How time (and money) flies

We can dare to hope that, however bad things are, the rot has been stopped. It is highly significant that the stock market is ignoring the bad news and concentrating on the positive.

And there is plenty of bad news about. The economy is shrinking, almost certainly faster and for longer than Chancellor Alistair Darling has forecast. The government seems increasingly paralyzed, rather as those of John Major and James Callaghan were as the struggle to stay in power stifles the desire to legislate (though one may feel that is all to the good in the present circumstances).

The Bank of England clearly feels that there is still a long way to go. Having reached the point where it cannot cut interest rates any further, it is pursuing its alternative policy of quantitative easing rather than pausing to assess the impact so far.

It seems that about £25 billion has been dished out in each of the two months that the policy has been in place and similar amounts will be dispensed in each of the next three months. So the £75 billion first tranche will be gone by the end of the month and we embark on the £75 billion standby in June. How time (and money) flies.

A group of economists are quoted in The Times as arguing that quantitative easing is not working because yields on gilts have not fallen. This is surely seeing things back to front. With all the extra gilts that will have to be pumped out to fund the government’s horrendous debt projections, gilt yields would have soared had the Bank not been going round mopping up the glut.

This slightly cautious approach, if one can call £25 billion a month cautious, is probably the right policy. The Bank has not dished out the whole £150 billion in one fell panic-stricken swoop but has done enough to demonstrate that action is being taken. With interest rate cutting having run its course, the Bank has bought itself until September for the second string to its bow to hit the bull’s eye.

We have to hope that the corner will be turned by then and although the economy will not be recovering by the autumn there is reason to hope that we will be bumping along the bottom. As yet even the more optimistic pundits and politicians are talking about how the world economy is no longer in freefall.

And yet mortgage approvals, although still at very low levels, are rising again; manufacturing at last seems to be gaining some benefit from the fall in the value of the pound; the services and retailing sectors are also seeing glimmers of revival; Barclays has produced excellent profits despite another slab of write-offs.

Among reports of companies moving out of the UK to escape the tax regime we have Japanese photographic firm Canon choosing London for its European headquarters rather than Amsterdam.

The stock market has had a great week, with the Footsie finally topping 4,400 points this morning after briefly flirting with this important barrier yesterday. For the moment at least, investors are buying on good news and turning a blind eye to the bad news, which to me is the true sign that the bear market is over.

So more nasty losses at Lloyds Banking Group and Royal Bank of Scotland are pushed aside by the better figures from Barclays. The travails of industries such as airlines and vehicle manufacturing are ignored. Every day there is a reminder of how far we still have to go to get out of the woods. It’s just that investors do not want to know any more.

I hope I am not being blinded by my long standing belief that investors will be too nervous to take the Footsie much above present levels this year. Reason says I am right, but with investors in a more bullish mood it is becoming increasingly advisable to get back into shares.

Shelling out

Few people will have assumed that the years of outrageous bonus payments could end overnight so it is hardly surprising that the remuneration board at Royal Dutch Shell has ignored the public outcry. For the second year running, Shell executives failed to reach their targets; for the second year, they have been awarded bonuses anyway.

Wake up, you dozy members of the Shell remuneration committee. It’s not your money you are dishing out to your pals on the board.

Shell shareholders should vote against all resolutions put to the next AGM to register their disapproval. Attend the meeting and speak out if you can. It will take a lot of shouting to make the arrogant board listen.