The meal that cost £44,007 at a London restaurant could have been either a celebration or a wake
Six men spent £44,007 on alcohol in a London restaurant last week.
The £7 bought two bottles of beer; the rest bought five bottles of wine, including a 1947 Chateau Petrus costing £12,300.
Was it a last supper, a kind of wake for the securities industry ' the most likely origin of the credit card that absorbed the expense ' where stock and bond trading profits are melting and legions of bankers are being fired?
Or is it a vote of confidence in the outlook, suggesting that the glass isn't just half full, it's brimming with Chateau d'Yquem circa 1900 at £9,200 a bottle ' the same wine Hannibal Lecter bought Clarice Starling for her birthday in the Thomas Harris novel, and the dessert wine of choice last week.
As things stand, the last supper scenario is looking more likely. It's starting to smell just a little like 1998 out there. That was the year Russia defaulted on its debts, triggering a crisis of confidence in emerging markets. It's also the year Long- Term Capital Management became Short-Term Whoops Where's The Capital Mismanagement, as John Meriwether and crew proved there's no such thing as a free lunch, dragging the Federal Reserve into a rescue operation which reintroduced the term 'moral hazard' into the financial lexicon.
So let's tip-toe through the current market environment. Instead of Russia as the principal villain of the piece, we've got Argentina. Investors are growing more convinced that Argentina will default on its $130bn of debt.
The nation's debt-swap program, deferring today's interest payments to a later date and at a higher rate, only works if Argentina can use the breathing space to put a bellows to growth and exports. It's similar to Russia's 1998 bet on its ability to continuously raise short-term funds by rolling over its Treasury bills. Both are like a drowning man trusting that with each swell of the ocean, he'll suck down air rather than salt water.
As a result, investors are beating up the currencies of countries ranging from Taiwan to South Africa to Poland to Brazil to Hungary to Russia. If Argentina defaults, those emerging markets will again become submerging markets.
In place of LTCM, we've got a much wider hedge fund industry, stuffed with freshly minted portfolio managers all thinking that they're smarter than the market. Who says so? Barton Biggs, the chief global strategist at Morgan Stanley Dean Witter.
'The hedge fund mania that currently grips the US and Europe is rapidly assuming all the characteristics of a classic bubble,' he wrote in last Monday's Financial Times newspaper. 'Hedge funds have become the new asset class of choice. There is now more than $400bn of equity in about 6,000 hedge funds, completely unregulated and highly leveraged. A lot of money is going to apprentices who worked for the old masters. Maybe I shouldn't worry. Maybe they are all geniuses. What seriously bad things could happen in the public markets because of this hedge fund mania?'
It's not just emerging markets that are running into trouble. Analysts surveyed by First Call/Thomson Financial are forecasting average fourth-quarter profit growth of just 4.2% for S&P 500 companies. That's down from a 5.5% estimate at the beginning of this month and about a third of the 12.6% growth they were forecasting in April. Meantime, the Nasdaq Composite Index is down 20% this year.
In the bond market, investors are demanding an average yield premium to Treasuries of about 990 basis points to buy non- investment grade debt. That's up about 100 basis points in the past six weeks and means junk-rated companies trying to raise finance in the bond market will have to pay usurious interest rates for their cash.
'It sure looks like we might get a replay of 1998 soon, only this time it's worse because it involves both developed and emerging markets globally in one big horrible synchronism,' said Henrik Lumholdt, managing director of research firm Strategic Economics.
The London dinner last week at Petrus ' proprietor Gordon Ramsay didn't charge for the £300 worth of food ' was reported in several UK newspapers. The Guardian cited Ramsay saying the diners 'didn't bat an eyelid when they got the bill,' a copy of which the newspaper reproduced. Ramsay would only identify his customers as 'City gentlemen.'
At £7,333 per head, they smashed the previous record of £4,363 listed in the Guinness Book of Records, set by three diners at Le Gavroche, also in London, in September 1997.
That previous record-setting dinner coincided with a slump in the Thai baht which triggered the Asian currency crisis. DÃ©jÃ vu all over again?
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