the times | Friday July 31 2020 1GM 37

CommentBusiness

When it comes to rebranding many

companies are right off their games

T

he price of gold reached a

record high this week of

$1,944 an ounce, marking a

gain of close to 30 per cent

since the start of the year.

The price of bitcoin, though only

around half the level of its peak in

2017, has rallied by about 20 per cent

this week. What is going on and

should these assets be in your

investment portfolio?

I can answer the second question

straightaway: no. I can see no role

for gold, cryptocurrencies or any

other alternative asset in the

financial planning of retail or

institutional investors. The first

question — why these assets have

done so well recently — requires a

bit more background.

Investors are wary about the

dollar. The reasoning is set out in a

research note this week from

Goldman Sachs. The investment

bank warns of “real concerns” about

the dollar’s status as the world’s

reserve currency amid soaring

public debt and political uncertainty

in the United States because of the

coronavirus crisis. The temptation

for future US administrations will be

to resort to inflationary monetary

financing.

It is the risks of what Goldman

refers to as “debasement fears” that

are driving the price of gold higher,

because gold is regarded as a hedge

against inflation, currency risk and

political uncertainty. Investors are

also looking afresh at alternative

assets including cryptocurrencies.

It would be disruptive if the dollar

lost its pre-eminent place in the

international monetary system. The

dollar is used globally by importers,

exporters, governments, central

banks and investors as a preferred

medium of exchange. That demand

is what makes it the world’s reserve

currency.

The global financial system works

more smoothly and the United

States is able to run a bigger current

account deficit than it could

otherwise because of global demand

for dollars.

If that demand for dollars sank

then the dollar exchange rate would

fall. One possible view is that this

would benefit the US economy by

boosting exports and narrowing the

current account deficit. It’s not a

strong argument, because it would

primarily benefit only a small part

of the US economy (manufacturing,

and its mainly skilled labour) and

damage America’s ability to pursue

its foreign policy goals.

It would be a huge shift in the

international monetary system for

the dollar’s status to be overturned.

In his book on the subject nine years

ago titled Exorbitant Privilege, the

Berkeley economist Barry

Eichengreen stressed that for

Americans “the only plausible

scenario for a dollar crash is one in

which we bring it upon ourselves”.

He was writing after the banking

crash of 2007-09; in the current

situation, the cast of global

monetary and fiscal policy to deal

with the coronavirus crisis has been

even more radical. A loss of pre-

eminent status for the dollar is still

unlikely, but the risk is certainly on

investors’ minds.

To manage your investment risk

in these tumultuous times, the best

course is to diversify holdings across

asset classes and regions. But that

doesn’t mean you should pile into

commodities or other alternative

investments. The problem with these

investments as an asset class is that

they don’t generate cashflows.

Unlike fixed-income securities

(which pay interest) or equities

(which pay dividends), there’s no

objective way in which anyone can

attempt to estimate what they’re

worth at any particular moment.

Their price depends purely on what

someone else is willing to pay for

them. They are in that respect

speculation, not investment. They

don’t belong in a well-diversified

investment portfolio.

The only assets that do belong

there are the traditional ones of

cash, bonds and (preferably in the

form of an index fund) equities. The

longer you’re willing to wait, the

more risk you can afford to take on.

It’s not rocket science.

Oliver Kamm

I am an Olympics

nut. Always have

been. Canoe slalom,

the pommel horse,

skeet and sabre —

the heady mix of obscure sports,

breathtaking skill and unbridled

patriotism is wonderful to me. I can

still remember during the dark days

of Atlanta 1996 when I would

endlessly refresh Ceefax to check on

yet another medal-chance Brit being

pipped into 17th place.

Sir John Major doesn’t get enough

credit for one of the great policies of

the late 20th century: national lottery

funding. The journey from 1996,

when Team GB ended in 36th place

in the medal table, to 2016, when it

came second — beating China! — is a

remarkable one.

Today I should be skiving off work

to settle down to hours of action in

the velodrome. Only, of course, Tokyo

2020 isn’t happening. It’s being

delayed until next year.

Curiously, the games will still be

called Tokyo 2020. Not Tokyo 2021.

This is a blow, because last year I was

in Japan and went out of my way to

buy a load of (hugely expensive)

official merchandise to bring back to

my children, whom I’ve corralled into

my Olympic addiction. I was hoping,

as a silver lining, that the Tokyo 2020

T-shirts and keyrings would become

curios like those Edward VIII

coronation mugs that wash up on

Antiques Roadshow. Commercial

considerations, however, have won

out over calendarial accuracy.

