Is there anything more frustrating than discovering you’ve overpaid?
PUBLISHED: 14:58 11 September 2017 | UPDATED: 15:03 11 September 2017
Is there anything more frustrating than discovering you’ve overpaid for a product or service?
That quiet sense of elation you feel when telling a mate that you persuaded your internet provider to lower their monthly charge from £39 to £32 quickly evaporates when your slightly embarrassed pal tells you his charge has remained constant, at £24 a month, for the past two years. And he’s with the same provider. And he gets a slightly better package too.
The price of flights on ‘low-cost’ airlines is another purchase about which people tend to keep quiet. No-one wants to be identified as the idiot who willingly dropped £139 for a trip when almost everyone else on the plane secured their return journey at a cost of £25.
Theoretically, the internet should have improved the chances of us avoiding rip-offs, scams, or over-paying for something, but this isn’t the case. Who hasn’t wondered, immediately prior to pressing the on-screen ‘buy now’ button, whether what they’re about to buy is available at a much lower price elsewhere?
Instead of making the transaction process more transparent, it could be argued that the internet has actually made it more opaque and frustrating, because we can’t possibly compare every single price quoted against the same item, even when we know there’s a good chance we’d pay less elsewhere.
The irony is that whereas you’re likely to see the same pair of jeans offered at dozens of different prices online, this is rarely the case with investing, especially when a company has suffered from an outbreak of one of those prolonged bouts of righteous indignation that causes its share price to plummet. Its temporary embarrassment is startlingly evident as concerned sellers abandon ship in their droves and the company’s value slumps.
Companies are often the architects of their own misfortune. Remember Gerald Ratner describing his company’s products as “total cr*p”? Hardly a great PR stunt; it cost Ratner his company. Then there was the decision by Krispy Kreme donuts to advertise a promotion as ‘KKK Wednesdays’ which, while popular with a handful of folks in some isolated parts of the USA, was not exactly embraced by shocked Americans and quickly dropped.
Two years ago, it emerged Volkswagen had been, ahem, amending emissions data on its diesel vehicles to make them look cleaner and greener than they actually were. This was a scandal on an enormous scale, one which has so far cost the car manufacturer $2.8billion in fines (there could be more to come), but take a look at Volkswagen’s share price and you will see that the outrage, once it subsided, has had little long-term material impact upon the company’s value.
In September 2015, VW’s share price plunged to 104 euros; today it’s 135, an increase of almost 30%. Last year, the company sold 6million cars, 3% more than in the previous 12 months.
Earlier this year, David Dao boarded a United Continental plane in Chicago but the airline had over-booked his flight and Mr Dao was dragged from the aircraft by police officers. Footage of the nasty-looking incident went viral and attracted millions of views on social media. Continental’s response was less than effective and its share price nosedived as investors called for the company’s chief executive to step down.
In the week following the incident, Continental’s shares could be acquired for $60.33, but within two months they had climbed to $82, a 35% increase in value in the space of eight weeks. Do you note any kind of trend here?
Baron Rothschild, the 18th century British noble and member of the Rothschild banking dynasty, is credited with saying that “The time to buy is when there’s blood on the streets, even if the blood is your own.”
Rothschild made a fortune following his own advice in the wake of the Battle of Waterloo, making him perhaps the first contrarian investor.
Today’s investors may not be absolutely sure they’ve achieved the best possible price when buying a pair of jeans online, but whenever a company suffers from a bout of online hysteria which causes its share price to tumble, they can be assured the price at which they can become a shareholder in the company is the same as everyone else is paying. Granted, it could move lower or the hysteria could last longer than anticipated, but ‘buying on the dip’, while a strategy for the bold, tends to be one that pays dividends.
The Week In Numbers
Percentage of UK workers who admit to sending private Facebook, WhatsApp and other messages during the day from work, according to recruitment company Dice. On average, British workers send 100 messages every day on company time.
Average selling price of a Redrow home, an increase of 7% from last year. No wonder the company’s annual pre-tax profits leapt by 26% to £315 million.
Forecasted fall in new car registrations this year, following the highest-ever level of sales (2.69 million) in 2016. A total of 2.6 million new vehicles are expected to be driven off the forecourt this year.
Estimated fall in this year’s registration of diesel vehicles as a percentage of market share. In 2016, almost half (47.2%) of all new cars sold were diesel. That figure is expected to fall below 40% in 2017. A total of 135,000 new “alternatively fuelled vehicles”, electric cars to you and me, are likely to be sold this year.
The Royal Opera House is to sell stall tickets for some of its most popular productions for as little as £10. The normal asking price is £230, but there is a catch – you won’t get a seat if you buy a ticket for a tenner. You may, however, make yourself comfortable on the floor and the ROH has announced that picnic blankets will be welcome.
Fine imposed by Croydon Council on parents who drive to and then drop their children at the school gates. The council wants to revive a once-popular, but long-forgotten, activity: walking to school.
The net cost of a proposal announced by Scottish First Minister Nicola Sturgeon to give every child under 16 a ‘citizen’s income’ of £50 a week: 16- to 18-year-olds would get £100, while pensioners would collect £150. The catch? The basic rate of income tax would increase from 20% to 30%, while the top rate would be raised to 50%.
n Peter Sharkey read economics at the University of Bristol. He worked as an accountant on three continents and has been a company director and investor for more than 30 years, building and selling three different companies.