Indholdsfortegnelse for 1169 i MoneyWeek

“If something cannot go on forever, it will stop.” Nixon’s adviser Herbert Stein clearly wasn’t thinking of wedding speeches when he coined this aphorism, but it is a stark reminder of an immutable law of economics: reversion to the mean. Once trends reach an unsustainable extreme, they head back the other way. Or as our columnist Bill Bonner likes to put it, “things that are out of whack have a way of getting back into whack”. It has been quite a week for whack. Owing to the rapidly deteriorating data, there is now a pervasive sense that China is embarking on a Japanese-style deflationary stagnation without having got rich first (see pages 13 and 18). Having always been sceptical about debt-fuelled booms, we have entertained this possibility longer than most.…

“Terms such as conscious capitalism, ESG [environmental, social and governance], inclusivity and purpose were thrown around with increasing licence in the last cycle... Boards and investors fooled themselves... into thinking they were changing the world... Since last year, the bandwagon has been on the skids... in recent months, the wheels have come off... US investment giant BlackRock said it would no longer use the acronym ESG... because it had been politically ‘weaponised’... The Wall Street Journal reported that chief diversity officers... were being culled... I am as up for addressing climate change, societal problems and corporate governance as anyone, but... I disagree with the ESG movement’s tendency towards box-ticking [and] flawed metrics... I [suggest] replacing ESG with CDP — common sense, decency and pragmatism.”…

Amazon uses chips made by Arm throughout its cloud infrastructure, says Tobias Mann in The Register. No wonder, then, that last week it was reported to be in talks to become an anchor investor in the British chip designer’s impending initial public offering (IPO). Maintaining a “sizeable stake in the company on which you’ve grown increasingly dependent isn’t just good insurance, it’s common sense”. Other chipmakers have a ”vested interest in Arm’s future” too. Nvidia, Apple, Samsung and Intel are all preparing to bid for shares. They want a “seat at the table” once Arm “is at the mercy of Wall Street once again”. Amazon taking a stake will certainly provide a “useful marketing boost”, says Karen Kwok on Breakingviews, but it may not be “as decisive as it seems”.…

Anthony Tan set up his Singapore-based taxi app GrabTaxi in 2012. Since then his company has not only swallowed up Uber’s Southeast Asian division, but has also expanded into food delivery, online travel and internet banking – Grab now calls itself the Everyday Everything app. And there should be ample scope for further growth, says Der Aktionär. A study by consultancy Bain and investment group Temasek Holdings estimates that the market for car services and food delivery will have expanded sevenfold to $42bn in the seven years to 2025. Investors should take advantage of the recent fall in the share price to stock up.…

In a result that “upended Argentina’s political universe”, the libertarian candidate Javier Milei (pictured) won the presidential primary on Sunday with 30% of the vote, says Uki Goñi in The Guardian. Despite pledging “to do away with Argentina’s public health and education systems, disband the central bank, dollarise the economy and allow people to sell their organs”, he led the field, beating the “hand-picked successor” to the ruling Peronist party, who came third behind the main opposition coalition, United for Change. The actual election will take place in October, with a run-off in November, and Milei is now in a strong position to win. It’s no wonder voters are considering radical alternatives given “their country’s chronic economic dysfunction”, says The Economist. Annual inflation is “higher than anywhere else in the…

A few months ago, a think tank put out a short note with a passing comparison of how America and Europe had done since the global financial crisis. This has belatedly been seized upon by critics of the European Union – and no wonder, since it is catnip to them. In 2008, US GDP stood at $14.8trn dollars (in today’s terms), while EU GDP stood at $16.3trn. Today, the US has grown to $25.5trn, while the EU is barely larger, at $16.4trn. Even when you allow for the UK leaving the EU, the difference remains stark: the EU plus the UK today is less than $20trn. Inevitably, there is more here than meets the eye. Most obviously, the comparison ignores currency movements. Back in 2008, the US dollar had been…

