City Eye: I'll tell you a secret: this is not the end of the world

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The Independent Online

There's no such thing as "Chatham House rules" – the notion that anything said within the confines of a meeting is totally unattributable, strictly off the record. The reason? The same as the logic that says it's impossible to tell someone a secret, because as soon as you have, it's no longer a secret.

So it's with no compunction that I bring you – without revealing my sources, of course – supposedly top-secret information from inside the closed sessions of the recent Studio Ambrosetti economic conference in Italy.

The Cernobbio meeting is a kind of panettone-flavoured afterthought to the more famous main course of self-congratulation that is Davos. Attendees include heads of state, academics, scientists (much in demand for their prognoses about global warming) and economic policy- makers, including Jean-Claude Trichet, head of the European Central Bank.

We are a week on from the conference, and that's a long time in the markets. But a participant in one closed session noticed something that I was opining on last week. This, in essence, is the dichotomy between finance and business. They overlap, of course, but I subscribe to the view that finance is the oil and business the engine – the real driving force of the economy.

My source told me she was struck by the gloom among those involved in finance, including some policy makers. This contrasted sharply with the generally positive noises from those running multinational groups. "One of the world's largest conglomerates was most optimistic about the emerging world, with its sales apparently continuing to rise dramatically," I was told.

The rating agencies came in for a lot of stick, mainly from academics, finance specialists and market operatives. Criticisms involved lack of transparency and the health of the credit markets. We in the media have been part of this cacophonous wailing to drive everything in banks' figures on to the balance sheets.

What this really means, in effect, is the death of the footnote. I know a number of fund managers – Tim Steer at New Star being a classic example – who make great use of accounting footnotes. The transparency has always been there if you're prepared to read the bits you find of interest.

But the real question after the bailout of Northern Rock is whether the lack of liquidity in the credit markets is really going to upset things. The view of some is that now the credit crunch has happened, we should expect the markets and then the world's economies to topple soon.

This is drivel. The Northern Rock loan, made at penal rates by the Bank of England, represents an opportunity missed by the financial markets. The bank is solvent and will still make a profit, though this figure has been substantially reduced by the interest it will be paying to the lender of last resort. It seems a nice piece of business that the financiers have missed out on.

And talking of business, I hear there are several hedge funds looking at buying loans from distressed – or should that be panicky? – banks. I shall report back.

Back in the swing

Aberdeen Asset Management's jovial chief executive, Martin Gilbert, knows a thing or two about crises. He stood at the helm of his company during a period of intense pressure over the marketing of split-level capital trusts.

Despite a public pillorying in front of a parliamentary committee and some breathtakingly mean press coverage, he has overseen a remarkable renaissance in his company's fortunes.

Gilbert is hosting an evening of "City Golf" on Tuesday, which should be a great opportunity to test market sentiment.

martin@martinfdbaker.com

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