Private Investor: Don't waste your sympathy on shareholders
Saturday 19 January 2008
Writing as a former small shareholder in Northern Rock – and I emphasise the former part here, I'm glad to say – I confess I have very little sympathy for my former fellow owners of the bank. They knew, surely, that you can lose your shirt on shares; that equities can go down as well as up; that you shouldn't put money into shares you can't afford to lose; and that investment is a matter of research and understanding. Or at least if it isn't, and you're effectively gambling, you do that with your eyes open too.
I lost money on my holding, which, as I wrote in these pages, I thought was a good idea at 660p. I got out at 440p. Lucky.
No one made anyone buy these shares. Indeed, quite a few of the small shareholders will have received their investment at nil cost when the former building society was demutualised in 1997. Even if they receive but a penny piece for their stake when the dust settles, that penny will be pure profit.
Northern Rock shareholders have also had the benefit of a decade of "progressive" dividends, reaping the returns from a business model that was lauded when it was doing well, but which eventually ran out of rope.
I agree that few, if any, pointed out the weaknesses of the Rock's business approach, unusual as it was and removed from more conventional banking practices. To rely so heavily on wholesale money markets, rather than, say, retail depositors, was not condemned by many.
Reading the money pages of the papers, blogs and mags, you'd understand why so many people purchased shares in this go-ahead bank at £12 plus, thus being doomed eventually to lose 95 per cent of their punt.
Still, this was no fraud. The facts about Northern Rock's policy were abundantly clear. The market was never misled. No one lined their own pockets. The world just turned the wrong way for Northern Rock, and, well, life's like that.
In fact, something of the same argument might even be applied to the depositors. Again, if you're going to entrust a financial institution with tens of thousands of pounds of your savings, you might at least enquire what would transpire in the worst case scenario. There again, the information was all in the public domain. The modest extent of guaranteed investor compensation – about £30,000 – was in the public domain. Again, there is a case for letting the depositors go to the wall if they were foolish enough to ignore this basic prudential principle. Naturally, that might have serious consequences for the rest of the system, so I can understand why the Bank of England chose to intervene on the Treasury's behalf. However, as I say, the case for letting the depositors go hang last September hasn't really been made.
Clearly, no one should trust more than £30,000 in cash to a single bank; and I've got my doubts about the security of nominee accounts, too, but that's another story. We might all prudentially put a little into National Savings too, simply because they are the only state-guaranteed savings provider (apart, that is, from Northern Rock nowadays). And so on. Just as banks ought to apply ratios and have prudential rules and reviews of their activities, so ought private investors.
One of the leaders of the shareholders' rebellion at the Northern Rock extraordinary general meeting last week went on the radio to state his case. His argument – I kid you not – was that if the Government wanted people to buy shares in denationalised industries then they should make sure that the shares performed well. Hmm.
I don't know where to start. First, government has no such obligation. Second, Northern Rock wasn't denationalised and was never the property of the state (though it may be soon). Third, the shareholders' equity in Northern Rock wouldn't even be worth what it is today without vast taxpayer funding behind it. A "fair price" for shares at nationalisation should be determined by an independent arbiter. I wouldn't expect it to be higher than where the shares stand now. The hedge funds will lose billions. Boohoo.
Northern Rock doesn't need time to pull itself together. It cannot do so. It is over. The business is kaput and it can be best served by being taken into public ownership with a minimum of fuss. It will be parked until after the general election and then quietly sold on for whatever pittance it will fetch. So, I'm sorry to say, Northern Rock's excellent and blameless staff lose their jobs, the biggest injustice of all. Shareholders will surely lose out too. So, as taxpayers, will everyone else.
Under new state pension rules we will all be much worse off
Interest-only mortgages return to give more flexibility to borrowers
Five Questions On: GB Energy's new tariff
Bargain Hunter: Take your children on Eurostar on a £1 ticket
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
- 1 Michael Douglas regrets 'embarrassing' Catherine Zeta-Jones with oral sex comments
- 2 Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
- 3 Tunisian builder has been hailed a hero after knocking gunman to the ground with roof tiles
- 4 German ethics council calls for incest between siblings to be legalised by Government
- 5 Fifty Shades of Grey author E.L James's Twitter Q&A didn't go exactly as planned
The moment a Queen's Guard soldier lost it and drew his gun at annoying tourist
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
David Cameron struck double blow in his hopes to win Britain a new EU deal
Extend Right To Buy to tenants of private landlords, Labour's Jeremy Corbyn says
Pentagon accuses Russia of 'playing with fire' over nuclear threats towards Nato
iJobs Money & Business
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...
Negotiable: Recruitment Genius: This extremely successful and well-established...
Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...
Day In a Page
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.