As investment-trust discounts have blown out from negligible levels at the start of 2022 to 16% on average today, equity issuance – both by existing trusts and new launches – has vanished. Boards are responding with improved communications, marketing and share buybacks. But while buying back shares at a discount enhances net asset value (NAV) per share, it does not necessarily reduce the discount. Some trusts are going further, pursuing a reorganisation, merger, or winding-up. Trusts managed by Abrdn have been particularly active in this area. Abrdn’s numerous acquisitions over the years have left the group with a wide variety of trusts of different styles and sizes. Many of them had a mediocre performance, leading to the impression that they’ve been neglected by the manager. Three years ago, Perpetual Income…

Inflation is not caused by greed Satyajit Das Nikkei Asia The return of high inflation was accompanied by a neologism: “greedflation”. The idea is that higher prices are a result of corporate greed for higher profits, and has become accepted by many as an explanation, says Satyajit Das. But as H.L. Mencken said, “There is always a well-known solution to every human problem – neat, plausible, and wrong”. True, there is evidence that corporate profits have risen disproportionately. But averages and aggregates can be deceptive, and blaming greed confuses cause and effect. In a market economy, price equilibrates supply and demand. Businesses have been struggling with the rising cost of capital as interest rates rise and had to deal with much disruption and uncertainty, and hence risk. Recent elevated profits…

capx.co Tories are mulling tax cuts to lure voters ahead of a likely 2024 general election, but unless you shrink the size of the state, or at least limit its growth, the pressure on taxpayers will remain, says Conor Holohan. Chancellor Jeremy Hunt realises this, which is why he has written to government departments demanding reductions in Whitehall headcounts. Health secretary Steve Barclay “got the memo”. He has axed one in six jobs in his department. But this is just a drop in the ocean. The size of the civil service has ballooned since 2016, reports the Taxpayers’ Alliance. Total headcount has gone up by a quarter, the sharpest rise in 50 years. The annual salary bill has gone up by 60%. Median pay has risen by 26%. Here is…

Several pension-scheme administrators that incorrectly calculated some defined benefit (DB) transfer values are now demanding money back from former members who were overpaid, says Citywire. While it’s not clear how many transfers have been affected, there are at least 17 cases in which members have now received letters demanding between £19,000 and £80,000. Several cases involve the Northumbrian Water Pension Scheme, which was run by Capita until December 2022. Capita is now trying to recover at least £1m in overpayments and has sent dozens of letters chasing these overpayments, some of which include threats of legal action, a source tells Citywire. The GMB union, which represents many employees of Northumbrian Water, is now due to meet representatives of Capita and trustees of the scheme to try to resolve the issue.…

Online marketplace Etsy has backed down in a row over the way it treats some small and medium-sized enterprises (SMEs). But the controversy underlines the potential downsides of selling through such channels. Etsy now plans to change its policy on how much money it holds back when a purchase is made through its site. Some sellers complain that up to 75% of their sale proceeds have been frozen for 45 days. Etsy insists that the practice is to protect buyers who subsequently claim refunds, but that it is now reducing the percentage. Online marketplaces such as Etsy have become hugely popular with small firms selling online because they provide a far larger audience than a seller could hope to attract by itself. Many marketplaces also look after the administration of…

Our investment process in the GAM UK Equity Income Fund is focused on stocks of all sizes. The fund aims to provide income and capital growth through investment in predominantly British stocks with an emphasis on cash-generative companies. We meet managers and conduct on-site visits in order to hunt out cheap companies that have been overlooked by the wider UK equity market. Our investment process follows four main stages. Firstly, we do cash-flow analysis to gauge which companies have a high cash-flow yield. The second stage, which involves an assessment of the firm’s sector, entails detailed analysis of environmental and social governance (ESG) and also prevents distressed companies from entering the portfolio. The third stage is a management review. This is pivotal, as it enables us to sit down with…

Robbie BurnsHarriman House, £14.99 Few trading gurus have caught the imagination of ordinary investors, at least in the UK, like Robbie Burns. His introductory guide to short-term trading and spread-betting, The Naked Trader, was a big hit when it was published in 2005, and has since gone through several editions. Here Burns explains his trading strategies in more detail, backed up with examples from his own portfolio. This is not a book for beginners. It is pitched at those who have dabbled in the market, but feel that they have reached a plateau and are hungry for new ideas. Most of those ideas – setting tight stop-losses, avoiding investing in companies with too much debt, putting yourself in the shoes of someone thinking about owning the company (the “Dragons’ Den…

