All the signs of an economic recovery may be there but not everyone in the industry is convinced
Two thirds of UK senior managers might feel too vulnerable to office politics to take their annual holiday but carefully planned business trips can cover a multitude of personal, social and professional needs. Each year about this time, a dirty dozen of the investment industry's finest free-thinkers conspire to meet, funded by their respective employers.
Sadly, we seldom achieve full house, but a decade-long tradition dictates that a quorum is eight. If time is the new money, we are paupers. For two days, we are slaves to marketing lunches and client presentations, and the intervening evening is invariably booked by the local big cheese. But that still leaves the hours between 11.30 pm and dawn for discussions on the advancement and protection of our individual fortunes.
Relaxing in the warm embrace of superior victuals, we tell each other our deepest hopes and fears, although not, of course, our trading positions, the phone numbers of our personal coaches, or the source of our Cuban cigars. Come morning we part, spiritually refreshed, and return to the office hinting at all night endeavours for the firm.
This year, the consensus among these successful executives is a deep and pervading sense of unease. Predictions of economic recovery are now rolled over like a bad debt and, similarly, the costs associated with delayed delivery are rising. Yes, we hear the upbeat data about consumer spending, house price inflation, falling unemployment and improved corporate earnings. Surely, if it looks like a recovery, walks and talks like a recovery, then it is a recovery? It is just that this bunch of experienced, shrewd managers, who also want a recovery, can't quite see it yet.
We are uneasy about Iraq. Apparently the US+1 won the war, but why is it beginning to feel like a defeat? If the invasion was costly, the occupation is becoming ruinously expensive. The small US force is clearly making little headway with the population ambivalent (to be generous) about being liberated. At home, questions of political legitimacy persist. The joke among US Democrats is that the White House levelled everything in Iraq, except the playing field.
Furthermore, the oil bonanza has, like WMD, failed to materialise. The global oil companies are backward in coming forward. Where does that leave a nation with a flagging currency that still imports 53% of its crude oil? The US has now had 13 interest rate cuts but the past three have had little effect. Lately, every time a Fed official speaks, the dollar falls, bond yields rise and so does gold, now at $364/oz up from $295 in January. Western central banks, of course, no longer hold gold reserves, although, curiously, the Chinese government does. Gold mining shares are up 61% in the past 18 months, against a 31% drop for the Nasdaq.
We have had the stock market bubble burst, including the technology bubble. Now the great contrarian in the sky has stuck a pin in the bond market ' he just hasn't pulled it out yet. In the past few weeks, the yield on the 10-year Treasury bond has gone from 3.1% to 4.29%. Expect a pop.
Next up? The mortgage refinancing bubble. The authorities hope mortgage refinances are to secure better terms and longer maturities. But we can personally advise they are being blown on conscience-salving treats for families whose main breadwinners don't dare leave their desks. The light at the end of the tunnel just may be an oncoming train.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till