Ponty
pfm Member
Sorry, a shareholder is a shareholder. Irrelevant who they are and cannot be treated differently. Can’t have upside and be indemnified from downside risk. Within a pension fund, it will be a tiny % of an individual’s fund.
Thames Water
- Thread starter ks.234
- Start date
Sorry, a shareholder is a shareholder. Irrelevant who they are and cannot be treated differently. Can’t have upside and be indemnified from downside risk. Within a pension fund, it will be a tiny % of an individual’s fund.
Jim Audiomisc
pfm Member
I note your opinion, but do not share it. 
(pun alert!)
If your bank went bust because it lost loads in TW will you feel you have to take the hit because you kept your money in that bank? The point here is that many 'shareholders' aren't individuals, and the money lost is that of people who 'invested in something that invested (that may have invested(that...)) So leaving the loss as being to all of these regardless of the recursion depth just means we all lose... as the guilty walk away laughing.
(pun alert!)If your bank went bust because it lost loads in TW will you feel you have to take the hit because you kept your money in that bank? The point here is that many 'shareholders' aren't individuals, and the money lost is that of people who 'invested in something that invested (that may have invested(that...)) So leaving the loss as being to all of these regardless of the recursion depth just means we all lose... as the guilty walk away laughing.
Ponty
pfm Member
I note your opinion, but do not share it.
If your bank went bust because it lost loads in TW will you feel you have to take the hit because you kept your money in that bank? The point here is that many 'shareholders' aren't individuals, and the money lost is that of people who 'invested in something that invested (that may have invested(that...)) So leaving the loss as being to all of these regardless of the recursion depth just means we all lose... as the guilty walk away laughing.
A bank isn’t going bust because of one bad loan. Same as a pension fund doesn’t go bust because of one investment gone wrong within a portfolio. To think any shareholder in a company can be indemnified is laughable. Besides, they’ve received the divs along the way.
paulfromcamden
Baffled
And any 'foreign' pension funds that own shares in Thames Water?
I don't really follow your logic that UK shareholders are blameless victims who've had the wool pulled over their eyes and non-UK shareholders are evil speculators.
My pension holds lots of non-UK assets. Most do. It's a way of diversifying and (hopefully) spreading risk.
paulfromcamden
Baffled
Yep. I can understand why people with USS pensions may be concerned. But even if Thames Water shares went to zero (hint: they won't) it's less than a 1.5% hit to the fund. Not ideal but many funds will lose or gain more than that in a single day of market volatility.
Ponty
pfm Member
Quite, less the divs received of course. I wish some of mine had only lost 1.5%!
Jim Audiomisc
pfm Member
Sorry I explained too simply. I was using 'bank' as shorthand, etc. The point is that any investors who invested in something that invested in something (recurse a few times) that ends up holding a debt that can't be repaid will lose out via 'pass the parcel'. In essence, that means we all do. My point is that to try to minimise this we need to seperate two things:
1) Take over and control/run the 'debt crippled' business if it is still needed for a vital function.
from
2) The debt.
We then need to put in place measures to protect our own citizens + victim path investors from the debt as best we can. *Because* not doing so simply means we end up coping with the cost anyway. e.g. Others then need 'state benefits' or support, or reduce our economic activity.
But it isn't then our job to similar help overseas investors, asset-holders, etc. That's for their impacted organisations and their governments. Whos *own* regulators should have also spotted the looming problem.
Ideally, some of those who ran the company and made loadsamoney out of the debt-loading and failings to improve facilities, etc, would also go to the pokey or face a clawback. But I won't hold my breath on that.
Not beyond the wit of man to at least partially do such things. Just requires a willingness to investigate and think about what might minimise the harm done to us by the spectacular failings of regulation and Tory Govs.
Jim Audiomisc
pfm Member
"Shareholders" are not only of one direct type. Many may be affected via paths of impact though a chain of which they have no awareness or control.
And it is the reponsibilty of non-UK 'investments' to regulate their markets, and bear responsibility on that basis.
This area seems to me to be another example of the way the 'conventional economics' we get fed is a 'one step' view that rarely looks beyond that one step. Its part of what Keen and others has been warning about for many years. Indeed, Galbraith could be said to have shown it in his book on "innocent fraud".