King Charles will receive a 45% rise in public funding to £124.8m in 2025, says William Wallis in the Financial Times. It is due to “one of the more contentious sources of royal income”. The Crown Estate, which controls the monarchy’s portfolio of assets, is due to earn £8bn by 2031 from a boom in the revenues of offshore wind projects (the estate owns the seabed up to 12 nautical miles from the coast) and the king receives a percentage of the profits as part of the sovereign grant. In January, the king said he would forgo his share in the green-enegy “bonanza” for the “wider public good” and so his percentage from estate profits was revised down from 25% to 12%. But such has been the clamour at auctions…

Credit-rating agency Moody’s has delivered “a wake-up call”, say Saqib Iqbal Ahmed and Nupur Anand on Reuters. Last week Moody’s cut its rating for ten small and medium-sized US banks and warned that it may downgrade several larger lenders. Moody’s cited higher funding costs, exposure to shaky commercial property and the risk of recession to explain the decision. The collapse of three regional US banks this spring led to fears that a new financial crisis was at hand. However “no further bank failures and resilient economic data have helped shore up... sentiment since May”. While the mini-banking crisis didn’t cause the economic shock many feared at the time, it did deal a sizeable blow to US financial shares. The KBW Bank index, which tracks the 24 largest US bank stocks,…

Sanctions following Russia’s invasion of Ukraine in February 2022 led to a sharp collapse in the value of the rouble, but the currency soon rallied back above pre-invasion levels. Surging energy prices fattened Russia’s exports and padded global demand for the rouble, says the Financial Times. “Trade flows have become the driving force behind movements in the rouble after foreign trading of the currency dried up”. But this year weaker oil and gas prices have seen Russia’s current-account surplus plunge by 85% in the first seven months of 2023 compared with the same period a year before. That has triggered a 25% fall in the currency to a 16-month low of more than 100 to the US dollar.…

Deliveroo’s shares rose by 3.5% last week due to news that shareholders could earn their first dividend this year. The food-delivery platform says “it will dish out as much as £250m to shareholders”, says Leah Montebello in the Daily Mail. The payout will take the form of “a special dividend, a tender offer or a share buyback”. While Deliveroo still makes a loss, the company “has set its sights on profitability”, cutting its workforce by 9% earlier this year and scaling back operations in some markets – it has left Australia, for instance. With sales growing by 11% in the first half of the year, Deliveroo now expects to make pre-tax profits of £60m-£80m for the full year, up from a previous estimate of between £20m and £50m. Last week’s…

Last year was Wall Street’s worst for initial public offerings (IPOs) since the financial crisis: just 71 firms listed. This year, however, animal spirits are slowly returning. Investors burnt by sharp declines in IPOs launched in 2021 and 2022 have had to be coaxed back into the market with “big carve-outs from established public companies”, says William Cohan in the Financial Times – witness the listing of GE’s healthcare arm and Johnson & Johnson’s consumer-products business. Recently, Oddity Tech, a “much-hyped” Israeli beauty-products outfit, and Mediterranean restaurant group Cava, floated successfully, but they were “profitable and not priced too crazily”.…

Next year is shaping up to be a busy one for political bettors. Not only do Americans go to the polls for another presidential contest, not to mention congressional and gubernatorial elections, but it is highly likely there will also be a general election here in the UK. Plus there will be other, less high-profile contests around the world, and sometimes these events offer great opportunities for savvy punters willing to do their research. Australian politics is particularly good, as the federal system offers plenty of niche contests. For example, in just under 15 months’ time, voters in the state of Queensland go to the polls in elections to choose the member of their legislative assembly. Already bookmaker Bet365 is putting Labor as favourites at 4/5 (55.5%), with the Liberal…

In the wake of the pandemic, the EU finally managed to put in place a system for transferring money from one country to another. It unveiled a massive €750bn fund to rebuild economies hit by the pandemic, with resources pooled by member states, and, crucially, with Brussels borrowing directly from the markets to fund it. To enthusiasts for the project, the eurozone was finally summoning up the political will to do what it should have done from the start. It would make significant fiscal transfers from richer regions to poorer ones, and it would issue its own debt to help pay for it. The single currency would at last be acting as if it had a single government, and that would help the countries that were falling behind catch up,…

