So farewell, Wegelin & Co, the oldest bank in Switzerland and the one with the simplest strategy for growth — which was to offer secret accounts to American tax-evaders who could no longer obtain that valuable service from bigger Swiss banks such as UBS. Founded by a linen merchant in 1741, which makes it half a century younger than Coutts and Barclays, Wegelin last week pleaded guilty to helping US citizens evade tax on $1.2 billion, agreed to pay $58 million in fines and restitution, and announced that it is closing down. The explosive growth of Wegelin’s funds under management during the last decade — despite being headquartered in a house reminiscent of a giant cuckoo-clock in St Gallen, a quaint provincial town the size of Shrewsbury — must have looked suspicious even to the complacent Swiss authorities, but the bank did its best to put up a smokescreen. In an interview in 2008, one of its managing partners, Magne Orgland, spoke of the advantage of not being located in Zurich or Geneva because remoteness made it ‘easy to avoid the deadly emotions of greed and fear; after all, the world’s most successful investor Warren Buffett is based in Omaha’, and of combining ‘client servicing with modern financial theory’ — presumably a reference to the late Leona Helmsley’s very modern theory that ‘only the little people pay taxes’.
Wegelin’s fall is just one episode in a continuing international assault on tax evasion. George Osborne has struck a deal with the Swiss authorities that he hopes will flush out £5 billion of tax on an estimated £40 billion held by British taxpayers in Switzerland — though the Treasury admits a risk of ‘identification failure’, meaning that it expects many billions to stay buried. The Americans shun government-to-government accords, however, preferring to send in the Department of Justice. Having extracted $780 million and 4,000 sets of customer details from UBS in 2009 — hence that troubled bank’s withdrawal from the secret-account sector — the DoJ’s men in black have taken aim at 13 more Swiss institutions and won’t be content until they have skittled a whole bowling alley of gnomes, as it were. That should at least have the collateral benefit of bringing new bundles of tax-declared loot into the hands of London-based wealth managers — and in the meantime, I’m told, it’s easier for a camel to pass through the eye of a needle than for an American to open a new bank account in the Alps.
Buy yourself a Bentley…
Amid so many mixed signals in the economy, at least the automotive industry and the motor trade — separate but related indicators, since three quarters of what we make in the sector is exported and an even higher proportion of the cars we buy are imported — look bright. New car registrations passed two million in 2012, the best result since 2008. Sales in the last quarter, when every other form of commerce looked so gloomy, showed a relatively spectacular 9.3 per cent rise on 2011. The pre-recession record of 2.4 million new cars in 2007 is still a hill climb away, but my man on the forecourt with a hipflask and a cruise-holiday brochure in his pocket tells me that mass-market manufacturers — Ford being the frontrunner — are setting dealers’ sales targets as high as 30 per cent up on last year.
On the factory front, even with a slump in demand from continental Europe, assembly lines have been humming along: the politicians’ favourite Jaguar Land Rover had a bumper year, and the great Nissan factory at Sunderland, having produced more than half a million cars in 2012, is investing £250 million in production of a new luxury model, the Infiniti, in addition to the Leaf electric car — surging demand for plug-in motoring being one of the industry’s optimistic themes for 2013.
Finally, indicative of the fact that top-rate taxpayers and non-doms are still not feeling the pinch was a 22 per cent increase in Bentley’s UK sales last year. I must say that the soft-top Continental GTC Speed, in showrooms soon at £150,000-plus, looks like a very attractive toy. But if you’re keen not to catch the taxman’s eye, better to make yourself less conspicuous by emulating my new style guru, the brilliant but misunderstood Mohican-haired Manchester City striker Mario Balotelli, in a Continental saloon with amilitary-camouflage paint-job.
… but beware the triple top
Where is the FTSE 100 index heading in 2013? Some years ago, for another magazine, I kept close track of year-end FTSE forecasts made by leading brokers and investment banks, but on average they were wrong by such shockingly wide margins, year after year, that I eventually stopped bothering. So if I tell you the consensus City view is that the index will rise this year by around 8 per cent to 6400 from its New Year’s Eve close at 5898, please don’t rush out and start buying indiscriminately.
The rally that broke the 6000 barrier early last week was a response to the so-called ‘fiscal cliff’ settlement in Washington, which was really no settlement at all and fulfilled exactly my prediction in November: ‘Brinkmanship will drag into the new year until, in Washington’s special way, the toughest decisions get kicked down the road again.’ So stand by for market turmoil in March, when the temporary truce expires. Meanwhile, some pundits — including the mighty Jim O’Neill of Goldman Sachs — talk of a tidal shift of institutional funds from bonds to equities, which would certainly boost share prices, but technical analysts who like to stare at chart shapes mutter ominously about an impending ‘triple top’. Don’t ask what that means, just assume bad news.
The solution must be never to assume that the trend is your friend, but to invest only where you see value in individual stocks. Connecting that thought to a quite different topic much discussed in recent months, one senior City source whispers in my ear: ‘It must be time to sell Carneys, I’ve never seen a stock so over-hyped.’
Comments