|Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free!
It is commonly believed among the coterie of prunes that make up society that illiquidity in securities markets is a condition that can be foreseen and avoided. Therefore, the FCA is looking at putting further restrictions on the management of unit trusts. For this the FCA gets paid to render the prunes poorer.
Of course, this costly (to the prunes) exercise is pointless since it is a fact of life that markets can go illiquid. By way of illustration I recall the tale of a young stockbroker at Cazenove in 1931 being depressed when he learnt that there was no sort of respectable bid in War Loan, then one of the major savings instruments quoted on the London Stock Exchange. Such is life.
In the same vein M&G, lately of Prudential, have frozen their £2.5bn property unit trust since requests for redemption of units outweigh the portfolio’s capacity to liquidate itself in an orderly manner. This means that savers have no means to raise the cash upon which they thought they could rely. Well I never. Whatever next!
However, help is at hand by courtesy of Knievil Engineering (a newly formed enterprise blessed with no capital other than access to my brain). For, surely, there is an opportunity for M&G to establish a forum centrally occupied by at least two firms of market makers who will deal competitively in these units.
This is not as easy as it looks since, quite understandably, the market makers will wish to be confident that they are taking delivery of stock that belongs to the seller. However, I am sure that, somehow, this happy condition can be achieved. If there are any difficulties, I confirm that Knievil Engineering will devise a solution.
Naturally, the FCA will want at our expense to be involved, though its intervention is totally unnecessary and bound to prove ineffectual. But that is how we have sort of chosen to govern ourselves. And how we wonder why there is a shortage of money.
The NHS asserts that “half the population are gamblers pursuant to the aggressive promotion of online betting”. Of course, I remember my dear old dad doing the pools which, were he alive today, would categorise him in the NHS’s eyes as a gambler. Readers, he was the last man on earth who could be described as a gambler. He just could not take the stress.