CITY AND SUBURBAN
Markets hunt the Snark, Greenspan rings the bell: `What I tell you three times is true'
CHRISTOPHER FILDES
Aan Greenspan is on honeymoon, so all of his exuberance is strictly rational. This puts him one up on Wall Street. It has been less than uberant (Latin uberare, to be fertile: uber, udder) as the idea has sunk in that he meant what he said, and the world's stock markets, ours included, have sunk with it. This just goes to show that they can. Six months ago I was in New York when the Dow Jones index burst through 6,000 — upwards, naturally. It had then risen by 50 per cent in a matter of 21 months. Those were heady days. Perhaps (so I wrote) the all-wise Mr Greenspan at the US Federal Reserve Board had abolished the business cycle, but at such a time investors could see the rewards more clearly than the risks. The index put on another 10 per cent before Mr Greenspan said so too. He saw signs, in the market, of irrational exuber- ance. Inflation, he warned, could show up in the prices of assets — share prices, for instance. They promptly inflated the index up to 7,000. He said it again. Now, like the Bellman, he can say, 'What I tell you three times is true,' and leave Wall Street to guess whether the Snark it had been hunt- ing is a Boojum. After his third warning he put interest rates up and the market is now wondering where he will stop. My New York reading was John Kenneth Gal- braith's The Great Crash, in which he explains the great stock market boom that came first. Markets, he says, catch exuber- ance when prosperous times have led them to believe that life will always be like this, only better. Then they are led onwards and upwards by vision and boundless hope and Optimism. Galbraith says, too, that the boom and bust of the 1920s might have been averted if the Federal Reserve had shown an ounce of steel and checked the exuberance while it still could. I wonder what Mr Greenspan has taken with him to read on his honeymoon.
Norman's conquest
FOR MYSELF, I should like to know more about the effects of matrimony upon central bankers of mature years. Mr Greenspan is a youthful 71. Montagu Norman, the Bank of England's mightiest Governor, was 66 when he took the plunge, married a widow and acquired Peregrine Worsthome for a step- Son. That kind of experience can be destabil- ising. All that Norman said was that the dogs barked and the caravan moved on. More research is needed.
Buried treasure
THIS seems the right moment to update my Bad Investment Guide. Here is a new rule: never invest in a gold mine whose geologist falls out of his helicopter. This happened to Bre-X, which claimed to have found the world's largest gold deposit. Since then the shares have fallen faster than the geologist. The mine is in Borneo, but Bre-X is a Canadian company, regis- tered in Calgary (home of the stampede) and listed on the Vancouver Stock Exchange — as Wild West markets go, the wildest and westernmost market of them all. Another rule: never invest in a company whose shares are listed on Vancouver. Nothing cheers up a share price like a claim to have found buried treasure on the other side of the world. Those were cheerful days when the Tasminex prospectors found nick- el in the Australian outback while digging for a dunny. There was some suggestion that they might have put it there, but the City's wine bars buzzed while the boom in Australian nickel shares lasted. Old stock market maxim: many a good mine has been spoiled by sinking a shaft.
New losses for old
I HAVE boundless faith in our banks' abili- ty to come up with new ways of losing money, but I like their latest choice. It is the European single currency. What — the device that is meant to make Europe more prosperous by cutting out a whole layer of risk? So popular with the Confederation of British Industry, which imagines that its idler members would be left with some- thing less to think about? Now it has shot to the top of the banks' worry list. They tell the Centre for the Study of Financial Inno- vation that monetary union would bring political and economic strains — my good- ness, they've noticed. It would shake up Europe's banks, not necessarily to their advantage. In any case, they are by no means convinced that this emu will fly. So it worries them more than rogue traders, bad lending, derivatives, fraud, foul-ups or the persistent inability of their computers to count up to two in time for the millennium. As for a Labour government, it is propping up the worry list in 15th place. I must add that this list-making exercise is by its nature limited. As Sibley's Law explains, giving capital to a bank is like giving a gallon of beer to a drunk. You know what will become of it but you can't tell which wall he will choose.
Making allowances
TAX allowances transferable between spouses — I suppose it is a battle-cry. If it does not send me charging into action under the government's banner, that must be because I am in the wrong focus group. I can see that it would get the votes of virile central bankers who plan on regularising their relationships. There it is, at the core of the Conservative manifesto, and it will certainly go some way to compensate for what the present Chancellor has done in eroding the value of the marriage allowance. Next, pairs of High Church curates will approach the European courts, asking for a ruling that this tax break should apply to them, too. I have some sympathy with them, because I am for tax- ing individuals, not families. Nigel Lawson thought so too when he gave married women the right to their own tax returns. His successors plan a smart step backwards.
Tories on top
AT LEAST I can welcome the Conserva- tives' new slogan. 'Britain is booming,' says the poster, 'don't let Labour blow it.' More precisely, I welcome it back. Long ago, before Maurice Saatchi was ennobled or even invented, the 1959 'Tory Glory' elec- tion was won on the slogan, 'Life's better under the Conservatives — don't let Labour ruin it.' Christine Keeler and others went on to demonstrate how much better life could be in that position. Here we go again.
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