How my splendidly safe and boring bank shares made me a loser.
I have an interest to declare. I am a loser. Some time ago I bought some Lloyds TSB shares - that is why I have never written about it before.
They provided an absurdly generous yield on dividends I thought would not be cut.
Last year, indeed, there was a small increase.
It was a splendidly boring bank, devoid of ambitions to take anything over, or make funny money gambling in financial instruments nobody really understood.
It made a serious and sustained effort to please its customers and attract more of them at a time when most banks were content to be hated.
It relied more than the hated banks on high street deposits for its funds rather than the vagaries of the money markets.
I felt a warm glow of being proved right when the queues assembled outside Northern Rock last year and we learned that Lloyds TSB had refused to take the thing over without a Government guarantee.
Quite right, too, I thought. It may have been foolish to own a bank share at a time like that, but Lloyds TSB had enough stuck-in-the-mud commonsense to be the exception.
Now look what has happened. Boring, commonsensical Lloyds TSB is all over the headlines for taking on - never say rescuing - our biggest mortgage lender at a time of collapsing house prices.
With it comes a bunch of Scots in Edinburgh who turn out to be less canny than they thought. One of them misled me in a private conversation earlier this year, probably unintentionally, which only makes it worse.
My final dividend is to be paid - meaninglessly - in shares this year and future pay-outs are to be "re-based", the weasel word for cut.
The price of my shares crumbled another 15 per cent yesterday amid chatter that the short sellers who drove HBOS to the brink may now target the new, swollen Lloyds TSB.
My misfortune has spared us the spectacle of Northern Rock-style queues besieging Halifax branches.
With a little luck they won't end up besieging Lloyds TSB branches instead.
As a reward, Gordon Brown personally ordained that my bank should be allowed to become a technical monopoly in several enviable markets, starting with one mortgage in three.
It is a great coup, we are told, a once in a century opportunity. For all I know, it may well be.
But if I had wanted strategic vision and so on I would have bought shares in Sir Fred Goodwin's Royal Bank of Scotland.
At least I never did that.
As to the turmoil all around, consider two points. First, the Americans did get it right, letting Lehman go to the wall and nationalising the two mortgage monsters and, above all, AIG. Its crash would have destroyed confidence in insurance as well as banking on top of quite unquantifiable financial consequences.
Secondly, watch for signs of this financial crisis on the real economy beyond housing. The Bank of England is watching for them, too. It is looking for a slowdown to squeeze inflation out of the system. If you want serious interest rate cuts, pray for bad news.
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|Publication:||The Birmingham Post (England)|
|Date:||Sep 19, 2008|
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