Buy London and the southeast – sell Merseyside

Rebalancing the economy and redistributing the wealth runs counter to basic portfolio theory, says Matthew Lynn. If Britain is to prosper at all, the government must focus on its successes. That means London.

Anyone familiar with portfolio theory will know there is one very simple rule: run with your winners and cut your losers. It might seem obvious, but most investors do precisely the reverse. They sell their winners, thinking they need to take profits while they still can, and hang onto their losers, hoping they might finally come good one day. As a result, they end up with a portfolio stuffed with rubbish companies because they sell the successful ones and keep the ones that are failing. Instead, they should hang onto winners and sell their losers, so that they end up with a portfolio full of success stories, all making money.

Something similar is happening with Britain itself. We have a clear winner in London and some other parts of the southeast of England. Yet, just like a nave investor, we punish that and focus on helping our losers regions such as Wales, the northeast or Northern Ireland. The result is that we will end up poorer than we should be.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.