The year that humbled City's star strategists

GO on, allow yourself a chuckle. A year ago, those clever folk in the City - people so revered that they merit the grand title 'strategists' rather than mere analysts - made their predictions for how 2001 might end. In particular, they gave their forecasts of how share prices might move over the following 12 months.

Then, remember, the FTSE 100 index was bobbing around above 6,000. The sages of the City tinkered with their spreadsheets, sucked on their pencils and stared out of the window (or whatever these highly paid people do when they are thinking big thoughts) and then they delivered their judgment. Without exception, they decided that the stock market would rise during 2001. Without exception, they were wrong. A year ago, most strategists predicted that the FTSE would now be between 6,500 and 7,250. In fact, it is little more than 5,200.

Ho, ho, ho, they were a mile off. Even the brightest and best-paid people in the Square Mile were no better at forecasting than Mystic Meg on a bad day.

Ah, but what about September 11? No one could reasonably have been expected to predict that, could they? Indeed they couldn't. But that is absolutely no excuse. Share prices are higher now than they were on September 10. Indeed, the three months since September 11 have broken the bear run which started in January 2000. Anyone who invested in the market at the start of last year would still have lost around a quarter of their money. Put some perspective on this - equity markets have suffered their worst stretch since 1973-74.

And what next? Already, tons of paper and gallons of printing ink have been used to speculate about the year ahead. Many people seem to expect that interest rates will be raised as economies in the US and Europe revive. Maybe. Perhaps, though, the greater worry is that both low growth and low inflation will mean that the increase in corporate earnings will remain subdued in 2002.

But there is one consolation - there will be no dramatic upheavals. This can be stated with reassuring certainty. Why? Because 'the general economic cycle is measured by the movements of Jupiter, planet of growth and expansion. Its position in Cancer and its gradual movement away from the Saturn restriction, leads to the belief that there will be no sudden crash.' At least, that's what it says in this year's Old Moore's Almanack - which, let's face it, is probably as good a guide as any. Oh, a further top tip for financial success in 2002. If you are Geminian, you are most likely to win at bingo between February 9 and July 7 and from October 8 to December 2. Well, has anyone got any better ideas?

The year now drawing to a close has been a bumper one for high-profile departures from boardrooms. British Telecom lost its chairman and chief executive. Marconi - which surely deserves anyone's award for basket case of the year - lost three people from the top. Alliance & Leicester, Abbey National, Lazards, Standard Chartered all saw shake-ups. And in retailing, Angus Monro left Matalan, Marks & Spencer had a further clear-out and Malcolm Walker, bless him, left Iceland to spend more time with the DTI investigators looking at insider dealing allegations. Gerald Corbett left Railtrack - and found himself a new berth with Woolworths.

Several departures were the result of old-fashioned bust-ups. In other cases, executives paid the price of their failures.

It is this second category that is the more interesting. One point is simple and familiar, but worth repeating: it remains a source of astonishment that people who have performed lamentably can still coerce the firms they helped ruin to give such lavish pay-offs. It is hard to feel sorry for the likes of Lord Simpson and John Mayo who brought Marconi to its knees then walked from the wreckage clutching enormous pay-off and pension packages - £2.8m and £600,000 respectively.

More subtle is the question of whether or not replacing the people at the top means that a company is thereby transformed. Indeed, in some cases at least, it is arguable that the transformation is already under way by the time the nonexecutives get round to sacking the chief executive for past shortcomings.

Little more than 12 months ago, for example, Stuart Rose replaced John Hoerner at Arcadia. This year, Arcadia has been the best-performing share in the FTSE 350. No one should think that it's all down to Rose. Much of the company's success since he arrived is a result of simply implementing changes put in place by his predecessor.

In a year's time, who knows? We might be saying the same about British Telecom. We might. We might be saying the same about other companies that have had a clear-out at the top. But don't count on it.