The bank keeps feeding us rate cuts. But the economy looks to need healthier sustenance
Yet another interest rate cut in the UK! But Meester King, you are spoiling us! Have some more money ' no, please do help yourself. There is plenty more where that came from! But what is this? Ungrateful beggars! The reaction to our central bank's munificence is, well, precisely nil, nul, nothing at all! Could it be that the punters are crammed to the gunnels with credit, and they just can't fit one more melting morsel into their mouths?
In continental Europe, of course, the monetary monarchs know how to treat the lumpen investoriat. European Central Bank president Dim Wuisenberg, in an extraordinary last-minute display of savoir faire, told investors they could sing for their interest rate cuts. Sort out your pensions and health systems, he says. Start implementing the reforms you have talked about for years and stick to EU rules on budget deficits, and then we'll see about freer money. Cometh the hour, cometh the man!
Investors are just overwhelmed with incentive. Perhaps that is why most bourses have in the past week 'paused for breath'. In the three months from mid-March to mid-June various stock markets have risen between 20% and 35%. Take the 25 leading technology stocks in the US ' they are up 58% in the past four months, and up 116% in the past nine months. Optimism is in the air. According to the Confederation of British Industry and PricewaterhouseCoopers ' institutions with their fingers on the pulse of the street ' we have bottomed out. The only way out is up!
Yet one player's pause for breath is another's caution. Fear strikes as investors peer through the fog of economic indicators, each qualified and revised until meaningless, hoping the bear market has finally gone to ground. One fund manager, who has become more erudite and sophisticated in his expression as he has become richer, declares himself 'still anxious about the tune' of the markets. Stocks now seem a little overvalued, and there is not much to tempt his jaded palate.
Another offering of corporate bonds... so beautifully crafted and presented? Lovely, but I just couldn't. I've already had three! I have to admit, tech stocks make me sick if I even smell them. I once took one that wasn't quite ripe, and boy did I regret it. I was down and out for days. A slice of mortgage debt, just a little? Well, if you insist. I really shouldn't, but I just love it. No, I'll pass on the index-linked, if you don't mind.
Product providers have undoubtedly missed a trick with the food theme. Yes to tobacco, arms and gold, but a big No-No to Fat. Obesity is a major marketing opportunity, and the biggest market in the world is the US, where 60% of the population is overweight. Who is responsible (think lawsuits) and who can profit from the slim-down (Geest's fresh salad operation)? Food for thought, indeed.
If we have to diet to lose weight, can we grow without eating? Where is the widely expected year-end turnaround to come from? Inward investment to the UK fell in the year to June. The pound has slid 15% on the euro in the past six months but manufacturing is still weakening. UK high street spending was down year on year, and the housing market is slowing. The authorities' response is 'the mixture as before' ' more interest rate cuts. Is this the only recipe in the book?
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation