One of the problems with knowing a lot of people in the City is that you end up with an irritatingly large number of friends who, while not being much older than you, are very successful, very rich and, to add insult to injury, retired.
I recently had lunch with one of them. He is a generally optimistic man and likes to berate me for my pessimism. Which he did.
I pointed out that we’ve actually been rather optimistic recently. We have long thought America is turning as the housing market sorts itself out (see David C Stevenson’s views on making money out of this) and the bonus of natural gas is chucked into the equation.
We love Japan. We’ve been suggesting you buy Europe for many months now and we have always said we expected the eurozone to hold (as it so far has).
We say nice things about a few emerging markets. We also offer you endless interesting tips on the big plays of the future (nanotechnology of interest?). This week we even tell you why it can be worth buying expensive-looking stocks!
Our big worries are, as they have been for a long time, the dismal state of Britain, the way in which the endless quantitative easing might lead to an inflationary disaster, and the possibility of an implosion in China.
He batted away the inflation suggestion (“won’t happen”) and only partially accepted our China concern (he sees the real issues as social rather than financial). Then he surprised me with a remarkably bearish comment.
The biggest risk to the global economy today, he said, is Britain. You can blame it on the EU, on over-the-top state spending on the civil service. Whatever. But when it comes down to it we have an “emperor’s new clothes economy” that produces almost nothing but debt, and is in line for an almost inevitable currency crisis.
This is a view regular readers will know many of us here hold pretty firmly, and a new report from Tim Morgan of Tullett Prebon sums it up nicely in its title: “Perfect Storm: Energy, Finance and the End of Growth”. I’ll put more on this up on the blog over the week, but for a good summary of all that’s wrong with Britain see Permanent QE will hammer sterling and impoverish Britain.
The end of Britain is nasty for all of us, of course, but the point my usually happy friend made is that it is bad for everyone else too. The collapse of the likes of Greece is by the by. It is too small to matter. But Britain? It is still the world’s sixth largest economy. It matters.
On the plus side, I asked what he thought of RIT Capital, one of the investment trusts in our core portfolio and one I’ve been agonising over. It’s his second-largest personal holding, he reckons it is full of undervalued assets and he’s hanging on to it. So are we. See How our tips have fared for our (sort-of) six monthly update of the portfolio.