Lincoln Drill Hall

Wednesday, 21 January 2009

Dot com - remember that?

Amid the really astonishing events surrounding the banks comes a thread of memory of quite why it was the FTSE last reached the 6,000's. The context is relevant and might well age me. Dear old Phillips and Drew, a massively respected name, stuck to the principle of value investment; you know, actually looking at what a company does and assessing the quality of its earnings. They fell in the league talbes whilst the flash boys all went for momentum investment; my favourite image of the round tray filled with water which sloshes to the side to which the trays is tipping at any one time; and the more it sloshes the more it tips until...you've guessed.
Well, dot com was quintessential momentum, money piled in after money and values (what an odd use of a word) rose and rose. This is so like the other metaphor of the roundabout which spins for ever faster until some one blows the whistle and, another metaphor, the king is seen to have no clothes.
What strikes immediately as odd is how the banking sector seems to have taken the mantle of the dot coms. It is odd until we look more closely at what banking had become. Profits it seems came from clever financial instruments which defied gravity. So that they fell should be no surprise. The problem is that they were in the same banks which have serious job to do in any economy.

Monday, 19 January 2009

Employment

The Graduation Ceremony at Exeter on Saturday brought it home. It is no longer numbers; it is names and faces and on Saturday they were mostly post graduate degrees.
I return to a piece I wrote with tongue firmly in cheek, as indeed we all did, as we argued that higher education should be only for the rich. Outrageous and wrong, but...
But, is it fair to take people through three years as undergraduates and then one doing a masters or solicitors exams or some such, with no real possibility of work? Or do we play a longer game and accept that first time round the right job won't come, but that there are other opportunities which will add something whilst we wait? It is the prospect of so many people educated to a level which the jobs market simply does not require. Or, again, is government thinking of a longer game? Or, as I have argued before, is it a device to massage the unemployment figures?
An honest and informed assessment would go down well.

Friday, 9 January 2009

Will this recession pass?

Simon Jenkins in the Guardian of 9 January takes leaf out of the historian's file to assure us that all will be well.

As usual with Jenkins, there are buckets full of common sense slopping around everywhere in his argument. I'm with him in his jibes. I have to say the Bishops got my goat particularly with their hefty shutting of the borrowing the door so long after it would have done any good.

My question though is whether we are seeing something that has a substantial structural element to it. A friend told me that he had been away from Falmouth for the Christmas Holiday and returned to find third of the shops shut. This is an exaggeration, but the high street of smaller towns are beginning to look like mouths after a visit to the dentist. Retail is changing. My own village is awash with courier companies delivering on line purchases. It has been apparent for ages that the high street is made up largely of financial services, opticians, designer clothes and coffee shops. Soon surely it wil just be spectacles and cups of coffee.

But what does or should this mean for the economy? As pointed out elsewhere in Jenkins's article one third of workers are relatively untouched by recession, being on the public payroll; another cohort, those already taking their pensions, are in the clear. Those at risk are those for whom economic growth is a vital link in the chain. Many jobs go on from year to year simply because they need to be done; these surely are pretty safe. It is the jobs that come from someone taking risk to gain advantage that go in recession but even then not all of these.

But in the longer term, are these jobs less likely to appear in the future? I think not. the entrepreneurial instinct is firmly in place and will be bursting through any minute now.
The landscape though will change and this we must accept. Perhaps though the old labourites were right. An economy cannot exist happily on financial service and retail alone. some how, somewhere, someone needs still to make something.