Indholdsfortegnelse for 1146 i MoneyWeek

“India is poised to become the world’s most important country... It has the largest population... and with a per-capita GDP that is just one-quarter that of China’s, its economy has enormous scope for productivity gains... Yet the model that has driven India’s growth now threatens to constrain it... India has moved to an economic model where a few... large private oligopolistic conglomerates... control significant parts of the... economy... this concentration of economic power [has enabled] these conglomerates... to capture policymaking... [That] is stifling innovation and... killing early-stage start-ups... The Asian financial crisis of the 1990s demonstrated that... the partial capture of economic policy by crony capitalist conglomerates will hurt productivity growth by hampering competition... and increasing inequality.”…

Tobacco giant Altria is to acquire “vaping pioneer” NJOY for at least $2.75bn, says Breanna Bradham for Bloomberg. It is also “closing the chapter on its disastrous investment in e-cigarette maker Juul Labs” by selling its remaining stake in exchange for “non-exclusive rights to some of Juul’s intellectual property related to heated tobacco devices”. This means the $12.8bn that it paid for Juul in 2018 has now essentially gone up in smoke thanks to a dispute with the federal Food and Drug Administration over whether Juul’s e-cigarettes can remain on the US market, and lawsuits alleging it had targeted minors. The investment in Juul has certainly backfired, but buying NJOY, which is its third attempt to break into the market, might not be the solution to Altria’s woes either, say…

Diabetes and obesity are on the rise, says WirtschaftsWoche, and that bodes well for the pharmaceuticals industry. It is also good news for the sector’s suppliers, such as Germany’s Gerresheimer, which specialises in drug-packaging (comprising specialised glass and plastic) and drug-delivery systems; offerings in this area include inhalers and injection pens. The health sector accounts for around 80% of sales, while the cosmetics industry comprises the rest. In the year to 30 November the group grew sales by 21% to €1.8bn, while net income jumped by 15% to €96.1m. Management didn’t raise the dividend (the current yield is 1.5%), but that leaves more money to invest in expansion.…

Rishi Sunak has declared he is “up for the fight” with judges in Europe over the government’s Illegal Migration Bill, unveiled this week by home secretary, Suella Braverman. Under the plans, which are expected to be challenged on the grounds that the bill is incompatible with the European Convention on Human Rights, almost all those arriving in the UK on small boats will be detained without bail for 28 days before being deported to their home country or a country such as Rwanda. They won’t be allowed to challenge their deportation and face a lifetime ban from Britain. The law will apply as of now, but will not be enforced until the bill has received royal assent. The number of Channel crossings has soared in recent years, with 46,000 illegal…

No politician has had more ups and downs than Boris Johnson. In the aftermath of Leave’s victory in 2016, he was briefly considered favourite to be David Cameron’s successor, before dramatically withdrawing following Michael Gove’s change of mind. When he finally became prime minister he won a landslide election and rode high in the polls, before seeing his approval disintegrate over revelations about pandemic parties in Downing Street, which led to his departure. However, despite trying and failing to make an improbable comeback last October, he now faces the very real chance of being booted out altogether. The preliminary report from the parliamentary standards group implies that it will find that he misled Parliament, potentially opening the door for a recall. With £3,089 now matched on Smarkets, punters put the…

It is starting to look less and less likely that the UK will be able to carve out a space for itself in the electric-vehicle market. Our attempts to build our own manufacturing capacity look feeble compared with the US, China, Germany, or indeed France. Battery manufacturer Britishvolt has gone bust and electric-van maker Arrival, on which plenty of hopes were pinned, is struggling. We can’t hope to keep up with the billions in subsidies being offered in the US or the EU, nor can we compete on cost with South Korea or China. We might find one or two niches in upmarket, luxury cars. But the UK as a mass manufacturer? It doesn’t seem very likely. Yet that doesn’t mean we have to give up on our motor industry.…

