Any other business

It has been a terrible 12 months for investors. It didn’t make much difference whether you invested in stocks, commodities or corporate bonds, the chances were you took a hammering. Even gold failed to sparkle as the credit crunch cut a swath through every kind of asset class. And yet there were a few individuals who managed to make fortunes as the markets tumbled. In the US, John Paulson cleaned up by betting big against the subprime mortgage market. Over here, amid the general gloom along Mayfair’s Hedge Fund Alley, there were a couple of money managers who could still afford somewhere better than Pret a Manger for lunch. BlueGold rode commodity markets to perfection, making money on the way up and on the way down again.

I’ve recently developed a callous indifference towards the torrent of amateur self-analysis that’s infiltrating our everyday pattern of speech. I’m over ‘issues’. Way too many people have way too many issues for my liking. And too many people I don’t care about feel compelled to ‘share’ their issues with me. Last week people started ‘gathering’, and now I fear gathering is set to become the new big issue. Ever since Kate Winslet dramatically implored herself to ‘gather’ at the Golden Globes (surely ‘get a grip’ would have worked just as well?) I’ve witnessed two perfectly ordinary mates inexplicably ‘gather’ — rather than just admit they’d lost track of what they were saying.

What is simplicity? And is it desirable, on principle? A good question. My recent essay on the origins of the universe, arguing that the simple explanation, its creation by an omni-potent God, is more plausible than its sudden emergence as a result of infinitely complex (and disputed) events, angered some readers. They took the view that only the simple-minded see virtue in simplicity, and that a love of complexity is the mark of intellectual maturity. So, returning to the subject, let us look at complexity, and what promotes it. There seem to be three main factors. The first is constructive knowledge. Human beings are clever creatures and delight in their ability to create, and to put their creations to the test. This is particularly true of those who design machines.

The government recently proposed that schoolchildren be given lessons in personal finance. Can I ask that, alongside the Lower Fourth, room be made in the classes for the AA spokesman who recently said this: ‘People wanting to get high-aspiration vehicles at an affordable price will have been hit by the crash in [the cars’] value.’ Yes, this remark really is as stupid as it seems, but first a little context. He was talking about a form of hire purchase called ‘Personal Contract Purchase’, whereby a motorist pays a deposit, followed by two years of monthly payments. At the end of this period, the buyer has two options: he can either pay a lump sum to purchase the car outright, or he can return it to the finance company which organised the deal.

It is a sobering thought that a year ago the nominal wealth of the world, as registered in bank holdings, stock and bond prices, real estate and company valuations, was twice what it is today. Where has all the money gone? Was it there in the first place? The $50 billion ‘invested’ with Bernard Madoff seems to have simply disappeared into a celestial, or infernal, black hole, leaving ‘not a rack behind’. I heard the other day of a man supposedly worth $6 billion a few months ago, now down to $500 million, so technically he is not even a billionaire any more. He did not actually do anything to cause his fortune to be divided by 12: just sat appalled, watching it vanish, on TV.

Matthew Lynn says banks that prospered by offering exclusive ‘wealth management’ services during the boom years are about to encounter some very angry customers Of all the phrases in the financial lexicon, ‘private banker’ is one of the most evocative. It summons up images of discreet addresses in the more remote Swiss cantons, of luxuriously furnished townhouses in Mayfair, of chequebooks printed in florid script, of pinstriped executives who never stint on the second bottle of claret. Thriller writers find them as handy a plot device as a fully loaded Beretta. Nothing else manages to wrap up tradition, snobbery and timeless financial solidity quite so completely in one institution. Until now, that is.

Hedge Fund Land seems to be in disarray. Investment losses keep mounting up. It would not come as a surprise to hear that fully 70 per cent of these often complex and sophisticated offshore investment vehicles have percentage losses running into double figures over the last year, with a large number down by over 25 per cent. This all seems to point conclusively to the fact that the majority of practitioners are unable to cope with market conditions and have failed to remember Investment Rule 1.01 for confronting losses: ‘Get out, stop losing and live to fight another day.’ The fact that most funds are losing should not be a cause for complete surprise, however. This brutal market has been nigh on impossible to stand up to.

Are you sophisticated? Here’s how to find out The word ‘sophisticated’, though commonly used, especially by persons who turn out on close investigation to be unsophisticated, is tricky, and truly sophisticated people avoid it altogether. Now, having got that off my chest, let us try to define it. One difficulty is that the root of the word can mean opposite things. Thus, a sophist can be either ‘a wise or learned man’ (OED), or ‘one who makes use of fallacious arguments’. Macaulay, in his History, ferociously calls Catholic theologians, especially casuists, ‘this odious school of sophists’. ‘Sophistry’ nearly always means ‘deceptiveness’.

This is the time of year when I repeat Christina Rossetti’s lines In the bleak mid-winter Frosty wind made moan, Earth stood hard as iron Water like a stone. November was as cold as I remember this once-muggy, foggy month. And December even harder. The Met Office says the rest of winter will be severe, and this is the first of a cold series. I am prepared. I have two lovely, comfortable scarves, one of white, of pure cashmere, bought at an Armani sale by that Prussian beauty Lady Niti Gowrie, which somehow found its way to me, and I also possess an immense long red thing of wool, from MoMA in New York, with matching gloves, a present from Drue Heinz to my wife, which I appropriated as the spoils of war. What war?

To a hammer everything is a nail, and to a doctor everything is a symptom. I was recently in a supermarket in a handsome and as yet unspoilt town in the west of England where, as my wife observed (being French and therefore a close observer of the English in all their guises), every woman over the age of 50 looked and spoke as if she had stepped from the pages of a novel by Barbara Pym. I looked at the purchases of the man in front of me. The man himself, clearly not of the lowest social echelon, dressed in green country tweedery, was only in his late thirties, but his face was already somewhat ravaged. His hand trembled slightly and he was jocular in a slightly guilty way.