CITY AND SUBURBAN
In August's heat, prosperity's building-blocks are turning squishy at the edges
CHRISTOPHER FILDES
August is a sticky month in markets. The chief dealers are on holiday, bumping into each other in pleasant hotels on the shores of Lake Garda. Left to cope, their deputies wriggle and fret. Somewhere, something feels the heat and starts to melt. Six years ago it was sterling. Last year it was Asia. This year, shares? Those building- blocks of prosperity that to the eye of faith appeared so solid have suddenly turned squishy at the edges. A month ago, prices in New York and London were setting new records. Since then the Dow Jones index has come down by the thick end of 10 per cent, and the FT-SE index by more than that, as investors gave a sour reception to the Chan- cellor's commitment to a splurge of public spending. It is two months since the partners in Goldman Sachs bit on the bullet and resolved to sell their investment bank for $30 billion. I concluded that this was, to their minds, a once-for-all price. They may need to hurry up and take it. Three months earlier America's most revered investor, Warren Buffett, the sage of Omaha, made a move that seemed right out of character. The shares of Berkshire Hathaway, his mas- ter company, have been prized and priced for their scarcity value. Suddenly he issues $22 billion worth of them and exchanges them for shares in an insurance company. What does that get him? The insurance company's own portfolio of investments. What's in there? Shares only account for one-fifth of it. So the rest is in bonds, or property, or even plain old cash. Does that look like a good swap for the sage? It has been looking better all this month.
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