Ponty
pfm Member
Makes no difference whether an individual or pension fund invests in a company. No such thing as good or bad shareholders, a shareholder is a shareholder. If you don’t want to carry an element of risk of it going bust, don’t invest in it. Why should other taxpayers indemnify someone else’s investment which goes wrong, whilst they were happy to trouser the divs along the way. As has been said, it’ll be a tiny element of a pension fund, with far greater external influences on its overall performance than one company going south. It could move several % a day in volatile times. You want indemnity against that as well presumably, unless it’s up of course?
Jim Audiomisc
pfm Member
Yes, I do know that is the standard argument people put out.
My point is that it is a presumption about the view people have been got to make, not a fact.'Incorporation' is, for example, a legal convenience... which is now widely abused. e.g. the trick of having 'unearned' income face lower tax than 'earned' wages. In reality, though, a big multinational 'corporation' isn't a person at all.
paulfromcamden
Baffled
Jim - completely agree that there's been a massive failure of regulation and that's really what's at the heart of this. As I've posted above the regulators in many cases appear to be the same people lining their own pockets from the water companies.
DEFRA and EFRA have been sitting on their hands watching companies being run into the ground. Whether because of corruption or an adherence to free market ideology I don't know but the result is the same.
Have USS made any statement on the matter? I still don't understand why they decided it was a good idea to drop a £1bn on Thames Water shares. The asset stripping took place years earlier. It's finances were a matter of public record. On the face of it there seems to have been an extraordinary lack of due diligence.
DEFRA and EFRA have been sitting on their hands watching companies being run into the ground. Whether because of corruption or an adherence to free market ideology I don't know but the result is the same.
Have USS made any statement on the matter? I still don't understand why they decided it was a good idea to drop a £1bn on Thames Water shares. The asset stripping took place years earlier. It's finances were a matter of public record. On the face of it there seems to have been an extraordinary lack of due diligence.
paulfromcamden
Baffled
Agree with all of that I'm afraid.
Though I also understand people's unease when they realise how easily some of their retirement savings could be wiped out.
To me it raises a bigger question of whether people are really best served by DC pensions whose returns are largely dependant on the performance of the stock market. But with the demise of DB pensions there are few other options.
I can well understand why some folks like yourself decide to not put all their eggs in one basket and put some of their retirement savings into property.
Jim Audiomisc
pfm Member
No idea of the position of USS. They probably moved some time ago to reduce/change their portfolio. And it isn't really my specific concern. Just an example of a wider problem with the 'standard way' things get done... often by a mix of stealth and keeping people misdirected. i.e. what con men do.
BTW the BBC have in recent times done a number of R4 items that touch on aspects of these general failings of the 'standard way'. Couple of recent examples perhaps worth a listen are:
https://www.bbc.co.uk/programmes/m001mlnk
https://www.bbc.co.uk/programmes/m001msv9
(FWIW Thinking Allowed is always worth a listen, along with Analysis, Briefing Room, etc.)
"Thinking out of the box" should imply to people that conventional views are often a 'box' we get put into by those it suits to condition what we realise we can think. 8-]
For me, the real enjoyment in science and engineering was always to think *out* of the box. Works well in other areas as well. Stops topics becoming little more than a received 'faith'.
Those who run funds may be required by the articles of their organisation to simply 'go for profits' and be clueless of the - to them - hidden flaws. But as yet we don't know about what various investors may have done in recent months, say. Question of who held the parcel when the music stopped.
Some funds may also have insurance policies with other financial bodies. I know part of my pension is paid from an insurance fund because I had to take early retirement. Again, most of us won't know the details until we need them.
BTW the BBC have in recent times done a number of R4 items that touch on aspects of these general failings of the 'standard way'. Couple of recent examples perhaps worth a listen are:
https://www.bbc.co.uk/programmes/m001mlnk
https://www.bbc.co.uk/programmes/m001msv9
(FWIW Thinking Allowed is always worth a listen, along with Analysis, Briefing Room, etc.)
"Thinking out of the box" should imply to people that conventional views are often a 'box' we get put into by those it suits to condition what we realise we can think. 8-]
For me, the real enjoyment in science and engineering was always to think *out* of the box. Works well in other areas as well. Stops topics becoming little more than a received 'faith'.
