Baker Street, London -- As Freeserve fever continued, the blue-chips decided to pull their socks up after seven consecutive falls. The main cause was news concerning three long-running corporate stories; namely, Reckitt & Colman, Cellnet and Barclays.
The mid-caps were more sedate, with the FTSE 250 actually posting a small loss due to renewed worries over the IT sector.
Long-time bid favourite Reckitt & Colman(LSE: RCOL) ended the day up 84p at 785p following news that it was to merge with the Dutch household products group, Benckiser. As the combined group will only have turnover of just over £3.1b, it still remains a just a mere morsel for its much larger competitors. Unilever tops most commentators' lists.
Barclays(LSE: BARC) has a new boss. The new chief executive, 54 year-old Matthew Barrett, will start in October 1999, leaving plenty of time for more speculation about banking mergers. Although Barrett has been with the Bank of Montreal since he was 17, he is also a director of Seagram and Molson.
The market appeared relieved that this position has finally been filled, marking the shares up 78p to 1782p. Other banking stocks decided to join the party as well following better than expected results from the Halifax (LSE: HFX).
Securicor(LSE: SCR) moved ahead 39p to 583.5p as the group said BT(LSE: BT.A), will pay £3.15b for the 40% stake in mobile telephone operation Cellnet that it does not yet own. Securicor said that most of the money would be returned to shareholders in the form of cash or a loan note alternative. On the basis of Securicor's current valuation the market appears to think that its remaining businesses are worth just £350m, which would suggest it will fall out of the FTSE 100 index following the completion of the deal. Obviously somebody thought that BT had got a bargain as it rose 66p to 1117p adding £4.2b to its market capitalisation.
The biggest faller in the FTSE 100 was Telewest Communications(LSE: TWT), which was down 12.75p to 271.5p following yesterday's move by NTL to buy the domestic element of Cable & Wireless Communications (LSE: CWZ).
Greenalls(LSE: GREW) fell 39.5p to 329.5p as it warned investors that full year profits would be 'materially below current market expectations'. The finger was pointed at the group's Tavern Wholesaling division, where sales in the last three months were 6.5% down on 1998 and margins were under pressure, in fact so much so that the division is expected to make a loss for the year.
As discussed in the Foolish Lunchbox the market wasn't overly impressed with the results released by Admiral(LSE: ADC) this morning. The price fell below 700p at one stage but staged a partial recovery and closed down 61p at 751.5p.
As always the other IT stalwarts fell in sympathy. The most sympathetic were Misys(LSE: MSY) down 20p to 540p and Logica(LSE: LOG) down 31p to 700p.
Apparently we can all enjoy an average price reduction of 14% in our water bills next year, courtesy of OFWAT's latest proposals. In the stock market there were mixed reactions but there were more losers than winners. In particular, Yorkshire Water(LSE: YW.) was down 32p to 461.5p.
Freeserve(LSE: FRE) continued to fall, ending the day down 10p at 195.5p. Apparently 60 million shares were traded today, in addition to the 106 million traded yesterday. As only 153 million shares were made available the entire free float of this company has been traded in just under two days. We suspect this is a record, although it will no doubt be smashed by other forthcoming Internet flotations.
Historically-minded French Fools may have noticed the death last month of the pretender to the French throne. Henri d'Orleans, Comte de Paris, was a direct descendant of the last king of France, Louis Philippe, who fled the country in 1848. If the monarchy had survived Henri would have been Henri VI of France. Although he didn't manage to inherit the throne he was still, as the head of the House of Orleans, left a £400m fortune by his father in 1940.
But the would-be king has in turn left his descendants just six handkerchiefs and a pair of slippers. Last week one of Henri's nine children looked likely to prepare a legal action after the publication of his will. The lawyer leading the action said that so far he had failed to recover any of the family's heirlooms and that all of Henri's bank accounts were left empty. He suggests Henri may have hidden the assets in secret locations in an effort to disinherit his children, with whom he had fallen out.