“Technically I’m a nepotism baby. My parents came from very little [but] I’ve always acknowledged that I come from privilege. My parents told me: ‘Just because you have parents who were successful, it doesn’t mean that you shouldn’t walk into the job being as nice and as hardworking as you can be.’” US model and television personality Gigi Hadid (pictured), quoted in The Sunday Times “I didn’t primarily do it for the money.” Matt Hancock, quoted in The Guardian, on his stint on the reality television show I’m a Celebrity … Get Me Out of Here! He ultimately donated £10,000 to charity, just 3% of his £320,000 fee “Tomatoes on the vine are the biggest con. It is a bit like paying more money for potatoes with dirt on them.”…

branko2f7.substack.com First-time visitors to Switzerland are surprised to find that the country’s famous “order” and “cleanliness” co-exist alongside “abundant” drugs, “easily noticeable” prostitution and casinos that “are practically everywhere”, says Branko Milanovic. Switzerland is what I call a government “of limited vice”. Such countries recognise the frailties of human nature, but only allow vice to operate within carefully controlled boundaries. They will “allow corruption, but call it lobbying and ask that you register”, or permit prostitution, but “ask that prostitutes issue bills and pay taxes”. If a vice “spills out of its confined area, governments of limited vice crack down on it with all their might”. By contrast, governments of open vice allow theft and corruption to overwhelm the body politic – think of Russia in the 1990s. Governments of…

A group of individual shareholders in Hong Kong is pushing HSBC to allow a vote at its annual general meeting in May on whether it should develop a plan to spin off its Asia business, says Reuters. The Spin Off HSBC Asia Concern Group, which wants the bank to be broken up, is also calling for the dividend to be restored to pre-pandemic levels of $0.51, up from $0.32 in 2022. The proposal echoes demands by Ping An, the Chinese insurer that is HSBC’s largest investor, to separate the Asia division – which generates most of HSBC’s profits – from the rest of the company, but the group’s leader, Ken Lui, says he has “not engaged with Ping An at all”. HSBC’s other major shareholders, especially in the UK, have…

If you want to invest in a broad range of cybersecurity companies, then you should consider an exchange-traded fund (ETF) such as the iShares Digital Security UCITS ETF (LSE: LOCK). It invests in more than 100 outfits involved in digital security. The three largest holdings are cloud-computing company Nutanix, networking group Arista Networks and software giant Oracle. The ETF has a trailing price/earnings (p/e) ratio of 24.7 and a total expense ratio (TER) of 0.4%. A more concentrated alternative is the L&G Cyber Security UCITS ETF (LSE: ISPY). This has only 49 holdings, with the largest being BlackBerry, now a cybersecurity specialist, and its peers Cloudflare and Paolo Alto Networks. This ETF has a slightly higher TER of 0.69%. One cybersecurity firm that is a major holding in both ETFs…

● Government support for energy bills is expected to be extended at the current level until June, preventing an average increase in bills of £500, says Sky News. The energy price guarantee (EPG), which effectively caps the price for households and reimburses suppliers for the extra cost of buying on wholesale energy markets, is set to rise in April. That would take an average bill from £2,500 to £3,000. However, the government has asked energy firms to prepare for both scenarios, fuelling expectations that chancellor Jeremy Hunt will announce a three-month extension in the budget in 15 March. The end of a separate scheme that provided £400 of support for every household over the past six months – typically in the form of monthly £67 rebates – is expected to…

● Should people with terminal health conditions be allowed to access their state-pension benefits early? At present there are no provisions to allow people with poor health to access their state pensions before the state retirement age, even where they have made many years of national insurance contributions. However, a new petition, signed by more than 166,000 people, calls for a change in the law. Reform would cost just £114m a year, according to Loughborough University, less than 0.1% of the annual state pension bill. ● An initiative designed to make it easier for savers to stay on top of their pension planning has been delayed again. Pension dashboards, which will allow savers to see all their pensions – both individual and occupational ones – on a single screen, were…

