It’s not much of an endorsement when a major shareholder announces a sale of your shares with the price at a five-year low. It’s even worse when your company takes half the stock itself. The company here is BT, the vendor is Orange and the shares the leftovers from the purchase of EE, itself a shove-together of T-Mobile and Orange UK.

These are unhappy days for Gavin Patterson, the man who looks like Hollywood’s idea of a CEO. Indeed, short of the regulator forcing the company to divest Openreach, its wires business, almost everything else is going wrong.

Following an accounting scandal in Italy and troubles with BT’s public sector business, there is our growing reluctance to pay more to speed up superslow broadband. Even the footie is not what it was. The great British couch potato had seemed impervious to price rises, encouraging Mr Patterson into a bidding war with Sky for the rights. Now, it seems, our appetite is not insatiable after all, as Sky reported a 14 per cent drop in the average number of viewers per game.

Saeed Baradar, of brokers Louis Capital, concluded last year that BT had no chance of recouping its investment and urged shareholders to sell. This month’s departure of BT’s head of TV, Delia Bushell, three months after spending £1.2bn on football rights, suggests he was right.

BT still hopes to raise its dividend by 10 per cent a year, but even maintaining it is starting to look like a stretch. And looming over everything is the vast pension liability from BT’s days as a public sector business.

Mr Patterson has already forfeited his bonus. Jan du Plessis joined the board this month, slated to become chairman in November. The first line of his official biography issued by BT notes that Mr du Plessis “oversaw the appointment of a new CEO in 2013, as a consequence of Rio Tinto’s first-ever annual loss”. Mr Patterson may soon be calling a Hollywood agent.

Argentina to default (but not yet)

If investors want to lend you money for 100 years, it looks rude not to take it, even at a yield of 7.9 per cent. After all, everyone on both sides will be long gone well before the stock is due for repayment. Argentina desperately needs the money, while the lenders are gambling that  things there will keep improving enough over the next few years to keep the stock up to par, or even better.

And yet…if ever there was a triumph of financial hope over experience, this is surely it. Two centuries ago Argentina offered Britain the Falkland Islands in return for debt forgiveness (the offer was turned down on the grounds that Britain already owned them) and the last century has seen debt crises in 1930, 1955, 1976, 1989, 2001 and 2014.

Those in charge of the sovereign wealth, private portfolio, pension and bond funds who constitute the buyers of such bonds nowadays will hardly care about history. The banks will collect their commissions and move on, while the fund managers will point to a lucrative income stream and Argentina’s improving economic management.

Say, for the sake of argument, that this time it really is different, and the next default is 12 years away. By then, the holders will have received $95 in interest payments on each $100 invested. A buyer of 12-year US Treasury stock will have received $30. So the Argentinian debt would have to be worth less than 35 cents on the dollar for the buyer to have done worse, even ignoring the time value of the higher interest payments. Not such a bad bet, after all.

More forward guidance

If Mark Carney and the Monetary Policy Committee had not halved Bank Rate in his post-referendum panic, would they be contemplating a cut now? The answer is obvious,  but Mr Carney is stuck with the political reality that to raise it back to 0.5 per cent is dynamite in this month of disasters. His chief economist Andy Haldane can take a more objective view. Put it down to continuing the process of softening us up for the inevitable rise. But if, as his boss says, now is not the time, when is?

 

This is my FT column from Saturday

 

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