Socialism, Stupidity And The Royal Mail

By Zak Mir.

One of the main reasons I asked to write for Spreadbet Magazine in the summer of 2012 was its no holds barred approach to the financial markets. I believe this attitude is vital for traders if they are to stand any chance at being successful. Without this edge, even the best strategy can end up being a Charge of the Light Brigade. If I’m really honest, I would like to see this attitude applied to more areas of life, especially politics.

I’ve never been able to reconcile myself with result of the general election in 1945. Instead of rewarding Winston Churchill for having led us to victory, the Great British public booted him out of office and unleashed 35 years of disastrous consensus politics on the country. Socialism was the main driver and it culminated in our entry into the EU, which is nothing more than a federalist money wasting disaster zone.

And it’s not like domestic policies have been much better. The culture of universal benefits and a fully funded National Health Service have to be perhaps two of the most stupid notions known to mankind. Why should everyone get free welfare? The waste of billions of pounds in subsidising people who can afford health insurance, education and all the trappings of a modern wealthy life is sheer madness and immoral. Of course, these rich people (the 1% who pay 30% of taxes) are still loathed in the media, whereas those who contribute nothing are loved and pandered to at every opportunity.

Just in case you are wondering exactly what this article has to do with financial markets, bear with me. I’m getting to the dish of the day; the Royal Mail Rip Off.

Here we have a cash-strapped government, looking for ways to bribe our welfare addled society with some pre-election handouts. To help in their efforts, they bribed postal workers with free shares and, of course, gave 60% of the £3.3billion float to outside/non-taxpaying institutions and investors.This meant less money trickled back to help drive a consumer boom and the Treasury lost out on at least £3billion. Would this have happened had the business hating old codger Vince Cable not been involved?

The whole affair would be laughable if it were not so serious. Presumably HMRC will now go around hounding and bullying the “little people” (small business, expats, old people and others) to recoup the money it has missed out on thanks to the government’s mishandling of this affair. Obviously, if the people who had been involved in setting up the IPO of the Royal Mail had know what they were doing then they would be working for hedge funds or sovereign wealth funds, rather than their current six-figure day jobs (for which they have no aptitude).

You might well say to yourself it is easy for Mr. Zak Mir to be so wise after the event and that there was “exceptional” demand for Royal Mail shares. If anything, this shows the floatation was a success and demonstrates all that is good with popular capitalism. I can agree with that, but even a rookie would know that a 6% plus dividend yield would quickly revert to a 3-4% yield (the normal level for a FTSE100 stock).

So then HM Treasury, next time please price a privatisation along these lines. It will be less embarrassing for all concerned!