Indholdsfortegnelse for 1137 i MoneyWeek

Most people will have recovered from their New Year parties by now. The financial markets’ hangover, unfortunately, will take a great deal more than a couple of paracetamol to fix. Let’s survey the wreckage. The MSCI ACWI index, comprising both developed and emerging-market equities, lost around 20% in 2022, the biggest decline since the global financial crisis of 2008 (see page 4). Bond markets plunged. Inflation soared to 40-year highs. Housing bubbles have started to hiss air all over the world. A third of the world economy will be in recession this year, according to the International Monetary Fund. The war in Ukraine drags on and globalisation is sputtering (see pages 12 and 22). The “everything bubble” bursts The world is trying to recover from the biggest monetary bubble in…

“As growth opportunities dissipate [investors] might start to question... decisions [made] on their behalf... the longest liquidity-fuelled bull run in history [saw] an unprecedented expansion of environmental, social and governance (ESG) mandates... some already [think] that they’re a luxury we can no longer afford... [In October Missouri] announced that the... State Employees’ Retirement System had pulled $500m... in assets managed by BlackRock, citing [the firm’s] social and political agenda... An earlier letter signed by 19 state attorneys general was sent to BlackRock chief executive Larry Fink setting out similar concerns... the change in market liquidity [could hamper] ESG strategies, many of which lack coherence... fund managers are better placed to achieve [superior] returns when they’re focused solely on their fiduciary duty to investors.”…

Barron’s Pittsburgh-based Alcoa is “probably the world’s best pure-play aluminium producer”, but on nine times 2022 earnings the shares lost more than a fifth in 2022 owing to falling metals prices. That could change: lightweight and recyclable, aluminium has a key role to play in decarbonisation and a China-led boost to commodity prices could occur in 2023 ($46). Shares in Google’s parent Alphabet fell by 39% in 2022 amid a weaker outlook for advertising revenue, but the sell-off looks overdone. On 18 times 2023 projected earnings the shares are reasonably priced for a peerless technology champion ($95). Bank of America’s affluent customer base gives it the “highest-quality loan portfolio” among the big US lenders even as recession looms. Trading for less than nine times projected 2023 earnings, the shares yield…

We often say that investors should use the start of the year to spring-clean their portfolios and throw out holdings that show no signs of improvement. There’s nothing special about the new year – unlike some countries, it’s not the start of a tax year in the UK – but it’s as good a time as any for a step that we should all take on a regular basis. But as well as reviewing individual investments, you should also review your overall strategy. Is it working? Where are gains and losses coming from? Could that change? Regular readers may know that I run several strategies in my portfolio. This isn’t something I’d recommend to everybody: many investors will be best served by a single strategy suited to their goals. However,…

Petrostates place bets on hydrogen Editorial The Economist The Gulf’s big energy players used to simply defend fossil fuels, says The Economist. Now they profess a commitment to decarbonisation. The UAE and Oman are aiming for net zero by 2050; Saudi Arabia and Kuwait by 2060. Some suspect that this is “greenwash”, given Gulf states’ reliance on fossil-fuel revenues. However, firms’ investment plans do reveal a “genuine” and sometimes “rather large bet on green technologies”. Their approach rests on “two pillars”; first, to double down on oil and gas with the aim of being the “last one standing”. The Gulf giants have the advantage of “vast, low-cost reserves”, which are among the “least carbon-intensive to extract”. Second, to invest in clean-energy technologies such as carbon capture, renewables and hydrogen. The…

ritholtz.com When people acquire wealth and power, they also tend to accumulate “yes men”, a class of “sycophants, acolytes and hangers-on”, says Barry Ritholtz. “They tell their master what he wants to hear, fail to challenge their worst ideas, and generally encourage their worst instincts.” That is dangerous. A case in point is Elon Musk. His “magical” career at PayPal, SpaceX and Tesla, whose success made him the world’s wealthiest man, has been brought to earth by a “series of dubious decisions”, from his numerous violations of financial regulations to his “due-diligence-free” purchase of Twitter for $44bn. That latter decision in particular must lead one to question the quality of the counsel he receives. Shareholders in Tesla are “apoplectic” over the damage his twittering has done to the electric car…

