Mr Charles Stahl, the American editor of Greens Commodity Newsletter,
has been visiting London. His newsletter has been almost invariably correct in forecasting the market in silver and gold and should be obligatory reading for commodity dealers and those interested in future positions in bullion and is available from Greens Commodity Newsletter, 12 Petersham Place, London SW7. His views on the regulation of City practice are not only outspoken but are typically farsighted and
Robert Maxwell—aide memoire
Just a line, Robert, to remind you that you owe me £30. You will remember the £5 in hard coin (a fiver actually) I wagered at 5 to 1 that you would not be returned as a Labour candidate at the last election. Sorry to rub it in, but the money would come in handy.
John Bentley
Game-theory economists call the stock market a zero-sum two-person game: that is, one person wins what the other one loses, as in gin rummy. Except for an interest in attempting to recognise the small rapidly growing company, it is a view with which it is hard not to agree — somewhat ruefully — during the present convulsive period. I was reminded of this a couple of weeks ago when I bumped into John Bentley (late of Barclay Securities) in the street. There have been various mischievous rumours since he sold out to Vavasseur. For example, that he was broke and down to twelve thousand, his old car, new girl friend and a tatty flat. That he had sold all his Vavasseur shares at the top of the market, and then shorted them all the way down as they collapsed, was another rumour, embellished with the snippet that Vavasseur loan stock would be redeemed at par and was a buy at thirty-five. Bentley, in fact, looked prosperous enough to me and certainly more cheerful than the people at Vavasseur have cause to be in their agony.
He looked as if the zero-sum twoperson game he had been in had tilted his way.
Building societies
If you accept the likelihood of government direction of institutional funds as a measure to lower interest rate and thus help directly the supply and cost of domestic mortgage money, as I certainly do now that Labour backbenchers have taken to the idea, preparations should be made for a hedging investment policy. Both the share and property markets will be affected by the preliminary ministerial statement saying that the matter is being studied. Probably the Chancellor or possibly the Governor of the Bank of England will publicly say that ways of directing pension and institutional fund investments in bands as between commercial offices, domestic property and industrial building is being worked out. And that at the same time thought is being given to setting limits on the holdings of equities and government stocks by these institutions.
It is not difficult to imagine commerCial property and building falling dramatically on the announcement. Many insurance companies know full well that they have far too big commitments in property for a judicious spread. Rents are too high and yields too low. Institutions will realise at once the dangers and no longer be net buyers of commercial office rents. They will switch into gilts and cash
Obviously gilts will rise and their yields fall, exerting downward pressure on general interest levels. With a sufficient fall, the mortgage supply problems of the building societies will be assisted, though more powerful aid is available to the authorities who could decree that term deposits with a building society would rank with government stock in the make-up of institutional portfolios. The investment message to a private investor has a crystal clarity: get out of commercial property shares even at these bombed-out levels, good and bad alike. Buy government stock and possibly domestic housebuilders selectively. The course for equities will continue to be unclear — don't be tempted in yet.
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