This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/2016/oct/16/short-selling-could-sweep-stock-market-if-inflation-pushes-up-borrowing-costs
The article has changed 4 times. There is an RSS feed of changes available.
| Version 0 | Version 1 |
|---|---|
| Short-selling could sweep stock market if inflation pushes up borrowing costs | Short-selling could sweep stock market if inflation pushes up borrowing costs |
| (35 minutes later) | |
| A wave of speculative bets on company share price falls could sweep through the London stock market if recent rises in inflation push up borrowing costs, according to a veteran short-seller. | A wave of speculative bets on company share price falls could sweep through the London stock market if recent rises in inflation push up borrowing costs, according to a veteran short-seller. |
| Simon Cawkwell, 70, is reputed to have made several fortunes placing financial bets against the shares in companies ranging from Maxwell Communications Corporation and Polly Peck in the early 1990s through to Northern Rock in 2007. | Simon Cawkwell, 70, is reputed to have made several fortunes placing financial bets against the shares in companies ranging from Maxwell Communications Corporation and Polly Peck in the early 1990s through to Northern Rock in 2007. |
| Along the way, there have been big losses too. But Cawkwell, who writes frequently under his nom de plume Evil Knievil, remains one of a shrinking band of incorrigible market gossips willing to pit their wits against large investment institutions and hedge funds that now dominate the London stock market. | |
| The latest signs of rising inflation, Cawkwell argues, could soon trigger a different mood among investors. Some companies, he suggests, will be rapidly found out as short-sellers move in to target shares that are overvalued. | The latest signs of rising inflation, Cawkwell argues, could soon trigger a different mood among investors. Some companies, he suggests, will be rapidly found out as short-sellers move in to target shares that are overvalued. |
| Cawkwell warns of a “weight of cash” that has been encouraged – by ultra-low interest rates and quantitative easing – into buying shares since the 2008 financial crisis. “When the weight of the public’s money is there [invested in shares], or ready to have a go, it is difficult to go short.” | Cawkwell warns of a “weight of cash” that has been encouraged – by ultra-low interest rates and quantitative easing – into buying shares since the 2008 financial crisis. “When the weight of the public’s money is there [invested in shares], or ready to have a go, it is difficult to go short.” |
| And until the mood in the market reacts to inflation, he concedes, “a much safer trade would be to slap it all on Almanzor at Ascot on Saturday”. Two days after this remark, the Champion Stakes was indeed won by 11/8 favourite Almanzor. | And until the mood in the market reacts to inflation, he concedes, “a much safer trade would be to slap it all on Almanzor at Ascot on Saturday”. Two days after this remark, the Champion Stakes was indeed won by 11/8 favourite Almanzor. |
| “The Marmite stories is what all this is actually all about,” Cawkwell declares, identifying last week’s brief pricing spat between Tesco and Unilever, maker of the spread, as a emblematic of a building upward pressure on prices. “We are having a rip-roaring rise in inflation.” | “The Marmite stories is what all this is actually all about,” Cawkwell declares, identifying last week’s brief pricing spat between Tesco and Unilever, maker of the spread, as a emblematic of a building upward pressure on prices. “We are having a rip-roaring rise in inflation.” |
| As a result, Cawkwell predicts, many weaker companies are likely to be squeezed between tougher trading conditions and rising borrowing costs. | As a result, Cawkwell predicts, many weaker companies are likely to be squeezed between tougher trading conditions and rising borrowing costs. |
| At the height of the banking crisis eight years ago, there was fierce criticism of short-sellers, some of whom were accused of deliberately undermining confidence in bank stocks at a time when the global financial system was in peril. | At the height of the banking crisis eight years ago, there was fierce criticism of short-sellers, some of whom were accused of deliberately undermining confidence in bank stocks at a time when the global financial system was in peril. |
| The then chancellor Alistair Darling warned against “speculation that can be quite harmful”, while Alex Salmond, then Scotland’s first minister, referred to “short-selling spivs and speculators”. Regulators, meanwhile, imposed a temporary ban on short-selling bank shares. | The then chancellor Alistair Darling warned against “speculation that can be quite harmful”, while Alex Salmond, then Scotland’s first minister, referred to “short-selling spivs and speculators”. Regulators, meanwhile, imposed a temporary ban on short-selling bank shares. |
| Since then, however, several official inquiries have found serious failures in banks themselves, while probes into the conduct of short-sellers have been dropped. | Since then, however, several official inquiries have found serious failures in banks themselves, while probes into the conduct of short-sellers have been dropped. |
| Cawkwell says: “Short-sellers are indeed regarded as a black-hearted brigade. But that is because most people are silly and, above all, dishonest with themselves. This is of course the prelude to being dishonest towards and about others.” |