Finsbury Growth & Income Trust (LSE: FGT) is among the best-performing UK equity trusts over ten years, delivering total returns of 187% (11.1% per annum) versus 89% (6.6% p/a) for the FTSE All-Share index. But in the last three and a half years, progress has stalled. The share price is £1 above its June low, but still £1 below its mid-2019 high of 950p. The £2bn trust, managed for 20 years by Nick Train, invests in long-established companies, mostly listed in the UK, whose brands, market share and reputation give them a competitive edge, enabling high margins and long-term growth. It has 22 holdings, the ten largest of which account for 85% of the portfolio, focused on the consumer (65%) and financial (22%) sectors. The durability of the firms enables…

■ Delays to Boeing’s new 777X wide-body aircraft could be a boost to the Doric Nimrod Air Two (LSE: DNA2), Doric Nimrod Air Three (LSE: DNA3) and Amedeo Air Four Plus (LSE: AA4) aircraft leasing funds, says The Wall Street Journal. The 777X is not expected before 2025, increasing the odds that Emirates Airline will need the Airbus A380s that it leases from these funds for longer. In July, Emirates agreed to buy the sole A380 owned by another fund, Doric Nimrod Air One (LSE: DNA), for about $30m after its lease expired. Yet the share prices of DNA2 and DNA3 imply a residual value for their planes of $15m. If Emirates doesn’t want these, the $12m it must pay to return them in used condition plus scrap value should…

About 12 million people file a self-assessment tax return each year. While it is mostly seen as something that self-employed workers have to do, many people in regular employment also file a tax return if they receive some form of income that is not taxed at source. People who receive an income from renting out property or make more than £10,000 a year from savings interest or investments will need to file, as will those earning more than £2,000 from dividends or making capital gains above £12,300. So, too, must those who earn an income from abroad. Other examples include people that earn more than £50,000 and need to repay some of the child benefit they have received, and employees who earn over £100,000. The deadline for submitting online self-assessment…

It’s a not so happy new year for small businesses, many of which expect recession and the cost-of-living crisis to threaten their survival in 2023. One in four worry that they could have to close, or at least downsize, by the spring, according to the Federation of Small Businesses. Here are ten tips that might help your business get through the year. Firstly, audit your costs. Now is the time to go through every line of your firm’s spending in order to identify potential savings. In areas of significant cost – energy bills, perhaps – what measures can you take to reduce spending? Are there costs you can get rid of completely – perhaps products and services your business is subscribing to but no longer needs? Plan your cash flow.…

Oil and gas giant Exxon Mobil (NYSE: XOM) has seen its share price rise further after analysts pencilled in a record annual profit of $56bn for 2022, says the Financial Times. The ongoing war in Ukraine sent energy prices soaring last year, propelling the share price to new highs and marking a major rebound after the pandemic-induced oil price crash and the loss of control of three board seats to activist investor Engine No. 1. Exxon has announced plans to buy back $50bn of its own shares by 2024, including the $15bn it has already repurchased. The stock has risen by 74% in the last year.…

In 1978 Stephen Hilbert set up Security National of Indiana, with the idea of buying troubled insurance companies and turning them around by cutting costs. By 1982 he had made his first purchase, acquiring Executive Income Life Insurance, a trade that proved so successful that the company (now renamed Conseco) followed it up with a string of similar deals, almost all in the insurance sector, buying a total of 19 companies over the next 16 years. Conseco’s shares soared – $1 invested in the stock in 1989 would have grown to $58 by 1998. When did it start to go sour? In 1998 Conseco, which by then had a market capitalisation of $19bn, unveiled a further string of acquisitions. The most prominent of these was Greentree Financial, one of the…

Megathreats The Ten Trends That Imperil Our Future, and How to Survive Them Nouriel Roubini John Murray, £20 Ever since Gilgamesh, “apocalyptic prophecies have been a staple of human culture”, says Daniel Rasmussen in The Wall Street Journal. There have also been plenty of writers predicting doom and gloom in recent years, but Nouriel Roubini, an economist and consultant who “earned the sobriquet ‘Dr Doom’ for his congenital pessimism… makes those Cassandras look like Pollyannas”. According to his latest book, the big question is not whether humanity will survive, but which of the “ten different megathreats”, in areas ranging from economics to epidemiology to foreign policy to technology, is likely to finish us off. Readers of a nervous disposition may want to file this book in the bin…