It has been a good fortnight for my long tips, with five rising and three going down. Retailer Dunelm increased from 1,194p to 1,283p, while telecoms operator Gamma Communications climbed from 1,174p to 1,213p and Savills increased from 991p to 994p. Online retailer ASOS went up from 818p to 957p, while discount store B&M Value Retail rose from 486p to 495p. But luxury clothing retailer Burberry fell from 2,563p to 2,500p, builder DR Horton slid from $94.08 to $91.84, and streaming service Netflix declined from $347 to $312. My long tips are making collective net profits of £4,393. My short tips also did well, with four of five falling. Real-estate investment trust Digital Realty slipped from $109.22 to $105.54, ticketing firm Live Nation Entertainment declined from $77.59 to $73.20. Electric-charging…

Hedge-fund pioneer Michael Steinhardt was born in New York in 1940. He studied sociology and statistics at the University of Pennsylvania before working at the fund manager Calvin Bullock, the newsletter Financial World and the Wall Street brokerage Loeb, Rhoades & Co. At the latter, he enjoyed success tipping growth stocks and conglomerates, which inspired him to set up the Steinhardt, Fine, Berkowitz & Co hedge fund (later known as Steinhardt Partners), with two other Pennsylvania alumni in 1967. He would run this fund for more than a quarter of a century until 1995, making most of the major investment decisions. What was the idea? In the early 1970s growth investing was very popular, particularly a group of shares known as the “Nifty Fifty”. This included companies such as Coca-Cola,…

Public companies in the US are now disclosing, typically in annual proxy statements, how much their top executives are poised to receive in total pay by tabulating gains and losses on stock awards under new rules, says Theo Francis in The Wall Street Journal. Under the old method, the value of stock options and restricted stock reflect the day they were granted, which can be a more than a year before they are disclosed and several years before they vest. The new additional approach, dubbed “compensation actually paid”, seeks to give investors a clearer picture of how those values change during that time. In a late-February filing, pharmaceutical giant Eli Lilly disclosed total pay for last year of $21.4m for CEO David Ricks (pictured) under the old calculation, and $64.1m…

Core inflation in the euro area hit a record high of 5.6% in February, its third monthly rise in a row. Core inflation strips out volatile food, energy, alcohol and tobacco prices. Annual headline inflation fell slightly to 8.5%, but is still more than four times the 2% target, says Mehreen Khan in The Times. The unexpected strength of inflation piles “pressure on the European Central Bank to double down on its monetary tightening”. It has lifted interest rates by three percentage points since June, but that is less than other big Western central banks. Hawks calling for tougher rate rises are now in the driving seat. For years markets worried that Europe would fall into deflation, says Andrew Sheets of Morgan Stanley. Now they have suddenly concluded that the…

The 2011 Fukushima nuclear disaster in Japan provoked a long slump in atomic energy and demand for the uranium that powers it. Prices fell from above $70 per pound in early 2011 to $18 by the 2016 nadir. Yet rising interest in nuclear energy’s de-carbonisation potential and the invasion of Ukraine, which raised fears that Russian supplies would be hit, have sparked a revival. In Japan a majority of the public are “now in favour of restarting nuclear plants”, says Myra Saefong in Barron’s. Prices spiked to $64 a pound in April 2022. That rally didn’t hold amid a weak global economy and continued exports of Russian uranium, which still haven’t been sanctioned. Yet after a “lost decade” for uranium, the long-term outlook is auspicious.…

Tesla’s shares dipped this week after the electric-car giant cut the prices of two of its most expensive models in the US, the Model S and Model X. These were Tesla’s latest price cuts to bolster demand in a competitive market, says Alyssa Lukpat in the Wall Street Journal. The group is also charging ahead “with plans to scale up production to around 20 million vehicles a year from around 1.3 million in 2022”. While Tesla’s stock has bounced by 55% this year, it is still 50% below its November 2021 peak. These price cuts are just one step in a plan to build a “cheaper next generation of electric cars”, says Robert Miller in The Times. Tesla’s engineers have “described plans to cut vehicle assembly costs by half”. This…

Saudi Arabian real-estate firm DarGlobal has carried out a direct listing on the London Stock Exchange, valuing it at $600m. DarGlobal is the international arm of Dar Al Arkan Real Estate Development – which is listed in Riyadh with a $4bn market cap – and focuses on luxury second homes and holiday homes. A direct listing is a cheaper alternative to an initial public offering (IPO) in which the firm does not issue new shares to the public. The aim is often to improve a firm’s profile or provide liquidity for existing investors, but direct listings are sometimes preceded by a fund raising via a private placement. In this case, DarGlobal raised $72m by selling a 12% stake to institutional investors.…

