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.
“UK markets have slumped as the uncertain outcome of the general election unsettles investors”. That’s the general tenor of mainstream press commentary today.
It’s wrong. As our economics writer points out today, gilts are no lower today than they were a month ago. Yes, shares are down – but not by as much as they are in other countries. Sterling might have fallen against the dollar, but it’s still comparatively high against the euro. Much as it might irk our self-important politicians to hear it, the rest of the investing world isn’t that interested in their partisan bickering.
In the past, Investors Chronicle has not made a habit of telling its readers how to vote, something that I have no plans to change. That’s no bad thing, because the paucity of substance in this election campaign would make it very tough to make any recommendation. There’s no harm, however, in marking the cards of each of the main parties.
Gordon Brown did handle the banking crisis well. While Europe’s leaders sent out contradictory signals and the US Congress was paralysed by infighting, he took bold and decisive steps to stop a systemic banking crisis becoming another depression, winning widespread admiration outside the UK for doing so.
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.
Who’s the biggest banker basher? It’s a dead heat. Thump! David Cameron says banks will be forced to repay the billions injected by the taxpayer via a compulsory levy. Biff! Alistair Darling will force banks to provide financial services to the unbanked. Wallop! Everybody will crack down on ‘excessive bonuses’.There will only be one loser in all of this. According to a press release from Moneyfacts.co.uk earlier this week, politicians’ reforming zeal is hastening the end of free banking.
Well, pardon me, but I don’t think that would be such a bad thing. Let’s be honest, there is no such thing as ‘free banking’ anyway. Banking services are provided free of charge to the majority of customers, and the cost of that provision is met by charging outrageous fees to a minority. So far as I can remember, this is not how the rest of the world operates. When I lived in the US (in the early 1990s), I was charged 25 cents for every cheque (sorry, check) I wrote. In Hong Kong some years later, I paid a monthly fee to run a bank account. And I’d lived in Germany for nearly a year before I was even deemed worthy of Teutonic banking services.
“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.