Private Investor: Don't get mad about Northern Rock, get even
Saturday 23 February 2008
I'm fortunate that I wasn't a shareholder in Northern Rock when it was nationalised. Were I one, I think I'd write off my investment and try to forget about the whole affair. However, should you need some ex post facto hedging on your losses, an intriguing possibility is out there whereby you could actually make some money from the thing being worthless. However, you might also lose some, so be careful.
The answer comes from the world of financial spread betting. If you go to www.cantorspreadfair.com, you'll find a sort of market in the residual value of Northern Rock shares (which may of course be nil). The spread at the moment is 25p to 35p. So my fantasy bet, if I were a Northern Rock shareholder, would be to bet £10 on every penny the Rock is worth less than 25p per share. If, as I suspect, it does turn out to be nothing, then you'll be looking at a gain of £250.
On the other hand, if the Northern Rock shares turn out to be worth £1 a share, then you'll be down for a loss of £750. That will have to set against whatever value you have in your shares at £1 a pop.
Obviously, this isn't for the faint-hearted and nor is it for people desperate to try and recover something from the Northern wreckage. It is, perhaps, a way to cover your losses a little. Better, probably, to walk away and think about your next investment.
So you may well be heartily sick of Northern Rock. Certainly if you were a small shareholder in that operation, you have a right to know what happened to the bank and why. Maybe there should be some sort of public inquiry into it, except that that would waste even more of everybody's money and, frankly, pretty much everything that Northern Rock did was in the public domain. As too few folk have noted, this was not a question of some rogue trader secretly wrecking the enterprise, as with Société Gé*érale or Barings.
Nor was it really a question of reckless lending to sub-prime punters; even now, with their big mortgage deals, there seems to be little of really bad quality on the Rock's books. It is not like, say, Countrywide in the US, which had to be rescued because it had too many of the sort of customers they call trailer trash and we call chavs.
Nor, indeed, was it the case that ministers were plotting to nationalise the thing, as was alleged in the case of Railtrack/Network Rail. There is plenty of evidence that last week's events were the last thing the Treasury wished for.
The "business model" the Rock operated was in the public domain, it was commented upon and mostly lauded. Adam Applegarth, the former chief executive, was praised in the press for his go-ahead ways. He was, after all, taking a dusty old Newcastle-based former building society into the sexy bright steel and glass gherkin-shaped world of 21st-century finance. Maybe the Financial Services Authority or the Bank of England should have paid more attention to the downsides, but too many of us thought there would be a credit crunch so severe that banks would simply stop lending to each other. Everyone is looking for someone to blame for this, and it is obvious that things went to an extreme with the Rock's borrowing in the money markets. However, it may be "just one of those things", an act of God almost.
In fact, this is the more disturbing aspect of the Northern Rock affair: that we all knew what was going on. Had shareholders been more alert to what was happening they would have been welcome to turn up at the AGM and ask some questions. Or email them in.
I wasn't a shareholder in the Rock for very long; I got out fairly soon after the trouble started, and suffered a small loss. I count myself lucky. I'm not in the mood for taking legal action against the Chancellor of the Exchequer, although, looking back, I did find his argument that Northern Rock was illiquid but not insolvent persuasive and reassuring – but ultimately misleading.
For me, the best news of the week were the profits at Centrica. Some customers are obviously right to feel aggrieved, but they have the ability to shop around. For shareholders the results were excellent. If you are a disgruntled British Gas user, you should go and buy some shares in Centrica as a sort of emotional hedge. I'll add to my holding, but maybe take another look at their business model first.
Compare with the Independent: See how much you could save by switching credit cards. Compare now
Pensioners to be told how long they have left to live to help them plan their finances
Garden city in Ebbsfleet, Kent not enough to solve housing crisis in UK
Simon Read: Santander says that it's trying… it's certainly still trying my patience
Row goes on over deferred student loans
How to start your own internet business
- 1 Are you turning into your dad? The top ten signs you've embraced dad-ism revealed as survey says 38 is age men turn into their father
- 2 Overheard in Waitrose: documenting the chatter in 'Britain's poshest supermarket'
- 3 Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'
- 4 24 people applied for the 'world's toughest job', here are their interviews
- 5 Grace Dent on TV: Game of Thrones has jumped the shark
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
US Navy christens huge $3 billion destroyer ship USS Zumwalt that appears as a fishing boat on enemy radar
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
Nigel Farage fatigue? Half of voters ‘immune’ to Ukip’s appeal
Nigel Farage on Have I Got News For You: Ukip leader ridiculed over expenses and party 'fruitcakes'
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
iJobs Money & Business
£150.00 per week: QA Apprenticeships: This company has been providing on site ...
£221.25 per week: QA Apprenticeships: This company is a well established Inter...
£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...
£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...
Day In a Page
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds