The Week - UK (2021-02-13)

CITY 49

13 February 2021 THE WEEK

Commentators

Everyfund managerknowsthat“you cannotjudgeacompany

byits incomestatement alone”,saysPhilipAldrick.But mankind

tendsto measureitswealthbyGDP alone. AnewreportbyProf

SirParthaDasguptaonthe economics ofbiodiversityshows what

isbeingmissed. Between1992and 2014,“produced capital”–

roads, rail,portsandmachines –doubledperpersonglobally.But

“naturalcapital”,suchas rainforestsandfisheries, declinedby

two-fifths.To counterthis,“weneedtoputapriceon nature”–

includingeverythingfrom“elephantsandinsects”to the “eco-

systemservicesprovidedbysoilandthe seas”.Theidea hasbeen

called“afool’s errand”, and it’strue“thenumbersare silly”.You

can’tturnanelephantinto$1.75min cash (thevalue placedon

forestelephantsbythe IMF).“But then,ifyoutried tocash in

every FTSE 100 share tomorrow, you wouldn’t get $1.5trn,either.

These arenotional values.”AsDasgupta says,it’ssurelybetter

to workwith “rough-and-ready figures” than “toignore whole

swathesof capitalgoodsbypretending theydonot ex ist”.

“EventsonWallStreethavebecomesostrangethatNetflixissaid

tobeplanningashowtoimmortalisethem,”saysTheEconomist.

Whatshouldbetheplot?Ananti-establishmentmovement

causingchaosinhighfinance?Atoppymarketpoisedtocrash?

Bothscenariosmightappealtoscreenwriters,buttheyglossover

therealstory:namely,thetransformingpowerofITinfinance.In

recentdecades,tradingcostsforshares“havecollapsedtoroughly

zero”thankstotechnology.Meanwhile,informationflows,“the

lifeblood ofmarkets”,havebeendisaggregatedintoa“vast pool

ofinstantdata” availabletoall“with ascreen andthe timeto

spare”.It’s one reason whyretailinvestors“accountedfora

qua rterofalltradingin January”.Farfrombeingapassingfad,

thedisruptionofmarketswillintensify ascomputeralgorithms

expand “the universe ofassets that canbetradedeasily”.

Financial progressisoftenchaotic, and “the capacityof social

mediatospread misinformation and contagionisworrying”.

But thisrevolutionis surelywelcome. Itmaynothave thepull

of aNetflixTV drama,but“afarbiggercastcanwin”.

Mostcompanydirectors,especiallyinthecrucialmedium-sized

sector,havebeenthroughenoughuncertaintythislastyear“to

lastacoupleoflifetimes”,saysMatthewLynn.“But,hey,here’s

agoodidea.Let’sdumpawholenewpileofrulesandregulations

onthem.”AhighlyunwelcomemeasureintheGovernment’s

proposedclean-upofBritishauditingisaplantoimposefinesand

bansondirectorsforinaccuraciesintheiraccounts.Following

scandalsatfirmsrangingfromPatisserieValerietoCarillion,

there’scertainlyacasefor“goingaftertheauditors”,whoare

supposedtocheckfiguresand“ringalarmbells”wherenecessary.

Buthandingthatresponsibilitytocompanydirectorsisadifferent

matter.Sure,youcanarguethat“iftheirownhousesandpensions

wereatstake”,theymightbe“morecautious”.Butthelimited

liabilitycompany,inwhichtheonlyriskisthemoneyyouputup,

is“oneofthegreatinventionsofthemodernera”,andcontinues

tofuelinnovationtothisday.Theconcept“hasworkedpretty

wellsincethe 17 thcentury”.Wechipawayatitatourperil.

Working fromhome during apandemiccan be “tedious” –

especially duringaBritish winter.So why not escape toa“sun-

kissedCaribbeanisland”, asksMichaelStott. The idea isn’tas far-

fetched as itseems. Thousandsof “digita lnomads”from Brit ain

and elsewhere are beingencouragedto relocateviaspecial “work-

from-home” visas.Barbadoskicked offthe trend last July when it

began offeringaone-year visatoapplicants earning $50,000or

more annually from anyemployer based outside the country. The

Bahamas, St Lucia,Bermuda andAntigua havesince alllaunched

similar schemes. They hope thatthe initiativewillgos ome way

towardspluggingahole in oneof“theworld’s mosttourism-

dependentregions”.According to theWorld Bank,the Caribbean

economycontracted 7.7%in 2020 andwilltakeuntil 2024 to

return to its pre-pandemic size. Buthow feasible,really, is the

move? At $2,000,theBarbados visaitself isn’toverl yexpensive;

moreover,Brit ish guineapigs report that schools are “excellent”

and that they’ve madea“very wide arrayoffriends”.Perha ps

even dr eamingabou titiso ne wayofescapingthe gloom.

GeorgeOsborne

Theformerchancellorseems

bentonpractisinganeven

wider“powerstance”,said

MatthewVincentintheFT.

Osborne,“whoselegs-

akimboposeattheTory

conferencefirstprojectedhis

omnificencetothenation”,

evidently“thinkshecan

stretchtomore”than

advisingBlackRock,the

world’sbiggestasset

manager,andeditingthe

LondonEveningStandard.

Hehasgivenupbothfora

newjobinboutiquebanking

with“takeovergurus”Robey

Warshaw.Osborne’smove

to“bestridetheCity”has

“doubtlesspromptedhis

tailortosuggesthisnew

pinstripeshaveareinforced

insideleg”.Andithas

sparkedsomeamusement

too,saidTheTimes.Sadly,

forthosewhomighthave

likedtoseehim“sweating

overhisrevision”,itseems

unlikelybanking regulators

will “insist” on him gaining

the relevant qualifications.

MikeLynch

Aftersuffering“oneofthe

longestinterrogationsinUK

legalhistory”(22dayson

thestand)defendinga$5bn

civil fraud claim brought by

Hewlett-Packard in 2019,

“Mike Lynch would probably

be happy never to see the

inside ofacourtroom again”,

said The Sunday Telegraph.

But this week he was back

for “round two”–this time

facing US criminal charges

on claims that he defrauded

HP when it agreed to buy his

software firm, Autonomy, in

2011. The American IT giant
      later wrote down the value
      of the company by $8.8bn.
      Lynch, who facesapossible
      25 years in jail, has won “a
      roster of influential backers”
      in his battle to escape
      extradition. At stake, they
      say, is not just his freedom,
      but “Britain’s sovereignty”.

Don’t punish

directors for

audit errors

MatthewLynn

TheDailyTelegraph

The real

revolution on

Wall Street

Editorial

TheEconomist

Putting a

price on

the planet

PhilipAldrick

TheTimes

Let’s all

move to the

Caribbean

Michael Stott

Financial Times

City profiles