Martin Vander Weyer

‘Feed the ducks when they’re quacking’ sounds like advice from a foie gras farmer — but let’s leave gastronomy till last and focus first on stock market activity. The saying actually comes from Wall Street and means that if investor demand is strong, it’s best satisfied with ample supplies of new stock. What’s wrong with that? Nothing, if the investors understand risk and the offerings are sound. But is that what’s happening in the current retail investment craze on both sides of the Atlantic? Probably not. From its low in March last year, the FTSE 100 index has risen 40 per cent.

The long-awaited review of the railways by former British Airways executive Keith Williams chugged past the platform of public debate without creating much stir. Politicos noted that it had become ‘the Williams-Shapps Plan’, indicating an urge on the part of Transport Secretary Grant Shapps, in Tony Blair’s words, to be personally associated with eye-catching initiatives — in this case, especially those that have nothing to do with the issue of whether British holidaymakers will be allowed to fly abroad this summer. But the review’s core proposal — a new public body called Great British Railways that will control tracks, timetables and fares, and contract with private operators to run trains — provoked little controversy.

‘Consider a temporary cut in executive salaries’ was the Confederation of British Industry’s advice to members at the start of the pandemic. Back then I was gripped by fears of a backlash against capitalism: top pay cuts would indeed be wise, I wrote, not least because ‘sacrifice now is sensible insurance’. Looking at last week’s election results, I needn’t have been concerned about a second coming of socialism. But I’m one of many advocates for responsible capitalism who have long worried about growing disparities between executive and average pay — the key multiple having risen from 50 to 120 over the past two decades — that rarely reflect underlying performance.

‘We are seeing very substantial inflation,’ the great investor Warren Buffett told shareholders in his master company Berkshire Hathaway at their online annual meeting last weekend. He was talking chiefly about the housebuilding businesses in his port-folio, hit by rising material costs in what he called a ‘red hot’ economic recovery. But his remarks align him on a broader front with jittery bond investors and big-name economists, such as Larry Summers of Harvard, who have fuelled the US ‘inflation scare’. And if it’s coming over there — pessimists whisper — surely it’s coming over here? Maybe, but let’s keep this in perspective. Headline US inflation is 2.

The alleged frauds for which the Post Office prosecuted no fewer than 736 of its sub-postmasters has turned out in almost all cases to be the result of faults in a computer system called Horizon which Post Office managers and the system’s supplier, Fujitsu of Japan, were reluctant to acknowledge. That’s the short summary of a miscarriage of justice which also looks like a case of mismanagement to the point of delusion: how could anyone believe a copy-cat crime wave on this scale was sweeping through a cohort of small businesspeople generally seen as the most upstanding of local citizens? And if that wasn’t the belief, the only other explanation is worse: cynical concealment of a 15-year IT cock-up for which no one was willing to carry the can.

The market emphatically endorsed my negative opinion of the Deliveroo share offer, which bombed from its offer price of 390p to close at 282p before Easter. The biggest London IPO since the commodity giant Glencore went public in 2011 now also stands as the most embarrassing flop in living City memory. Goldman Sachs and JP Morgan Cazenove, the deal’s bookrunners, must have known it was in jeopardy when they knocked more than a billion off their first indicative valuation after UK institutional investors lined up to say they wouldn’t touch it. But 70,000 Deliveroo app users, having failed to read that signal, bought into the ‘community offer’ — and have lost an average of £200 each.

‘The reason we have the vaccine success is because of capitalism — because of greed, my friends.’ So Boris Johnson told his backbenchers last week, though he immediately muttered ‘Forget I said that’ while aides tried to explain it as a joke on the chief whip, who was munching a cheese and pickle sandwich at the time. Whatever, the PM’s gaffe makes a neat text for a short Easter sermon. The fact is that ‘capitalism’ — the mustering of vast private-sector resources to bring lab-tested potions to mass production in record time — has indeed delivered a triumph, in combination with university science, a smart Whitehall taskforce, military logistics and NHS networks.