● Reckitt’s self-declared purpose is “to protect, heal and nurture in the relentless pursuit of a cleaner and healthier world”, so “cigar-smoking ex-BAT chief” Nicandro Durante is not an obvious fit as CEO, says Alistair Osborne in The Times. But he was senior independent director when Laxman Narasimhan left for Starbucks with a month’s notice, and stepped up to take the job on an interim basis. The first set of results under his watch were decent. Like-for-like sales growth of 7.6% was all due to price rises, but the fall in volumes was down to the post-Covid drop in hygiene sales. Operating profits were up by 17%, to £3.44bn. Still, what investors want to know is how the firm will find a new boss with “strategic staying power”. Reckitt is…

newrepublic.com “ChatGPT, the new artificial intelligence [AI] text generator,” is seen as highly significant, says Alex Shephard. One opinion piece in The Wall Street Journal declares that “generative artificial intelligence” is a “transformational technology, on par with Gutenberg’s printing press”. By distilling “vast amounts of human knowledge in an instant”, AI will have “remarkable effects on... consciousness” while disrupting industries. Yet distilling knowledge from “a nearly infinite number of potential sources” sounds rather similar to what search engines such as Google already do. There has been much concern about ChatGPT’s ability to aid academic cheating, but while it can crawl the web to produce “the facsimile” of an essay, the bot doesn’t have its own ideas. “There’s nothing to suggest that it can mimic, let alone replace, critical thought.” Like…

■ Investors in renewable-energy infrastructure trusts should brace for lower electricity prices, says Investors’ Chronicle. Popular trusts such as Foresight Solar, JLEN Environmental Assets, Next Energy Solar Fund, Bluefield Solar Income and The Renewables Infrastructure Group delivered strong net asset value (NAV) gains for 2022 as a whole, but “record power prices were a key tailwind” and thus trusts “might deliver less spectacular results this year”. The last quarter of the year showed that conditions are becoming less helpful: NAVs for most trusts were broadly unchanged or reduced, due to a mix of factors including increased discount rates, lower forecasts for future power prices and the effect that the government’s levy on electricity generators will have on profits. The main exception was Greencoat UK Wind, which reported a 7.8% increase…

One of the big differences between income choices in the UK and the US is that the latter has a thriving market for tax-free municipal bonds (fixed-income securities issued by state and local authorities). There are around $4trn in outstanding “muni” bonds, an average of over $10bn traded daily and yearly issuance of around $400bn. These bonds offer higher yields than central-government bonds and while they are not risk-free, defaults have been low (the average five-year default rate has been less than 0.1% since 1971, compared to 6.8% for global corporate bonds, according to Moody’s). Sadly, we don’t have a similar market in the UK. Our local authorities here can borrow from a Treasury-run organisation called the Public Works Loan Board (PWLB), so have little reason to bother with a…

The clock is ticking. The 2022-2023 tax year comes to an end on 5 April. You have only a few weeks left to make full use of your annual allowance, which governs how much you may pay into tax-efficient private pensions each year. Not maximising your pension contributions means missing out on valuable income-tax relief – effectively an additional contribution from the state – so it usually makes sense to pay in as much as you can afford. Just make sure you understand how the rules work. For most people, the annual allowance is £40,000. But you will only receive tax relief on contributions worth up to 100% of your earnings; if your earnings are below £40,000, you’ll therefore get relief up to the amount you earn. If you earn…

One company that needs no introduction is GameStop (NYSE: GME). At the start of 2021 the videogames retailer was on the brink of bankruptcy as the shift to online downloads damaged its core business, which was built on physical sales. Nevertheless, in January 2021 it became the poster-child for what became known as the “meme stock” craze – ie, when retail investors, many acting on advice that they had picked up on Reddit, piled into the company in the belief that by acting together they could “squeeze” various hedge funds who had shorted it. In the short run this succeeded beyond their wildest dreams, with the price rocketing 30-fold in the space of a few weeks. They even wrongfooted this column, which recommended that you short it just before the…

