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BoE May Cut Interest Rates

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TheMotorcycleBoy
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Re: BoE May Cut Interest Rates

#278695

Postby TheMotorcycleBoy » January 20th, 2020, 10:03 am

SalvorHardin wrote:
TheMotorcycleBoy wrote:I can only guess that the stocks I mentioned (Softcat SCT is another currently very bullish UK one of mine, +32% in the last 3 months) are priced based on a short-term fantasy but that the BoE are predicting a depressing slowburn medium/long term picture.

The Bank of England, and in particular its Governor, has been spectacularly wrong in the last few years when it comes to predicting the economy. The Bank of England said that if Britain voted to leave the EU in June 2016 that this would cause a serious recession in the second half of 2016, a stockmarket crash, a house price crash and unemployment would as a consequence rise by up to 800,000. Badly wrong on all counts.

Their forecasts about GDP growth are almost always wrong. Then when they do calculate what GDP growth actually happened they invariably get the calculation wrong and it has to be revised later (admittedly GDP is a highly flawed measure of the economy). Yet we're still supposed to treat these clowns' forecasts seriously? I'd rather toss a coin. The article below, from 2017, covers an interview with the Bank of England's chief economist:

"The bank has come under intense criticism for predicting a dramatic slowdown in the UK’s fortunes in the event of a vote for Brexit only for the economy to bounce back strongly and remain one of the best performing in the developed world."

https://www.theguardian.com/business/20 ... its-errors

The good thing for investors is that these wildly incorrect forecasts are latched onto by many market participants (and much of the media), especially those who wish for the forecast to come true for political reasons (I remember the laughable desperation of a couple of posters on Polite Discussions to "prove" that there had been a stockmarket crash in the second half of 2016. Keep banging the rocks together guys). This leads to mispricing and opportunities for those of us who can separate what we would like to happen from what we predict will happen.

Cheers, Salvor.

Yes mispricing+opportunities are certainly on my wish list. (FWIW I too have heard that GDP is flawed, IIRC the argument being that it included too many different variables, i.e. was a little too noisy.)

As Taleb says about these pundits and forecasters: "Don't tell me what you think, tell me what you have in your portfolio". They generally don't put their money where the mouth is, unlike many of us here on TLF, and their forecasting track record is rarely audited.

Yup, I've got to that bit. I recently read the bit about "experts in empty suits" or some such. I love the guy's sense of humour. Particularly when he mentions the higher intelligence of the human race, and continues with "as followed by bank executives, dolphins, primates, dogs...".

But just being a slight devil's advocate to this point. Surely some of the BoEs advisor's have portfolios or have dabbled with a small bunch of stocks and share ISA holdings? Hmm.... actually may be not. Perhaps they are civil servants? I briefly worked in the public sector (6 months in 2007, absolutely hated it)......but I remember the consolation was that the HMGovt provided a whopping 22% of ones salary into yer pension pot. So perhaps most dyed in the wool civil servants, don't really need to consider their savings and investments as much as us private sector kids.

Matt

SalvorHardin
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Re: BoE May Cut Interest Rates

#278697

Postby SalvorHardin » January 20th, 2020, 10:19 am

TheMotorcycleBoy wrote:But just being a slight devil's advocate to this point. Surely some of the BoEs advisor's have portfolios or have dabbled with a small bunch of stocks and share ISA holdings? Hmm.... actually may be not. Perhaps they are civil servants? I briefly worked in the public sector (6 months in 2007, absolutely hated it)......but I remember the consolation was that the HMGovt provided a whopping 22% of ones salary into yer pension pot. So perhaps most dyed in the wool civil servants, don't really need to consider their savings and investments as much as us private sector kids.

True. When you've got a cast iron index-linked pension, combined with some serious job security (hard to be sacked for incompetence) there isn't the same need to provide for yourself compared to those of us in the private sector.

They probably have some investments, but almost certainly have serious restrictions on dealing (especially the senior staff) because of their access to inside information. For top level staff it may be that they have to put their investments in a blind trust (managed elsewhere without any input from the owner) to prevent conflicts of interest. Some years ago I read about an unnamed person brought into a top level public sector financial role from the public sector; because of these restrictions their stockmarket investments on being appointed were moved into four index funds (domestic equity and fixed-interest plus global equity and fixed-interest).

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Re: BoE May Cut Interest Rates

#279649

Postby JamesMuenchen » January 24th, 2020, 11:37 am

Cut seems less likely now given cracking PMI data
https://www.cityam.com/uk-pmi-economy-c ... -rate-cut/
The UK economy has returned to growth in January, according to a flash Purchasing Managers’ Index (PMI) reading, hitting a 16-month high as the Bank of England weighs up whether or not to cut UK interest rates.
The flash IHS Markit / CIPS composite PMI reading for the UK hit 52.4 in January, up from 49.3 in December.
The composite reading exceeded expectations, and the strong performance is likely to stave off the prospect of an imminent rate cut by the BoE when its monetary policy committee (MPC) meets later this month.
The composite UK PMI reading for January had been expected to climb to 50.5 following December’s reading of 49.3.


52.4 puts the UK about 4th in the G20
https://tradingeconomics.com/country-li ... tinent=g20


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