Run for the Hills

When you hear “democratisation” run for the hills, a wise friend told me on Friday.

What does she mean? It’s a harmless even good thing to democratise, isn’t it?

Do you remember David Howell? He was a Minister under Thatcher and a pretty safe pair of hands I reckon. Possibly labelled Wet by Margaret, his credentials are impeccable in my book: Eton, Cambridge and the Treasury. Now he sits in the House of Lords as Lord Howell of Guildford, the constituency he represented from 1966 to 1997. The Chinese would call him a living fossil, a compliment I think, as he is 87. He brings a wealth of experience to the Upper House and is firing on all cylinders, twenty-six years after leaving the Commons.

On Wednesday the Lords debated the Autumn Statement and Lord Howell’s contribution was a master class in economics leavened with reminiscence. I will spare you the former, though if you are studying Economics it is good stuff. He recalled Edward Heath lamenting that the Treasury and Bank of England used only interest rates (putting them up) and government expenditure (cutting it) to tame inflation, likening it to playing a round of golf with just one club. Later he referred to Geoffrey Howe – “my dear friend, wonderful man”. At the end of his speech he praised capitalism but said “capitalism works best of all if it is democratised.” What did he mean? I don’t know and I wonder what he meant?

There is a cheekily named start-up, online broker called Robinhood; mission to democratize (Robinhood is American) finance for all. I do know what this means. The idea is to attract lots of small investors who don’t know their Astra Zeneca from their elbow and hope they trade and trade until their money runs out. This is more or less the business model bookies use.

To digress, a broker said condescendingly to a client that nobody over the age of fifty knows what ETFs are. Maybe so but there is no need to understand something to know that it is dangerous. In the same category are structured products and short selling – don’t try these at home either.

I was also reminded on Friday of the perils of being a Name at Lloyd’s thirty and more years ago. The victims were greedy and didn’t know what they were doing; a dangerous combination. To conclude, don’t imagine you can open an account at Robinhood and out-smart the market or you Will see Scarlet on your statements , sorry.