Indholdsfortegnelse for 1162 i MoneyWeek

“Just kick ‘em up the rump a little.” So said Richard Nixon to US Federal Reserve chairman Arthur Burns in 1971 when he wanted the other members of the Fed’s board to vote for interest-rate cuts that would bolster growth, employment and his re-election odds. They cut, and Nixon won the vote. Most economists at the time thought monetary policy was too loose and should be tightened. The boom stoked inflation that was only squeezed out of the system in the 1980s. The Fed is an independent central bank, of course, and Nixon had said the year before that he respected the chairman’s independence, but also hoped “he will conclude that my views are the ones that should be followed”. Such interference is unthinkable now. “Independent central banks can’t blame…

“If...weather forecasters are right, El Niño conditions have arrived in the Pacific and are set to build over the next few months... weather conditions would... be drier than normal across... Africa, Southeast Asia and northern South America [and] wetter than normal in eastern South America... past... El Niño events have been associated with lower global cocoa, coffee and sugar production... If El Niño were to affect the next sugarcane harvest [in Brazil, then] sugar prices are unlikely to drop back from their current near-record highs... Supply disruptions [look likely to] have an outsized impact on coffee prices as [global] coffee stocks are [already] near their lowest point in over a decade... In general, wholesale agricultural prices have fallen since early 2022 when the war in Ukraine sent prices soaring... But…

Shares in copper miner Freeport-McMoRan have slipped this year owing to fears of recession in the US and lacklustre growth in China, factors expected to reduce demand for the red metal. But there is plenty of scope for long-term gains, says Jacob Sonenshine in Barron’s. Demand in China, the biggest consumer of copper, may bounce now that Beijing is trying to stimulate growth. In the longer term, the shift towards renewable energy bodes well. Electric cars, for instance, need three times as much copper as internal combustion engines, and supply is expected to struggle to meet demand by the end of the decade. The group also boasts the strongest balance sheet in the sector.…

The man who raised a force against Moscow, 62-year-old Yevgeny Prigozhin, is a “former convict and hotdog seller, notorious for his ruthlessness, violence and cruelty”, says Emma Graham-Harrison in The Observer. With his shaven head, scarred face and “tobacco-stained teeth”, he is, according to polls, now the fifth most recognisable figure in Russia, says Al Jazeera. Born in St Petersburg, he was convicted of a series of violent robberies at the age of 20 and spent around ten years in prison. He went on to run a hotdog stand, but soon had a stake in a supermarket chain and some “fancy restaurants”, which first drew him to the attention of Putin, says Ellen Knickmeyer in The Independent. The men grew close and Prigozhin built a personal fortune –…

It is finally official. Earlier this week, the Bank for International Settlements spelt out a simple truth that has been obvious to just about anyone for months. The round of inflation that is doing so much damage to the economy, both in this country and elsewhere, was largely caused by lockdown, and the money printed to pay for it all. According to Agustín Carstens, the head of the body that oversees the world’s central banks, far too much free money was dished out during the pandemic, and far too much extra cash was printed to pay for it all. We are seeing the consequences now, with very high rates of inflation and rising taxes. A disastrous experiment Three years on from those weird months when we were all locked up…

Book value is also known as shareholders’ equity or net asset value (NAV). It is the value of all of a company’s assets, less all of its liabilities (debts) and can be found on the balance sheet in the annual report. Book value is an estimate of what a company would be worth if all of its assets were sold for their balance-sheet values. It’s often used as a way to value firms such as banks, housebuilders and insurers. When you know the book value, you can get an idea of how cheap or expensive a share is by dividing the share price by the book value per share (hence the price/book, or p/b, value ratio). A p/b of below one means that – technically speaking – you can buy…

fee.org Critics of capitalism complain that it is obsessed with stuff, says Patrick Carroll. The ultimate goal is deemed to be to produce things for consumption, at the expense of other goals, such as health, sustainability or justice. But this is a distorted view. The end goal of the economy is not just “stuff”, but meeting the wants and needs of people. This includes physical objects, but also all the things that make for a good quality of life, from healthcare to a clean environment to a safe community. Even material “bread”, as Murray Rothbard pointed out, is valued not for itself, but for its service in satisfying wants. Music, medical care, haircuts and friendship equally service our needs, and are met by the profit-seeking entrepreneur – they might provide…

■ Polar Capital suffered a significant drop in assets under management (AUM) last year as its funds underperformed, says CityWire. The company, which is best known for its technology funds, saw a £2.9bn decline in AUM to £19.2bn in the 12 months to the end of March 2023. Net outflows totalled £1.5bn, with the rest of the decline coming from falling asset values and fund closures. Polar’s technology funds, which account for 38% of total AUM, reported outflows of £1.3bn. The group’s overall profits before tax dropped by 27% to £45.2m, thanks chiefly to the decline in AUM. Performance fees earned on funds also slumped from £14.1m to £6.7m over the year. Its flagship Polar Capital Global Technology fund lagged its benchmark by 450 basis points in the year to…