A fitness influencer known as the “Liver King” who claimed that his musclebound physique was the result of consuming raw liver is facing a class-action lawsuit after admitting that he was taking $11,000 of steroids a month, says the New York Post. Brian Johnson (pictured) advocated what he called a “Nine Ancestral Tenets” lifestyle, including the Eat Tenet which was based on a diet of raw liver, spleen, pancreas, heart, kidney, bull’s testicles and sweetbreads. In reality, the diet was “dangerous and life-threatening”, causing “a large portion of consumers” to suffer “severe” food-borne illnesses, claims the lawsuit, which asks for $25m in damages. Followers felt pressured to buy supplements sold by Johnson, it alleges. Johnson repeatedly denied using steroids, until a journalist obtained emails exchanged with another bodybuilder in which…

In most of the world, 2022 was a dull year for initial public offerings (IPOs), says Laurence Boisseau in Les Échos. But the Middle East bucked the trend, with flotations raising $23.9bn in 2022, 115% more than in 2021. Strong oil prices buoyed confidence. Governments have also begun to float minority stakes in state-owned enterprises in a bid to attract foreign investment and to diversify their economies away from energy. In April, Dewa, Dubai’s electricity and water utility, raised $6.1bn in the region’s biggest flotation since the 2019 blockbuster listing of oil giant Saudi Aramco. The rise of stock exchanges in the region is shown by the fact that the total market value of listed firms in Saudi Arabia, which now stands at $2.9trn, has eclipsed those in the UK,…

Since the 2008 financial crisis the developed world has been plagued by “high inequality, slowing economic growth and bouts of political instability”, says The Economist. Britain has performed worse than most. GDP per person has grown by 7% in real terms since 2007 – slightly ahead of France and Canada (6%), but well behind the US, Australia and Germany (13%-16%). Yet deepening inequality has seen the median UK household do worse than those across comparable countries. Even this “meagre growth” comes largely from working longer hours rather than efficiency gains: since 2007 labour productivity (GDP per hour worked) has climbed by just 4%, compared with double-digit gains in many other developed economies.…

Dependable firms with growth prospects offering a solid dividend are worth stocking up on. Enter Germany’s Hannover Rück, the world’s third-largest reinsurer with gross premiums of more than €27bn. It offers property and casualty, and health and life reinsurance. The group was hit by several large claims in 2022, with Hurricane Ian in America a key event, but such disasters, which many feel are likely to become more frequent as the global climate changes, tend to pave the way for higher future premiums, as WirtschaftsWoche points out, while the group is successfully combatting inflation. Rising overall price levels raise the cost of hurricanes and floods further, but Hannover Rück has proved able to pass higher expenses on to its customers. The dividend yield of just over 3% is among the…

When China opens its borders on 8 January, it will have spent 1,016 days “closed to the outside world”, says The Economist. China’s zero-Covid policy may have mostly kept the disease at bay as long as it lasted, but it turned into a “waking nightmare” for many of the country’s 1.4 billion citizens. Daily life in major cities “stood still for months on end”. Slowed economic growth has cost China an estimated half a trillion dollars. China’s currency fell to its lowest in decades, few foreign students remain and overseas tourism has collapsed. Zero-Covid also put pressure on local government budgets, led to small business failures, a “devastated service industry” and youth unemployment, says James Stent in Nikkei Asia. It was only after Xi Jinping won his third…

Last year was one to forget. Every major index around the world had a rough ride. In total $14trn was wiped off global equities in the worst bear market since the crash of 2008. Some of the major technology stocks that led the bull market crashed spectacularly, with Tesla down by 70% and Meta down by 65%. Germany’s Dax was down by 12%, Japan’s Nikkei 225 by 10%, and China’s CSI 300 by 20%. The FTSE 100, by contrast, managed to eke out a 0.9% gain, making it the only major developed-world index to end 2022 up. That’s not a massive rise, to be sure, and the broader FTSE 250 index, a better indicator of the health of the British economy, was down 21%. Even so, in a year when…