Gross domestic product (GDP) is a measure of the size of an economy over a period of time (normally a year). GDP is most often used for discussing individual countries, but may also be calculated for regions (eg, southeast Asia), trading blocs (eg, the European Union), or areas within a country. GDP is calculated in three ways. The production or output approach is the sum of all the value added through producing goods and providing services (ie, the market value of what’s produced minus the costs of producing it). The income approach is the sum of all the income earned by companies and individuals from offering the same goods and services. The expenditure approach is the sum of everything spent on finished goods and services. In theory, all three should…

The growing clout of activist investors in Japan may be driving a surge in the number of companies being taken private, says Bloomberg. Corporate governance reforms and an emphasis on returns and profitability are giving activists more influence: a total of 67 activist proposals were submitted to companies in the first six months of the year, up from 58 in the whole of 2022 and just four in 2014. However, some management teams may now prefer to take their firms private to restructure or avoid specific changes pushed by activists. A $15bn buyout of conglomerate Toshiba began last week, while semiconductor firm JSR is set for a $6.3bn buyout. Last year a total of 135 Japanese companies were de-listed, three times the typical number a decade ago.…

“He started off [doing it] for moral support, but now he’s seen huge benefits in himself. He saves money. We’ve started investing in stocks and shares and Isas.” John Whaite (pictured), winner of The Great British Bake Off and contestant on Strictly Come Dancing, on his partner giving up alcohol in solidarity with him, quoted in The Times “Communism forgets that life is individual. Capitalism forgets that life is social.” Martin Luther King Jr, quoted in The New York Times “It is true that the customer is always right, but it is equally true that additional requests have a cost.” The owner of a bar on Lake Como who charged a customer €2 to cut a sandwich in half, quoted in The Mail on Sunday “When we got really poor……

iai.tv Imagine you are a young woman who desires to be a world-leading research scientist, says Katherine Puddifoot. The fact is that women are statistically underrepresented in higher-level science, and many think structural barriers exist that make it harder for them to succeed. But because you want to do it anyway, you ignore articles and studies that tell you this and focus instead on the successes of specific high-profile women scientists. These successes allow you to believe what you want to believe and to strive to achieve your goals. This is what psychologists call motivated reasoning, and it can of course lead people to make poor decisions. A philosopher might call you irrational. However, applying motivated reasoning can work to our advantage too. If the young woman paid attention to…

● John Lewis is considering launching a buy now, pay later (BNPL) service to attract younger shoppers, says The Telegraph. Nish Kankiwala, the retailer’s CEO, says younger customers “expect” companies to offer BNPL and so the partnership is likely to develop its own offering. John Lewis already offers buy now, pay later interest-free credit for purchases over £500 on big-ticket buys, allowing customers to spread the cost over 12 months, interest-free. The new product would be aimed at smaller purchases by younger consumers, who’ve perhaps had to cut back due to rising costs. The group wants to invest £100m in its financial-services business over the next five years. ● Scammers managed to publish an announcement on the London Stock Exchange’s regulatory news site in an apparent attempt to lure people…

● Small companies working to ensure their products qualify for a new safety mark that the government planned to introduce next year have been given a reprieve. Ministers have announced they are putting off the introduction of the new “UKCA” mark indefinitely, opting instead to stick with the European Union’s CE mark. The new mark had been expected to be compulsory from December 2024. ● Small businesses working on climate change goals in line with the Science Based Targets Initiatives (SBTI) are being unfairly treated compared with their larger counterparts, critics claim. A white paper from sustainability consultant Eight Versa points out that smaller enterprises have much less flexibility over how they define net-zero if they work within the SBTI, which was developed jointly by groups including the UN Global…

