David Craig, on June 26th, 2019(Wednesday blog)
Some readers will find today’s blog a bit boring. But it’s quite important so I’ll do it anyway.
Offloading sh*t to suckers – Lloyds
One of the best examples of insiders offloading sh*t to suckers came in the 1990s. Insiders in the London Lloyds Insurance Market realised in the late 1980s that they were about to be hit by hundreds of millions of pounds (billions in today’s money) of claims from the US from workers whose health had been damaged by working with asbestos. This would have been disastrous for many Lloyds Names as they all have unlimited liability.
It should be said that up till then being a Lloyds Name was seen as prestigious and akin to printing money. Only a few lucky members of the elites were invited to become Names.
Anyway, as you can imagine, the Lloyds Names were not too delighted at the prospect of being seriously impoverished and even bankrupted by the asbestos claims. So what did these fine upstanding members of society’s elites do? They shoved most of the worst asbestos policies into a few insurance syndicates and then went on a massive recruitment drive to invite as many (usually pretentious, social-climbing) outsiders as possible to become Lloyds Names. Thousands joined Lloyds, flattered that they were being invited into this elitist club. These newcomers then got shoved into the insurance syndicates with the worst exposure to the asbestos claims. So the newcomers got totally fleeced while the original insiders laughed all the way to their private banks.
“So what?” You may think. “That’s just a bunch of elitist crooks ripping off a bunch of elitist suckers. What’s that got to do with me?”
Offloading sh*t to suckers – your council
In my 25 years working in over 100 organisations, the stupidest people I ever came across worked for Britain’s councils. Therefore I’m going to write this section slowly so that even someone running one of our councils can understand.
Let’s spool forward to today. What’s happening to Britain’s shops? Unless you’ve been in a cave for the last 10 years or unless you’re a dunderhead working for a council, you’ll know that on-line shopping is devastating Britain’s high streets and shopping centres. Loads of large retailers – Comet, BHS, Toys ‘R Us, HMV, Maplin, Poundworld, House of Fraser etc – have gone bankrupt and many others are closing stores (M&S, Next) and doing CVAs (Company Voluntary Arrangements) – Carpetright, Debenhams, Mothercare, Homebase, Topshop – to get their rents reduced by 30% to 50%.
Given the massacre in Britain’s retail sector, where would be the worst possible place to have your money invested? I’ll give you a couple of minutes to think about this. Yup, you got it, the worst place to invest your money would be in companies owning shopping centres and retail sites.
With me so far?
The other thing that is happening is that the Internet and mobile technology is making working from home more popular and thus reducing the need for office buildings.
So what are our councils doing? Yup, you must be a genius. You guessed it. Faced with budget cuts from central government, many councils are borrowing money – we’re talking billions – and investing this money in commercial property, mainly shopping centres, other retail sites and office buildings. In the last 5 years, our councils have borrowed over �3.8bn for these ‘investments’.
Retail accounted for nearly �1.2bn of spend with shopping centres (�600m) and retail warehouses (�400m) the most popular assets. The remaining investment was split between industrial (�500m), mixed-use (�100m) and leisure (�80m) with a small amount diverted to other alternatives.
Spelthorne Borough Council in Surrey, which contains the towns of Ashford, Shepperton, Staines and Sunbury, emerged as the biggest local authority investor committing an estimated �477.1m to assets within its domain. This is more than double its nearest rival Warrington Borough Council (�219.5m).
The insiders always find suckers
Just like the Lloyds insiders in the 1960s, the insiders in today’s commercial property market must be laughing their arses off. Like the Lloyds insiders, they were faced with catastrophic losses. And just like the Lloyds insiders, they managed to offload their sh*t onto commercially-naive suckers – our local councils. In this case, councils were tricked into investing at ludicrously-inflated values and face massive losses at some point in the future.
The scandal hasn’t broken yet. But it will. And the council bosses who have squandered your billions on almost worthless property will all retire with massive pensions and maybe even a few gongs.�Oh, and it will be you who has to pay for these losses through increased council tax and drastic cuts in council services.