“These trusts offer exposure to a wide array of early stage firms” The tax burden is at its highest since 1949, increasingly weighing on higher earners. And it’s about to get worse. Come 6 April 2023, more people will be dragged into the higher and top rates of income tax, while those already caught will see their tax bills rise. Whereas in the past wealthier investors might have mitigated this with large pension contributions, thanks to years of increasingly punitive pension restrictions, this is not an option for many. As a result, more and more investors are turning to venture capital trusts (VCTs). When you invest in VCTs, you get up to 30% income-tax relief plus tax-free dividends; these could be particularly valuable once the tax-free allowance for dividends is…

2020 Vinha Grande, Casa Ferreirinha, Douro Tinto, Portugal £15.95, oldbridgewine.co.uk A couple of weeks ago, in my Wednesday Wines article on my website, I wrote up the new 2019 vintage of Casa Ferreirinha’s epic single estate Douro red, Vinha da Leda. Weighing in at £65, this is one of the most “affordable” of the world’s truly great red wines. Of course, £65 is affordable to some but not many, so some of my readers asked me, “what should we drink if we want a similar experience, but at a more modest price?”. I have the answer – it arrives this very second on the excellent shelves of John Hoskins MW’s fine emporium, Old Bridge Wine. The Vinha Grande label represents the top of the “everyday wines” range at Ferreirinha. The…

London’s position as a top financial centre has suffered “a double blow”, says John-Paul Ford Rojas in the Daily Mail. Computer-chip designer Arm and building-materials giant CRH are both shunning the City for US listings. Combined, the two firms are worth more than £80bn. In February, Paddy Power owner Flutter said it was considering a flotation in America, while it has emerged that even oil giant Shell discussed a US move in 2021 before ultimately deciding to consolidate in London. Many FTSE bosses are sick of the deep valuation discount applied to UK stocks. The exodus across the Atlantic is the latest threat to the UK equity market, which was already the focus of US buyout funds attracted by cheap valuations, says Bloomberg. The total market value of London-listed equities…

Shares in Persimmon, one of the country’s top housebuilders, tumbled by 12% last week after it said it was “slashing” construction, says Archie Mitchell in the Daily Mail. The group warned that if “headwinds” such as higher mortgage rates and the cost-of-living crisis endure, it “will build as few as 8,000 homes this year”, a 46% slump from last year’s 14,868. Persimmon expects margins and profits to fall and has also wiped 75% off its dividend. Persimmon isn’t the only builder worried about the future, says Julia Kollewe in The Guardian. Shares in Taylor Wimpey fell by 4% when it reported that its sales rate for private homes had plunged by nearly 40% to 0.62 a week, compared with 1.02 a year ago. What’s more, Taylor Wimpey’s management estimates that…

Five to buy Dechra Pharmaceuticals The Mail on Sunday This veterinary-medicines provider may sell “equine sedatives”, but its recent performance has still managed to “scare the horses”. Investors are nervous as a pandemic-era pet-buying boom wanes and farming heads for a difficult period. But the sell-off looks “overdone”. Spending on pets tends to be resilient in recessions, while Dechra’s drugs pipeline, including “long-acting dog insulin”, heralds future growth. It’s “a buying opportunity for the brave”. 2,756p General Mills Shares This US food multinational is behind everything from Cheerios breakfast cereal to Nature Valley granola bars. The portfolio is well positioned for the cost-of-living squeeze: higher prices prompt shoppers to eat more meals at home. The firm has a proven ability to ride out inflation through cost savings and price increases.…

Convoys of tractors brought Brussels to a standstill last week, as thousands of Belgian farmers protested against the regional government’s plans to limit nitrogen emissions from agriculture, says Susannah Savage in Politico. Farmers say the new rules “threaten to put many of them out of business”, either by limiting the number of animals that they keep, or closing them down outright. They argue that the cuts are unfair because they “place a heavier burden on agriculture than industry”. The Belgians are not alone, says Brendan O’Neill in Spiked. Dutch farmers have been in a “state of revolt” for almost four years now over plans to cut nitrogen emissions in the Netherlands in half by 2030, leading to the closure of perhaps 3,000 farms. Irish farmers believe similar moves could cost…

