Nuts in May
THERE are two ways of looking at the markets now — political, and financial. Mine is the financial view. The political view is on top, which is one reason why shares have had such a strong run. (The other reason is the ovine herd instinct of fund managers, who were stampeded by an astute market-maker into investing their spare cash before the prices ran away from them — thus, of course, making the prices run faster.) This view sees the Govern- ment, some time next year, pulling off a conjuring trick. By then, interest rates will be coming down, and bringing down with them the 'headline' figure for inflation (though not the figures that matter) while our new-found EMS membership tempor- arily takes care of sterling. Cue for snap election; what a clever trick; everyone applauds; gosh. The financial view is of trouble to come — more casualties from the interest-rate squeeze, more companies running out of money. The big banks see it continuing for the rest of the year. London United Investments, which told a judge this week that it was probably insolvent and could not meet its debts as they fall due, shows the trouble spreading to inter- national and professional insurance. A failure there could be the most damaging yet, more serious in its implications than the wreck of British & Commonwealth. I add that the market's political judgment always runs to extremes, and was no better when panicking in April than it is when cheering in May.
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