In the wake of the 2008 financial crisis, interest rates across the developed world were cut to near 0%. As a result, the world’s central banks were forced to experiment with ever more radical monetary policies, from negative interest rates to quantitative easing (QE) – essentially creating money to buy government bonds and other assets. Another such monetary policy tool was yield curve control (YCC). A yield curve compares the yield on bonds with the same credit quality, but different maturities (the maturity is the length of time before the bond repays its face value). So the US Treasury yield curve shows how interest rates vary across different maturities of US government debt. A healthy yield curve slopes upwards from left to right – in other words, a ten-year bond…

“I initially took a big hit financially, and it was a bloody disaster in that sense. My parents never stopped worrying, and right to the day she died, my mother would tell me to get a proper job. But parents aren’t always right.” Rhod Gilbert (pictured) on starting out in stand-up comedy, quoted in The Sunday Times “My best financial decision was vowing never to be in debt. And always to own everything that I have both physically and creatively. I’m very much involved in licensing and branding. The future of Hall & Oates as music is in its past.” John Oates of musical duo Hall & Oates, quoted in The Telegraph “I like work. It fascinates me. I can sit and look at it for hours.” Author Jerome K.…

bloomberg.com/opinion The US constitution safeguards the right of individuals to pursue happiness, says Andreas Kluth. But you’d be wise not to make that your New Year’s resolution. Happiness should not be your goal, nor is it the point of life. Aristotle set off in a more mature direction, realising that what we needed was not happiness but eudaimonia, or “good spirit” – what we would call flourishing, fulfilling your purpose in life. A way of thinking about what that purpose should be is provided by Virgil’s hero Aeneas, who was rarely happy, and often wretched, but lived well by being “pius”, meaning dutiful. As Ralph Waldo Emerson put it, “The purpose of life is not to be happy. It is to be useful, to be honourable, to be compassionate, to…

One of America’s leading makers of cremation equipment and coffins is being targeted by an activist investor that wants it to cut costs, replace long-serving directors and sell an underperforming division, says Bloomberg. Barington Capital argues that Matthews International has three divisions with few synergies. The memorialisation business (coffins, memorials and cremation), which accounts for 48% of sales, is a “cash cow”. The industrial technologies arm (battery-production tools, warehouse automation and product marking) has good growth prospects. However, its packaging division is a “turnaround story” that should be fixed and sold. Matthews has returned just 8.3%, including dividends, since the current CEO took over in 2006.…

There are dozens of global transport, logistics, shipping and supply-chain related companies, most of which had a bumper pandemic thanks to huge rises in freight costs while countries and companies were willing to pay up for services. Many will now suffer a hangover and lower earnings. One option, however, is the L&G Ecommerce Logistics GO UCITS ETF (LSE: ECOG), which tracks an e-commerce logistics index and has an ongoing charge of 0.49%. Two of its top holdings are also worth a look. The safer one is Germany’s Zalando SE (Frankfurt: ZAL), which I own. It is Europe’s largest home-grown online-fashion retailer, with more than 50 million active customers. Over the last 15 months it has tumbled from a pandemic-induced high of €105 to €35, even as its underlying business grows,…

Rule number one is not to leave your tax return to the last minute this year, writes Ruth Jackson-Kirby. “Sitting down to do your tax return the day before it is due and then being frozen out of your account because you have lost your password or the system fails is the stuff of nightmares,” says David Byers in The Sunday Times. And the system is now under severe pressure thanks to a backlog of queries since the pandemic. When it comes to the form itself, tread carefully with child benefit, says Mike Warburton in The Telegraph. If you or your partner have claimed child benefit and earn more than £50,000, the partner with the higher income must report it and pay a charge, even if they are not the…

● The government will close applications to its Help to Grow: Digital scheme on 2 February 2023, ministers have announced. The scheme enables business owners to secure free advice on how technology might help their organisations, in addition to vouchers worth up to £5,000 that can be used to buy pre-approved software packages. A separate scheme, Help to Grow: Management, will remain open – it offers management and leadership training support. ● Good news for small business owners worried about the deadline to comply with the Making Tax Digital scheme. Ministers had planned that small businesses would have to begin filing income tax returns digitally by 2024, requiring them to secure specialist software tools. But this move has now been delayed until 2026 – and the smallest businesses, earning less…

Online retailer THG (LSE: THG), formerly The Hut Group, which specialises in beauty products, continues to struggle. Credit insurer Allianz Trade has cut its cover for the retailer’s suppliers, says The Guardian. Credit insurance shields suppliers from the risk of a retailer going under between accepting an order and receiving the money for it. THG claims that the reduction was minor, but the news has further unnerved investors worried about consumers cutting back, THG’s e-commerce technology platform Ingenuity, and the firm’s governance. The shares have plunged by 77% this year.…

