Covingtons New Years Day Message

Good morning and Happy New Year,
Uprisings, natural disasters, macroeconomic chaos and political fumbling have made 2011 a year Fund Managers and investors will want to forget.
Following recent events in Europe, the Author, Frederick Forsyth, was so concerned by German and French comments, that he chose to write to the German Chancellor, Angela Merkle, directly. I have shown the letter below. It’s well worth a read.
Can I take this opportunity to thank my Clients’ for continuing to invest through Covington’s. We have had a pretty good year investment wise and long may it continue.
May I wish you and your family a very happy and healthy New Year. All the very best to you.
Phil

Dear Madame Chancellor
Permit me to begin this letter with a brief description of my knowledge of, and affection for, your country.
I first came to Germany as a boy student aged 13 in 1952, two years before you were born. After three extended vacations with German families who spoke no English I found at the age of 16 and to my pleasure that I could pass for German among Germans.
In my 20s I was posted as a foreign correspondent to East Germany in 1963, when you would have been a schoolgirl just north of East Berlin where I lived.

I know Germany, Frau Merkel, from the alleys of Hamburg to the spires of Dresden, from the Rhine to the Oder, from the bleak Baltic coast to the snows of the Bavarian Alps. I say it is only to show you that I am neither ignoramus nor enemy.
I also had occasion in those years to visit the many thousands of my countrymen who held the line of the Elbe against 50,000 Soviet main battle tanks and thus kept Germany free to recover, modernise and prosper at no defence cost to herself.
And from inside the Cold War I saw our decades of effort to defeat the Soviet empire and set your East Germany free.
I was therefore disappointed last Friday to see you take the part of a small and vindictive Frenchman in what can only be seen as a targeted attack on the land of my fathers.

We both know that every country has at least one aspect of its society or economy that is so crucial, so vital that it simply cannot be conceded.
Any foreign-sourced measure to target German cars and render them unsaleable would have to be opposed to vetopoint by a German chancellor.
For France it is the agricultural sector. For more than 50 years members of the EU have been taxed under the terms of the Common Agricultural Policy in order to subsidise France’s agriculture. Indeed, the CAP has been the cornerstone of every EU budget since the first day. Attack it and France fights back.

For us the crucial corner of our economy is the financial services industry. Although parts of it exist all over the country it is concentrated in that part of London known even internationally as “the City”.
It is not just a few greedy bankers; we both have those but the City is far more. It is indeed a vast banking agglomeration of more banks than anywhere else in the world.
But that is the tip of the iceberg. Also in the City is the world’s greatest concentration of insurance companies. Add to that the brokers; traders in stocks and shares worldwide, second only, and then maybe not, to Wall Street. But it is not just stocks. The City is also home to the “exchanges” of gold and precious metals, diamonds, base metals, commodities, futures, derivatives, coffee, cocoa… the list goes on and on.
And it does not yet touch upon shipping, aviation, fuels, energy, textiles… enough. Suffice to say the City is the biggest and busiest marketplace in the world.
It makes the Paris Bourse look like a parish council set against the United Nations and even dwarfs your Frankfurt many times.

That, surely, is the point of what happened in Brussels. The French wish to wreck it and you seem to have agreed. Its contribution to the British economy is not simply useful nor even merely valuable.
It is absolutely crucial. The financial services industry contributes 10 per cent of our Gross Domestic Product and 17.5 per cent of our taxation revenue.
A direct and targeted attack on the City is an attack on my country. But that, although devised in Paris, is what you have chosen to support. You seem to have decided that Britain is once again Germany’s enemy, a situation that has not existed since 1945.
I deeply regret this but the choice was yours and entirely yours. The Transaction Tax or Tobin Tax you reserve the right to impose would not even generate money for Brussels.
It would simply lead to massive emigration from London to other havens. Long ago it was necessary to live in a city to trade in it.
In the days when deals can flash across the world in a nanosecond all a major brokerage needs is a suite of rooms, computers, telephones and the talent of the young people barking offers and agreements down the phone.
Such a suite of rooms could be in Berne, Thun, Zurich or even Singapore. Under your Tobin Tax tens of thousands would leave London.
This would not help Brussels, it would simply help destroy the British economy.

Your conference did not even save the euro. Permit me a few home truths about it. The euro is a Franco-German construct.
It was a German chancellor (Kohl) who ordered a German banker (Karl Otto Pohl) to get together with a French civil servant (Delors) on the orders of a French president (Mitterrand) and create a common currency. Which they did. IT was a flawed construct. Like a ship with a twisted hull it might float in calm water but if it ever hit a force eight it would probably founder.
Even then it might have worked for it was launched with a manual of rules, the Growth And Stability Pact. If the terms of that book of rules had been complied with the Good Ship Euro might have survived.
But compliance was entrusted to the European Central Bank which catastrophically failed to insist on that compliance.
Rules governing the growing of cucumbers are more zealously enforced. This was a European Bank in a German city under a French president and it failed in its primary, even its sole, duty.
This had everything to do with France and Germany and nothing whatever to do with Britain.
Yet in Brussels last week the EU pack seemed intent only on venting its spleen on the country that wisely refused to abolish its pound.
You did not even address yourselves to saving the euro but only to seeking a way to ensure it might work in some future time.
But the euro will not be saved. It is crumbling now. And since you have now turned against my country, from this side of the Channel, Madame Chancellor, one can only say of the euro: YOU MADE IT, YOU MEND IT.