2021 Suavis, Vernaccia Di San Gimignano, Mormoraia, Tuscany, Italy £14.50, reduced to £12.95 each by the case, leaandsandeman.co.uk. The eternal quest for affordable, exciting, uniquely delicious, GPS-accurate white wines continues. There used to be a vast selection of wines on our shelves in the key £10-£15-mark, but recent nonsensical duty increases, sky-rocketing transport costs, increased profit-margin requirements, and multiple other unavoidable annoyances have pushed thousands of artisan wines out of this bracket and up to the dreaded 20-quid barrier. So while epic wines in this price bracket are diminishing as time passes, it doesn’t mean I have given up hope. I anticipate the new vintage of my featured wine hitting the shelves this autumn, but before it does, please avail yourself of the opportunity to purchase this spectacular, organic, dreamy…

Why Empires Fall Rome, America and the Future of the West John Rapley and Peter Heather Allen Lane, £20 “One does not need to be a professional historian to know that history repeats itself,” says Simon Heffer in The Daily Telegraph. John Rapley, a political economist, and Peter Heather, a medieval historian, attempt to show us just how by drawing parallels between the fall of the Western Roman empire and the condition of the world today. The duo argue that, contrary to the traditional view of a long decline, the Roman empire’s power actually peaked shortly before it imploded. They then go on to warn that if we’re not careful, the same rapid disintegration could happen to the West, despite appearances that its political and economic dominance are…

The French have recently “done a fine job portraying their country as broken”, says The Economist. Yet below the surface, much is going right. “Since 2018 cumulative growth in GDP... has been twice that in Germany, and ahead of Britain... and Spain.” Plentiful nuclear energy has kept a lid on inflation and attracted new manufacturing investment. Last year, France registered almost twice as many patents as Britain. It “has more companies in the global top-100, measured by market [value], than any other European country”, not least because of a luxury boom. The world’s big fashion conglomerates are overwhelmingly French. Over-regulated and overtaxed, Paris was long written off as a financial centre, says Patrick Jenkins in the Financial Times. Yet while the UK has been raising corporate taxes, in France tax…

Virgin Galactic, founded by Richard Branson, has carried its first crew of tourists into space, says Maya Yang in The Guardian. The event marked Virgin Galactic’s second commercial space-flight mission. The group carried a team of Italian scientists two months ago, but this was the first flight with private customers. Branson hopes this heralds a new era of commercial space tourism. He claims his firm has already booked 800 people, each willing to pay between $250,000 and $450,000 to fly 88 kilometres up above the Earth. Virgin Galactic plans a third commercial space flight next month. Some may quibble over whether this is “real space flight”, as it is “an up-and-down flight, not an orbital one”, says The Times. Moreover, at 88km high it does not reach the Kármán line,…

Four to buy 4imprint The Telegraph This distributor of firms’ promotional products – think branded pens and umbrellas – has seen both profits and dividends come “roaring back” post-Covid. It paid a special dividend in June and the base payout also has a solid record of growth. An absence of debt and strong cash generation, boosted by heavy exposure to the robust US market, should keep the payouts flowing to investors. On 20 times forecast earnings, the shares aren’t cheap, but that rating has dipped in the past five years as earnings growth has outpaced even the 164% rise in the share price. 5,080p Dr Martens Interactive Investor Shares in this boot maker have tumbled by 20% this year following “marketing mistakes” and a “warehousing fiasco” that have blighted attempts…

● Tui “is basking in a return to pre-pandemic travel patterns”, says Alistair Osborne in The Times. The travel operator catered for 5.5 million customers last quarter, back to 95% of pre-Covid levels. Underlying operating profits were €16m, up from a €27m loss at the same time last year. CEO Sebastian Ebel says he’s confident of “a very good travel summer”, leaving the firm well on track to meet forecasts for the full year. Yet the shares slipped a bit: investors are still digesting the €1.8bn rights issue in March, which was used to repay German state aid. That didn’t improve a reputation “for needing more refuellings than a thirsty customer on an all-inclusive trip” – it’s now done four cash calls in three years and it still carries €2.2bn…

