Finance and fiction

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Christmas Quiz (with full answers)

‘The trouble with people is not that they don’t know, but that they know so much that ain’t so.’ (Josh Billings).

Nowhere is this more true than in the worlds of business and finance. For this who really want to be a millionaire, here are some of the things people know that ain’t so. Feel free to ask the audience, and if you want to call a friend, there is a fuller explanation of some of the answers at www.johnkay.com.

1. Stock prices always go up. The Dow Jones index hit a new all-time high in January 1966. When – after adjusting for inflation – did it reach that level again?

(a) 1972 (b) 1982 (c) 1987 (d) 1992

2. Regulation and inflexible labour markets have held back the European economy. Which country has had the fastest productivity growth since 1960?

(a) UK (b) Germany (c) US (d) New Zealand

3. An emphasis on shareholder value is essential for investors. Which country has the best performing stock market over the past fifty years?

(a) Japan (b) Germany (c) Sweden (d) US

4. Which major car company almost went bust in 1959?

(a) Leyland (b) Chrysler (c) Nissan (d) BMW

5. The removal of the sovereign’s head on Britain’s banknotes would end a long British tradition. The first monarch to appear on British notes was

(a) Charles II (b) George I (c) Queen Victoria

(d) Elizabeth II

6. The life cycle of companies is much shorter than it used to be. When did International Business Machines become one of the world’s largest 100 companies by market capitalisation?

(a) 1920’s (b) 1940’s (c) 1960’s (d) 1980’s

7. Which was the richest country in the world in 1870?

(a) Australia (b) United Kingdom (c) United States

(d) Argentina

8. Who invented the worldwide web?

(a) Bill Gates (b) Al Gore (c) Tim Berners-Lee

(d) Martha Lane Fox

9. Concentration in major industries is steadily increasing. In 1969 the largest three firms produced more than half of all the world’s cars. That figure is now

(a) 73% (b) 61% (c) 48% (d) 35%

10. New technology is the engine of job creation. Which company has most employees today?

(a) Microsoft (b) Toyota (c) Daimler Chrysler

(d) Wal-mart

11. Who said “those only are happy who have their minds fixed on some object other than their own happiness”?

(a) St Francis of Assisi (b) J. M. Keynes (c) Andrew Carnegie

(d) John Stuart Mill

12. Which company has the highest ratio of cash in its balance sheet to its market capitalisation?

(a) Lastminute.com (b) Marks and Spencer (c) Marconi

(d) Land Securities

13. The largest industrial company in Britain before the First World War was

(a) ICI (b) J & P Coats (c) Morris Motors (d) GEC

14. And who really won the American presidential election?

(a) George W. Bush (b) Al Gore (c) the lawyers

Answers:

1. Data comes from Robert Schiller’s Irrational Exuberance. Schiller argues persuasively that the expectation of ever-rising stock prices formed over the last four decades or so is largely because real performance is disguised by inflation.

2. Growth in GNP per capita, 1960 – 1999

UK 2.0% Germany 1.9% USA 1.7% New Zealand 1.1%

3. Average annual capital growth of principal stock market index over period

Japan 14.7% Germany 11.9% Sweden 10.9% US 9.0%

4. BMW. The company struggled through the 1950’s: at a fraught annual meeting in 1959 Herbert Quandt resisted the seemingly inevitable takeover by Mercedes. The rest is history.

5. The present queen. As a private company until 1948, the Bank of England was not permitted to make use of a reproduction of the sovereign.

6. 1920’s. IBM has been a major supplier of office equipment for a long time.

7. Australia. Contrary to popular myth, Argentina was never richer than Australia – but it was once comparable with the other three.

8. Tim Berners Lee

9. 35%. In 1969, the three largest were GM, Ford and Chrysler. Through the merger, Daimler Chrysler regained third place from Toyota. But concentration has still fallen.

10. Wal-mart. It has around 900,000 employees, as against 470,000 for Daimler Chrysler, 183,000 for Toyota – and only 40,000 for Microsoft.

11. Not Andrew Carnegie. Actually John Stuart Mill, high priest of utilitarianism.

12. lastminute.com, followed by Marks and Spencer. The best way to have a high ratio of cash to market rate is to have a market capitalisation which has recently collapsed. And even better if you have recently issued shares.

13. J & P Coats, the world’s leading manufacturer of sewing cotton.

14. Everyone knows the answer to this one

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