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Bull and Bear – an optimistic and pessimistic view of investment news. Today’s stories: Germans vote for softer stance on troubled euro area. UK and Germany move closer together. Weidmann warns of currency war. Rose set to take-over at Ocado. The world needs a $14 trillion stimulus, Davos told. Companies in the news Pearson 

Rose set to take-over at Ocado

Shareholders in Marks and Spencer might well be saying: “But we want him back”. Maybe, in a roundabout way they may get their wish.

Stuart Rose – the man who performed miracles at Marks, rescuing it from an apparently unstoppable buy-out by Philip Green – is due to take up the reins as the next chairman of Ocado. The ‘FT’ quoted Mr Rose as saying: “As retail goes through a fundamental shift into the digital world, I believe Ocado’s model and the high standards of customer service it provides will see it emerge as a powerful online player.”

You may know Ocado sells Waitrose’s products online. But in this regard it has a problem. For these days Waitrose sells Waitrose’s product online too.

Does Ocado have a future?

There is talk that Marks and Spencer is considering buying out Ocado.  So here is an idea, what if Marks says that as part of its condition for buying the online company, it wants its new chairman too. That might seem a bit more like it

Germans vote for softer stance on troubled euro area

It was election time in Lower Saxony this weekend, and the electorate voted for change.  They voted for a party that is more likely to advance higher taxes, more likely to push for fiscal stimulus, but is also, apparently, softer on the European periphery.

Of course, Lower Saxony is just one region. Change in local government is not going to affect central government, not that much. But Lower Saxony is seen as a bellwether state. In September, it will be the time for Germany’s main election, and if last weekend’s poll proves to be as prophetic as it often is, Germany’s government may be due an overhaul.

That does not mean it’s curtains for Angel Merkel, but if the September election goes the way the Lower Saxony vote suggests, Mrs Merkel may have to ditch her preferred coalition partner and opt for a coalition with the Social Democrat Party instead.

The Social Democrat Party is in favour of some debt forgiveness, more growth policies and less austerity for the periphery. It also supports a higher top rate of income tax, more regulation for financial services, a financial transaction tax, fewer agriculture subsidies, and is supportive of investment loans into the Eurozone periphery. It’s a shame we can’t have pick and mix because some of those policies seem pretty good, others seems dangerous. Mind you, coalition governments do involve an element of pick and mix, but let’s hope that in the event that the September election does throw up a result consistent with the Lower Saxony election, the right policies are picked and mixed.

If the Social Democrat Party does indeed form a coalition with Angela’s Merkel’s CDU, things won’t be that odd. Indeed such a coalition existed between 2005 and 2009, but it may force a pretty significant switch from the German policy we have become used to in these austere times.

UK and Germany move closer together

As the debate over the UK’s continuing involvement with the EU grabs more of the headlines, it is easy to forget that the UK does have some trump cards.

For one thing, in terms of philosophy and attitudes to free trade, the UK is quite close to the Netherlands, Sweden and Germany, and also to Poland. None of these countries want to lose their natural ally in the EU.

But recent data also shows how close the economic ties are between the UK and Germany.

According to data from the Bundesbank, trade in goods and services between the UK and Germany was worth 153 billion euros in the first nine months of 2012, compared with 150 billion euros between Germany and France, 149 billion between Germany and the US, and 115 billion with China.

And it’s not all Germany selling to the UK, either. British goods exports rose 20 per cent over the period, compared to a year ago, and the deficit shrunk. Ambrose Evans-Pritchard covered it in the ‘Telegraph’. He wrote: “British suppliers and manufacturers are deeply integrated into the German industrial machine and enjoy the follow-through benefits of German exports to the rest of the world.” See: Britain becomes Germany’s biggest trade partner as Berlin-London pact deepens


Weidmann warns of currency war

And before we leave the subject of Germany, and indeed the Bundesbank,  President of Germany’s central bank Jens Weidmann made a speech in Frankfurt which – while the tone was not surprising – was, when you think about it, a little odd.

His fears seem to be twofold: First, he is worried about central banks losing their independence, and secondly, he is worried about this resulting in a kind of race to devalue currencies. In short, he is worried about a currency war.