Those who run funds may be required by the articles of their organisation to simply 'go for profits' and be clueless of the - to them - hidden flaws. But as yet we don't know about what various investors may have done in recent months, say. Question of who held the parcel when the music stopped.
Some funds may also have insurance policies with other financial bodies. I know part of my pension is paid from an insurance fund because I had to take early retirement. Again, most of us won't know the details until we need them.
Ponty
pfm Member
Yes, I do know that is the standard argument people put out.
'Incorporation' is, for example, a legal convenience... which is now widely abused. e.g. the trick of having 'unearned' income face lower tax than 'earned' wages. In reality, though, a big multinational 'corporation' isn't a person at all.
The answer is for someone to not participate and make their own pension provision instead, if they think they have greater risk management insight and abilities.
Jim Audiomisc
pfm Member
Alas, due to the recusrsions of modern 'investments' many have no idea or control of where their money ends up being 'invested'.
People might like to have a look at:
https://www.bbc.co.uk/programmes/m001nv0y
and also - if you can find it, the film, "Patterns of Power"
By luck I've been watching both of these.
Also, I'd suggest "Taxtopia", and also older books like Galbraith's "Innocent Fraud". These, and some others on topics like having us 'rent' things rather than own, etc, show how our standard economy simply doesn't work as polticians like to tell is. Indeed, that it doesn't work at all for most of us... but for a few who usually keep at a distance in terms of legal responsibilty.
Note for example in the above BBC Parliament item that, early on, those being quizzed said they weren't in their current jobs as most of the dodgy behaviour was carried out at TW. (i.e. Not my fault, guv.)
ks.234
Half way to Infinity
Private Equity as Public Debt
Financial Capitalism's uncanny resemblance to Soviet-style economics
ANN PETTIFOR
SEP 14
In today’s Financial Times Iosco chair Jean-Paul Servais, has pressed a regulator’s equivalent of the panic button.
Acknowledging that Private Equity (PE), hedge funds and private finance are “now systemically important” Servais warns of “vulnerability” in the sector and notes there is also “frankly speaking, a little too much confidence that all will be fine.”
If your pension fund dear reader, is invested in the sector, or if you are an employee of a GP’s surgery, a hospital, a nursing home, or the resident of a housing estate acquired by PE - you too must worry about its “vulnerability”, which combined with what Servais calls
a lack of transparency and a changing macro-financial environment
threatens the global economy with systemic failure.
And “systemic failure” here means: we all get hurt by a financial crisis of the system that like lightning, will ricochet around the world.
Thames Water is the poster child for PE investment, debt and risk. It is Britain’s largest water and wastewater services company and is on the brink of bankruptcy. Its failure gives an alarming insight into the potential systemic failure of the whole PE sector - and with it deeper insights into what passes today as “capitalism”.
Privatisation and Debt: the case of Thames Water.
In 1989, back in the heady days when public utilities like water were privatised by the Thatcher government, UK water companies had all of their debt (£5 billion) written off as an inducement to investors in the City of London to buy the utility.
Since then the company’s collective private debt burden has risen to more than £60 billion - despite managers having ‘saved’ money by not investing in the maintenance of waterworks systems - a requirement of the law - and by pouring sewage in, and polluting the rivers and the sea.
Thames Water was purchased by Macquarie in 2007 at a price of £4.8 billion with debt of £2.8 billion. Over the ten years (2007-17) of Macquarie’s ownership, the company’s debt rose from £3.4 billion to £10.8 billion, and Macquarie ultimately took out £2.7 billion in dividends and £2.2 billion in loans. Since 2017 the company’s debt has grown to £14.5 billion, according to Dr. Sissoko. With interest rates rising the company is on the brink of bankruptcy, well before it addresses the crisis of sewage spills and the contamination of rivers.
Thames Water is a case where investors such as Macquarie have made high returns, at the expense of leaving urban Britain with grossly underinvested waterworks infrastructure.
Someone will have to pay to clean up those rivers. And that someone may well be you, dear reader - as an employee, rate payer, tax payer or pension claimant.
To understand how we’ve arrived at this critical point, bear with me as I take you through the evolution of this story.
An independent analyst, I write about the international financial system and its impact on humanity and ecosystem. I do so without fear or favour. Your support is appreciated.
