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I am almost old enough not to have to drink to forget, so in my time at MoneyWeek I have seen several major asset-price cycles, along with financial crises large and small. But although we have been through the two nastiest post-1945 recessions, 2009 and 2020, contractions in GDP have not been very common in the past two decades, as Deutsche Bank’s latest Long-Term Asset Return Study, which delves into the history of recessions in G7 countries since 1700, confirms. Recessions have become much rarer over the past few decades, particularly since 1982. Britain has had a mere three since then, America four. In the previous 40 years, the US suffered nine. In the 40 years before that, ten. In the century after the US began to measure business cycles…

“[US] commercial real estate [is] potentially entering a ‘doom loop’... Private equity is in a decided down cycle... [US] regional banks continue to suffer... Hollywood is engaged in a truly existential battle over how to cut up the revenue pie... These industries... benefited from low interest rates that enabled them to borrow money to fund projects that never should have been done... Lower interest rates lower the intelligence of the people borrowing money... [Imagine] you are paying 5% interest instead of 15%... for a risky project... Think of that 10% difference as the stupidity quotient that gives people the courage to do things they shouldn’t do, like overpay for a company or a building or finance... television series that nobody wants to watch. The result is billions of dollars of…

Online grocer Ocado is proving resilient in a “challenging trading environment”, says Isabella Fish in The Times. Its 50-50 joint venture with Marks & Spencer (M&S) reported a 7.2% annual rise in sales to £569m in the three months to the end of August. That compares with the 5% pace reported in July. It’s true that things “are looking up for Ocado’s joint venture with M&S”, which has hitherto been “stuck in the mud”, says AJ Bell’s Russ Mould. The latest update shows a “higher number of average orders per week” and “a bigger pool of active users”. There has also been an improvement in the average value of customers’ shopping baskets. But “the average basket size is still shrinking”, while the “overall gains are not enough to move the…

The world economy’s appetite for oil has doubled to 100 million barrels a day since the 1970s, while the US fracking boom is cooling and the Opec+ oil cartel is restricting supplies. We will need oil from the Canadian tar sands in future. Enter Cenovus Energy, says WirtschaftsWoche. Extracting oil from the sands requires much water and energy, but Cenovus has the sector’s lowest steam-to-oil ratio (SOR – this gauges how many barrels of water are required to secure a barrel of oil) at 1.9. The group’s production costs are therefore lower than its competitors’. The group aims to produce 785,000 barrels this year, and has overall reserves that should last for 31 years.…

Politics & economics “HS2, the high-speed rail link first announced in 1876, was predicted to take three months to build and cost four shillings and sixpence,” says Tim Stanley in The Telegraph. “Today, the bill is around £100bn, it’s scheduled to open by 2033, and (it is rumoured) will run only from Birmingham to Old Oak Common, a far-flung station close to Wormwood Scrubs.” Most of us don’t want it and backbench MPs are split between those “furious that it was ever commissioned” and those “outraged that it’ll never be finished”. Tony Berkeley, vice-chair of the Oakervee review of HS2, puts the cost as high as £180bn, notes The Guardian’s Gwyn Topham. The High-Speed Rail 2 project was supposed to “speed passengers” between London and northern cities, but ministers and…

The latest controversy over the poor state of many school and hospital buildings hasn’t helped improve punters’ view of the Conservative’s prospects at the forthcoming election. With £1.59m matched on Betfair, Labour is favourite to get the most seats at 1.19 (84%), with the Conservatives out at 6.2 (16.1%). With £1.38m matched, a Labour majority is also considered the most likely overall outcome at 1.47 (68%), with no overall majority at 4.2 (23.8%) in second, and a Tory majority out at 11.5 (8.7%). In my view these odds are, if anything, too generous towards the Conservatives. Even if there is a sudden economic turnaround, polls show that many people are simply tired of the government and want a change, as shown by Sunak’s negative ratings. The Labour leader Keir Starmer…

