The business - Patrick Hosking reports that writs fly in the City

High court writs are flying in the Square Mile, alleging bad behaviour among stockbrokers. It's the

A dispute between an obscure investment analyst and a relatively minor firm of stockbrokers has boiled over into a furious City row. In a high court writ, James Middleweek has accused his former employer Collins Stewart of a string of failings, including leaking price-sensitive information, flamming up poor-quality flotations and allowing conflicts of interest within the company to go unchecked. The picture painted by Middleweek is of a firm where the culture is to earn fees regardless of the effect on the wallets of clients or the consciences of employees. Collins Stewart, which emphatically denies all the allegations, has in response accused Middleweek of blackmail. It argues that, through his solicitor, he originally offered to keep schtum about his allegations in return for a £2.4m pay-off, more than 25 times his basic pay. Both Middleweek and his solicitor deny blackmail.

The City of London Police and the Financial Services Authority are investigating. The decision by Collins to sue the Financial Times for defamation in its reporting of the allegations adds to the general juiciness of the affair. Collins blames "muck-raking" and "a hatchet job" by the Pink 'un for helping to wipe £128m from its market value in a few days.

They won't be talking about this in the pubs of Peterborough. But if - and it's a very big if - Collins has indeed sinned, it raises the question of whether its peers have been misbehaving, too. In a modest way, the City securities houses, which largely escaped the spanking for dodgy practices meted out last year to their counterparts on Wall Street, are on trial over this.

Just as the stock market shows hopeful signs of having bottomed out and small punters tentatively start to invest again, this is the last thing the City needs.

It is all deeply ironic for Terry Smith, the chief executive at Collins. In an industry full of bullshitters, smarmers and play-it-safe jobsworths, Smith is one of the good guys.

For 20 years, he has spoken his mind when staying silent might have served him better. At the broking house BZW, he publicly criticised Barclays, which happened to be BZW's parent company. More than a decade before Enron, he was sacked by the Swiss bank UBS for writing a book rightly critical of the accounting methods of several UBS client companies. Even as chief of Collins, he has continued to expose sloppy thinking and dubious accounting, most recently by pointing out the poor financial performance and questionable presentation thereof of Pearson, the media group whose assets include - you've guessed it - the Financial Times.

He is also a walking, talking advertisement for a fairer, meritocratic City. An East End boy with a razor-sharp intellect and a penchant for boxing, he is the antithesis of the pukka buffer who would doubtless have been running Collins a generation ago.

Smith cannot resist a scrap. He chose to fight Middleweek when he could have paid him off at a fraction of the expense thrown up by the ensuing rumpus. He chose to take on the FT, which has the resources to put every corner of Collins under the microscope.

Is that pugnacity a measure of his confidence that Collins has nothing to hide? Or has the belligerence that made Smith such a brilliant analyst helped to foster what his foe alleges: a culture of fees at any cost? Unless there is a settlement, the questions will be answered next year in court.

The Nationwide Building Society has just upped its forecast for house price inflation this year - from 10 per cent to 13 per cent. Yet again, the experts have been wrong-footed by the British addiction to bricks and mortar. This is the third year running that the Nationwide has underestimated the momentum of the market and been forced to revise its forecast upwards. The Halifax has been equally inaccurate.

Expecting the mortgage and estate agency industry to forecast house prices is a bit like asking the Mob to predict the crime rate. It argues that prices will cool of their own accord because it doesn't want anyone to spoil the party by lifting interest rates. And it certainly doesn't want any nasty controls and taxes on property- as recommended by the Institute for Public Policy Research, the Prime Minister's favourite think-tank.

But it is not just the housing industry that has repeatedly got it wrong. So have the Bank of England and the vast majority of economists.

They bung things such as income growth, real interest rates and unemployment into their computer models but don't seem to be able to take enough account of that ineffable quality, consumer sentiment.

Economists need to shove a bit more psychology into their sums.

Patrick Hosking is deputy City editor of the London Evening Standard