26 SEPTEMBER 1998, Page 28


The hinge turns, and the markets swing away from greed and towards fear


Markets, so Sir Patrick Sergeant taught me, are ruled by greed and fear, and the price is always telling you something. Not always the truth, he would add, but something. It is easy to guess what the mar- kets are telling us now. They have swung, as though on a great hinge, from greed to fear. Barely two months ago the hinge creaked in London and Wall Street, and since then our biggest companies' shares, as measured by the FT-SE index, have lost one-fifth of their value. Stalwarts like Imperial Chemical Industries and Barclays Bank have halved. Government stocks on both sides of the Atlantic have reached heights not seen for half a lifetime. The price of these stocks says that there is a premium on fear, and that the two governments, for all their fail- ings, are unlikely to default, which is more than can be said for Russia's. That collapse showed how rapidly and thoroughly credit and capital could be wiped out. Elsewhere the process of destruction has been going on for some time. The hinge turned in Asia last year, and the heights to which greed propelled Japan's shares in the 1980s are no more than a distant memory. Enough dam- age has been done for investors and lenders to take less on trust, to scale down their expectations and to be less ambitious about making money and more insistent on not losing it. This is a process that feeds on itself. So it has, and so it will.