With most high-street savings accounts still paying less than the Bank of England base rate, you might be better off investing in short-duration gilts. Clearly, opening a savings account is more straightforward than opting for government bonds; you have instant access and there’s no need to open an investment account or pay trading fees. However, you do not have to pay capital-gains tax on any profits you make when you sell or redeem the gilt. This is particularly useful for higher- and additional-rate taxpayers. These savers can get around high tax rates on savings income by acquiring gilts and earning a capital return (as well as interest income, where there’s still tax to pay). Savers can buy the gilts meeting their cash-flow requirements, and then hold until maturity, earning a…

Pension dashboards were meant to transform the way people save for retirement, enabling them to see all their different pensions on a single online page. But the initiative, first announced in 2016, has repeatedly been stalled by technical problems. It won’t go live until 2026. That leaves savers in a quandary. How do they organise multiple pension plans to deliver the retirement income they seek? The difficulty with managing lots of different plans – many savers accumulate ten to 20 pensions – is that working out where you stand overall is challenging. There is also the danger of losing track of your money; the Association of British Insurers estimates that 1.6 million savers have lost £19.4bn in total. A digital dashboard would enable you to see all your pensions in…

If you think the US stockmarket’s 14% gain this year means investors are putting inflation and recession fears behind them, think again. Strip out all the money desperately driving up the share prices of a few mega-companies involved in artificial intelligence (AI) – the next “big thing” – and the market has barely budged. AI should not be dismissed, but how it will develop, and which businesses will profit or lose out, is still wide open. In the meantime, while investors pile into technology, there are profitable and growing businesses largely unnoticed elsewhere that are going cheap. One that stands out is Ulta Beauty (Nasdaq: ULTA). The 30-year old group, worth $23bn, operates 1,350 beauty salons across the US. The shares are still down by a few percent this year…

2021 Cullen, Diana Madeline, Margaret River, Western Australia RRP £110, select specialist wine merchants In 872 columns, this is the very first time I have recommend a wine with no definitive retailer at the time of filing copy. The reason for this rule-shredding manoeuvre is the imminent release of the 2021 vintage of Diana Madeline. It is an utterly incredible Aussie cabernet that rivals even the finest wines from both sides of the Gironde. Diana Madeline would have been 100 years old in February this year, and this 2021 vintage marks the 50th year since Di and Kevin Cullen planted these vines. Their daughter, esteemed winemaker Vanya, flew to London to launch this celestial 2021 vintage and celebrate her parents’ legacy. I will never forget Di’s invitation to walk with…

The yield curve plots the yields on different maturities of US government (Treasury) bonds. Holding bonds for longer carries higher risk, so normally the curve slopes upwards, with lower yields for shorter maturities and higher yields for longer ones. But parts of the curve have been inverted (downward-sloping) for more than a year, with the two-year Treasury now yielding 4.7%, more than the ten-year’s 3.7%. This means investors anticipate lower interest rates in the future because of a recession. An inverted curve has preceded every US recession in the past fifty years. Yet the economy and job market are still robust, says James Mackintosh in The Wall Street Journal. So far, the widely predicted “2023 recession is missing in action”.…

Initial public offerings in Europe “have all but dried up” as the war in Ukraine and dearer money have undermined markets’ confidence. says the Financial Times. But next month’s listing of Romania’s Hidroelectrica is likely to be a success. The state-owned group operates 182 hydropower plants, accounting for 33% of the nation’s electricity production. Sales and profits are growing at an annual clip of more than 30%, and the global focus on green energy has helped spur interest among investors. The initial public offering will raise around €2bn, implying a valuation of between €8.5bn and €10.2bn. It will be Romania’s largest flotation on record.…

● The Unilever that Hein Schumacher takes charge of next week as CEO “should be firing on all cylinders” given its “powerful brands and enviable positions in emerging markets”, says Andrea Felsted on Bloomberg. But the group’s organic sales growth has lagged that of its major competitors for most of the past five years – even though 60% of sales stem from rapidly growing emerging markets. So what should he do? Keep slimming down the portfolio, for starters. He should ditch peripheral areas such as the Elida Beauty arm, US ice-cream brands and cleaning products such as Domestos, reinvesting the proceeds in blockbuster labels. If this doesn’t work, “a more radical solution” should be considered: a split between Unilever’s food and non-food businesses. Meanwhile, the good news is that the…

Tories are caught in a trap Robert ColvileThe Times A recent poll by the Centre for Policy Studies finds 73% of people believe “more freedom” is preferable to “more government”, says Robert Colvile. Yet, unlike Americans, Britons do not see government as the enemy of freedom. Indeed, two-thirds thought that the state’s job was to “protect most people against most risks” rather than acting as a “safety net”. This explains why, for all that Tory politicians “rail against” the expansion of the state, it is an expansion that most Tory voters (often older and consuming more health services and benefits), along with many Tory MPs and activists, are “pretty comfortable with”. It explains why the UK spent 23% of national income to support families and the economy during Covid (more…

economist.com When it comes to motoring, Europeans have long felt that size did not matter, says The Economist’s Charlemagne columnist. The continent was “woven together by poky cars powered by engines that would have been shamed by American lawnmowers”. Yet what European cars lacked in size they “made up for in va va voom”. The Fiat 500, VW Beetle, Austin Mini, Citroën 2CV and even the drab Trabants of East Germany all became “pop-culture icons” Alas, they’re heading for the scrapheap. Since the start of the century, cars sold in the EU have gained more than 200kg in weight on average – a third of an original Fiat 500. They have grown taller, wider and longer. SUVs have replaced the family hatch. Ford’s little Fiesta will cease production this month;…

