27 JULY 2002, Page 34

It's time for an Eeyorist view of the market good morning, if it is, which I doubt


Two views make a market, or three, if you count mine. The optimists think that share prices will soon get back to normal and the pessimists fear that this may well be true. As for me, my patient readers (if such there be) will have long since identified me as an Eeyorist. Invited to greet the unseen with a cheer, I am temperamentally likely to answer, like my exemplar Eeyore, 'Good morning. If it is a good morning. Which I doubt.' Anyone who shared my doubts will have missed the later stages of one of the great bull markets of all time, with exceptional opportunities for making money, and, of course, later on, losing it. I doubted the transformational powers of the new technology. I was not as enthused as I might have been about the global superhighway. Much as I hoped that we could all go motoring along this highway at full speed without any danger of skidding, I felt that this was asking too much of life. I spotted the threat to ccommerce, which I thought would be s-commerce: shops. In fact the most lethal threat was the oldest of all. Businesses cannot survive when they run out of cash. `Dotcoms go up in smoke', I was writing two summers ago, 'cash is the best fire-break, stick close to it now'. The fire spread through the new economy and licked at the telecom companies and their suppliers. They learnt the hard way that there were, after all, limits to the number of mobile telephones that we could hang on our ears. Markets tried to adjust to reality, and found that major companies had been adjusting it to suit themselves. By this stage the President of the United States has stopped complaining of corporate greed and has started to talk shares up. Now that is worrying.

Runaway train

GREED and fear rule the markets, and the transition from greed to fear may not yet be complete. Monday of this week was like Monday of last week, which was Brown Monday: it chipped 5 per cent off the FT-SE index. Two more days like this and shares will have lost half their value, but in the bear market of the 1970s they fell further, and in the last dozen years Japanese shares have fallen further still. The bigger the bubble, the bigger the pop. It is time for some Eeyorist thinking. First precept: markets exaggerate. They do not move in the same direction for ever, but they overshoot in both

directions. This one could soon, as a matter of simple arithmetic, be nearer the bottom than it is to the top, and volatile markets will throw up anomalous prices and relative bargains, but a runaway market (says Simon Cawkwell, the short-seller better known as Evil Knievel) is like a runaway train. You may not agree with it but don't stand in front of it, Leave that to heroes.

Sell in May

THERE was once a stockbroker in a small way of business who, much to the City's surprise, left a fortune. 'Papa didn't come into work very much,' his son explained. 'He was happier in the garden. But in May, when the sun was shining and the corks were popping and everyone was cheerful, he would turn up in the market and sell a little stock. Then he'd go away again — but in November, in the murk and the slush when everyone was miserable, he would turn up in the market and buy a little stock.' We have left May behind but this doesn't yet feel like November to me.

Terry takes over

NEVER a dull moment for Terry Burns. When watching Queen's Park Rangers becomes too predictable he can always go back to the office. He was head of the Treasury until Gordon Brown's style proved too much for him. He moved on with a peerage to analyse hunting and sort out the Lottery, and settled down last year in the chair of Abbey National. Now he finds himself running it. Ian Harley, who was chief executive, got rid of his four most senior subordinates, ran out of human sacrifices and left before this week's figures (profits down by a third). I am sure that Lord Burns will take to the life so long as he knows when to stop. A friend of his and mine had a similar experience, and reported that running a bank was fine until something went wrong, when it turned into a 24-hour-a-day job. There will be more days like that for the banks.

Memo from Arnold

A MEMO came round from the managing director: 'All standing committees are by this direction disbanded. If you wish to confer with colleagues, by all means do so, but remember that you will be held personally responsible for any decision affecting your operating unit. Also remember that you are not obliged to join any such gathering. Incidentally, on this matter of personal responsibility, prior permission from HQ is required for any proposal to employ management consultants.' This was the young Arnold Weinstock at GEC, and this was his style. Cash was controlled, performance was monitored, there were no hiding places. When he died this week, he had suffered the mortification of seeing his successors wreck his work — but how I wish he could come back to blast away all the clutter of committees and codes and consultants that now overrun British companies, sometimes in the sacred name of corporate governance, and to tell managers that they must get on and manage. There are (as my aviation correspondent was saying a week ago) 184 meeting rooms at British Airways' head office. At Arnold's HO, so far as I know, there were none.

Fly Picardy

I LIKE Alistair Darling's approach. This week he dotted the landscape with runways and airports — in the Severn estuary, on the Kentish marshes, and on the centre strip of the M45 somewhere west of Watford Gap. Later on he can rub most of them out again, assuage local feeling and save money. His new runways at Stansted would tie in with my plans to move it upmarket, relaunching it as City of London International Airport. (Its direct rail link to my office is there already.) All the same, lateral thinking should show Mr Darling that the right place for London's next airport is Picardy. As he can see when he next takes the Eurostar, nobody lives there, and in a few years it will be linked by rail to St Pancras. The only risk is that the unscrupulous French may build an airport there first.