It’s one damn’ thing after another for Britain’s biggest grocer. Since pulling out of the US, chopping back its overdose of megastores and admitting that its other foreign adventures don’t look too hot, here comes a threat from a beast big enough to wreak havoc at home. Amazon picks you a book from a million and delivers it the next day. It’s promising to do the same with the groceries in California, and internationally if that goes well.

Tesco’s no-longer-new boss, Philip Clarke, said this week that “the direction of travel” is right, even if the pace is glacial. Well, he’s paid to stay cheerful in the face of adversity, but as Dave McCarthy at Investec pointed out in a note published ahead of last Wednesday’s trading update, “we find aspects of the Tesco strategy contradictory.”

The company is determined to maintain its margin, but Mr McCarthy can’t see how this can be done without raising prices, which is hardly the preferred direction of travel. “Such a strategy would push Tesco down the doom loop, not shift it to a virtuous circle.” His remedy is to “re-set its margin”, a euphemism for cutting it, “before it is eroded.”

Not so long ago, Tesco could have started a real price war (unlike the phoney headline-grabbers that are the norm in this industry) and done its competitors permanent damage. But it is losing market share at home, despite “investing” £1bn in more staff and better presentation.

Away from home, the picture looks worse, with falling sales in key territories. Over the years, successive British retailers have found that abroad is a foreign place where their profits go to die. Tesco seems unlikely to break this pattern, especially now that it has domestic distractions. With the shares now at a price they first saw seven years ago, Mr Clarke must think he could do without an Amazonian assault as well.

Help for Help to Buy

Few critics of George Osborne’s attempt to push up house prices have been quite as scathing as Albert Edwards of SocGen, who’s not so much an uber-bear as a polar bear with his arctic economic forecasts. He’s awarded the Chancellor the same mantle of “moron” he first bestowed on Gordon Brown, arguing that Help to Buy will turn into Help to Boom, followed by Help to Bust.

Stephen Lewis, the cerebral economist at Monument Securities, disagrees. He points out that the 40 per cent fall in prices required to bring affordability back to the levels of the 1990s would wipe out the UK banking industry (again) with catastrophic consequences. Even to stabilise the market requires a supply of new buyers and, London aside, he can’t see enough of them to push up prices.

He argues that critics of Mr Osborne’s scheme are failing to differentiate between those who can afford to buy, even if they struggle to make the payments, and those who shouldn’t be borrowing in the first place.

The roots of the crisis lay in the lenders’ indifference to borrowers’ creditworthiness, but today the problem is the other way about: those without a monthly payslip are almost excluded from the mortgage market. While we may wish for an economy rebalanced to investment and exports, we haven’t got one. As Mr Lewis gloomily concludes: “If policymakers want growth at all, they are obliged to have traditional recourse to stoking domestic demand.”

Risky risk-free assets

At the start of last month, buyers of UK Treasury 4.25per cent 2032 stock paid £125. Today, they wish they’d sold in May and gone away, as the price has crumbled to £119 in little over a month. It’s true, of course, that if those buyers hold on for another 19 years, they will get the guaranteed 2.6 per cent redemption yield (3.4 per cent annual income followed by a 20 per cent capital loss).

Still, to lose 5 per cent of your capital in so many weeks is hardly what most people would describe as a “risk-free return”, as the actuaries insist on calling it. As they continue to drive pension funds away from long-term productive assets like shares, and into the “safety” of bonds, they might consider the real risks in their risk-free returns.

This is my FT column from Saturday

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