CITY AND SUBURBAN
Vision and boundless hope and optimism there's a lot of it about
CHRISTOPHER FILDES
New York Here on Wall Street, these are heady days. The world's biggest economy, as val- ued by its stock market, is worth a half as much again as it was 21 months ago, and everyone wants to be part of it. Sales of mutual funds, the little man's way in, look set to double the figures for last year, when stocks were (of course) cheaper. Fund managers appear on the cover of Time magazine. The last big bears, at Morgan Stanley, have gone back into the woods. Shares with high-tech names and no earn- ings sell like hot properties. Americans are better off, their pay-packets are fatter (on Wall Street, some of them, gargantuan) but prices in the shops have yet to follow. The recovery is heading for its seventh year, with Alan Greenspan at the Federal Reserve looking down upon it like Miner- va's owl. The scene is one of vision and boundless hope and optimism. Such are the words of Professor Charles Amos Dice, as preserved in John Kenneth Galbraith's The Great Crash — his account of the collective madness that swept over Wall Street at the end of the 1920s and brought on its greatest boom and bust. I brought it with me, think- ing (on Gwendolen Fairfax's lines) that one should always have something sensational to read on the plane. Galbraith argues that such frenzies — like the South Sea Bubble or the house boom that closed the 1980s come at the end of a prosperous time, when people too readily believe that it will always be like this, only better. Perhaps the all- wise Mr Greenspan has abolished the busi- ness cycle, or at any rate its down side. At such a time investors, and lenders too, can see the rewards more clearly than the risks. I dare say there are more rewards to come, but to me the great bull market of the 1990s has begun to look risky.
Manchester thinks today
THE 113-year-old Factory Point National Bank of Manchester, Vermont, has found a new way to secure its independence. It wants to turn its customers into owners, by raffling its shares. Ten prizes of ten shares each: improve your chances by filling in a form a day at all or any of the bank's branches. What an example to our own dear banks! Barclays and National Westminster have been buying shares back from the big institutions, who would happily cut their throats for an extra sixpence. Instead they should be handing shares out to the cus- tomers who will this year help them make £10 billion between them. I look forward to seeing raffle tickets in every one of their branches. What Manchester, Vermont, thinks today, Manchester, England, thinks tomorrow, and head office will catch up.
97, 98, 99, whoops
I ALWAYS thought that computers were dumb clucks, whose only skill was to count up to two, over and over again. Now I learn that they can't even do that. This worries a consultant who, like so many people in New York, tells other people how to make the most of their dumb friends. Computers, she explains to me, have programmes to tell them what year it is, with the answer expressed in two digits, creeping up from 95 to 96 to 97 . . . In just over three years' time, she tells me, they will blow their fuses. Nobody has ever told them how to cope with a four-figure change to a year with a 2 in front of it. Reprogramming them all will cost a fortune. The alternative is not to bother, but this might have startling consequences — for instance, in the computers that con- trol Russia's nuclear missile sites and power stations. I continue to reflect how much bet- ter we handled the millennium last time round. That was a move up from three to four digits, but the candle-clocks of those days managed it without a drip.
Dinghy ahoy!
I JUST saved myself from doing the nose trick with a martini at the Lotos Club. Given the strength of the Lotos martinis, this might have been been fatal. I was react- ing to the news from J. 0. Hambro, the ele- gant little firm that Rupert Hambro set up when he peeled off from his family bank. When bigger banks were floundering (so I was saying here three months ago) his handy new vessel made waves, or as my headline had put it at the time: `Rupert's racing dinghy whizzes past NatWest's costly yacht.' Now comes the news that NatWest is buying out Hambro Magan, his corporate finance business, for the thick end of a hun- dred million pounds. Yacht gives up the chase, pays salvage, hoists dinghy inboard. It set off my nose trick. I do not doubt that George Magan, the firm's master deal maker, made this one with his usual skill. I remember his advising Allianz of Munich to drop out of the auction for Eagle Star and instead pouch a certain profit of £166 mil- lion. 'I told them,' he explained to me, 'that valour can be the better part of discretion.'
In the vaults, votes
THE GOLD in the Federal Reserve Bank of New York has to rest on the bedrock of Manhattan Island. There is too much of it for a man-made floor to carry. That will stop if Senator D'Amato has his way. He has got in on the row about Nazi gold in Swiss banks, reasoning, so I am told, that there are more Jewish voters in New York than there are Swiss bankers. What about all that gold, he wants to know, that came to New York from Germany after the war? Why shouldn't it go to a good Jewish cause? This is monetary gold, stored in the Fed (and the Bank of England, too) by a commission of the wartime allies, still held to that commission's orders, and not in the Fed's gift. Once a move to dig it up and hand it out gets going, who can say where it will stop? What about all that gold extract- ed from the Irish, as seen in Michael Collins? When are the Brits going to give it back? How soon can the Kennedys go to Threadneedle Street and have a look at it? Just as soon as they are re-elected.
Conspiracy theory
NO BOOM and no bull market can have been better timed for and in the year of a presidential election. What happens later is another story. Galbraith tells us that after the crash a conspiracy theory developed in Washington: 'Whenever an Administration official gives out an optimistic statement about business conditions, the market immediately drops.'
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