The current stock-market correction has been steaming down the track since August and I claim no wisdom for having predicted it: the FTSE100 dipped below 7,000 at the start of the week, having shed all of the 10 per cent it had gained since it began to surge in April. Weaker UK growth forecasts from the EY Item Club, reflecting the impact of the Brexit impasse on business and consumer confidence, are just one factor in the autumnal mood.
But let’s cheer ourselves up with a round of applause for our veteran investor Robin Andrews, whose ‘Faangs to Banngs’ trading idea I offered you on 1 September. His proposition was that soaring US tech stocks led by Facebook, Apple, Amazon, Netflix and Google (via listed parent Alphabet) were bound to run out of road, while a swing to pessimism would bring a revival in leading goldminers such as Barrick, Agnico Eagle, Newmont Mining, Newcrest Mining and Goldcorp, of which Agnico and Barrick were his favourites. He turns out to have been — how can I put it? — Banng-on.
Let’s use big numbers. If you started September with a million dollars spread equally between the five Faang shares, your holding would have sunk to $901,400 by Monday’s close. But if you had sold them and reinvested equally in the five Banngs, you’d be worth $1,081,000; and if you had followed Robin’s tip and bought only Agnico and Barrick (the Canadian-based group whose shares were boosted in late September by news of a merger with an African miner, Randgold), you would be sitting on $1,159,500 — more than a quarter of a million better off. ‘The validity of the switch remains as trade wars and currency fears increase,’ says our man, and I’m sure he’s right.
Luke’s luck turns
Would it be wrong to sympathise with Patisserie Valerie chairman Luke Johnson after what he called ‘the most harrowing week of my life’, just because he happens to be a fellow columnist in his spare time? Or should the fractious fraternity of hacks give him a drubbing for taking his eye off the till in one of his own businesses, having so often lectured us on the financial disciplines of entrepreneurship? The chain of 200 cake-and-coffee shops built by Johnson and his partners since 2006 turns out to have a huge hole in its accounts: far from having ‘a strong balance sheet… with net cash of £28.8 million’, as its March interim statement claimed, it is being pursued by HMRC for unpaid taxes and has been running ‘secret overdrafts’ of £9.7 million.
Finance director Chris Marsh was suspended and arrested on suspicion of fraud. Attention also focused on the performance of the auditors, Grant Thornton. Johnson himself, who owns 37 per cent of the Aim-listed company, has injected £20 million in emergency loans and is scrambling to muster other investors to help save a business with 2,800 employees.
His personal fortune, estimated at £250 million in the latest ‘rich list’, will be dented by the episode, but won’t be wiped out. So should we feel sorry for him? Perhaps not, but I think we might give him the benefit of the doubt. In a long career as a risk-taker in the catering sector he has owned enjoyable eateries from Pizza Express to Le Caprice, made money for many investors beside himself, and given encouragement to a generation of younger would-be business builders. When I spoke to him about The Spectator’s Economic Disruptor of the Year Awards, he talked of the key ability of entrepreneurs to ‘pivot’ swiftly when real-world circumstances change. He certainly needs to do that at Patisserie Valerie. I hope it survives.
A message from BT
Readers who contributed tales of woe to the ‘broadband dossier’ I delivered to BT chairman Jan du Plessis last month must have wondered whether our 15,000-word document provoked any reaction at all, or had perhaps been referred to a call centre in Bangalore. Well, I’m pleased to report that action is in hand. Gavin Patterson — the BT chief executive whose departure was announced in June and whose successor will be revealed any day now — writes to say he and his chairman have both read the dossier and taken it seriously: ‘However uncomfortable it is for us to read of instances where we have not met the standards your readers rightly expect of us, their input is invaluable and we will treat it with the respect and response you would expect.’
Fine words butter no parsnips and make no better broadband speeds, I hear you say — but Patterson’s letter also details, for example, how BT has reversed a six-year rise in faults on the Openreach network and slashed the proportion of missed appointments by engineers. I’m not suggesting we should be collectively ready to give BT the benefit of the doubt, but I’ll try to ensure that this initial response translates into individual follow-up.
My Riyadh boycott
Saudi Arabian shares (of which there are 186 listed, with a combined value of around $450 billion) were also down by as much as 9 per cent at the beginning of the week, as investors worried about deteriorating international relations after the alleged killing of Jamal Khashoggi — but my man in the Riyadh camel market had no clever trading ideas to suggest, other than to buy faster camels. Meanwhile I’m shoulder to shoulder with Jamie Dimon of JPMorgan Chase and other titans in refusing to attend Crown Prince Mohammed bin Salman’s Future Finance Initiative conference next week. Indeed I’m virtuously ahead of the pack on this one, having shunned last year’s so-called ‘Davos in the Desert’ too. A formal invitation to this gathering of ‘visionary, innovative and renowned leaders’ from around the world arrived at 22 Old Queen Street from an official styling himself ‘His Excellency’ but I challenged it as bluntly as any veteran journalist should: ‘Is this a freebie?’ It wasn’t, so I didn’t go.