I would also encourage readers to be very careful following financial offers from cyberspace. I have, for instance, received dozens of emails asking me to wire cash to someone in a far flung corner of the globe in order to receive an even larger lump of cash - a scam known as advance fee fraud. 'Spoof' emails regularly hit my inbox, purporting to be from a bank, or even the tax office notifying me of a rebate. They're designed to trick us into a clicking a link through which the fraudster can hijack our computers and empty our accounts, and their disguises are getting much more convincing. It's a growing problem that we look at in this week's lead feature - and reassuringly, many quoted companies are emerging to fight this often well organised crime.
Before I sign off I'd like to talk about another subject that, whilst not a scam as such, is one that could also have lost investors a lot of money over the years: the concept of shareholder value. As James Montier of GMO wrote this week, it seems almost heretical to be criticising an approach that, as its name suggest, theoretically exists to make sure companies are run for their owners’ benefit. “Like criticizing motherhood and apple pie”, he says. But, unperturbed, Mr Montier argues it is "the World’s dumbest idea" - in a sea of bad investment ideas - that, for various reasons, has not delivered higher returns than the oft-derided era of 'managerialism' that preceded it.
I can't do Mr Montier’s excellent paper justice here, but a simplistic summary would be that those companies that put their customer first have done better over the long term than those that have ostensibly prioritised shareholders - and in some cases (like certain banks and supermarkets maybe) viewed their customers (not to mention their staff and suppliers) as cattle to simply be milked for profit. The focus on shareholder returns has also led companies into prioritising actions that, whilst flattering short term performance and keeping shareholders temporarily sated with cash, do nothing to help them develop better products and services over the long term - financial engineering, capital underinvestment and perennial cost cutting do not keep customers coming back year after year. “Only by focusing on being a good business are you likely to end up delivering decent returns to shareholders” says Mr Montier. It’s a simple truth that many companies seem to have forgotten - and I'd encourage investors to back the ones that haven't
