stick their Apple shares up…

It was Apple’s AGM, and in the room sat representatives for the National Center for Public Policy Research, that is a grand title for a body whose main aim is to argue against action aimed to tackle climate change.

The Apple CEO Tim Cook was asked to comment on whether Apple’s environmental related investments were profitable.

And with that the mist came down, and Cook was, according to accounts, rather angry.

“When we work on making our devices accessible by the blind, I don’t consider the bloody ROI,” he said, and he suggested that the same principle applies to its investments in environment and safety issues.

He said: “If you want me to do things only for ROI reasons, you should get out of this stock.”

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees