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Thursday 4 December 2008

Any Other Business

I think I’ve spotted the ‘trash and cash’ merchants, dining at Mayfair’s best tables

A posse of hedge fund managers came round to The Spectator the other day, not to indulge in ‘trash and cash’ — or the even less attractive ‘pump and dump’ — but to participate in a breakfast discussion about how they are perceived by the media and the political world, and what they ought to do about it. I was asked to kick-start the debate, so I gave it to them straight in the croissants. Most journalists are not sure who you are or what you do, I began, but what we think you are is ‘a slightly sinister, super-wealthy clique who occupy all the best tables at the best restaurants in Mayfair’; and what we think you do is to use secretive methods to provoke and profit from market price-swings that frighten the pants off ordinary people. Warming to my theme amid a rattle of irritated coffee cups (you can hear a podcast of all this on the Editorial Intelligence website), I accused our guests of causing inflationary spikes in oil and grain prices, and seeking to profit from the Northern Rock crisis at its height by short-selling shares in Alliance & Leicester and Bradford & Bingley on the back of false rumours.

The latter gambit can now be seen as a trial run for last week’s ‘trash and cash’ bear raid on HBOS, whose shares fell by 20 per cent before the Bank of England stepped in to quash whispers that HBOS was in trouble. Those whispers seem to have started in the Far East, rather than Mayfair, but the incident was a perfect example of how footloose funds make markets more susceptible to manipulation. What was interesting about the response of our hedgie guests to my accusations was that they seemed to have little awareness of their impact on the real world: their answers were all about technique, with barely a word about responsibility. One made a distinction between what is ‘permissible’ by regulators and what may or may not be ‘acceptable’ in what he clearly regarded as the ill-informed court of media opinion. Another protested that hedge funds never collude to move markets, missing the point that a bandwagon of false-rumour-chasing is as unhealthy, in its effect, as an old-fashioned City concert-party.

More articles from: Martin Vander Weyer | this section

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