Money Matters

I might be sitting more than 3,000 miles from Washington DC, but even from here I can detect the rank stench of hypocrisy. President Obama, not content with bashing banks, has now started on Big Oil. He wants to make BP pay every cent of claims arising from the Deepwater Horizon disaster, and has intimated that he will back a bill that raises – retrospectively – the liability limit for claims from $75m to $10bn.

Now, it’s entirely possible that BP may have been negligent, or cut corners. Memories of the blast at its Texas City refinery in 2005, where its safety standards did fall short, are still fresh. But it’s also plausible that one of its subcontractors – rig operator Transocean, or well casing contractor Halliburton – was to blame. Or that the blast was simply bad luck on a spectacular scale. But Congress has, it seems, already tried and convicted the British company and is now working out the punishment.

No, not the 1986 falsetto hit by Prince, nor the ludicrously over-theatrical American stadium rockers. Kiss is an acronym beloved of web programmers and sundry other Californian software nerds – and one that investors would do well to take on board. It stands for Keep It Simple, Stoopid.

And the benefits of keeping things simple are plain to see. In last week’s Investors Chronicle, we saw that John Baron’s two investment trust portfolios, each comprising just 16 holdings, have comfortably beaten their benchmarks over the past year.

“The grannies lose their blouses…it’s the American investors we have to worry about.” This remark was widely attributed to Shriti Vadera, a Treasury adviser, as the government prepared to push Railtrack into railway administration in 2001. The disparaging reference to private shareholders as “grannies” whose interests could safely be ignored, irritated many at the time. But shareholders in Railtrack did at least receive recompense for the effective nationalisation of the company.

This time last year, the UK stock market was in the process of forming what appears to have been its bear market low. It was at its March 2009 meeting that the Bank of England cut the base rate to 0.5 per cent, and fired up the printing press.

The doom and gloom back then was all-pervasive, but it was short-lived. Superficially, things are vastly better now. The country is, statistically at least, out of recession. Forecasts of mass unemployment, a slew of corporate failures and waves of repossessions have so far proved wide of the mark. The stock market has put on 2,000 points, or 57 per cent, since its low point. Channel 4 has even promised us we will only have to endure one more series of Big Brother.