The big money seems to have made up its mind already. Two-thirds of money managers and traders quizzed by Bloomberg this week said a Labour government would be the “most market-friendly outcome” of the general election next year. The majority believed that the Tories’ management of the economy and the public finances had been dire, and that Keir Starmer’s party would make a better job of it. It is not just the City. Big business is getting on board as well. Private donations to the party reached £6.5m in the latest quarter, according to the electoral commission, led by a £2m donation from Lord David Sainsbury, the former chairman of the supermarket chain, and more than £2m in the quarter before that from Gary Lubner, the former boss of Autoglass,…

Exchange-traded funds (ETFs) are bought and sold on a stock exchange in the same way as you would trade normal shares. Unlike investment trusts, which are also traded on exchanges, ETFs are mostly (though by no means all) passively managed. This means their aim is to track the performance of a particular market, rather than beat it, as an active fund attempts to do. Also unlike investment trusts, the net asset value of an ETF should not diverge from its share price, barring extreme circumstances. ETFs are available on a range of indices, sectors, themes and commodities, and index providers constantly launch new indices for them to track. Given their largely passive structure, ETFs tend to have lower fees than active funds, and rampant competition between providers has driven prices…

California-based Phase 2 Partners has taken aim at FTSE-250 financial-services provider IG Group, says The Times. The investment fund focuses on financial services companies, and last year built a large stake in TP Icap, the world’s biggest interdealer broker. Phase 2 went on to urge TP immediately to take “decisive steps... to benefit long-suffering shareholders”. The fund’s decision to build a position in IG comes at a difficult time for the business. Shares in the group have slumped by 15% since the start of the year, and it is currently on the lookout for a new CEO. The former CEO left the company for medical reasons over the summer after five years at the helm, with the chief financial officer (CFO) stepping in temporarily.…

“I don’t work for money, I work because I enjoy it. It does give a focus to the day, it makes me think: ‘Am I fit, am I eating the right thing?’… Work is a way of… not denying getting older, but taking my mind away from it.” Actor Ian McKellen (pictured), 84, quoted in The Times “What I’m earning now is ridiculously better than what I was earning in the military. I look back at my military days and think: ‘How… did I survive with a family?’ When I was a sergeant major with three kids, I was putting £2,800 a month into the bank. It’s a disgusting salary, but like all soldiers you don’t do it for the money.” Novelist and actor Mark Billingham, star of the series…

noahpinion.blog Twitter and other social media are awash with charts designed to make you furious on behalf of a political ideology, says Noah Smith. Often, the graphics are utter rubbish and telling lies – but few will appreciate that before the charts have gone viral and changed minds. So stop and think before sharing them. One of the easiest ways to make a graph that turns heads is, for example, to compare an inflation-adjusted number with a nominal one. The result will be a big yet illusory gap over time. Most are now aware of this trick, so some charts are labelled as inflation-adjusted even when they’re not. A useful rule of thumb is to be especially sceptical about charts that seem particularly “eye-popping or startling”. One viral chart showing…

Young workers and low earners could see their pension pots boosted by £120,000 thanks to the latest changes to the auto-enrolment system, says This is Money. Under the current system, employees are automatically enrolled into pension schemes when they earn more than £10,000 a year and are over 22 years of age. For those who qualify, employers have to put a minimum of 3% of an employee’s earnings between £6,240 and £50,270 into a pension, with workers adding 4% and the government contributing an extra 1% in tax relief. However, the £10,000 lower earnings limit and lower age limit will now be abolished, allowing younger workers to start saving sooner. The government’s analysis suggests that these changes will boost total pension contributions by £2bn a year. The government first proposed…

If your business sells online to consumers, should you offer them the option of buy-now, pay-later (BNPL) finance? After all, in a cost-of-living crisis, the option of paying on credit has the potential to increase your sales. The good news is that adding a BNPL option is surprisingly easy. Companies such as Klarna and Afterpay do all the work for you, and, crucially, they carry the credit risk so that you don’t have to worry about whether customers will ultimately pay what they owe. These BNPL providers operate through links built into your website. When a customer wants to buy your products on credit, they click on the link and arrange the deal through your BNPL provider. You get the money in full upfront, rather than having to wait to…