Yet others believe that the pretender had in fact squandered his immense pile on gambling and other reckless pursuits in recent years. Certainly over the last 25 years Henri had sold all his numerous manors, chateaux and estates. The 90-year-old family head lived in a modest bungalow, owned by his mistress, by the time he died. Other luxury goods such as antiques and jewellery, including some diamonds which had belonged to Marie Antoniette, were sold at ludicrously low prices.
Heir Jacques d'Orleans' lawyer said he thought it was impossible for his client's father to have spent all the estimated 100 million francs he is believed to have raised from this selling spree. "Maybe the man had a hatred of his children," he said. "Maybe he just went mad towards the end of his life." The investigation begins this summer but Foolish lessons can be learnt from this staggering story, particularly if it turns out that Henri's royal investment touch did really desert him.
To turn £400m into £40, or lose 99.99% of this fortune (a rate of decline of 24% a year), over a 59-year period when inflation has been roaring, is almost unbelievable. The only possible way Henri's actions could be deemed Foolish is if he had decided that his asset classes were too heavily concentrated in the French property market and illiquid items like antiques, paintings, diamonds and jewellery. In recent years the underlying prices of diamonds and precious metals like gold have been dropping disastrously as deflation rears its ugly head again.
A Fool could understand it if he had been desperate to get involved in equities and switch from commodities into shares. The French stock market has boomed lately. Over the past ten years the CAC 40 index of leading shares on the Paris bourse has risen 181.2%. Thus if Henri had put his £400m in a fund tracking this index, he would have left his family over £1,124.8m. This may not have been enough to restore the fortunes of the House of Orleans completely, with the throne gone, but it would have stopped his children having to go out to work (poor devils!).
£400m would have probably bought most companies in their entirety in London's FT 30 index in 1940. However, imagine Henri had escaped at Dunkirk with the Free French but had only managed to bring over £40 (the sum he has left his descendants). At that time the FT 30 had plunged to an all time low of 49.4, as more pressing concerns, such as the raging war, occupied most inhabitants of the Allied countries. However, if carefree Henri had decided to put just this £40 on the FT 30, today he would be sitting on a remarkable £3.24m -- an average annual return of only 7.7%, in a period that included the last five years of the Second World War followed by a period of widespread nationalisation. Over the past 59 years this blue chip index has increased by 8003.8%.
Many more Foolish investors could have replicated this with such a long term buy and hold strategy. Indeed a recent survey suggests many British people have started saving for the long term to some degree. The Policy Studies Institute, in a report funded by the Joseph Rowntree Foundation, found that those who have recently retired are the richest group in the country. The average wealth of 60 to 69 year-olds is now £133,000. The survey puts this down to the assets from pension funds, the increasing number of homeowners and increased benefit provision.
More worrying though were those people interviewed who were scared about being poor in retirement but were either not bothered or didn't feel compelled to save for the future. The report concluded that recent government proposals, including the stakeholder pension scheme, "make it less likely that people will save the sort of sums that would provide them with the retirement income to which they aspire."
However, if you are feeling poor and want to start getting exposure to equities Foolishly, then a new book published by the US Fool might give you some idea how to provide "King" Henri's fate. "Investing Without a Silver Spoon" by Jeff Fischer has just been published and will tell you all about how to start investing directly in shares with small amounts of money, without using managed schemes or brokers. This is via dividend re-investment plans or DRiPs, which large companies run. But a more detailed explanation will have to wait for another day. No doubt a UK book on this theme will appear before long.
If you follow these simple schemes over the long term you will be hard pressed to lose as much as Henri. In fact it is more likely that you will become the King of France than replicate Henri's 99.99% losses!
More news demonstrating the power of the Internet. Apparently Encyclopedia Britannica is to stop selling books and concentrate on its CD-ROM publication. Book sales are minimal, whilst over 150,000 CD-ROMs are sold in Europe every year. The cost of the full set of books is £900. The CD-ROM version will cost you a mere £89. The company's UK managing director Foolishly commented: "I think this shows a beginning of a revolution that nobody properly understands yet."
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