Any other business

Falling US shares tell us only that investors were too excited in January

10 February 2018

9:00 AM

10 February 2018

9:00 AM

If you were the incoming or retiring chairman of the Federal Reserve, you might be quietly pleased to see stock markets plunge on the day of the handover. As Jerome Powell was sworn in on Monday to succeed Dr Janet Yellen as head of America’s central bank, the Dow Jones index of leading US stocks was falling by a one-day record of 1,175 points, with Asian, European and London markets following overnight.

But this wiping out of recent gains does not reflect badly on Yellen, whose steady hand leaves behind US inflation at just 2 per cent, unemployment barely above 4 per cent and a strongly recapitalised banking system. Nor does it indicate any radical shift to be expected from ‘Jay’ Powell, a lawyer-turned-banker who was widely seen as the most sensible ‘continuity’ choice Donald Trump could have made for the Fed, short of awarding Yellen the second term she would very much have liked.

What it does reflect is the over-exuberance of investors who piled into equities in January, driving the Dow from 24,800 to 26,600 and creating seriously out-of-whack price-earnings multiples; worry that full employment will lead to an upsurge in wage-led inflation; certainty that interest rates will rise this year but may have to do so faster if inflation does revive; and rising fear of what higher rates will do to over-borrowed companies and consumers.

These are all real concerns, especially the incipient debt problems. But the only new factor has been the steepness of the share-price rise since the beginning of the year. Hence most US pundits described this week’s fall as a ‘correction’ that was widely foreseen and probably overdue, rather than the beginning of a crash to match 2008. Some even saw it as a buying opportunity, and we might wonder whether that includes whoever manages the Trump family’s investment portfolio these days.


Only a month ago, the President was claiming the strength of the 2017 stock market and January’s ‘record fastest 1,000 point move in history’ (though in fact it wasn’t), as both a by-product and an endorsement of his achievements in office. But if the correction turns into a more sustained wave of selling, will the President send his man into the exchange —emulating the Wall Street aristocrat Richard Whitney on 29 October 1928 — to bid up blue-chip stocks against the storm tide? Somehow I doubt it.

All change again

Regular passengers on the East Coast mainline are inured to change — and baffled as to why this transport artery cannot be run at a steady but modest profit by a private-sector operator. We recall with sadness the demise of GNER, the first post-privatisation franchisee from 1996 to 2007: part of the Sea Containers group that also owned the Venice-Simplon Orient Express, its service standards won passenger loyalty but it overbid for franchise renewal in 2005 and ran into losses; its parent went bust the following year.

Then we had to put up with back-to-basics National Express East Coast, which lasted barely two years before defaulting, followed by five years under a taxpayer-owned ‘operator of last resort’. In 2015 the franchise was re-let, this time to Virgin, though the operation is 90 per cent owned by Stagecoach, better known as a Scottish bus company. Now that too has failed and Transport Secretary Chris Grayling is searching for yet another solution. A state-run entity is likely to take over within ‘a few months’. But I’m hoping it will involve the German state — whose Deutsche Bahn owns, through Arriva, many of Britain’s better trains — rather than another shuffling of the pack among our own incompetent rail bureaucrats.

A planeload of judges

This winter’s panto plot — you may recall that I was playing the dame — felt a touch far-fetched when future Lord Mayor of London Dick Whittington achieved an unlikely British export triumph by lending his cat to exterminate the rats in the palace of the Sultana of Morocco. Now real life has gone one better: the 84-year-old former lord chief justice Lord Woolf has been appointed to head a new commercial court in Kazakhstan, wearing specially designed robes and taking with him, on five visits a year, a team of other British jurists and QCs in the sunset of their careers.

A country of vast mineral wealth beneath empty steppes, Kazakhstan is ruled in old-fashioned style by President Nursultan Nazarbayev, who has high ambitions for its developing economy. That makes it just the sort of place where we’d like to raise our export game, chiefly by selling specialist expertise in the oil, gas and mining industries, as well as services such as architecture and education: Haileybury was the first British public school to open an outpost there. But we’d feel more comfortable doing so if we could also be assured of more respect for the rule of law than is customary in Central Asian fiefdoms. Selling the Kazakhs a planeload of judges looks like a win-win solution.

Civilising influences

Your suggestions for companies that have made a ‘benignly egalitarian value-for–money contribution to modern civilisation’ to match Ikea’s were many and varied. I’m happy to include Laker Airways as the low-cost pioneer before Ryanair, eBay ‘for globalising the car-boot sale’, Travelodge and its ilk for budget hotel rooms, Hoover for easier housework, Singer for home sewing machines, ICI for beta-blockers and Lever Bros for mass-produced soap. Tampax Inc, founded in 1936 and now part of Procter & Gamble, is an obviously worthy addition. And I’m grateful to my Wiki Man colleague Rory Sutherland for a quote from The Philosophy of Andy Warhol about the democratic nature of American consumerism: ‘A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking.’ I just don’t see what that’s got to do with civilisation.

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