£10.99, houseoftownend.com I have always been intrigued by the concept of interpretative dance. Watching my daughters (now both at university), at primary school age, being asked to “move to the music” was an eye-opening experience. While they summoned up their finest, rhythmic, swaying moves, others were pogo-ing and beserking while a couple of keen lads managed an impressive bout of head-banging. I am not asking you to leap up from your repose while reading this page and cavort around, but to imagine the perfume and taste of the essence of what “New Year” means to you. This is not a physical challenge but a sensory one. I have endeavoured to get myself into a metaphorical and organoleptic lotus position and deliver you my interpretation of the most vital vinous experience…

Not straightforward West led a Heart v Three Notrumps and East covered dummy’s singleton Queen with the King. Declarer ducked his Ace until the third round (discarding two Diamonds from dummy). Now what? It made sense to play Spades to lose the finesse to the safe hand (West – with no more Hearts). Declarer crossed to the Ace and ran the Knave. West won his Queen and returned a passive third Spade (best), declarer winning and cashing a fourth Spade (discarding a Club from dummy, as East discarded two Clubs). At the table, declarer looked no further than his straightforward chances in the minor suits. With East having thrown two Clubs, he crossed to the Ace-King. No Queen dropped, so he reverted to Diamonds. However he played this suit, he…

This New Year, in the eighth decade of our life, we count our blessings. The feds and the educated elite are putting on such a great show, such a rollicking, frolicking display; every day is a laughfest! A great Carnival of Claptrap. A Jamboree of Jackassery. What great fun! It’s a great time to be alive. Too bad the feds are ruining it. How could that be? The federal government has been around for a long time. So have the two parties. They haven’t wrecked the country yet. Have they become dumber? More incompetent? More corrupt? Yes, they have. In our early career, the federal government was an obvious menace to civil society, progress and prosperity. But it seemed to be more or less under control. There were many who…

Last year will go down as “the year of the rate shock”, says The Economist. Persistently high inflation caught central bankers flat-footed last year, prompting the US Federal Reserve to raise interest rates by more than four percentage points for its “swiftest tightening cycle since the 1980s”. The hikes repeatedly upset markets: each of the five worst weeks for US stocks in 2022 “took place immediately before or after a Fed meeting”. The resulting sell-off in the technology sector was so “violent” that Facebook-owner Meta “twice shed more than a quarter of its value in a single trading day”. As the old saying goes: “bull markets don’t die of old age... they are murdered by central banks”. US stockmarkets endured their worst year since 2008 last year, with the S&P…

While 2021 was a record year for initial public offerings (IPOs) in the US technology sector, with ten listings raising at least $1bn, 2022 proved a major disappointment, says CNBC. The largest debut last year was Intel’s spin-off of self-driving car firm Mobileye, which raised $861m; no other US tech IPO mustered even $100m. Overall US IPO deal proceeds plummeted by 94% in 2022, from $155.8bn to $8.6bn, according to Ernst & Young. Rattled by the economic outlook and the war, investors lost confidence in risky assets worldwide. The tech companies that made promising US debuts during the sector’s pandemic boom had a shocking 2022, adds The Wall Street Journal. Of the nearly 600 companies that went public in 2020 or 2021, more than one in four is trading at…

● Any Christmas cook knows that it hurts “when one’s hard work goes unappreciated”, so GSK’s CEO Emma Walmsley (pictured) “will be feeling pretty frustrated this festive season”, says Lex in the Financial Times. The pharma group still trades at a one-third discount to its sector, even though she “appears to be working from the right recipe sheet”. GSK has spun off its consumer division, strengthened its balance sheet and increased investment. Earnings guidance has been raised twice this year. “But for the pharma crowd, this is just the trimmings.” The “meat” lies in developing new drugs. Walmsley can point to some successes, but investors still feel that what’s on offer looks “underdone”, especially in oncology and immunotherapy. So the CEO’s New Year resolution must be a greater focus on…

