At a stroke, Barclays turned volatile assets that had to be marked to market, and thus had the potential to cause sudden pain in the profit and capital departments, into a loan, where gentler accounting treatment applied.
Protium, though legal, always looked cosmetic. Last year Lord Turner, chairman of the Financial Services Authority, called it "a convoluted attempt to portray a favourable accounting result" in his general complaint to Barclays' then chairman about the bank's "pattern of behaviour". The bank, he added, "often seems to be seeking to gain advantage through the use of complex structures".
But was Protium a mere after-dinner mint? The explosive story in the FTon Friday was that UK authorities are investigating whether Barclays made a loan to Qatar which was then invested in Barclays' vital £7.3bn fundraising in 2008. That was the cash call that enabled the bank to refuse a state-funded rescue.
It's only an allegation. Barclays loyalists might argue that, whatever the truth, the tale ended happily – Barclays and the Qataris prospered and the Treasury didn't have to bail out another bank.
But that would be beside the point. Lending to an investor to buy your shares is a deeply dubious concept, raising questions of legality and disclosure. This inquiry is not about ancient history.
Still on Barclays, we must assume that chief executive Antony Jenkins' decision not to be considered for a bonus this year is unrelated to the Qatar tale; he wasn't on the executive committee, let alone the main board, in 2008.
Take him at his word. He is accepting some accountability for "multiple issues of our own making besetting the bank" in the past year. Translation: after the scandals of PPI, Libor and mis-selling of interest rate swaps, the new boss had to show some leadership.
The odd part, though, is that he says he made his decision "early this week". If so, he could have told the chair of Barclays pay committee, Sir John Sunderland, promptly. On Wednesday – the precise middle of the working week – Sunderland was entertainingly duffed up by members of the banking standards commission as he gave a limp defence of Bob Diamond's bumper £2.7m bonus for 2011. Sunderland would not have looked quite so feeble if he had arrived bearing news of Jenkins' decision. News management failure, or policy on the hoof? It's one or the other.
On the wider question of how Barclays should reform its boardroom pay practices, one matter is straightforward. HSBC last year established the principle that its executive directors must hold incentive shares until retirement; regulators have rightly applauded the policy. The minimum requirement for Sunderland is to ensure the same happens at Barclays.
In which of these investments would you prefer to park a lump sum for a decade? The first is a 10-year UK government gilt, yielding 2.1% at a time when the next governor of the Bank of England sounds a little soft on inflation, the enemy of the fixed-income investor.
Or would you take shares in Diageo, the Guinness and Johnnie Walker firm? The dividend yield on Diageo shares is 2.5% but, crucially, the dividend is rising. Indeed, this week it was increased by 9%, the highest rate of increase in the 15 years since Diageo's formation. What's more, chief executive Paul Walsh has a spring in his step.
There's no sign of recovery in southern Europe, where sales collapsed by 19%, but that's only one-twentieth of Diageo's business these days. Meanwhile, sales in the US are strengthening and South America and the Far East are booming for Diageo.
Investors, understandably, are voting for shares – in Diageo and others. The FTSE 100 index has just enjoyed its best January since 1998, and on Friday the Dow Jones industrial average pushed through 14,000 for the first time since 2007. Can the optimism around shares last?
Well, it could – at least for a while. If you avert your eyes from Spain and Greece, it's possible to think growth is back, at least for some multinationals. Unilever, another global titan, reported 11% earnings growth the other day, fuelled by its emerging markets interests. Diageo's and Unilever's shares have been sprinting for the past year (up by a third and a quarter respectively), but you'd be hard pressed to say either was outright expensive by historical price-to-earnings yardsticks.
Then there's the inflation angle. Ben Bernanke won't rest until US employment has fallen to 6.5%; the Bank of Japan has been ordered to generate inflation; and Mark Carney seems to want to make a splash in Britain. Faced with hyperactive central bankers, who wouldn't want to seek some shelter in shares? At least the whisky maturing in Diageo's barrels should also rise in value if inflationary breezes blow.
That's the bullish case for shares. So why does the 20% rise in global stock markets since last summer – since Mario Draghi's pledge that the European Central Bank would do "whatever it takes" to save the euro – feel slightly unreal?
Two reasons. First, the inflation bet is not a one-way affair. Yes, inflation at 5%, say, sounds comfortable for companies with the pricing power to pass it on. But what happens if the interest rate brakes are then applied to prevent a rise to, say, 6% or more? The result is likely to be one step forwards followed by two backwards for debt-laden economies and consumers.
Second, the eurozone debt crisis is not over. Spain's GDP fell 0.7% in the past quarter and more tightening is being demanded; the Italian political scene is unpredictable and Greece's debt burden still looks unbearable. Bulls point to forward-looking signs of business confidence in the eurozone, but that's a fragile asset. We have yet to see what happens to confidence if Draghi is obliged to make good on his promise to buy the debt of countries that request a bailout.
Add it all up and the assumption that financial markets are "stable" looks optimistic. Yes, one would happily take a basket of strong blue-chip stocks – the likes of Diageo and Unilever – over gilts on a 10-year view. You would be quite prepared to ride the inevitable bumps and hope the inflation hedge holds. But the start of a great bull market in shares for one and all? Probably not; there's a whiff of "too much, too soon" about the current rally.
BSkyB finds its limit
Rupert Murdoch was right: the time to bid for BSkyB was 2011. News Corporation would have bagged a good deal if the phone-hacking revelations had not exploded just as victory seemed in sight. The high point for BSkyB's shares in June 2011 was 850p, reflecting the market's view at the time that 880p-ish would win. After the deal collapsed, the shares fell to 620p. Now they're 825p, meaning that, under its own steam, BSkyB is almost back to its peak valuation.
Only a matter of time, say several analysts. Citi's target price is 900p; Nomura says 975p. Their confidence will be enhanced by BSkyB's own. The company increased its interim dividend by a fifth this week. As BSkyB's wiser outside shareholders said all along: if Murdoch wants to buy, you don't want to sell.
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