If Polly actually understood the report she quoted, she would have made a better point, or at least an arguable one. She says profits at the privatised industries rose faster than the average FTSE company. The report she relies on says that returns to investors were better than the rest of the FTSE. That is consistent with sale at an undervalue (though doesn’t prove it).
I think you should be consistent. Work on the assumption that *everything* she says about finance or economics is suspect. Do not assume she’s got something right because it suits you.
Martin
Also suggests the organisation was previously run inefficiently. Company spends time and money making the organisation efficient its indeed likely to show improved profits.
Luke
Martin,
It doesn’t really suggest anything at all, not least because
what she linked to did NOT say profits increased at the companies. (Though it’s not that difficult to increase profits at a utility if you’re allowed to put the price up every year.) Nor did it say that profits increased faster than at other companies. It said that there were larger returns *for investors* who bought privatised companies than for those who bought other stocks. That doesn’t need improved profits – it just needs the share price to go up. The best returns (*for investors*) were at regulated utilities.
That is perfectly consistent with shares being sold cheaply (easy to say with hindsight), and with regulators giving them an easy time. It is also perfectly consistent with there being no improvement in performance or underlying profit from the companies. The only ones to under-perform the market were BT and BA. They were the only ones who actually had competition.
I am not criticising Tim for saying privatisation can improve performance – I am criticising him for believing something Polly said about finance or economics.
Martin
Larger returns also includes dividends. Share price returns count when sold, not while held hence the lack of tax on held shares.
If Polly actually understood the report she quoted, she would have made a better point, or at least an arguable one. She says profits at the privatised industries rose faster than the average FTSE company. The report she relies on says that returns to investors were better than the rest of the FTSE. That is consistent with sale at an undervalue (though doesn’t prove it).
I think you should be consistent. Work on the assumption that *everything* she says about finance or economics is suspect. Do not assume she’s got something right because it suits you.
Also suggests the organisation was previously run inefficiently. Company spends time and money making the organisation efficient its indeed likely to show improved profits.
Martin,
It doesn’t really suggest anything at all, not least because
what she linked to did NOT say profits increased at the companies. (Though it’s not that difficult to increase profits at a utility if you’re allowed to put the price up every year.) Nor did it say that profits increased faster than at other companies. It said that there were larger returns *for investors* who bought privatised companies than for those who bought other stocks. That doesn’t need improved profits – it just needs the share price to go up. The best returns (*for investors*) were at regulated utilities.
That is perfectly consistent with shares being sold cheaply (easy to say with hindsight), and with regulators giving them an easy time. It is also perfectly consistent with there being no improvement in performance or underlying profit from the companies. The only ones to under-perform the market were BT and BA. They were the only ones who actually had competition.
I am not criticising Tim for saying privatisation can improve performance – I am criticising him for believing something Polly said about finance or economics.
Larger returns also includes dividends. Share price returns count when sold, not while held hence the lack of tax on held shares.