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a personal view from Erithacus
8th November 2003
UK stock markets confounded the analysts by shrugging off any pessimism from the rise of 0.25% in base interest rates and finished the week up 89.3 points at 4376.9.
In fact, it seems that press reports of the likelihood of an 0.5% rise in rates did produce nervousness at the beginning of the week and a substantial fall on Wednesday and Thursday morning before the Monetary Policy Committee’s announcement, but climbed steadily towards 4400 as soon as it was confirmed that for this month at least the increase in base rates was to be just 0.25%.
The fall in the FTSE100 on Wednesday which wiped out the cautious movements upwards on Monday and Tuesday, was the result not only of the interest rate fears but also new National Statistics economic figures. The new figures showed that manufacturing output in the UK fell by 0.2% through August and September, which in itself lessened the likelihood of an interest rate rise larger than 0.25%, but at the same time a report from the Chartered Institute of Purchasing and Supply indicated that the UK service sector was showing its highest rate of growth since November 1999.
Fears that an interest rate rise could cause a property price crash, and indeed hopes that the rise would slow what some see as an alarming rate of house price rises, seem equally unfounded. According to the Halifax, an 0.25% rise adds £4 a week to an average £80,000 mortgage and even a string of similar rises will be highly unlikely to make mortgages unaffordable for the vast majority of buyers. At worst, say the experts, the rate rise will focus the attention of the public on their current personal debt levels, and that more than anything else is almost certainly what the Bank of England’s Monetary Policy Committee are anxious to achieve.
And now I can say it without being sexist.
Researchers in Germany this week published results of their study measuring electrical impulses in various parts of the brains of female shoppers. Amazingly, they found that activity in the section of the brain dealing with common sense and rational thought was almost nil, while the part of the brain governing the emotions and pleasant feelings went into overdrive.
One of the scientists, Dr Michael Deppe, said, "The more expensive the product, the crazier the female shoppers get. They simply lose the ability to think straight."
How many of us could have told him that without the need for all the expensive research?
Mr Stonebanks has had a new resolution drafter by a barrister and reviewed by an independent solicitor in the hope that this time Standard Life will have no grounds for finding it invalid.
He has also angered some of the longstanding policyholders by including a proposal that they give up 10% of any benefits they might have received on demutualisation so that newer members will receive benefits. He says he believes the vote for demutualisation will have more support if he can win the approval of new policyholders as well as those older members.
Despite the persistence of Mr Stonebanks which surely has to be admired, however grudgingly, even by the Board of Standard Life, I have to wonder whether demutualisation is really in anyone’s interests. Perhaps I am wrong, but as I read the figures and for all its faults, Standard Life has performed consistently better for its policyholders than almost any other organisation offering similar financial products - and certainly better than those which have demutualised in recent years. More importantly for would-be carpetbaggers, the amount that each policyholder is likely to receive is now very much lower than it was a few years ago, simply because stock markets remain well under where they were at the beginning of 2000 and the reserves and assets of Standard Life along with the reserves and assets of all similar organisations are much less than they were.
Now is not the time, Mr Stonebanks. Leave it a few years, and we will all do very much better out of it.
8th November 2003
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