The Olympics makes most of its

money from sponsorship, ticket sales

and broadcast rights, but it still makes

a tidy sum from licensing. In Beijing

licensing income peaked at

$163 million — which was nearly as

much as the Chinese organising

committee made from ticket sales

($185 million). In London, thanks to

Brits’ insatiable appetite for watching

early rounds of the weightlifting and

dressage, ticket sales hit a record

$988 million, a significantly larger

sum than the $119 million made from

licensing. Remember those weird

alien-like Wenlock and Mandeville

mascots? Not everything was brilliant

about 2012.

Still, $100 million or so of revenue

can’t be written off just because the

date isn’t quite right. So “Tokyo 2020”

it remains. So too “Euro 2020”.

But though it is anachronistic, I

rather like it. The dates of the

Olympics, to me, are easy to

remember — the same as a leap year.

The even number is part of its

branding. And if the branding is

strong, don’t muck about it with it.

It reminds me of one of the great

anachronistic brands on the high

street: Carphone Warehouse, which

hasn’t sold a carphone since at least

2003 when using a phone while

driving was made illegal. And most of

its shops are pretty small, not

cavernous. But the 1980s brand —

matter-of-fact but with a touch of

red-braces swagger — hints at a

solidity that is missing from so many

brands founded in the internet era

when search engine optimisation

means everything has to miss a vowel

or be idiotically snappy: Flickr,

Grindr, Lyft, Letterboxd, Infltr,

Breathwrk, Memrise, Doo, Houzz. In

a couple of decades, how many of

these will still be part of our weekly

lives? Will we still wonder how half of

them are pronounced?

A bit of history is no bad thing.

Bombay Dyeing, which started life as

a textiles business in the 1870s, is now

a vast home furnishing business in

India. Logically, they should rename

it Mumbai Dyeing or Mumbai

Furnishings but to do so would scrap

150 years of heritage.

Scottish Widows sells financial

products to plenty of men, and

English women with spouses not yet

dead. But I like it and much prefer it

to LV=, the cretinous rebranding of its

fellow financial services company

Liverpool Victoria.

Rebranding is nearly always a

terrible idea, especially if it is done in

an attempt to seem cutting edge and

with it. I still mourn the loss of Pig

Improvement Company from the

stock market. The rump of old

Dalgety, it supplied top-notch porcine

semen to the world’s pork farmers.

But by the early 2000s the

management thought the name was a

bit old-fashioned and distasteful so

rebranded itself Sygen.

A phoney Latin name is even worse

than the smartphone apps without

vowels. It reeks of boardroom self-

regard and a chronic lack of

imagination: Diageo, Vivendi, Arriva,

Altria, Centrica — they are all truly

dire. Do the investors of Philip Morris

really think that renaming the

company Altria means it no longer

sells tobacco but some dazzlingly

healthy alternative?

These rebrandings are the

corporate equivalent of an estate

agent hoping that a lick of Dulux and

a plug-in Febreze will distract from

the damp patch behind the sitting-

room sofa.

Branding experts will argue that

Norwich Union was too parochial, too

Delia Smith and Colman’s mustard to

ever become a truly global company.

It needed to be rebranded Aviva to

make it big in China. I’m not

convinced — Evian and Nokia

became global brands despite being

named after their home towns in

France and Finland.

The greatest of all embarrassments

was when Royal Mail, under the

leadership of John Roberts, adopted

the meaningless name Consignia. Mr

Roberts explained that Consignia

described “the full scope of what the

post office does in a way that the

words ‘post’ and ‘office’ cannot”.

Within two years the name was gone.

At least it lasted longer than PWC

Consulting calling itself Monday back

in 2002. My skin crawls when I

remember the copy dreamt up by the

branding agency Wolff Olins to sell

the name: “Sharpen your pencil, iron

your crispy white shirts, set the alarm

clock, relish the challenge, listen, be

fulfilled, make an impact, take a risk.”

Aagh.

As long as I get two weeks of

heptathlon, synchronised diving and

taekwondo next

year, I don’t really

care what they call

it. Tokyo 2020 will

do just fine.

‘‘

’’

Harry Wallop is a consumer

journalist and broadcaster. Follow

him on Twitter @hwallop

Oliver Kamm is a Times leader writer

and columnist. Twitter: @OliverKamm

Do not be fooled by

flights of fancy into

alternative investments

Dollars per ounce

Q4 Q1 Q2

2019 2020

Q3

1,400

1,600

1,800

2,000

Gold price

Harry Wallop