Persimmon, the company named after a racehorse, is Britain’s second biggest housebuilder. Last week it reported  sales of 7,238 homes in its latest six months at prices  6 per cent higher, adding that nobody seems to have told the enthusiastic site visitors that we’re all doomed after Brexit.

It also acquired enough land to replace the houses sold, and could build 93,519 more before running out of plots. It is making 27 per cent gross margins and 35 per cent on capital employed. Conventional economics says it should be expanding fast and attracting competition like wasps to a jamjar.

Instead, it is paying money back to the shareholders – not just dividends, but massive amounts of capital, over £1bn (and counting) under its current repayment plan. As CEO Jeff Fairburn put it: “We are confident that our long term strategic focus will continue to deliver strong returns for our shareholders.”

This is the point. Persimmon encapsulates Britain’s housing crisis. It is not up to Mr Fairburn or his competitors to solve it.He has no intention of quickly building out Persimmon’s 100,000 plots, because steady expansion already produces lovely returns. The very small number of big housebuilders who dominate the industry are happy the way things are: steady build-out with modest inflation, a constantly topped-up land bank and a market chronically short of properties.

They remember the near-death experience of some of them in the financial crisis. For many smaller housebuilders it was actual financial death, and they are an endangered species today. The survivors lack the skills or the capital to negotiate the planning labyrinth, or to comply with increasing regulation of both construction and labour. The small sites which they used to exploit are often not worth the bother for the big companies.

Any attempt by the government to fix this broken market is fraught with political traps. Measures like Help to Buy stoke demand and do nothing for supply. Homeowners enjoy house price inflation because it makes them feel clever, while Nimbies have votes which they are keen to use. Besides, Britain cannot produce enough bricks for today’s demand, let alone enough to build more.

In the “unsafe havens” portfolio constructed here last month following the Brexit panic, Persimmon shares cost £13.60. At £18.80 they are still not dear. But the political risk to this cosy, informal cartel is rising all the time.

Send no money now

The prices and recent gains for the holders of government debt defy parody. UK government seccurities, which looked expensive (to some of us) a year ago, have delivered extraordinary gains to those who happily accepted negative interest rates.

This cannot go on indefinitely, but while it does, there’s an opportunity. So with thanks to Grant’s Interest Rate Observer, here comes the “No Money Down Negative Yield Sovereign Bond Income Fund.”

This is how it works: you line up commitments, say $10m each, from investors, who do not actually put up any money. The NMDNYSBIF buys no bonds, either. The management calculates the negative interest cost of the notional portfolio, say 0.25 per cent, so after a year the notional $10m has cost the investor $25,000. Split that 50-50, and the clients beat the market while the promoters make $12,500.

It is absurd, of course, but hardly more so than the prices of one-third of the world’s government bonds which guarantee to cost the holders money, or the sight of the Bank of England bidding up the price of bonds beyond reason in its ideological commitment to Quantatitive Easing..

 

Such a gamble, these shares

Now that the bizarre bid for William Hill, elegantly described by its chairman as “based on risk, debt and hope” has collapsed, the analysts at Barclays can get back to the routine business of rating the shares. Armed with the new, improved guidance from the company, the analysts plump for “overweight”, with a target price of 340p. It hardly seems worth putting on the avoirdupois, with the bookies’ shares at 325p, but the Barclays boys understand that betting is a risky business, so they have studied the form to assess the odds. Their conclusion?  “Our upside case implies 42% upside and our downside case implies 41% downside.” This is one bet they should get right.

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