2021 Niederhäuser Klamm, Riesling Kabinett, Dönnhoff, Nahe, Germany £22.95, vinatis.co.uk; £90 in bond per six bottles, seckfordwines.co.uk, uncorked.co.uk There are only a handful of cases of this wine loitering around cellars in the UK, so I expect that only early bird MoneyWeek readers will benefit this week. Huge apologies if you miss out, but I couldn’t bear to leave this wine out this week, because it is nothing short of phenomenal. Let me set the scene. I tasted a range of scintillating 2022 rieslings from the legendary Dönnhoff estate recently, and while they are all spinetinglingly delicious, they are all very taut and youthful. A couple of 2021s followed, and I went weak at the knees. Juicier, more forward and yet lacking none of the gravitas of the 2022s, these…

Turnips, a greengrocer’s stall at London’s Borough Market that has garnered a loyal following for its £7.50 pots of strawberries and chocolate, claimed the market had forced it to close, says Tom Saunders in The Times. “They’re claiming that our strawberries do not count as fruit, veg and related produce,” the stall’s manager told tens of thousands of viewers in a video posted on social media. Five days later, the strawberries were on sale again, with a staff member posting online “We won!”. Borough Market denied the claims. “Turnips are not being prevented from selling any of their products,” it said. Either way, fans are relieved. “[The strawberries] are very delicious,” says one young New Zealander. Good week for: Drinks giant Heineken has taken a “significant minority stake” in Served,…

Buybacks, whereby a company purchases its own shares (thus raising the price), have played an important role in keeping the US stockmarket roaring over the past decade. They are especially popular in the US, where they are deemed more tax-efficient than paying out spare cash to shareholders as dividends. US firms spent a record $1trn on buybacks in 2022, says Hardika Singh in The Wall Street Journal. Yet the pace is now slowing. S&P 500 firms spent $174.9bn on buybacks in the second quarter, 20% less than in the same period a year before. While the market has been robust this year, the fall reflects faltering corporate confidence amid a “slowing global economy”, as well as “lingering concerns about the banking sector” following the banking crisis earlier this year. Buybacks…

The £1 coin, first minted in 1983, has lost 70% of its value in real terms since then thanks to inflation, says Mark Atkinson of Alliance Trust. Putting that pound in an instant-access account would have produced 14p, while gold earns its reputation as an inflation-buster, with £1 worth £1.73 today in real terms. A UK gilt fund would have more than doubled in the 40-year bond bull market. Our “obsession with bricks and mortar” also produced a large real-terms gain. Yet global stocks did best. Equities can feel like “a rollercoaster”, but for those prepared to lock away their money for at least five years “history tells us stockmarket investing offers the best hope for growing... wealth ahead of inflation”.…

On Thursday shares in chip designer Arm Holdings surged as it began trading on the Nasdaq at $56 before closing at $63, says the Financial Times. The starting price was far above the $51 offer price agreed on Wednesday evening, and it also gave the chip designer a market capitalisation of $65.2bn, making it the biggest US initial public offering (IPO) in almost two years. The hope is that the “strong reception” for Arm’s listing “will fuel confidence in the wider IPO market, which has gradually been reopening after one of the worst fundraising downturns in decades”. The “spectacular surge” in Arm’s shares on its debut is clearly “an emphatic signal that the floats window is back open in America”, says Patrick Hosking in The Times. However, it is also…

The firm responsible for developing Egypt’s new capital city is planning an initial public offering (IPO), says Reuters. The Administrative Capital for Urban Development (ACUD), 51% of which is owned by the Egyptian military and 49% by the state’s New Urban Communities Authority, intends to sell between 5% and 10% of the shares in the spring of 2024. How much the group wants to raise is unclear, but an estimate in 2019 suggested that the project will need funding of around $58bn. The new capital will be 45km east of Cairo and is being touted as a less crowded and greener alternative to Cairo’s gridlocked urban sprawl.…

● “Martin Sorrell [pictured] built his reputation at WPP and now S4 Capital by espousing tech-led business,” says Lex in the Financial Times. But weak first-half results and a gloomy outlook raise fresh questions about his strategy among investors already made nervous by several profit warnings. Big tech firms such as Amazon and Meta have been cutting costs, to the detriment of advertising agencies. S4 is particularly vulnerable since tech made up 44% of its revenues in the first half. Meanwhile, a depressed share price – down by half over the past year – means S4 “can no longer rely on buying up revenue growth via smaller agencies as it did a few years ago”. Sorrell has no plans to change his course. He sees digital advertisements as the future:…

