Tag: Buttonwood’s notebook

MARK Carney, the governor of the Bank of England, has upset many people in the Conservative party because of his warnings about the economic impact of Brexit. So some including former chancellor Lord Lawson and Daniel Hannan, a eurosceptic MEP, have called on him to resign. 

As we argue in a leader in the latest issue, this political pressure on an independent central bank governor is a great mistake. On the day after the referendum vote, the prime minister resigned and Brexit campaign leaders were nowhere to be seen; it was Mark Carney who stepped forward to calm the markets. He was the only grown-up in the room.

Now the stories are circulating that Mr Carney might resign, with some even suggesting that it Continue reading

FINDING a reliable way of timing the market is something that has eluded the greatest investment minds in history. That is why many people are tempted by the “magazine cover indicator” as a contrarian signal. One of the most famous was Business Week’s “Death of Equities” cover in 1979 (which actually came three years before the great bull market got going).

Two analysts from Citigroup, Greg Marks and Brent Donnelly, write that:

The premise behind the indicator is that when a journalist or editor finally devotes a cover to a market trend, company, country or person, the story or theme has been in vogue for some time and is likely past its peak. Positioning and sentiment should already fully reflect the story on the cover of the publication and the story should be fully priced in. In other words, by the time a journalist writes about the trend, a majority of the move has already happened.

The analysts—the cheeky devils—decided to apply the test to The Economist’s covers. They…Continue reading

THE economic arguments for and against Brexit in the course of the referendum campaign were quite esoteric and confusing to the average voter. Similarly, sterling’s decline in the currency markets might seem like the kind of thing that only concerns City traders.

So the row that has broken out between Tesco, Britain’s biggest supermarket chain, and Unilever, the Anglo-Dutch multinational, has made the story concrete in ways that were not apparent before. Unilever wants to raise prices across a range of goods to reflect the fall in the pound, which has dropped from around $1.50 on the day of the referendum to less than $1.22 at the time of writing. Similar falls have been seen against the euro; indeed travellers who change their money at the airport are getting less than a euro per pound.

The row has centered on Marmite, a salty yeast-based spread that is loved by some, but not all, Britons including this blogger. (I have yet to meet an American who can stand it.) But Marmite isn’t the best example as it is made in this country. PG Tips, one of Britain’s favourite tea brands (pictured), is a better example; that is…Continue reading

THE foreign exchange markets are about the most liquid trading arena in the world, certainly for the major currencies. So sterling’s 6% fall in two minutes this morning—from $1.26 to $1.18 (see chart below), with a similar-sized move against the euro—was a very unusual event. 

Traders’ minds went back to the Swiss franc’s sudden jump in early 2015, when the currency rose by 30% in an instant. But that was down to a change in policy; the abandonment of the Swiss National Bank’s cap on the franc’s strength. There was no such news to affect the pound.

The best explanation seems to lie in the world of algorithmic trading—the computer programmes that automatically generate transactions. Such programmes have been blamed for “flash crashes” in the equity markets, particularly the May 2010 event which saw the Dow plunge nearly 1000 points in minutes before recovering. The problem seems to be that programmes feed off each other. Each may have a trigger point which requires the programme to sell an…Continue reading

FIRMS must list foreign workers, blares the headline of London’s Times newspaper today after a speech from the Conservative government’s new home secretary, Amber Rudd. The idea, it seems, is not to list each and every individual but for companies  to list the total number of their foreign employees so that they can be “named and shamed”. 

Conservative Home Secretaries have a tradition of throwing red meat to delegates so it may be that this policy never goes any further. On the BBC’s Today programme this morning, Ms Rudd was emphasising that the policy was only “for consultation”, and if she consults business, she’ll probably get a pretty rude answer. Which business would want to be named and shamed at the top of the list, with all the potential for adverse publicity, demonstrations etc? It’s all a bit reminiscent of the first world war, when shops with German-sounding names had their windows broken and the Royal family changed its name from Saxe-Coburg-Gotha to Windsor.  

But this was not the only bad idea to come out of the current Conservative conference. First, there was the idea of Continue reading