Hedge funds - stop your sobbing and try to make a difference

Global Outlook

he Bitcoin evangelist Roger Ver gave up US citizenship in order to avoid paying taxes. (Jesus Tomohiro/2014 Bloomberg Finance)

Hedge fund managers “from all over the world” are buying airstrips and farms in places like New Zealand to which they can escape in the event that society finally tires of extreme inequality and demands their heads on plates.

At least that’s what Robert Johnson – who in 1992 was one of the men at the George Soros hedge fund that “broke the Bank of England” – recently told a packed and rapt audience.

Forgive me, Robert, but I’m not buying it. Maybe a handful have bought boltholes rather than trophy estates, but as part of a larger trend? Very unlikely. That said, his claim does deserve more serious thought.

First, these stories about the super-wealthy packing their bags and heading off to tax-free Utopia do the rounds from time to time and they always turn out to be pipe dreams. People who resent contributing their share, fair or not, soon work out that paying for important stuff like security and healthcare is an awful lot cheaper when everyone chips in. New Zealand is beautiful but far from Utopia, and if the world collapses, the Kiwis are going down with us.

We probably aren’t talking either about people who are well prepared for life off the grid. These New York and London billionaires aren’t survivalists daydreaming about gunfights with the feds. Life in rural New Zealand is bloody hard graft and relies on being a small part of global trade. It’s laughable to think that pampered hedge fund managers are just going to become sheep farmers if the revolution begins, never mind the idea being an insult to the hard-working people who actually do that for a living. Second, if it is true then they should go. Now. Our society is better off without them. Mr Johnson used the word “getaway” when describing these flights of fancy. His choice of word perhaps, but if you think you need a getaway, it usually means you’ve robbed someone.

There is absolutely nothing wrong with people taking advantage of the economic system we have to make themselves wealthy. However, if people with huge sums of money think they will somehow be freed by leaving and taking their (presumably by then worthless) money with them, they are badly mistaken. Any individual considering the action Mr Johnson claims they are would be well advised to consider the fates of two very different people – Roger Ver and Alfred Nobel. Mr Ver is the Bitcoin evangelist who gave up his US citizenship in order to avoid paying taxes. Living the libertarian dream.

Now he wants back into the country and the US, quite rightly, has refused him a visa. A living, breathing illustration of not knowing what you’ve got until it’s gone.

At the other end of the spectrum is Mr Nobel, who made his money from dynamite but who passed on a more positive legacy after reading his own obituary following incorrect reports of his death. It’s hard to imagine a better legacy of wealth than the Nobel prizes. These terrified hedge fund managers would do better to take inspiration from Nobel, not Mr Ver. Thinking harder about using fabulous wealth to make a long-lasting positive impact on the society that created it – rather than simply accumulating for the sake of accumulation – is infinitely preferable to plotting an escape fantasy.

They’re not young guns now but they shot the lights out

There wasn’t much to cheer for the old fogies as the results season got into top gear. Caterpillar, Procter & Gamble and McDonald’s all had weeks to forget, the latter throwing its chief executive Don Thompson out like yesterday’s leftover fries.

Step up Apple, Amazon and Facebook – not exactly young bucks nowadays but they still feel that way. Their excellent results saved the week, embarrassed some analysts and left investors feeling a bit better about life.

But can it last? My take is pretty mainstream – that all are now mature businesses facing the same issues that any other mature business faces, like how to maintain growth and fight off the competition. Apple’s boss, Tim Cook, continues to move out of the shadow of Steve Jobs. He and his company are performing at a higher level than even any of his strongest supporters could have imagined.

Apple’s 2015 will be formed in part by the success or failure of its watch, due for a spring launch. Wearable tech has been a tough nut to crack and the failure of Google Glass makes it even more so. Wristwatches are beautiful things as they are, but it’s hard to imagine a room full of people staring at their watches (although easy to imagine a surge in muggings).

Facebook faces different challenges but its outlook is pretty rosy in the medium term. Attracting a new generation of users is the biggest obstacle, but the chances of a MySpace-like collapse are near zero. Most users who aren’t teenagers are so heavily invested in Facebook that leaving or using another platform is too much of a stretch.

Finally, Amazon seems to have decided to heed its investors and try to turn top-line revenue into bottom-line profit. Final-quarter earnings of $214m (£142m) were more than double Wall Street expectations, even if the company still made a loss for the year.

So out with the old, in with the not so old. There was a time when “real” businesses supported tech in the markets. Now it’s real tech supporting bricks and mortar – the new economic paradigm we heard so much about may finally have arrived.