Financial Capitalism's uncanny resemblance to Soviet-style economics
ANN PETTIFOR
SEP 14
In today’s Financial Times Iosco chair Jean-Paul Servais, has pressed a regulator’s equivalent of the panic button.
Acknowledging that Private Equity (PE), hedge funds and private finance are “now systemically important” Servais warns of “vulnerability” in the sector and notes there is also “frankly speaking, a little too much confidence that all will be fine.”
If your pension fund dear reader, is invested in the sector, or if you are an employee of a GP’s surgery, a hospital, a nursing home, or the resident of a housing estate acquired by PE - you too must worry about its “vulnerability”, which combined with what Servais calls
a lack of transparency and a changing macro-financial environment
threatens the global economy with systemic failure.
And “systemic failure” here means: we all get hurt by a financial crisis of the system that like lightning, will ricochet around the world.
Thames Water is the poster child for PE investment, debt and risk. It is Britain’s largest water and wastewater services company and is on the brink of bankruptcy. Its failure gives an alarming insight into the potential systemic failure of the whole PE sector - and with it deeper insights into what passes today as “capitalism”.
Privatisation and Debt: the case of Thames Water.
In 1989, back in the heady days when public utilities like water were privatised by the Thatcher government, UK water companies had all of their debt (£5 billion) written off as an inducement to investors in the City of London to buy the utility.
Since then the company’s collective private debt burden has risen to more than £60 billion - despite managers having ‘saved’ money by not investing in the maintenance of waterworks systems - a requirement of the law - and by pouring sewage in, and polluting the rivers and the sea.
Thames Water was purchased by Macquarie in 2007 at a price of £4.8 billion with debt of £2.8 billion. Over the ten years (2007-17) of Macquarie’s ownership, the company’s debt rose from £3.4 billion to £10.8 billion, and Macquarie ultimately took out £2.7 billion in dividends and £2.2 billion in loans. Since 2017 the company’s debt has grown to £14.5 billion, according to Dr. Sissoko. With interest rates rising the company is on the brink of bankruptcy, well before it addresses the crisis of sewage spills and the contamination of rivers.
Thames Water is a case where investors such as Macquarie have made high returns, at the expense of leaving urban Britain with grossly underinvested waterworks infrastructure.
Someone will have to pay to clean up those rivers. And that someone may well be you, dear reader - as an employee, rate payer, tax payer or pension claimant.
To understand how we’ve arrived at this critical point, bear with me as I take you through the evolution of this story.
An independent analyst, I write about the international financial system and its impact on humanity and ecosystem. I do so without fear or favour. Your support is appreciated.
paulfromcamden
Baffled
One of the biggest investors in Thames Water has slashed the value of its stake in the debt-laden utility by almost two-thirds, weeks after the company admitted that it does not have enough money to make its debt repayments. A fund controlled by Thames Water’s second largest investor, the University Superannuation Scheme (USS), reported a loss of almost £600m last year after writing down the value of the embattled water company as it struggles to shore up its balance sheet.
...
The USS spokesperson added: “We have not received a shareholder dividend or payments of interest on any shareholder loans since we first invested in 2017, with shareholders instead re-investing capital back into the business to drive improvements. We remain of the view that, with an appropriate regulatory environment, the long-term objective of repairing important UK infrastructure and paying pensions to our members are in strong alignment.”
Ouch!
www.theguardian.com
...
The USS spokesperson added: “We have not received a shareholder dividend or payments of interest on any shareholder loans since we first invested in 2017, with shareholders instead re-investing capital back into the business to drive improvements. We remain of the view that, with an appropriate regulatory environment, the long-term objective of repairing important UK infrastructure and paying pensions to our members are in strong alignment.”
Ouch!
Thames Water’s second largest investor slashes value of its stake
USS’s write down of almost two-thirds comes after utility admitted it cannot afford debt repayments
Darth Vader
From the Dark Side
I did. I have my own SIPP and diversified investments. Got 9.27% (before charges) over the last year ending 30th Dec.
I do now after many years have a wealth manager but its really only to help my wife when the grim reaper comes calling. Our conversations are at lot of fun .....
DV
ff1d1l
pfm Member
https://www.bbc.co.uk/programmes/m001jw74
Paul Whitehouse - Our Troubled Rivers.
Paul Whitehouse - Our Troubled Rivers.