City & Business: How I lost my money and learned to love risk

IN 1983, when I moved from New York to London, I hung on to my apartment on Manhattan's Upper West Side. It was a non-descript two-bedroom affair with little direct sunlight, but it was rent-stabilised - meaning that my monthly payments could not be raised beyond a token amount each year.

I sub-let it, and four years later, when my tenant made a deal with the landlord to grab the lease, sued him. He won on the grounds that I had forfeited the apartment by staying in London too long. But he had to pay me $25,000 (pounds 15,000) in compensation.

This I put into the stock market after the October 1987 crash, even though my wife was nervous, and - as my money gradually doubled - began offering family, friends, and strangers on the London Tube investment tips.

Then in the autumn of 1995, I covered the annual meetings of the International Monetary Fund and the World Bank. After listening to the world's top financial officials congratulate themselves for four days straight for making the Mexican peso crisis go away, I took my money out of the stock market and deposited it in a bank, on the grounds that the men running the world financial system were putting a brave face on a situation that was scaring them.

Since then, with the exception of the mini-crash caused by the Asian financial crisis last October, the stock markets have gone nearly straight up. My wife is now irate that our money is not in shares.

On Friday, as the FT-SE 100 Index broke through 6,000 and the Dow powered toward 9,000, I was reminded yet again that my move out of the market was premature. And yet I cannot bring myself to reinvest in shares.

This is not because I see a turn. I've sworn off calling market turns forever, even though the Footsie and Dow records being set smack of the final blow-off to this bull market. Despite the bull's stampede, the financial news is not all good. Any hopes that Japan will be the engine of Asia's recovery were dashed when earlier this month it was reported that its economy contracted 0.2 per cent in the last quarter of 1997.

In the US, Nike, Compaq, Intel, Disney and other blue-chip companies have issued dire profit warnings. Wall Street analysts now expect the earnings of the biggest US companies to grow at less than 2 per cent in the first quarter, the lowest rate this decade.

There is an argument in the City that despite these flaws in the international economy, the Footsie will continue to climb. This argument goes under the rubric of "weight of money". People, the "weight of money" argument goes, have to put their savings somewhere. Since they are waking up to the need and desirability of investing in shares, they will put their money in the market. This flood of money will in turn drive the market up, attracting more money.

But the "weight of money" argument is like the "Asian miracle" argument. It will remain cast-iron tight until the day events prove it wrong.

And yet I really am not calling a turn. Instead, I am belatedly waking up to one of the overriding truths of our time. The level of material risk in our lives is growing at a compound rate similar to that of the stock market. Only five months ago, remember, the Asian crisis so panicked investors that Wall Street had to close.

The jump from that dark day to the records set on Friday is volatility for real. At some point this volatility is going to jump off the news pages and bite. When it does, New Labour will be put to the test.

The Government's rhetoric about making Britain an enterprise culture is appealing, as long as the risks of being an enterprise are all running one way. The day the risks underpinning the concept of enterprise turn sour will be the day that New Labour shows its true spots.

This is not a snide threat. It is an inevitability. Meanwhile, if we are wise we shall learn to cope with much of the level of risk that the welfare state was erected to cushion us against. If I for one had learned to love risk earlier, I might not have taken my money out of the market on the eve of one of the biggest bull runs this century.

EMU out of the ether

THEN there is European Monetary Union. Since John Major signed up to the Maastricht Treaty in December 1991, the acronym EMU has been used 14,898,555,909 times in the English language, and some multiple thereof in the dozen other European languages.

EMU, it seems, exists only in the ether. A select bunch of bureaucrats and journalists keep promising it, but it never actually happens. Now it is. And for all the repetition of the term it is still a shock to see it coming.

This weekend, Europe's finance ministers converge on York to talk about the single currency. On Wednesday, the European Commission publishes its formal proposals on which EU countries should be allowed to trade in their currencies for euros.

On the same day, the European Monetary Institute - the forerunner of the European Central Bank - unveils its country-by-country analysis of the preparations made by EU nations for signing up to the euro.

The next stop down the road will be transparent, fully comparative pricing in 1999 of everything from Big Macs to the wages earned by assembly line workers in Ford plants all across Europe.

By the time we in the UK get around to voting on whether we join the single currency club, there is a good chance that prices and salaries will already be denominated - if not paid - in euros.