Why there is no need for a hung parliament hang-up

Both really need to change the script. The evidence from the City, and the mood of many of the economists it employs, is that the markets have got used to the idea. A hung parliament is now factored into market expectations, and though it would bring uncertainty it should not cause any more upset. In the jargon, it is already priced in.

Roger Bootle's Capital Economics was one of the first to say so, and repeated the message this week. Sterling fell against other currencies a few weeks ago when the Tory lead first began to evaporate, but it has begun to pick up again in recent days. This week, when the polls have suggested the Liberal Democrats' Nick Clegg to be the most popular of the three leaders in television terms and shown his party as having more than enough support to deny either of the others a clear-cut victory, the pound has actually got stronger, rising 1% in trade-weighted terms and 2% against the euro.

There has been a similar rally in gilts, and this indicates that the price the Government has to pay to borrow money has dropped, not risen. This again is not what one would expect if the political uncertainty was likely to do serious damage. True, rates are still higher than they were six months ago, but that is what you would expect, given that the economy is showing more signs of recovery.

What in fact has happened in recent weeks is that overseas participants in our markets have had to find out who the Liberal Democrats are, having previously barely known they existed. Now they have got used to the idea and appear reassured that the Liberal Democrats' economic agenda is as coherent as that of the other parties — albeit that is not saying much.

They might also pause to reflect that in the past 100 years, as Lombard Street Research points out in a soon-to-be-published paper Sharpening The Axe, which I will comment on in detail next week, the only time Britain has successfully cut spending has been under a coalition government.

Don't be fooled into thinking Mrs Thatcher did. All she achieved was to make it rise more slowly. State spending was almost as big a proportion of national income at the end of her term as at the beginning.

The only times it fell were in the Lloyd George-led Liberal-Conservative coalition of 1921-22, the Ramsay MacDonald-led National Government of 1931 and the Lib-Lab pact after the IMF's arrival in 1976.

On that basis, if you want genuine cuts in public spending rather than empty promises and if you believe history repeats itself then you should be actively hoping for a hung parliament. Now there's a thought...

Silly City turned a deaf ear to Yell

Even these days it's unusual for a share to rise 50% in a month, and even more unusual when the share is Yell — the directories group so long in the doghouse. But that is indeed what has happened — the shares, which had hovered around 40p for most of this year, were nudging 60p this week.

It is the usual story. The market had so convinced itself that the directories business was going to go bust that it failed to notice the advertising cycle had turned and the grass roots economy was picking up. It also ignored the fact that a major rights issue at the end of last year made the debt burden much more manageable and drastically reduced the chances of Yell breaching its loan covenants.

Now it is a bit of a scramble to catch up. Analysts at JPMorgan, while sheepishly admitting that they missed the bulk of the rise, reckon there is further to go because it is still at a significant discount to the rest of the media sector.

They may be right.

It is one of the best-managed businesses, and perhaps the only one that has a proven internet strategy from which it already makes money. Whether it can repeat on the web the past success of its phone directories remains to be seen but it is certainly heading in the right direction.