The Bank of England On The UK Stock Market
It is nearly 30 years since the New Labour government made the Bank of England “independent.” And what a disaster it has been. The concept of major economic decisions being made by a Politburo of unelected people is not a great one. Very often appointed because they could not find anyone else, or they are sympathetic to the centrist tyranny we have in this country. In fact, the only thing worse is to have elected people who are even more disastrous, which we have seen periodically as well.
At the time in 1997 it perhaps made sense as the Blair government wanted to fool the financial markets that the BoE being separate from a potentially socialist and incompetent Labour government would mean that the financial markets would be safe. For a time until Gordon Brown sold our gold reserves at the lows, one could argue that the concept was a winner. However, having second rate apparatchiks whose main goals in life are simply to get a gold plated pension and a gong does not necessarily help the economy.
This week the Deputy Governor of the Bank of England was clearly trying to show that she knows what she is talking about in warning that the stock market has not factored in the plethora of negatives currently overshadowing equities and they should go / could go lower. This is the first time that anyone from the BoE has commented so directly regarding share prices. Anyone with common sense of course knows that commenting on the direction of shares is about as reliable as commenting on the trajectory of a drunk outside a pub, unless you have special insight. While this may be the case as far as Sarah Breedon, one rather gets the feeling it might have been better if one her more long serving underlings at Threadneedle Street had suggested that she might not broach the subject. That said, Sod’s Law is that her warning comes ahead of one of the biggest stock market booms in history. We can only hope.
But speaking of the Bank of England, and speaking of its day job in controlling inflation, or as is usually the case, not doing so, there is one question that has not been asked of late. Why are UK interest rates so much higher than in the EU? Should interest rates being lower have been one of the benefits of Brexit? Currently UK base rates are 3.75%, versus the equivalent of 2.15% across the channel. If we had rates as they have in the EU there would be far less strain on family budgets, and who knows, would inflation be any higher than it is now?
Physiomics
One of the things we do know about the small cap end of the stock market is that it is a tough place to be both as an investor and a CEO. We also know that the cost of listing and the cost of remaining listed means that management is very often walking a tightrope as far as both staying alive in terms of the business, and keeping shareholders sweet. It is also the case that the relative shortage of listed shells and the hassle of forming one means that it is very tempting to hijack someone else’s via an EGM, or similar Trojan Horse behaviour,
Clearly at Physiomics (PYC) with the announcement of an EGM, it is evident that one or two people have not been kept sweet. What may be re-assuring for management, even though the EGM is to be held in Slough on Wednesday, is that in the recent past most EGM’s have gone the way of the incumbents, even if they did not necessarily at the time have the evidence for remaining so. Indeed, it is memorable that Reabold (RBD) has emerged from its EGM’s in what could describe as a positive way. Perhaps as far as EGMs are concerned, what does not kill you makes you stronger.
This Week’s Stock Risers
One of the things that a stock market commentator is supposed to be doing is to call out situations, whether bullish or bearish, ahead of time. Given that I do not want to be hated when I get it wrong, I do tend to avoid negative calls on stocks, preferring to limit these to the major markets. But at least on Wednesday morning in the Chart Rundown I did pick out Deltic (DELT) as a technical buy on the basis of the shares at the time spiking moderately towards 3.25p. The target was 5.75p to be hit by the end of next month. In fact, the shares hit 8p by the end of the day on M&A speculation. It has to be said that there is nothing better than spotting an early bird takeover situation, even if the basis was just the price action.
Perhaps the opposite situation to Deltic this week was the 70% rise on no new news from Sutton Harbour (SUH). The last we heard officially here was a bank facility amendment at the start of the month. Presumably, someone, somewhere is confident that the company’s debt reduction plans are on track.
There was an almighty share price spike for Quantum Data (QDE) to start the week, which was clearly too tempting for the company not to raise into by the end of it. The flexible power generation group says it is confident of getting the capex funding it needs.
There was a decent update and share price rise for Active Energy (AEG) who signed a non-binding Letter of Intent (LOI) with Bitdeer Middle East Technology Ltd., a wholly owned subsidiary of Bitdeer Technologies Group (NASDAQ: BTDR). AEG said the LOI establishes the framework for a strategic joint mining partnership, positioning Active Energy to rapidly transition into a scaled, revenue-generating digital infrastructure platform aligned with its targeted 100MW rollout. Shares of AEG were up 30% on the week.