A battle for our brain data Camilla Cavendish Financial Times Although many of us have a vague sense that our electronic devices might “work against us,” we continue to “blithely” give away our data, says Camilla Cavendish. “We need to wise up” because soon we will need to protect our “brain data”. Investment is “pouring into ‘neurotechnology’, which can record and analyse electrical impulses from the nervous system”. Brain-computer interfaces already offer “tremendous benefits”, such as helping stroke victims to recover. EEG headsets can detect when drivers are losing focus. However, this also feels like a “potential tool of oppression”. Nita Farahany, author of The Battle for Your Brain, predicts a world in which AI and neuroscience invade our mental privacy as algorithms “get better at translating brain…

unherd.com Today US CEOs “answer to Larry Fink first and their actual investors second”, says John Masko. The boss of investment juggernaut BlackRock has spearheaded his industry’s attempts to “force the principles of ESG [environmental and social governance] investing down the throats of companies”. Fink has urged firms to abandon shareholder capitalism for a model that focuses on other stakeholders as well. That sounds nice, but “by making companies answerable to everyone, proponents of stakeholder capitalism make them answerable to no one”, leaving the power of managers unchecked. There is emerging evidence that ESG portfolios do a bad job at actually directing capital towards firms with superior records on labour rights and environmental compliance, so fund managers should be showing more humility. Many will sympathise with Fink’s insistence that firms…

The interest rates that brokers pay on cash balances in investment accounts are slowly ticking up – but as usual, they remain well behind the Bank of England’s base rate. Hargreaves Lansdown, the UK’s largest broker, pays 1% for balances under £10,000 (1.7% in a self-invested personal pension – Sipp), rising to a maximum of 2.3% on balances over £100,000 in a Sipp. Most other brokers such as AJ Bell and Interactive Investors are similar. Some are noticeably less generous: Barclays Smart Investor pays no interest on a individual savings account (Isa) or Sipp. Vanguard quietly used to pay base rate minus a small deduction, which amounted to more than you could get in any cash Isa. However, after that got splashed all over various personal finance forums last month,…

The yields on Abundance’s CMIs are taxable, but the platform offers an innovative finance individual savings account (IF Isa) as a wrapper. You can put up to £20,000 per year in an IF Isa, subject to overall annual Isa limits. The top fixed-rate savings accounts yield around 4.5% taxable per year whether you lock your money up for two years or five years. Fixed-term Isas are around 4% tax-free from one year to five years. Fixed-rate accounts give your money back in one payment at the end of the term, while some of Abundance’s CMIs repay capital in instalments. Note that savings accounts are backed by the Financial Services Compensation Scheme (FSCS), up to a maximum of £85,000 per person per bank, while investments are not covered. Five-year UK government…

Is Generation Z (Gen Z) storing up trouble for the future? Research from Standard Life reveals that Britons under the age of 25 are the only generation more likely to favour saving for retirement using property rather than a private pension. While 35% of Gen Z savers told Standard Life they thought pensions were the better option, 38% preferred property. By contrast, baby-boomers, for example, voted 46% to 16% in favour of pensions. Millennial and Generation X savers take a similar view. While the long-term rise in house prices in the UK has seen growing numbers of people focus on residential property as a useful asset for retirement saving, Standard Life points to at least four reasons why savers should prioritise pensions. Firstly, the insurer points out, pension savers get…

Companies will occasionally issue bonds for various reasons. Experts disagree about the impact that this has on the share price. One view is that it should have no impact: although it could make the shares riskier, it also increases the potential returns. Some argue that the ability of companies to offset at least some of their interest payments against taxes means that taking on more debt should boost share prices. To complicate matters even more, a third view posits that borrowing reflects a company’s management being either too ambitious or unable to fund investment from cash flow. Most studies have come to the conclusion that issuing more debt doesn’t have much of an impact either way, at least in the short run. For instance, an analysis in 1991 by Dartmouth…