Never mind, the stock market won't fall to zero, unless we've gone back to St Petersburg
CHRISTOPHER FILDES
Grrrrr. Not for thirty years has a bear market growled as fiercely as this one. In those distant days a friend of mine found himself questioned by a BBC interviewer with a lofty indifference to matters of finance. Why should it matter, he was asked, if the stock market went down? Because markets are forecasters, and if you believe them, hard times are ahead. Yes, yes, but was this just a fuss in the City? Ordinary people, surely, didn't own shares? Perhaps not, but their pension funds did. Well, then, had a stock market index ever gone to zero? Yes, said my friend, with assurance: St Petersburg, 1917. Now, short of that precedent, the worst of the fall is presumably over. Leading shares have lost about half their value, and are not likely to lose as much again, but the mood of the market is febrile. So many props for hope have been pulled out. Those who thought that each fall was a healthy correction, or strained to look across the valley to the heights beyond, or counted on some sort of consolidation which would clear the sellers out — all of them found new reasons for losing more money. Two months ago I saw the markets as divided between optimists, who thought that things would soon get hack to normal, and pessimists, who feared that this was so. Since then the pessimists seem to have gained ground, as the faith that the markets had placed in new economics and new technology comes to be seen as a classic aberration. From the South Sea Bubble onwards, stock markets have gone over the top at the end of long periods of genuine prosperity, when we are tempted to believe that life will always be like this, only more so. That was asking too much.
Mugs away
TO guide us through these difficult times, what we need is a mugs' index. It might be called the DPC, to stand for Dinner Party Chatter. Dotcom shares, in their day, sent this index to an all-time high, for everyone knew some young spark who was going to sell cut flowers on the internet and had already made his fortune — on paper, of course. Nobody now wants to talk about shares, not even shares in solid, boring companies that generate cash and pay dividends. Surplus bank branches are high on the DPC, for the guests have all been to a property auction and come away with a lot. Buy-to-let is, perhaps, last year's fad, but the smart guests have put down deposits on half a dozen new flats, right off the developer's drawing board. Their predecessors did just the same in Docklands, last time round, and had to walk away from their money. Better luck this time.
Cosying up
IT WAS Will Hutton — in The State at the Stake, or some similar title in his ever-popular series — who told us that we should have banks like the Germans' banks. British industry was at the mercy of the City, so short-sighted, so distant, so lacking in the courage of its customers' convictions. Now, in Germany, all this was different. Companies got their finance from banks which stuck close to them, owned shares in them and knew all about them. It does not, just at the moment, seem to be doing Germany all that much good. Unemployment is high, growth is stalling, companies are failing and the banks are under stress. These symbiotic relationships between banks and companies were taken to their limits in Japan, where the stock market is back where it was two decades ago, while the policy-makers try once again to confront the horrid truth that some of their banks are bust in all but name. Their relationships turned out to be too cosy for anyone's good. We may be right, after all, to prefer the Mother-In-Law theory of banking, which provides that some relationships work better at a distance.
The law's delays
HENRY WELLCOME, the chemist, invented the tabloid — which in his day was a pill, not a paper — and the trust that he founded has grown to become the world's biggest charitable supporter of medical research. Now its work has been crowned with two Nobel prizes, won by two col leagues at the Trust's Sanger Centre, home of the Human Genome Project. There is one ailment, though, for which Wellcome's research can find no cure. On the land next door to the Centre, the thistles grow taller. The Trust hoped — hopes — to build a biotechnology park there, so that its discoveries could be transferred into products which would benefit human health. The tenants would live on campus and have the run of the Centre's research library and, for that matter, of its coffee shop. This project has had to spend five and a half years in search of planning permission. The local planning authority now favours it in principle, which is something, but not the same as a starting signal. As brakes on the British economy, the planning laws' delays are in a class of their own — seven years to think about Heathrow's new terminal — but time costs money, researchers are footloose, even charities have to face competition, and funding them, in today's markets, is harder than it was. Nobel prizes? We'd rather have thistles.
Lunch with the FT
THE Financial Times is running a series on cost-cutting (How the budget controllers gained the whip hand') and I can help it. I plan to open a soup kitchen at the City end of Southwark Bridge. Just across the river, in their granite fortress, the editorial staff of the FT are suffering. So straitened are the paper's own finances that the budget will no longer stretch to lunches, and the victims are left to hope that some practitioner of public relations will take pity on their plight and throw a morsel to them. Worse still, Dame Marjorie Scardino, who runs Pearson, the parent company, has charged them with being slow on the draw. She wants journalists who can read balance sheets. I wonder what they would make of a company which announced a £5 million profit 'post internet enterprises', when the profit and loss account, tucked away on page 8, was in the red by £235 million. (Yes, that was Pearson, a year ago, when its dashing new FT.com was losing more money than the old-technology paper was making.) They might even wonder what has been happening to Pearson's share price. Now that Dame Marjorie wants to assuage them — they're the greatest, she says — she should get her PR man to ask them to lunch.
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