The Bank of England (BoE) and the European Central Bank (ECB) need to keep raising interest rates to ward off stagflation, despite the weakness of their economies, says economist Nouriel Roubini, who won fame by forecasting the 2008 financial crisis, but has acquired the nickname “Dr Doom” for his consistently bearish predictions. Monetary policy is “a dilemma for both the ECB and the BoE”, he tells Bloomberg. “On one side, the contracting economic activity will lead them to maybe stop at this point. On the other, if inflation remains much higher than the target, they may need to hike much more.” The Bank of England should put rates up to 5.75%, which would help show that policymakers are committed to tackling inflation. Recent dovish signals are “telling us they’re not…

■ ThomasLloyd Energy Impact, the embattled renewable-energy trust, has served notice on its manager, ThomasLloyd Global Asset Management, notes Citywire. The £177m trust has been in dispute with its manager owing to“massive cost overruns” at its Rewa Ultra Mega Solar project in India. Last month, shareholders voted against continuing the investment trust, and following discussions with investors, including the UK Foreign Office, the board has terminated ThomasLloyd’s management contract. The board is now “in advanced discussions with a number of potential experienced transitional fund managers” to take over management of the portfolio. One of the new manager’s first jobs will be to complete the annual and half-year valuation of the trust’s assets, needed to complete the annual and half-year reports. Dealing in the trust’s shares has been suspended due to…

tomharwood.substack.com Those who tried to escape the country for some summer sun this year may have discovered on their return that they’d have got just as much of it if they’d stayed at home, says Tom Harwood. If they had, however, the chances are they would not have enjoyed the heat as much as they do abroad. Why? Because unlike “more developed countries”, Britain has “yet to discover” air conditioning. That makes the country feel hotter than other countries with the same outdoor temperatures. Air-cooling technology is now more than 100 years old, but Brits have to do without what others see as a “basic creature comfort”. That’s partly a result of our broken planning system, which allows developers to get away with shoddy quality because government regulations make it…

● Pensioners now have more disposable income than working families, says The Telegraph. This calculation is based on information from investment platform Interactive Investor. Thanks in part to the state-pension triple lock, the average disposable income for pensioner couples after housing costs rose by two-thirds between 1999 and the end of 2022, from £16,588 to £27,144. In comparison, disposable income for couples with children rose by 41% from £17,524 to £24,752. If working families had seen the same kind of growth as pensioners over the same period, they would have £28,676 in disposable income each year. ● NatWest has launched a new tracker mortgage that will allow borrowers to switch to a better fixed deal whenever they want, says The Times. Tracker mortgages, which are typically pegged to the Bank…

● The average small business in the UK is now owed more than £27,000 in late payments, accounting software group Intuit QuickBooks reveals, with one in six invoices not paid on time. More than half of small businesses say the situation has deteriorated in recent months. While chasing these debts down can be time-consuming and frustrating, it is worth remembering that you are entitled to charge interest on late payments at a rate of eight percentage points above the Bank of England’s base rate. ● The government-funded Start Up Loan scheme has now lent more than £1bn to early-stage firms. More than 100,000 businesses have borrowed money from the scheme, which was launched in 2012. It offers loans of between £500 and £25,000 repayable over terms of one to five…

Sequoia Capital was set up by venture-capital investor Don Valentine in 1972 in order to cash in on the development of the technology industry in Silicon Valley. By 1974 it had launched its first venture-capital fund. Over the next decades it would become a major investor in many of the largest names in technology, including Atari (in 1976) and Apple (in 1978), as well as Google and YouTube. In 1996 Doug Leone and Michael Moritz took over the running of the fund. They stepped back in 2012. What was the trade? In 2009 two Yahoo employees, Brian Acton and Jan Koum, set up WhatsApp. After modest success they tried to get funding from venture capitalists to expand the business. Many were deterred by the large number of rival firms doing…