He said: “It is already possible to observe alarming infringements, for example in Hungary or in Japan, where the new government is massively involving itself in the affairs of the central bank, is emphatically demanding an even more aggressive monetary policy and is threatening an end to central bank autonomy.”

But in the UK there are growing calls for the Bank of England target to be switched from inflation to nominal GDP, and the Bank of England has said it is concerned about the high level of sterling. The bank’s independence may or may not be questionable, but what is clear it is that it has become less Germanic.

But here is one odd thing. Mr Weidmann referred to the 1980s and 1990s period, which saw more and more central banks become independent, as something of a golden age. He called it “a great moderation.”  It really is just a little shocking. If there is one thing for which Alan Greenspan is now being ridiculed, it is for referring to that period pre 2008 as the Great Moderation. And indeed, Mr  Weidmann’s remarks bring back memories of the former Bank of England governor, the late Eddie George talking about NICE  – non inflationary consistently expansionary. We now know that during this era, the seeds for today’s woes were sown. Mr Weidmann may or may not have a good point to make, but his choice of words may suggest he has not moved on.

Here is another odd thing. He also said: “Until now the international monetary system got through the crisis without competitive devaluations and I hope very much it stays that way.”

But hasn’t the euro, because it includes countries such as Greece, had the effect of ensuring Germany’s exchange rate is much lower than it would otherwise have been. It may not be deliberate exchange rate manipulation, but it is most certainly artificial.


The world needs a $14 trillion stimulus, Davos told

Just remember there is always someone worse off than you.

Yes it’s cold and there is all that white stuff underfoot, but pity the poor souls who have descended on Davos. Temperatures are predicted to fall to minus 13 degrees today. So not only do they have to put up with caviar, smoked salmon, lobster washed down with a glass of Bolly, they have to trundle through the snow from their five star hotels to the conferences.

There are those who think the whole thing is a bit of an anachronism. Sure Mandela and de Klerk decided they quite liked each other while at Davos, but in these days of a troubled global economy, all that gluttony seems a bit, well… rich.

Maybe it is, but then again, perhaps it is better to have world leaders and CEOs and even the odd economist, talking to each other than making war with each other. And who knows, someone might actually have a good idea.

Perhaps Felipe Calderon, former president of Mexico, has had one of those.

He wants to see the developed world offer guarantees, insurance and all round support to private enterprise, to encourage them to invest some $14 trillion between now and 2030 into creating a green economy. He also wants to see a phasing out of fossil fuel subsidies.

He said: “Greening global economic growth is the only way to satisfy the needs of today’s population and up to 9 billion people by 2050, driving development and wellbeing while reducing greenhouse gas emissions and increasing natural resource productivity.”

It is difficult to see how private business can be persuaded to invest that kind of money, and it is even harder to see how – in the absence of the markets taking up the challenge – governments can be persuaded to invest that kind of money. But let’s just assume for one, perhaps naïve, moment that his idea is viable. If you believe the global economy needs a big Keynesian stimulus, $14 trillion should do the trick.

Companies in the news

Pearson fell under the spotlight at both the ‘Times’, via Tempus, and the ‘Telegraph’, via Questor, today. Tempus tipped the shares last year, on hopes relating to the education sector and a sale of the ‘FT’. The shares have not done so well since, but Tempus feels the rationale for its previous tip have not gone away and says “stay in there.” Questor, fretted about changes to management, with some senior people having recently left and concluded other media stock such as BSkyB and ITV look more appealing.

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Showing 2 comments

  1. We all like ‘pick n mix’ in principal, but shouldn’t forget the need to show our best team qualities if we want to be up there with the best.
    It’s great to be first choice or even second pick for the favourite team. So let’s hope we don’t end up like the poor kid with the runny nose and holes in his boots and pants, left waiting on the sideline, odd man out!
    (Or forget whoever gets that part also needs a break).

  2. Michael,

    Surely Morrison’s WM would be the better fit for Ocado? After all, I doubt Ocado are set up for delivering the latest outfit from Per Una – not to mention what happens to M & S existing online offering (even though it appears to be sharply disliked by its customers).


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