The Lemon Fool

Bank of England policy-maker hints at possible rate cut
Another Bank of England policy-maker has floated the idea of cutting the central bank's main interest rate.

AiYn'U

13th January 2020
Fall in inflation raises prospects of interest rate cut

The UK's inflation rate fell to its lowest for more than three years in December, increasing speculation that interest rates could be cut.

AiYn'U

17th January 2020
Retail sales fall sharply in December

Retail sales fell again in December as a Christmas shopping spree failed to materialise.

AiYn'U

And in industry:
FT article today: Forget staying close to EU after Brexit, chancellor tells business
"Urges companies to 'adjust' to new reality"

TUK020 wrote:And in industry:
FT article today: Forget staying close to EU after Brexit, chancellor tells business
"Urges companies to 'adjust' to new reality"

I think "flee" might be the better description.

regards, dspp

dspp wrote:I think "flee" might be the better description.

regards, dspp

It's 25 years since I have lived and worked in France, and my spoken French is very rusty.
I have started language tuition to get it back up to speed.
Looking on the Rightmove website, you get a lot of house for your money in the south of France

Snorvey wrote:One drawback.

It's full of French people.

No, we call ourselves Europeans.

dspp

Snorvey wrote:One drawback.

It's full of French people.

Well, I'm half Breton and married to a lady from Alsace.

AsleepInYorkshire wrote:13th January 2020
Fall in inflation raises prospects of interest rate cut

The UK's inflation rate fell to its lowest for more than three years in December, increasing speculation that interest rates could be cut.

AiYn'U

But the FTSE350 is very upbeat is it not? Even my UK-facing stocks in me and Mel's foli (MSLH, NXT, PSN, LGEN, etc. etc.) are well up. The only UK one we have that's struggling is TRI.

I guess the analyst/advisers to the big players (investors) on our markets are pricing in either "UK will be OK" or "Big corporation tax cuts".

Matt

So the rationale behind the rate cut, is to devalue the £ and juice up exports?

Snorvey wrote:One drawback.

It's full of French people.

Hmmm. Bit racist.

ffacoffipawb64 wrote:

Snorvey wrote:One drawback.

It's full of French people.

Hmmm. Bit racist.

Best report it to the moderators if you feel that way.

Does anyone __actually_want__ to discuss our economy or the BoE's statements in any way??

I think it is sensible for the BoE to risk a bit more inflation with a view towards stimulating investment.. The real difficulty is working out what impact a Canada - type deal will have. My guess is that the car manufacturers etc will not shut down overnight, but will stop investment and gradually transfer production outside the UK.

johnhemming wrote:I think it is sensible for the BoE to risk a bit more inflation with a view towards stimulating investment.. The real difficulty is working out what impact a Canada - type deal will have. My guess is that the car manufacturers etc will not shut down overnight, but will stop investment and gradually transfer production outside the UK.

Thanks John,

By that do you mean if we do have a "Canada - type deal" here, then it's possible car manufacturers in the UK will move overseas, but by reducing our IR we could offset that possibility by encouraging those firms to borrow money here and hence continue to invest in the UK (and hence pay British workers etc. etc.)?

Just curious and trying to figure out how these things work.

Matt

I think the difficulty is a mixture of customs friction and the rules of origin rather than any tariffs. Tariffs are relatively easy to deal with as it is only really about money and if the government wishes things can be done about that. I would assume any deal would not really have tariffs.

The financial services sector need to establish subsidiaries in the EU. In the main they have been doing that. Food exports are more of a challenge, but the government may simply fold on such rules.

Alternatively Johnson will simply do a mid year U turn as he did on Northern Ireland in the WA.

TheMotorcycleBoy wrote:

johnhemming wrote:I think it is sensible for the BoE to risk a bit more inflation with a view towards stimulating investment.. The real difficulty is working out what impact a Canada - type deal will have. My guess is that the car manufacturers etc will not shut down overnight, but will stop investment and gradually transfer production outside the UK.

Thanks John,

By that do you mean if we do have a "Canada - type deal" here, then it's possible car manufacturers in the UK will move overseas, but by reducing our IR we could offset that possibility by encouraging those firms to borrow money here and hence continue to invest in the UK (and hence pay British workers etc. etc.)?

Just curious and trying to figure out how these things work.

Matt

I think that divergence of standards could have a fairly drastic effect on investment. Devil will be in the detail. Any action on interest rates will be like pushing on a rope.

A rope which cannot be pushed that far anyway.

Hmm.. I'm still trying to connect why many of my UK-facing stocks like I mentioned in viewtopic.php?p=278554#p278554 are still quite bullish (as is the FTSE350). The proposed rate cut seems to flag pessimism, but my UK stocks seem to be indicating growing earnings (in GBP) and so are optimistic signals to my brain.

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.

(Sorry I'm currently reading "The Black Swan" - but I still can't get causality out of my head).

Matt

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.

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.