A letter to the Editor of the Daily Telegraph which was published on 16th March 2000.

The £500 million raised by the float of lastminute.com, a two-year-old company competing in the cut-throat business of air tickets, hotel rooms and the like, with total sales to-date of £2 million and no profits or realistic prospects of any (report, March 15th) should convince even the most sceptical that there is a fundamental fault in the financial system operating in this country.

Most of the absurd valuations attached to e-commerce stocks are due to pension fund managers chasing moonbeams.  The terrifying difference between the South Sea Bubble of the early 18th century and the present gambling fever is that fund managers are gambling with other people’s money on a gigantic scale.

The trustees of these funds need urgently to abolish the present linkage between managers’ salaries and stock-market valuations, in favour of one that links their salaries primarily to stock income expectations as assessed by actuaries.

Pensions should be paid after all out of income.  A pension fund that has to sell capital to meet its current obligations is in a bad way.

What the present system has done is to hand hundreds of millions of pounds to a few people with only the bare scrapings of an idea, while companies and innovations with real value languish for the sake of a few millions because fund managers do not have the expertise to assess them.

The City has shown itself to have roughly the same connection with the real economy as betting on the 3.30 has to do with the raising of bloodstock.