City & Business: Is the frantic bull market blowing our minds?

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The Independent Online
ON THURSDAY I had dinner with a stockbroker. He awaited the payment of his annual bonus with impatience. He buzzed with inside information. He personified the frantic bull market that on Friday drove the FT-SE 100 index to a record high.

Listening to him I thought of the buzz word "empowerment". The term used to mean giving people - usually middle managers in large companies - enough responsibility to feel in control of their destinies. This is dumb. Empowerment, it came to me belatedly, means dealing in shares successfully enough to get rich.

We have been through this before. Tom Wolfe coined the phrase "Masters of the Universe" in his 1980s epic, The Bonfire of the Vanities. In the 1980s the world still retained just enough Victorian morality so it was understood Masters of the Universe riding high were doomed to fall as per Ivan Boesky and Michael Milken.

In the 1990s, in keeping with the swing to the soft left on both sides of the Atlantic, the concept of Master of the Universe has been democratised. There are thousands of them out there now. But the last vestiges of Victorian morality are gone. Instead, we have public relations. The current generation of Masters of the Universe only show their stuff at dinners like the one I attended. Otherwise they keep their heads down and stay out of trouble.

Given the amazing wealth being created in the City now - the power this wealth is conferring on individuals, the excitement generated - it is wet blanketish to consider what is going on except at face value. Still, it looks like the bull market may be twisting the minds not only of empowered stockbrokers, but also those in government responsible for regulating financial activity.

Take the competition authorities. It looks to me like they have their signals on the two most talked about mergers of the day backward.

Trade minister Margaret Beckett seems happy to wave through Glaxo's hostile pounds 50bn bid for Smith Kline Beecham if it materialises. Pharmaceuticals is a global business, so the argument goes. Together, Glaxo and SKB can muster the funds necessary to invent the next generation of gene-bending wonder drugs. Yet no one has tested this argument. It could be puff and nonsense. Drugs R&D is arcane and the path it takes is changeable. The only thing that is certain is that if Glaxo does get SKB, Britain will end up with one of the world's biggest drug companies, not two. Who will then gain? It is not at all certain that the earnings of a new merged drug company will equal the future earnings of the two independent drug companies that now exist.

As for the other merger, Margaret Beckett has apparently let it be known she opposes a Barclays- NatWest combination. Each has critical mass on its own, supposedly. A merged bank would control so much of the financial market that the cost of capital for vulnerable companies would rise. Here again the argument is untested. The world is awash in bank mergers, in Switzerland, Sweden, the US. Next comes Europe. Why shouldn't Barclays and NatWest merge? The employees losing their jobs could set to work developing new financial mechanisms designed to raise money cheaply for companies not doing business with giants like Barclays-NatWest.