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Absolutely spot on, I’m amazed Tories in Spelthorne haven’t taken a bigger hit in the press on this.
Journalist Nick Cohen once explained to me that most UK journalists are ‘financially illiterate’. I guess it’s because most have useless degrees in English or Communications and Media Studies. So they wouldn’t have the interest or insight to investigate a ‘boring’ story like this one.
Certainly looks like bad news. I believe my council, North Somerset, has investments in retail outlets.There is one thing, though….personally, I don’t want to see the decline and fall of ALL high street retailing. There are some things that you really need to see “in the flesh” before purchasing….shoes, for example. I never buy shoes or clothes online because I can’t try them on for a proper fit. And carpets and furniture…uh uh, not the high quality stuff, I’d want to see and feel it first. There is still a place for the high street.
There is still a place for the high street. The problem is that our councils are pouring our money into property at massively-inflated values making property insiders rich and leaving us facing massive losses.
It’s happening in my nearest South Coast cathedral city too – vast amounts are scheduled to be invested in commercial and office development which will achieve nothing other than increase pressure on an already appallingly inadequate road system while coincidentally virtually cutting off vehicular access to the city for an entire peninsular. It is predictable that no businesses will be able to afford to rent the office and commercial space which will be created, since ever fewer are able to afford what’s available now. The existing city centre is dying – well, it’s now effectively dead – because rent and business rates have escalated to unsustainable levels and ever fewer folk are prepared to pay the extortionate parking charges. The only thriving commercial premises are the charity shops, which are patronised by oldies like me, blessed with our free bus passes, and we are not too proud to buy and wear other people’s cast-offs. All the stores you name have indeed gone, Poundland the latest, and M & S is crammed with high-priced, low quality tat, mainly manufactured in the Far East, which almost no one wants to buy.
It�s all part of a bigger picture for the UK. We are effectively bankrupt. People have high expectations and a high dependency on the state, encouraged by our socialist politicians. People focus on trivia like entertainment and leave essentials to the state, and the state has no money. Today there is an article written about allowing young people to draw from pensions for housing and essentials rather than borrowing. It will never be paid back in so what are they going to live on in retirement? It does make the point that we have to save more but we do not have jobs that allow that. The majority are living beyond their means because their expectations exceed their ability to earn.
The last 50 years or more have seen enormous changes never seen before and we simple cannot adapt to the pace of change. It will not end well, especially with all the brainwashed idiots our schools and universities are producing.
I recall during the Icelandic bank fiasco, back in 2007, when our local council was �cleared� after an investigation as to why they lost money in the subsequent collapse, stating the council had acted properly and had followed the correct procedures; I wrote a letter (which was published) pointing out all the warnings published in the financial papers of our national and foreign press with items like: �Iceland banks are now seen as the most unsafe in the developed world� and �Is Iceland heading for a meltdown�, all published months before the actual collapse and in plenty of time to get the council�s money out. Needless to say there was no reply from the council.
Re the Lloyds names the cleaver Harry Enfield Show had a sketch in which the Tim Nice but Dime character was ruined as a Lloyd name. Lost everything and was living on the street. The guy who used to bully him at public school was one in charge of an investigation into selling of toxic debt at Lloyds so they put Tim Nice but dim in charge of a full public investigation into miss selling.
Most of the big name high street retailers are like Homebase , Toys R US, Maplin they warehouse stuff and since Amazon can not compete with the economy of scale. There is no need for a high street store having money tied up in stock say home refrigerators when it can all be held at one or two locations around the country.
The councils who have “invested” in these high street locations will sell them off at discount prices to be converted into housing.
In the case of Debenhams they used to own the shops as they saw the way things where going they started selling of their stores a few at a time and leasing them back. Sale of a shop was than included in company profits as sells so they people in charge could show increasing profits and pay themselves accordingly.