The last time the FTSE100 Index was at today’s level, St Tony was in Number 10, boring old stocks like Unilever and Diageo were being dumped in favour of exciting new businesses like Freeserve and Dimension Data as the dotcom boom reached its apogee, and War Loan cost £70.

Government stocks were hardly more popular than “old economy” shares, but those who ditched the dotcommers and put their money into long-dated gilts (war loan is about the longest) have had a wonderful time.

They have avoided the heart-stopping plunges of two bear markets, enjoyed a guaranteed income of around 5 per cent and seen their capital gain. Lending to the British government has never been so agreeable.

Forecasting is always hard (especially for the future) but one thing is sure: it won’t be as agreeable over the next 14 years. Treasury 4.25 per cent 2027 yields 2.5 per cent. War loan at £90 yields 4 per cent, to reflect its shrunken relative size and the possibility of repayment at £100 if that suited the UK government.

Far more likely is the prospect of the state issuing much, much more paper, and since it must have the money, it will do so whether the market wants the paper or not. The Labour government was obliged to pay more than 15 per cent for 20-year money in 1976. This cycle turns slowly, but a bear market in gilts is surely the next big move.

The yield on the FTSE100 is 3.4 per cent, and even during the worst financial crisis in much more than 14 years, the total dividend payout of its constituents did not fall. When share prices go down, rising dividends provide a cushion of sorts. When bond prices go down, there’s nothing to ease the pain.

Heathrows go on and on

When the British Airports Authority was privatised in 1987, it was plain to all but those involved that the move turned a public sector monopoly into a private sector one. The then chairman argued with a straight face that there was plenty of competition – from Schipol and Charles de Gaulle airports. It took almost 20 years for the Office of Fair Trading to notice, panicked into referring BAA to the Competition Commission by a takeover bid for the company.

Another eight years on, and few would argue that splitting Gatwick (and Stansted) from Heathrow was a mistake. But for the sheer press of humanity, Heathrow is a much less miserable experience, and maintaining the competitive pressure is surely Gatwick’s best argument for hosting London’s next runway.

It is also Howard Davies’s best argument for ditching Boris’s fantasy island: if built, it would destroy Gatwick and Stansted (Heathrow would close to help pay the £1,000-plus per head of the UK population needed to build it). The old BAA monopoly would be restored, more powerful than ever.

There is something about grands projets which causes common sense to fly from the politicians’ minds. While everyone can agree that investment in infrastructure is a fine thing, finding prospects of sufficient size to make a difference and which are worth doing is hard. Neither HS2 nor the Thames supersewer adds up convincingly.

Crossrail seems like a rare successful example on track to complete inside a (generous) £15bn budget. Its success has raised the pressure to find something else, anything else, to exploit the project management expertise that it has created.  Boris island wasn’t the answer.

Their Cup runneth over

When sorrows come, they come not single spies, but in battalions, as the beleaguered top brass at Tesco have found out. Not only another profit warning and a slashed dividend, but the Carbuncle Cup for its new supermarket at Woolwich.

Still, there’s consolation, of sorts. Tesco cannot possibly win it next year, when the excrescence of Land Securities’ Walkie-Talkie will be finished, and thus eligible for the prize. A fire hazard to those below it on sunny days, its footprint is too small for its ambitions, so it gets fatter as it goes up (and up). If beauty is in the eye of the beholder, this is the ugliest new building I’ve seen since the now-demolished post-war horrors along London Wall.

This is my FT column from Saturday

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