So, they might have got out of bed for less than $10,000, after all. News that the UK competition body is investigating price fixing by modelling agencies invites many questions. If Linda Evangelista’s famous ‘minimum wage’ really was the work of a cartel, can anyone get a refund on Rosie Huntington-Whiteley?
Are prices pegged to a standard rate of exchange: the Moss pout or Delavigne frown? What, exactly, is the point of David Gandy?
But perhaps the bigger question for investors would be: is there now any price, in any market, that has not been fixed, manipulated or inflated? Earlier this month, UK prosecutors secured the first criminal conviction for the manipulation of Libor, when a court sentenced former UBS and Citi trader Tom Hayes to 14 years in prison.
Last week, Barclays, Goldman Sachs, and HSBC were among nine banks that agreed a $2 billion (Dh7.34 billion) settlement with US investors over the rigging of foreign exchange markets, with more to follow.
And it is not only intangibles on a screen that are being fixed. Cement prices have been under investigation since 2008. Members of a car part cartel in China, including Mercedes and Fiat, were fined up to $40 million each last year.
France’s competition watchdog handed out a record 951 million euros in fines to companies including L’Oreal after finding its colluded prices were not worth it. Even Germany’s sausage makers were made to pay 338 million euros for meeting secretly at the Atlantic Hotel in Hamburg to fix the price of Frankfurters.
If people are willing to inflate the cost of one lot of long, thin, unhealthy looking orange commodities, the supermodel case becomes a little less surprising.
However, arguably the most worrying example of misleading pricing is still playing out in China’s equity markets. Last week, the Shanghai Composite share index fell a further 11 per cent. It has now lost one-third of its value since hitting a seven-year high on June 12.
But it is not the rapidity of the fall that makes prices hard to trust. It is the role of certain market participants and regulators in creating a false market.
On a single day in May, shares in the two listed units of the Goldin Group conglomerate fell 40 per cent and lost a combined $17 billion of market value. A day earlier, solar equipment group Hanergy Thin Film had $19 billion wiped off the value of its shares.
In the previous six months, shares in all three had quadrupled. Both the companies and the authorities blamed traders for “illegal manipulations”.
But when companies fear their shares are being manipulated, they can suspend trading in them, as 1,000 of the 2,802 groups on mainland exchanges did in July. Indices then become works of fiction.
If Chinese equity prices cannot be trusted, what can? Bond yields — or, specifically, the absence of them — are a lot harder to contrive.
And it was as early as last March that a solar outfit suggested the true state of the industry by becoming the first Chinese company to default on traded bonds. This April, property developer Kaisa defaulted, as did state-owned Baoding Tianwei.
A month later, Hong Kong research firm Gavekal warned of “a greater incidence of defaults and near-defaults in the corporate bond market.”
Debt can provide a clearer picture of value than market price.
Even so, how the world’s first supermodel, Janice Dickinson, managed to go bankrupt on $10,000 paydays remains something of a deeper financial mystery.
Financial Times