CITY AND SUBURBAN
Hail, the ten wonders of the new economy which of them will be called Polly?
CHRISTOPHER FILDES
Iwonder which of the newcomers to the FT-SE Index will turn out to be the next Polly Peck. This is the stock market's pre- mier league, its members are the hundred most highly valued British companies, and ten old stick-in-the-muds who still make and sell things have lost their places to ten wonders of the new economy. (No, lastminute.com is not one of them, but give it time.) There is a touch of the self- fulfilling prophecy about this process, for as soon as a company starts to look like a pro- motion candidate, its shares are marked up. The 'tracker' funds which try to match their performance to the index's will need to own them. Conventional fund managers looking after life assurance companies or pension funds will want them, too. Otherwise they will be accused of being underweight in a sector of the market that is or has been going up, which is one way to lose their clients or their jobs. So they pile into the newcomers' shares and dump the stick-in- the-muds to make way for them. The sticki- est sectors (like drink) are down by a third in a year. One name for this is momentum investment. You lean out of the window, note the mob on the move, announce that you are its leader, and join in. Another name for it is bigger-fool theory. You wait until a share becomes expensive and then buy it, believing that a bigger fool than you will turn up and pay even more. In markets like these, tracker funds have the bigger- fool theory built into their systems. Con- versely, the shares' original owners know that if they can inflate the price far enough, they will find takers, and small investors may be fortunate enough to sell to big investors. It happened with Polly.
Bilge and Nadir
AH, Polly. . . . Like a fading telephone number in an out-of-date address book, what mixed emotions of pleasure and pain you arouse, what pungent memories. You, too, were a glamour stock, the dazzler of your day. Asil Nadir was your mentor. His fruit-packing business in Famagusta was positively oozing money, or was at least publishing profits. (Only six of the ten new- comers have got that far.) The persuasive Asil and his clever sister Bilge acquired a following. Small investors loved Polly, and up went the price until she caught the big boys' eyes. Polly was not, for most of her career, a favourite of theirs but they could not ignore her momentum. In the end she scraped into the index and gave her early admirers the chance to kiss her goodbye at the top of the market. These were shares that the institutions now had to own — and may still have owned when, not long after- wards, Polly went pop. She had fooled many people but the last fools were the biggest.
Give a dog a home
DOG seeks home. Answers to name of Rover. Healthy appetite for money. Tearful owner can no longer afford upkeep. Last time this ad appeared, a Bavarian car- making family answered it and discovered in their turn that they had bought a pup. Now they, too, are in search of a taker. This dog got through all its original owners' money and billions more of public money before finding a home with Professor Sir Roland Smith at British Aerospace. The Prof passed it on (or off) to BMW: sheer short-termism, so Will Hutton inveighed in one of his popular polemics — In A State? Raising The Stakes? He must have believed that the brute could be house-trained. I have long thought that Rover's destination is the Battersea Dogs' Home.
Losing confidence
CRACKLING across the ether, the news of Robert Ayling's going reached a British Air- ways captain on his flight-deck in the East- ern skies. He was heard to respond: 'Got the bastard!' Coming round to agree with the captain, the board of BA had lost confidence in the man they had picked to fly their air- line. Mr Ayling and the captain might just as well have lost confidence in the board. This was the lawyer from the Department of Trade and Industry who came up though BA's back office (legal department, company secretary, human resources, even) and joined the front line less than a decade ago. If he seemed to lack commercial instincts and relied, instead, on what consultants told him, who except the board could be surprised? A commercially-minded chief executive would have known that BA's best asset was its brand, that a premium brand could com- mand premium prices, that it needed careful maintenance and was easier to run down than to restore. He has left it looking dented but he had not been flying solo. BA's policy mistakes must be the board's responsibility as much as his. He leaves with no successor in sight — the board fell down on that, too — and his job joins the unrivalled collection of public and private appointments now held by his chairman, Lord Marshall of Knights- bridge. It is time that the shareholders cleared out the board. As for Mr Ayling, he can concentrate on being chairman of the Dome, where he has fired the chief execu- tive, but he must be in grave danger of join- ing Tony Blair's next list of Labour peers.
Ask no questions
HOME and hosed in the Grand Internation- al Boondoggle Handicap is Horst KOhler, in the German stable's second colours, after its front-runner, Caio Koch-Weser, had been brought down. He is something of a plodder, but at least the International Monetary Fund's staff will be able to increase and mul- tiply, as they always have, and as, so they believe, God and John Maynard Keynes intended. No one will ask what they are all doing there, or should be doing. Asking those questions first might have produced a more inspiring choice of managing director. The winner is keeping out of sight inside the European Boondoggle for Remuneration and Disbursements, where he has been for the last year without much to show for it but if he had gone around the EBRD asking awkward questions, he would never have won the big race.
Nice little runner
THE irrepressible Lord Archer, last week's Spectator diarist, pops up this week as an investor in One Stop Car Shop, which is to set the second-hand market alight. Readers will thus have the chance to decide for themselves whether they would buy a used car from this man.
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