Book of the week Anansi’s Gold The man who swindled the world Yepoka Yeebo Bloomsbury, £20 Most email users will have received a message in their inbox at some point from someone claiming to work for an African leader and offering a share of their client’s lost fortune in exchange for help with legal fees. The scam briefly became so common it had its own name – it became known as a “419 fraud”, after a section of the Nigerian criminal code. Yet it was nothing new. Anansi’s Gold tells the story of one very similar, high-profile fraud that ran for nearly 20 years from the early 1970s. When Ghanaian president Kwame Nkrumah, who led Ghana’s independence movement, was overthrown by the military in 1966, the country’s new leaders needed…

“Help, our economy is failing!” declares German tabloid Bild. The world’s fourth-biggest economy is caught in stagflation, with GDP poised to shrink this year and inflation running at 6.1%. An economic model dependent on cheap Russian gas and exporting to China has proved especially vulnerable to recent shocks, says Oliver Moody in The Times. Opinion polls show the public is pessimistic. The British aren’t the only ones prone to complaining; in Germany too, “schwarzmalen”, or “painting things black with a thick coat of pessimism”, is “a national sport”. As during the late 1990s, headlines once again label Germany the “sick man of Europe”, says Julian Hofmann in the Investors’ Chronicle. The present slump has revived “deep-seated nostalgia” for the 1970s, which – unlike in Britain – is remembered fondly in…

Last week, the CEO of energy giant BP, Bernard Looney, stepped down “abruptly”, says Jenny Strasburg in The Wall Street Journal. The company claims that Looney, who joined in 2019, was “not fully transparent” about past personal relationships with colleagues in response to an investigation by BP’s board last year. While that investigation led to the board deciding that there was “no breach of company code”, further allegations have now come to light, prompting Looney’s departure. Chief financial officer Murray Auchincloss will replace Looney on an interim basis. It’s a sad end for a man who joined the group at 21 and leaves BP “frantically scrambling” for a successor, says Ben Marlow in The Telegraph. However, a cynic might ask “whether the board was relieved”. After all, his “ambitious plan…

Five to buy Beazley Investors’ Chronicle Shares in this specialist insurer took a knock after it announced a flat pre-tax profit in the half year to 30 June. The market reaction looks “a bit harsh”: the results may have been driven as much by accounting technicalities as by the underlying performance. The US property business is doing very well indeed, with premiums up by 65% as extreme weather (such as hurricanes) becomes more common. Cybersecurity is also turning in a respectable performance. On a price/earnings (p/e) ratio of 27 there is scant scope for disappointment, but the investment case remains robust in a riskier world. 569p Equals Group The Mail on Sunday Equals is a “rare beast” – a financial technology (fintech) business that is profitable and even poised to…

Canadian prime minister Justin Trudeau (pictured) made waves on Monday when he claimed to have “credible intelligence” that India was behind the murder of the Canadian Sikh leader Singh Nijjar, which took place in Vancouver this summer, says The Economist. The accusation, which India calls “absurd”, was followed by the expulsion of the head of India’s intelligence agency; India expelled a Canadian diplomat in return. The spat marks “a new low in the already frosty relationship between the two countries”. Canada had already postponed trade talks scheduled for the start of September, and India has accused Canada of sheltering “terrorists and separatists”, who seek a separate Sikh homeland in the Punjab. This “widening rift” threatens to strain economic ties between the countries, say Geoffrey Morgan and Christine Dobby on Bloomberg.…

Cash gets very little respect in investing. The industry would prefer you to buy a stock or bond fund, because they pay higher fees, and tends to dismiss cash as “dead money”. And it is certainly true that over the long term, stocks and bonds beat cash. From 1900-2022, UK stocks returned 5.3% per year after inflation and government bonds returned 1.4%, according to data compiled by Elroy Dimson, Paul Marsh and Mike Staunton of London Business School. Short-term government bonds (also referred to as bills) – which are a fair proxy for realistic cash-like returns when we’re looking at history as long as this – returned 0.9%. In some markets, such as the US, the gap is even bigger. Yet there is an important role for cash in practice.…

For much of the past two decades, banks have been poor long-term investments; witness the shrinking weight of the sector in the FTSE 100 index. Two decades ago banks accounted for four-fifths of the 27% weighting of the financial sector in the index. Today, they account for just 18% of the FTSE 100 in total. Stringent regulation, tax raids by opportunistic governments and a need to evolve rapidly in the face of technology are just a few of the headwinds that have held the sector back over the past 20 years. But after this extended period of underperformance, positive signs are starting to emerge. A major rally? The collapse of Silicon Valley Bank, Credit Suisse and others earlier this year did not set off the widely expected chain reaction across…

