8 SEPTEMBER 2001, Page 34

Cash buyers for the new economy's debris, and a baleful signal from Marconi

CHRISTOPHER FILDES

A,y offers for 200 miles of armoured submarine cable across the English Channel and the North Sea? For a national digital and analogue communications network? Or for 20 mobile phone shops? Cash buyers preferred for the debris of the new economy. What a sign of changed times this is, and now comes Marconi to serve as a baleful portent. At companies like Viatel, Odyssey and Dolphin, the creditors have pulled the plug, the administrators from the big accounting firms are now in charge and the business assets and goodwill are on the market. Read all about them in the FTs page of businesses for sale. This corporate mortuary habitually accommodates the worn-out relics of old industries — Black Country metalbashers bashed into submission, collar-stud manufacturers (they used to sell to Woolworth) complete with their stock, plant and mill. Now the heroes of the new economy are on the slab beside them. Who would have thought that there would be enough mobile phones to go round, and rather more than enough? More superhighway than traffic? Empty rooms in the Internet hotels? How much more exciting it was to believe that the great communications boom had changed the world and rewritten the textbooks and the laws of economics. In this new paradigm the sky would be the limit — but the limit turned out to be closer than that. It so often is. Marconi has hit the barrier, and the wreckage is scattered all over the road.

Facing relegation

THIS was the General Electric Company, cautious, cagey, cash-rich, like Lord Weinstock, who ruled it, His successors reinvented it to join the brave new world of telecoms, with a new name and a designer website to match. Lord Simpson came in to take charge on a i10 million package, including an incentive he could scarcely fail to earn, so long as the company stayed in the stock market's premier league, the FT-SE 100-share index. Now it faces relegation, billions have been written off, the dividend has gone, and the list of redundancies is headed by Lord Simpson and Sir Roger Hum, his chairman. The fact is that companies and investors from here to California have made the same mistakes. They took the new paradigm at its face value and thought that they could not go wrong with it. The result has been a surge of investment that will never earn its keep, a gross misallocation of resources and a destruction of wealth. Neither the world's economy nor ours will get over this in any sort of a hurry. Superhighways, as I noted at the time, seem to have this effect on markets. It has happened before, a century and a half ago, when the highways were made of iron and operated by steam.

Rights issue

THE human race, to which, as G.K. Chesterton said, so many of my readers belong, turns out to have rights of all sorts, and one of them may be the right not to be stuffed with an annuity. Back from the Blair family's demanding holidays and restored to Matrix Chambers, Cherie Booth, QC, has been arguing the case this week in the High Court. Her client, Joe Singer from Preston, is 74 and next year, as the rules require, will be forced to invest his pension fund in an annuity unless his eloquent counsel can save him. Her argument must be that these rules contravene his rights under the European Declaration, now incorporated into English law. They certainly are a notorious grievance for Mr Singer's contemporaries and for those who hope to join them. They were all very well in the distant days when the Equitable Life could blithely guarantee that its annuities would yield 12 per cent, but now that inflation and interest rates have come down, annuity rates have come tumbling down with them. Those who are forced to buy them are left with no choice in their timing, and must commit themselves to an investment which offers them no chance to change their minds as circumstances change. Buy one and you are stuck with it, for better or worse, and for life.

A thorny tendril

THE Inland Revenue writes the rules, and the Treasury's knee-jerk reaction is that

they are needed to stop people like Mr Singer from squandering their pension funds and becoming a charge on the state. That is not a fate they would choose to inflict on themselves, having saved all their working lives in order to avoid it, but if this prospect worries the Treasury, it could always require them to show that they had made sufficient provisions to keep themselves off the breadline. These rules are just another thorny tendril in the impenetrable thicket of regulation and tax which was once an orderly hedge surrounding and protecting people's savings. This government has found its own ways to make the thicket more tangled. The opposition, if we get one, should be planning to take a billhook to it. I hope to hear it said that under our constitutional law, citizens delegate limited powers to governments, rather than waiting for governments to concede limited rights to them — and that if Mr Singer is not old enough to choose how to provide for the years ahead of him, he never will be.

Where there's a tip

THOSE high-minded people at HSBC have tightened their rules about share-tipping. From now on there will be as many 'sells' as 'buys' and the bank will put its money where its mouth is. This is a sore subject on Wall Street, where some of HSBC's opposite numbers tipped dot.com stocks at the top of the market and now find themselves being sued. The HSBC two-tone scale will come as a shock, all the same, to old-fashioned brokers in London, who believe that their own graduated scale is far more sensitive, when fully understood. Thus, below 'buy' comes 'buy on weakness', which means 'don't buy', 'accumulate' (there is no market in the stock) and 'long-term hold' (we are brokers to the company). Then comes 'hold' (we can't remember why we bought them) and 'weak hold' (please hold them until we get out of them). 'Avoid' means 'going bust', and is rare. 'Sell' is rarer still. The analyst who acronymically wrote 'Can't Recommend A Purchase' about Robert Maxwell's shares got fired. Even 'buy' may mean -we had lunch with these people and are hoping to impress them'. 'Fill your boots' means 'buy', but you should ask yourself who is filling them and what they may prove to contain. Where there's a tip, as the old maxim teaches, there's a tap.