“It is a myth to think the Fed is done. It has a lot of wood left to chop,” says Rupal Bhansali, the chief investment officer (CIO) of global equities at US asset manager Ariel Investments. The US central bank needs to bring down both current inflation and expectations for future inflation, and to do so with without a major dislocation in markets. This will not be easy, she tells Barron’s. “We have already witnessed some of the fallout from rapid interest-rate increases in the US regional-banking sector, with shareholders of some supposedly strong banking companies… wiped out.” While sectors such as regional banks have already fallen sharply, the wider market has yet to correct, despite rising bond yields and the bearish implications of this for equity valuations, says Bhansali.…

■ Bruce Stout, the lead manager of Murray International, will retire in June 2024, the trust said in its first-half results. Stout has worked at Abrdn since 1987 and has managed Murray since 2004. Co-managers Samantha Fitzpatrick and Martin Connaghan, who have worked with Stout since joining Abrdn in 2001, will continue. ■ Atlantis Japan Growth, a Japanese smaller companies trust that faced a continuation vote at its annual general meeting later this month, will merge with Nippon Active Value. Investors will be offered a chance to cash in up to 25% of their holdings at a 2% discount to net asset value (NAV) as an alternative to taking shares in NVAF. With £77m in assets, Atlantis Japan was the smallest of the 11 London-listed Japan trusts, and its recent…

thecritic.co.uk “Policy brainiacs” in right-wing think tanks say we’re in a housing crisis and the problem is one of supply, says Andrew Orlowski. Their solution to increase the number of homes is a “Street Votes” policy that would allow residents to permit development on their street in return for a share of the economic “uplift”. In other words, they’ll knock your house down to make way for denser housing development, but only if your neighbour votes for it. “It all seems a rather brutal proposition for residents who had been looking forward to a tranquil retirement.” Residents are not enthused by the prospect. They tend to put a greater value on tranquillity and the existing character of their neighbourhood than they do on the “hypothetical uplift posited by an economics…

London is preparing for the expansion of the Ultra Low Emission Zone (Ulez) to all 32 boroughs on 29 August. Anyone with a vehicle that does not meet the Ulez emission standards will have to pay a £12.50 daily charge to drive within the zone. There are a handful of exemptions – mostly specialist vehicles and those more than 40 years old. One of the major complaints about the scheme is the cost of replacing older vehicles. However, all drivers are now potentially eligible for a grant to meet part of the cost. While Londoners receiving child benefit or some means-tested benefits – such as pension credit and carer’s allowance – have been able to apply for this since January, the scheme will be opened to all on 21 August.…

What is the best way for small businesses planning for growth to fund their ambitions? With both debt and equity funding harder to come by in the current climate, entrepreneurs must consider the pros and cons of both approaches carefully. Equity investment in small and medium enterprises (SMEs) in the UK fell by 11% last year, according to the British Business Bank. Investors such as venture-capital funds and business angels took a more cautious view as the economic outlook darkened. But lending to SMEs has been even more crunched: UK Finance says leading banks loaned 32% less to firms in the first quarter of this year than in the same period of 2022. Traditionally, equity investment suits SMEs in two categories. Early-stage businesses with little record of profitability, or even…

This year I’ve been looking at UK real-estate investment trusts (REITs) in an attempt to uncover some hidden gems in a troubled sector. Over the past two years investors have dumped REITs on a scale not seen since 2008. Interest-rate hikes are to blame. Fifteen years of ultra-easy monetary policy by central banks in Europe and the US distorted property markets and rewarded the misallocation of capital. Investors could borrow cheaply, and as long as they covered interest payments with rental income, they were happy. It seemed as if property prices would go up forever: there would always be a greater fool willing to pay more. Higher interest rates have now upended this model. The higher cost of capital means investors are reconsidering their exposure. Value is now more important…

The City of Glasgow Bank was founded in 1839, and quickly became one of Scotland’s leading banks. It briefly shut down during a banking crisis in late 1857, which was caused by the collapse of its rival, Western Bank, but it was able to reopen by the end of the year thanks to support from other banks in Edinburgh. By 1878 it had resumed its former importance, and its shares were trading at a large premium to their nominal value, even though shareholders were ultimately personally liable for the bank’s debts. What was the investment? The bank started out following the established practice of putting its depositors’ money in low-risk investments. Like many other Scottish banks, it later took an increasingly aggressive approach in order to generate higher profits. By…