Any other business

The ticking parcel I failed to spot and the oil-price prediction I got spot on Last week’s global stock market panic, the overture to this week’s astonishing round of state interventions, was in part provoked by fear of humongous losses in something called ‘credit default swaps’. These arcane inventions by Wall Street rocket-scientists are a form of derivative contract — or ‘weapon of financial mass destruction’, as Warren Buffett put it — akin to debt insurance. A ticking parcel of at least $400 billion worth of them relates to bonds issued by Lehman Brothers before it went bust. Since Lehman paper is now priced at only 8 cents on the dollar, enormous claims are about to emerge against the parties to the swaps.

Ross Clark says speculators and fraudsters saw easy money in buying city-centre flats with borrowed money — but investors and lenders now face huge losses as prices crash I have developed a rather ghoulish pastime. It involves thumbing through auction results for repossessed apartments in city centres, then checking what those same properties sold for when new, a year or two ago. My record so far is a two-bedroom flat in a development called Beauchamp Place, Coventry, which was auctioned in September for £85,000 — less than 40 per cent of the £214,000 for which it was sold new in June 2006. That flat has, however, performed better as an investment than the shares of the company that led the buy-to-let boom.

When the credit crunch first hit, Icelanders blamed everyone but themselves: international banks for their loss of faith, hedge-funders in London for betting on the country going bankrupt. Seven months later, though, with its current troubles and the recent central bank rescue of Glitnir, Iceland’s third largest bank, the mood is one of anger amid the dawning realisation that perhaps Iceland’s own politicians and bankers may have played a part in the crisis all along.

Just as directors’ dealings often reveal more about the immediate outlook for their companies’ shares than can be gleaned from annual reports, it often makes sense to follow what fund managers do, rather than what they say. So it was a pleasant surprise over lunch the other day to find myself in step with one of the most successful investors alive in Britain today. Anthony Bolton, president of investments at Fidelity, the biggest unit trust manager in the world, is buying shares again, two years after he called the top of the bull market. This should give comfort — and pause for thought — to the herd who are dumping stocks and share-based funds in favour of cash or guaranteed returns.

This is getting serious — so serious that I’ve done something I may have cause to regret terribly a year or two hence. I have sold my shares in Lloyds TSB. I did so with a heavy heart, and an even heavier loss, since they were bought when the shares were yielding 7 per cent, a rate comfortably in excess of the interest on the bank’s most generous deposit account at the time. They are still yielding 7 per cent, in a manner of speaking, but the shares are sad, shrivelled things, and the extra income I’ve had is a tiny fraction of the capital I’ve lost. Lloyds was the bank that did Dull.

The US Treasury chief sees his interventionism as a case-by-case response to unprecedented events, says James Doran, but his critics see it as inconsistent, dangerous and ‘un-American’ It’s hard to keep up with Hank Paulson, the grim-faced US Treasury Secretary and would-be architect of a new financial order. Over the past eight months, since the collapse of the investment bank Bear Stearns, Paulson has been confronted with an escalating crisis that has engulfed Wall Street, plunged markets into chaos, and threatened to push the global economy into deep recession. And at each milestone on the road to ruin, Paulson — Hermes-like — has presented a different face.

We live in frightening times. Markets are in freefall; economies are in turmoil; the financial system is on the brink. People want simple explanations and easy answers. They want to know who to blame for the mess and what can be done to clear it up. Just as well, then, that there is no shortage of politicians ready to fulfil this need. The dictionary defines ‘cant’ as insincere, pious or moralistic talk. If cant was a commodity, it would be the first big bubble of the post-credit-crunch world. Already debate over the credit crunch is being reduced in some quarters to a series of simplistic narratives in which all bankers are greedy, markets are evil, governments are good and capitalism is doomed.