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Barking at the Bankers

Practice area: General


Justin Urquhart Stewart
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio, and in the press. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor. Justin provides financial advice to clients of Kester Cunningham John Financial Planning LLP.


You may recall the Dangerous Dogs Act of 1991 which was the legislation rushed in as a response to some dreadful incidents of serious injury or death resulting from attacks by aggressive and uncontrolled dogs, particularly on children. These attacks received typically hysterical tabloid headlines, causing widespread public concern over the keeping of dangerous dogs and the result was some ill thought through knee jerk legislation.

Under the 1991 Act (and as amended in 1997) it was illegal to own any 'specially controlled dogs' without specific exemption from a court. The dogs would have to be muzzled and kept on a leash in public, they must be registered and insured, neutered, tattooed and receive microchip implants. The Act also banned the breeding, sale and exchange of these dogs, even if they are on the Index of Exempted Dogs.

Four types in particular were identified by the Act:

• Pit Bull Terrier (a description which has led to some confusion, as the 'Pit Bull' is not a breed in and of itself but encompasses a range of breeds)
• Japanese Tosa
• Dogo Argentino
• Fila Brasileiro

In comparison the Chancellor's Pre-Budget speech pronouncements on city bonuses seemed to be about as equally thought through. I noticed that he only mentioned discretionary bonuses as opposed to contractual ones which of course would be a lot harder to hit but are often the most penal type and most reflect the weak and insipid management of various investment houses when negotiating pay contracts.

Like this canine act, his pronouncements have already been mainly ignored as Treasury officials rush out explanations as to what is included or not, what actually is a banker (as opposed to an asset management firm, say, owned by a bank?) and how the tax bill can be avoided, rather than just evaded.

Perhaps they could also identify and categorise these types of dangerous bankers properly as per the Dogs Act:

• The Pit Bull Banker (unpleasant aggressive New York banker usually identified by beautifully capped and whitened teeth covering the original fangs)
• The Euro Slick (too smartly dressed smug continental banker who rages at the Anglo Saxon financial system whilst still receiving a generous package)
• Japanese Banking Tosa (this may be just a mispronunciation but after nearly twenty years of domestic enfeeblement it has been effectively neutered in many markets)
• The Perfidious Albion (this over-bred and arrogant breed that has little realisation of where it has defecated and the unpleasantness it has caused).

Sadly, like the Dogs Act, such action and no doubt others to follow will have little effect on the industry's cultural attitude - which is endemic in certain areas, of greed and lack of responsibility. We should all recall that in dealing with others' assets we have a higher duty of care and remember that it is a privilege to be asked to do so and that we do not have any given right to be in such a position. However, perhaps we could adopt certain elements of the Dog Act for the bankers such that they need to be registered and insured, neutered, tattooed and receive microchip implants. Now that's what I call proactive regulation.

With Sarkozy and Brown enjoying the bank basking headlines there will no doubt be calls for other taxation ideas like the transactional 'Tobin' tax, but much of this has now turned into a form of banking stocks – and I don't mean shares, but old fashioned stocks in which you pillory your bankers with ageing fruit and vegetables. I would suggest it is time that they start to concentrate on the causes of the problem and not the symptoms.

***

Whilst the papers have finally realized that the Pre-Budget was a hollow tin when it came to debt management proposals, it just underlines that it is confidence that truly underpins markets and economies. Thus if politicians try to be too clever in times of worry then they will be rumbled. The ineffectual nature of Darling's comments about his debt plan only added to the lack of confidence. As I mentioned recently this is dangerous behaviour when sovereign debt valuations are under such scrutiny.

Perhaps I can offer an alternative view for the Government. Rather than just looking so bewildered over its debt, perhaps it should actually take a look at its overall balance sheet and assets as well as liabilities. The UK government now owns large elements of the UK economy. As well as being the country's largest employer, it is also the country's largest banker.

Add to this the range of its indirect assets by way of guarantee, the railway network, significant parts of the infrastructure, and of course by way of its bank ownership it has investments in pub chains, housing developments, nursing homes and even some yachts. In fact the UK government is now the country's largest private equity company. Maybe such a review could provide us with a better valuation of the government, the nation and its debt?

Perhaps then let us learn from our history to see if we can reinvigorate our economic vitality?

After the First Opium war with China in which British troops occupied Hong Kong 1841, the island was ceded to Britain but it was not until 1898 after another drug war that Britain obtained a 99 year lease on the New Territories. From these small acquisitions even the Chinese will admit that such a creation was an incredibly valuable and dynamic centre of trade and wealth creation.

Perhaps now is the time for a reversal of such a policy. Why don't we make an equivalent centre in the mouth of our equivalent of the Pearl River? There, sitting in the Thames, is the often ignored Isle of Sheppey. Well you don't have to sell it but lease it out as a tax free development centre to attract inward investment and entrepreneurial skills. So rather than a science park off a university campus why not a national development centre? Hong Kong might like a new base and Singapore certainly needs more space.

***

And finally............where in the world would you choose a town that could possibly be the obvious 'twin town' with Walt Disney World? The excitement, the thrill, the charm and the sheer magic of the place for young children, this has to be a very special place. There can only be one name that immediately comes to mind. Swindon.

Well there is hope for Hammersmith yet.


Justin A. Urquhart Stewart
Director
Seven Investment Management Limited

This article represents a personal and lighthearted view from Director, Justin Urquhart Stewart of Seven Investment Management Limited, and is based on current financial news and events around the world. Its content should not be used for investment purposes and you should contact an independent financial adviser before making any investment or financial decision. Seven Investment Management Limited is authorised and regulated by the Financial Services Authority. Member of the London Stock Exchange. Head office: 23 Austin Friars, London EC2N 2QP. Telephone 020 7760 8777.
Registered in England and Wales number 4092911. Registered office: 3 More London Riverside, London SE1 2AQ.

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