Just as the auto industry embraces the electric future I wrote about last month, it hits a new crisis: a shortage of the microchips that power everything under the bonnet. As a parable of globalisation’s perils, this one has all the ingredients from trade war to fire, drought and Covid pestilence. When car production slumped last year, chip-makers switched to meet booming demand for parts for smartphones, tablets and laptops. Now car factories are keen to raise output again, but there aren’t enough chips to go round. The leading source, Taiwan, is entangled in US-China tensions and its factories are afflicted by water shortages; other plants have been stricken by fire (in Japan) or extreme cold (Texas).

Historians of unforeseen crises talk about ‘chaos theory’ and the ‘butterfly effect’, in which a small perturbation far away — the flapping of a butterfly’s wings in Australia, as it were — have impacts across much larger connected systems. More usually applied to weather events, the theory had its 2008 moment when the collapse of AIG, a US insurer whose name meant little over here, threatened to cripple so many banks that, without immediate bailouts, our high street ATMs (we were told) might have been switched off there and then.

This column generally takes a sceptical view of financial novelties and gimmicks. So my antennae have twitched in recent days at frequent mentions of Spacs, or ‘Special Purpose Acquisition Companies’, which are the latest plaything of Wall Street and could be about to go large over here. Also known as a ‘blank cheque’ company, a Spac is a stockmarket-listed cash shell that raises money with a view to merging with a real — usually hi-tech, often relatively early-stage — business seeking a fast route to listed status. Hundreds of Spacs have been created in the US since the craze began last year, many with celebrity names — sports stars, astronauts, rappers — attached to win attention.

Why should business pay tax at all? That’s a provocative but forlorn question to ask in Budget week. Business pays corporation tax on profits because that’s what voters expect, partly because many are conditioned to believe profit is a sin and partly because all would prefer to pay less tax themselves. Investors pay tax on capital gains because — as the American bank robber Willie Sutton said of his crimes — that’s where the money is. And companies pay more tax as business rates on premises because that’s the easiest way to collect contributions towards public services from which they benefit — but it’s also an easy levy to relieve at times, like now, when the private sector needs help.

Back in November, when Downing Street’s pandemic responses looked daily more incompetent, the announcement of a ban on sales of new petrol and diesel cars by 2030, ten years earlier than originally planned, was largely greeted — along with the rest of the ‘Ten Point Plan for a Green Industrial Revolution’ — as another exercise in Johnsonian distraction and thin-air number-plucking. Auto makers responded defensively, citing the huge costs of re-engineering model ranges in short order and the shameful failure of ministers to encourage investment in plug-in networks for electric vehicles. Meanwhile, Tesla founder Elon Musk announced he would site a battery ‘gigafactory’ in Germany because Brexit made the UK ‘too risky’.

No sign of progress towards a workable deal with the EU for financial services, on which news is due next month. Bank of England Governor Andrew Bailey warned in unusually frank terms this week that although the UK has granted ‘equivalence’ to the EU in some financial activities, ‘the EU has not so far done likewise to the UK’ and seems unwilling to do so by reference to a ‘common framework of global standards’. Instead, Brussels is seeking to apply to the UK ‘a standard that the EU holds no other country to’, amounting to ‘rule-taking pure and simple’. Given the importance of financial services to the UK economy, that’s a major defeat of the Brexit principle which seems to be passing almost unnoticed.

It’s obvious from the body language of Bank of England Governor Andrew Bailey that negative interest rates — much talked about this week — are the last device he ever wants to use. Deployed with mixed success in Europe, this monetary equivalent of Pulp Fiction’s adrenaline jab in the heart is a desperate remedy against deflation, recession and banks’ reluctance to lend. UK banks have been given six months to prepare for the possibility, while Bailey has been talking up the likelihood of rapid recovery as vaccinations advance and Brexit trade disruptions fade.

The Reddit story — in which a ragtag army of small investors have executed a spectacular short squeeze against hedge-fund goliaths — can be interpreted two ways. Some say it’s another populist citadel--storming in the spirit of the moment, but this time an admirable one because its target is ‘Wall Street’, which everyone hates: the so-called ‘stick it to the man’ version. Others see a fever of price-chasing, part-driven by lockdown despair, akin to crypto-mania and the surge in online gambling; in this version, it has nothing to do with serious investment but is a sure signal of more market turmoil ahead.