It’s rare to read about a lottery winner and think to yourself that they probably deserve the money more than most, but the Daily Mail’s story this week about the Stannard family’s £8m win was an exception. The Stannards must be the only people left in Britain without a new kitchen. A year ago they started to refurbish, but ran out of cash half way through, so – and here’s the interesting bit – instead of borrowing to finish up, they just didn’t put any worktops in.
“I’d love to finally get some,” said Mrs Stannard. I imagine she now will.
Of course, anyone else in her position would have got them long ago and put the cost on their credit card, a national trend beginning to show up in some nasty statistics. Professor Elaine Kempson of the University of Bristol has been looking at the impact of interest-rate rises on the indebted. She reckons 30% of UK households could survive less than a month on savings; 2.5 million households are “showing financial stress”; and one million are struggling to meet their mortgages.
These numbers are all going to get worse as rates keep rising and as fixed-rate mortgage deals come to an end. The Daily Mail also points to a report out from the CAB that claims a million people who took out cheap fixed mortgage deals three years ago are about to have a shock: if they now shift on to a standard variable rate deal, their payments are going to go up by a third, something that isn’t going to make for a nice Christmas for anyone already suffering from financial stress.
The latter group isn’t going to include many people from the City this year. As Bill Bonner points out, most of them are just getting richer and richer. Some private-equity bankers will be taking home tens of millions, as will successful hedge fund managers. A handful, says The Business, will trouser “more than $50m”. It isn’t nice to begrudge people success, but there are a few things that irritate me about huge City paychecks.
The first is the way many long-only managers get paid vast sums for their ‘expertise’ when they are effectively running substandard tracker funds. The second is the way hedge-fund managers pay themselves – with a 2% management fee and, generally, 20% of any returns they produce. If they always do well, that’s fine. But they don’t, and that makes the system unfair: in good years, they make huge fortunes, but in bad they are in no way penalised. Only when they do badly enough for investors, fed up with being fleeced, to pull their money out does downside appear (in the form of the shutting down of their fund). But by then, most managers should have salted away enough not to care.
I’m told that there are lots of young managers making it their business to find trades that, while risky, won’t blow up for a few years (the place to look for these is the derivative markets). This gives them time to report good performance and make bonuses before they lose piles of other people’s money and have to make a hasty exit. Seems not everyone has the high moral standards of the Stannards.