Pepper and salt
FOREPLAY, end-play and the herd instinct: these, Gordon Pepper says, are what tickle up markets. No wonder they do not always appear cool and rational. He has known them in all their moods — from many years from his coign of vantage at Greenwell, the brokers, and now as a pro- fessor at the City University. His message, then and now, is that money moves mar- kets. In a seemingly rational world they would reflect the sum of knowledge. Every- thing that was known about a company would be reflected in the share price, and the theory of efficient markets says that they work like that. Mr Pepper disagrees. Tides of money, so he says, sweep through them, and eddies and undertows explain the oddities of their behaviour. In Money, Credit and Asset Prices (published by St Martin's Press at £40 — the tide must have come in) he sets out the argument, and scarcely needs to illustrate it from the mar- kets of today. Last year a floodtide of money swept out of the American banking system and into the world's markets, float- ing the least seaworthy of vessels. This year it has been ebbing. Markets responding to these ebbs and flows appear to take short views, much to the annoyance of industrial- ists and ministers who think they know bet- ter. The Financial Secretary to the Trea- sury, Stephen Dorrell, is studying how to improve the flow of funds to industry. He might find that a stable monetary policy would do it for him.
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