The rally in the FTSE 100 index is a “dash for trash” based on “fraud” that is likely to be harmful to investors’ wealth, according to one of Scotland’s leading investors.
Robin Angus, a director of the £200m Edinburgh-based Personal Assets Trust, said investors had been lulled into a false sense of security by £175 billion of “dishonest” money that has been pumped into the UK economy through the Bank of England’s quantitative easing programme, which has artificially propped up the FTS 100 index
Angus said: “Quantitative easing is a phrase which bears the same relationship to ‘printing money’ as ‘terminological inexactitude’ does to ‘lie’. “It is a dishonest name for a dishonest activity. Some have even called it state-sponsored theft.
“It has temporarily made the financial markets drunk on hopes of an economic recovery, but I can’t see how such a recovery can possibly be anything other than faltering, fragile [and] fraudulent.
“Sometimes, [Ben] Bernanke, [Mervyn] King and their ilk seem like pushers of a miracle drug that can defer hangovers forever. The trouble is that we get hangovers for a good reason. If we didn’t get them, we might keep on drinking and drinking until we poison ourselves.”
FTSE 100 rally based on a dash for trash, says Angus
Writing in the Personal Assets’ quarterly, Robin Angus described the market rally, which has seen the FTSE 100 surge from a low point of 3,512 on 3 March 2009 to close at 5,082 on Friday, as “a dash for trash which is likely to go into sharp reverse at the first hint of bad news or expectations unfulfilled”.
Explaining the investment trust’s decision not to fully participate in the FTSE 100 led rally, Robin Angus said: “To us, ‘danger’ means actually losing money, not failing to grab the last halfpenny in an overvalued equity market which might turn and tumble at any time.”
Last week Katherine Garrett-Cox, chief executive of Dundee-based Alliance Trust also warned that the current rally is unsustainable.
She said: “I’m sceptical about the market recovery given the fiscal environment we are in. Public spending is falling, consumer spending is down, and unemployment will rise.”
In the US, Peter Schiff, president of Euro Pacific Capital, said the Federal Reserve’s monetary policy “is based entirely on hypocrisy.” Schiff blames Greenspan’s expansionary monetary policy, particularly the low interest rate in 2002-4, for fuelling excessive borrowing, speculation, and the subsequent housing and financial crises.
“Without the Fed’s participation in the government and agency debt markets, our financial system would be completely frozen,” said Schiff. “By simply swapping private debt for public debt and keeping interest rates artificially low, the US government just creates more of the imbalances that created the crisis in the first place.
“Current Fed policy may buy some time, but it is making our underlying problems worse. Unfortunately, we will never have a real recovery until the Fed lets us have a real recession.”
An edited version of this article was published in The Sunday Times on 27 September 2009
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