Edwards strategy bears up well

Albert Edwards, Dresdner Kleinwort Wasserstein's notoriously pessimistic investment strategist, has never really been known for his market timing.

He had notable success seven years ago or so, when he accurately predicted the problems that were about to engulf the tigers of south-east Asia.

More recently he has had to endure endless barracking about his forthright declaration that the post-bubble downturn after the millennium did not go deep enough and has not lasted anything like as long as it should, given the excess built up in the financial system during the boom. The extraordinary 40% rally on the FTSE 100 - from the March lows of last year through to this April's high of 4576 - was threatening to turn Edwards into a laughing stock.

Yet a defiant research note, issued at the beginning of July, seems to have rescued the man's reputation. Talk of a second leg to the bear market has once again gripped trading rooms, with shares in Britain falling almost 5% so far this month.

Yesterday on Wall Street, where the Dow Jones has echoed the Footsie's performance, there was a fresh ripple of concern as the big US index dipped below 10,000 once more, before recovering.

The optimists say we are just suffering from a bout of jitters, brought on by the persistently strong price of crude and "emotional" matters, like the reminders of 9/11 which came with yesterday's US commission report. They point to Alan Greenspan's confident testimony to Congress this week, when he painted a picture of a balanced US economy which just needs a few flicks on the interest rate rudder to keep growth and inflation under control.

The pessimists also point to Greenspan, but for different reasons. They see the Fed chairman as having created a fresh bubble when the dotcom variety burst and the hijackers struck. By taking borrowing costs so low, so quickly, Greenspan has created a credit bubble, which we can see most obviously in house prices and rampant consumer spending.

In stock market terms, therefore, the great rally of 2003 might turn out to be nothing of the sort once investors wake up to the true imbalances threatening the world economy.Edwards, for one, hopes we're all in for a stormy summer.

Peer calls the shots

With a gun to their heads, the independent directors of retailer DFS have advised shareholders to accept a £500m bid by chairman Lord Kirkham.

The gun is the implied threat that the peer, who has run the firm for 35 years, will leave if the deal is not done. And that's a threat that is likely to push most investors into taking his cash - he is the central figure at DFS, having built the business over 35 years.

Kirkham owns a £45m stake in DFS (10%), which he is effectively using as part-payment, together with an extra £86m in hard cash from himself and his family. This will give the Kirkhams 100% of a business which will also shoulder about £400m of debt.

Barring the possibility that an already tough furniture market gets substantially tougher, this looks to be a good deal for the peer. And, let's face it, Kirkham knows the company intimately; he would not do the deal if trading looked in serious doubt.

This year DFS is still forecast to make a profit of £51m. Lord Kirkham plans to halt the new stores programme, which should save up to £30m a year in capital expenditure.

Assuming the profits and savings are put into paying down the debt, and assuming there are a few property disposals here and there, the borrowings look very manageable.

Put another way, this business is being taken private on the cheap. DFS is another illustration of why the City is invariably right to be leery of companies dominated by one individual.

US takes the biscuit

Jacob's Cream Crackers could soon be owned by the Americans. So what? Not many great British brands remain in identifiably British hands. Such is global capitalism.

The American private equity house said to be weighing up a bid for Jacob's (already owned by the French, by the way) is Hicks, Muse, Tate & Furst. Based in Dallas, Hicks etc is said to be competing with United Biscuits to take Jacob's off Danone's hands. If the US financiers win the day, they will have an interesting selection of British food brands. They already own Burton biscuits and recently bought Weetabix.

They are not just buyers, however. This week Hicks floated 50% of Premier Foods, owner of Marmite, HP Sauce and Sarson's Vinegar, on the London market, albeit at not quite the price first imagined. So there is hope that we might get Jacob's back - at some stage.