“The most important macro event [for 2023] is China’s reopening,” says Louis-Vincent Gave of research boutique Gavekal. “What we witness today is the second biggest economy in the world opening up after having been on lockdown for three years… we have seen this script when the US or Europe reopened: Pent-up demand causes a surge of consumption.” The amount of cash in household bank accounts has risen by 50% over three years because “all that people did was work and go home”, he tells The Market. Add that to record low interest rates, and the consumption surge is going to be enormous. However, “most Western investors have decided that China is uninvestable”. It will be hard for institutions to turn round and buy Chinese assets again. “But they can buy…

humanprogress.org It will have been a leaner Christmas this year for many, says Malcolm Cochran. The return of inflation has crimped real incomes. One poll showed 60% of Americans planning to cut back on spending. But in perspective, things don’t look so bad. The average American still planned on spending around $900 on presents. In 1900, a working-class family in the UK, one of the richest countries in the world, would have struggled to afford any toys at all at Christmas. In 2021, a blue-collar worker in the US could buy a virtual-reality toy for around 11 hours of work. Indeed, as Gale Pooley and Marian Tupy show in their book Superabundance, the “time prices” of finished goods in the US declined by 71% between 1979 and 2019. In other…

■ Energy was the best-performing sector last year, yet the Guinness Global Energy Fund trades on just 7.3 times 2023 earnings. The fund gained 33% in dollars in 2022, but that only made up for previous losses – over ten years, it is flat. Yet fossil fuels will remain the leading energy source for decades. Demand is still rising, but the era of low-cost oil is over. Investors’ aversion, environmental constraints, hostile governments and public delusion about the speed of the energy transition have curtailed investment. Now that the oil price has retreated close to pre-Ukraine levels, the downside risk has largely gone. With supply constrained by underinvestment and sanctions, prices should stay high. Companies in favourable locations, notably North America, should prosper, while the sword of Damocles hangs over…

I have always followed the annual “ten outrageous predictions” charade enviously. This annual exercise of Saxo Bank’s is a classic win-win exercise. If a forecast proves right, you are a genius for predicting it. If none pan out, well, you said that each one was very unlikely, so you are still right. Did these outrageous predictions ever include Russia’s invasion of Ukraine, a pandemic, the oil price falling below zero, or $18trn of bonds with negative yields? Of course not. There have been major surprises, but few have been predicted by anyone, let alone by desk-jockeys at a bank. So here is my list. The trick is for each prediction to be outrageous, but not so ludicrous as to attract ridicule. For example, suggesting that Harry and Meghan will ascend…

● Savings rates “appear to have peaked after taking huge leaps in the last three months of the year”, says George Nixon in The Times. The best fixed-rate savings account are at their lowest interest rates for two months, even though the Bank of England has raised the base rate to a 14-year high. “Analysts are advising savers... to snap up the best deals now, in case they drop again or disappear.” You can get a table-topping rate of 4.25% on a one-year savings bond from Cahoot or 4.53% over two years from Zenith Bank, according to Savings Champion. ● “First-time buyers made up the largest proportion of property purchasers last year, despite rising borrowing costs and the cost-of-living crisis,” says Matthew Field in The Telegraph. The Yorkshire Building Society…

Dividend income has always formed an important part of total equity returns. We suspect dividend income will form a bigger part of the total return an investor receives from their investments in the coming ten years than in the decade between 2010 and 2020, when capital growth arising from multiple expansion was the key driver of returns. We feel the record-low bond yields that drove that revaluation of equities in the past decade are unlikely to return despite the lower inflation we expect in 2023. When we analyse companies, we do not look at dividend income in isolation. Instead, we see it as one component of total return, so we seek to invest in good-quality businesses with strong balance sheets and robust market positions, generating sufficient free cashflow to pay…

€1 The average price of a baguette in France, which has reached the milestone for the first time after 35,000 artisan bakers raised their prices by 10% this week from last month’s 96 cents, says The Times. The cost of ingredients rose 30% in 2022, prompting protests. £1.1bn How much retailers and landlords will have to pay in business rates on empty premises vacant for at least three months over the next tax year, property adviser Altus Group estimates. Last year, 47 shops closed on average every day. ¥1m How much in Japanese yen (£6,350) per child families in Tokyo will be offered to move out of the capital in a bid to ease overcrowding, revive regional economies and reduce the cost of damages resulting from powerful earthquakes. €4m The…