Act now to save our high streets Damien PhillipsThe Spectator Wilko joins a “pantheon” of big names, from Warehouse to Paperchase, who have been forced to “shut their doors” since Covid, says Damien Phillips. Since 2018, 6,000 storefronts have closed and the situation is now so dire that John Lewis’s boss Sharon White has called for a royal commission, identifying rising crime, “unfair” business rates, poor planning rules and the government’s “tourist tax” as issues affecting high streets. “She is right.” Logged shop thefts have more than doubled to eight million in six years, even as those recorded by the police have remained fairly static at 300,000. Our “Byzantine” system of business rates sees firms pay “not on their actual activity”, but on the “rateable value” of their premises, which…

thecritic.co.uk This year marks the 175th anniversary of the Public Health Act, which provided Britain with clean drinking water, better drains and a sewage system, says Christopher Snowdon. The Act addressed problems that could only be solved through collective action and created public goods. This is what public health should mean. Today, though, it has “degenerated into a self-serving and self-indulgent racket”. The bodies that promote it are a “bloated, state-funded caricature” of the originals, populated by leftists and single-issue fanatics who “wouldn’t recognise a public-health problem if it called itself Covid-23”. A recent celebratory editorial in the British Medical Journal had nothing to say about recent public-health successes – semaglutide for weight loss, mRNA vaccines, etc – nor proposed any new solutions, but indulged instead in a lot of…

“Environmental, social and governance” investing – also known as ESG – has had a tough few months. The first hit came in late June when Larry Fink, CEO of the world’s largest asset-management company, BlackRock, said his company would no longer label its funds “ESG”. This is a huge blow to the industry, as BlackRock was an early adopter. But BlackRock is not alone. A survey from RBC Capital Markets finds that 56% of US sustainable-fund launches in 2023 labelled their product “thematic” rather than “ESG”. Why are the titans of global finance turning on ESG? Fink said that it was due to the “politicisation” of the brand. He probably had in mind Florida’s governor Ron DeSantis signing a bill into law in May banning state officials from investing public…

Start-up businesses need all the help they can get. The statistics suggest that around two-thirds of new businesses will eventually fail, but getting support at an early stage could help your start-up develop into one of the survivors. That’s where accelerators and incubators come in. New research reveals there are now almost 600 accelerators and incubators active in the UK. Groups such as the innovation agency Nesta publish directories of these programmes, so you can work out which might be the best to apply to. Broadly, however, they operate in the same way: they provide fledgling companies with a range of different kinds of help, introduce them to useful contacts and potential customers, and work with them to achieve their business objectives. Improving your odds The relationship can prove critical.…

While larger British companies have been relative outperformers in the turbulent market environment of the last few years, medium-sized and small companies, which are trading at a historically low valuations, currently offer a compelling opportunity for long-term investors. There are numerous examples of resilient medium-sized and small UK companies which, in addition to serving as innovators and disruptors in their respective industries, have demonstrated attractive qualities in a period of macroeconomic uncertainty and volatility. These include companies with competitive pricing power and strong balance sheets, but also those with the capacity to grow their market shares. To identify these businesses, we take a research-driven approach, meeting more than 350 management teams a year in order truly to understand the businesses within our sector and what makes them tick. This helps…

A Memoir from Within Rory Stewart Jonathan Cape, £22 Political memoirs have a reputation for dullness. But this is no typical memoir and Rory Stewart is no typical politician, at least by modern standards. Most MPs today enter Parliament straight from a stint in public relations, or as a political adviser; Stewart made his mark as a diplomat and writer. In contrast to the importance placed today on political activism, Stewart wasn’t even sure which party he wanted to support, originally intending to join the Liberal Democrats. Despite this, the brief Conservative experiment with open primaries resulted in his selection for a safe seat, kick-starting a career that would briefly see him stand as a contender for the leadership, before essentially being expelled for voting against a no-deal Brexit.…