Over the past decade, the two-year yield on government securities, otherwise known as gilts, has hardly been worth writing about. However, as interest rates have risen, even mass-market news websites such as the BBC have started covering gilt yields in the context of mortgage rates. The current two-year gilt rate is 5.14%, whereas for much of the last decade it was slumbering under 1%. I would argue that there’s a good chance this rate could go much higher. “The inflation genie is now clearly out of the bottle” The BoE gets tougher There’s a widespread argument that the Bank of England (BoE) was complacent in the early days of rising inflation. It didn’t react to the threat with the same fortitude and determination as the US Federal Reserve, and when…

Central banks’ balance sheets have exploded in size since 2008. After interest rates started rising last year, several of those institutions have reported losses. That’s not a problem, we’re told, because central banks are not bound by ordinary accounting rules. Recent research, however, finds that financial crises are more likely to occur after periods when their balance sheets have expanded massively. Besides, losses erode both the credibility and independence of monetary authorities, making it harder for them to fulfil their inflation-fighting mandate. In recent years, the typical central bank has combined the asset growth and asset-liability mismatches of the Silicon Valley Bank with the leverage of Lehman Brothers and the balance-sheet opacity of Enron. According to a new paper by Niall Ferguson and colleagues, published by Stanford University, central bank…

National Savings & Investments (NS&I) has boosted the prize rate on Premium Bonds to the highest level in more than a decade. As interest rates have increased and competition in the savings market has intensified, the state-backed savings provider has been struggling to draw in funds. Household deposits in all NS&I’s products slowed to £1.6bn in April, down from £3.8bn the previous month To try to counter this trend, NS&I is increasing the prize fund on the Premium Bonds to 3.7% from July. It is also raising the rate on its junior Isa to 3.65%, up from the current rate of 3.4% . However, it is also reducing the number of £25 prizes it pays to Premium Bond holders. The total number of £25 prizes will be cut from 2.1…

Savers hoping to take advantage of the abolition of the lifetime allowance (LTA) on pension savings may need to delay their plans. In particular, advisers say those who took advantage of the protection regulations, which enabled them to exceed the LTA without penalty as long as they made no further pension savings, should wait for guidance from the Treasury and HM Revenue & Customs. The chancellor’s decision to scrap the LTA on 6 April has prompted many savers to put more money into their pensions. Freed from the fear of tax charges on excess savings, many have already begun making additional tax-efficient pension contributions. But some of those savers have received letters from their pension providers warning them that they are giving up their protected status by making additional contributions.…

Towards the end of 2019, the Bank of England (BoE) was looking for the best man to replace Mark Carney as the central bank’s chief. In the end, the Treasury plumped for “the candidate it first thought of”, as the BBC put it at the time. Andrew Bailey (pictured), now 64, was respected by colleagues and civil servants, had 30 years of experience at the Bank under his belt, and his work under fire during the financial crisis was deemed “exemplary”. He had worked at the Bank as chief cashier from 2004 until 2011, was responsible for resolving problems in the banking sector during the crisis, then served as head of the Financial Conduct Authority city regulator. He was welcomed to the governorship of the Bank as a safe pair…

The TopspinPro is a handy contraption to help you get a handle on your topspin, designed by South African tennis coach and entrepreneur Phillip Hofmeyr. “You hit the ball and then slide your racket along the screen to get your muscles to memorise the correct angle for topspin forehands and backhands,” says Pamela Druckerman in the Financial Times, when she tried it last summer. “I went from not quite seeing the point… to becoming practically addicted to it.” It fits into a compact pouch and takes just moments to assemble. Then, with just two minutes of practice a day, you’ll be able to deliver devastating forehands on court with precision and power. £129, topspinpro.com Triniti Pro tennis balls by Wilson have been designed with environmental sustainability in mind. The balls…

Going… A letter written by a 26-year-old Wolfgang Amadeus Mozart (pictured) to his close friend Baroness von Waldstätten in the summer of 1782 is heading to auction with Christie’s in London on 6 July. In it, Mozart writes that he will have to marry Constanze Weber within two days to save the young woman with whom he was living in Vienna from the ignominy of being dragged from his house. Her mother, Cäcilia, had sent for the police to reclaim her daughter. Fittingly, Mozart had recently finished The Abduction from the Seraglio, the opera centred on the character Constanze that premiered that July. The couple married on 4 August 1782. The letter in German is expected to fetch £300,000 to £500,000. Gone… A recently discovered letter by Isaac Newton to…

“Japan’s stockmarket is leaving others in the dust,” says Matt Phillips of Axios. The Topix index has jumped by more than 20% in 2023 to become the world’s best-performing major market. The Nikkei 225, another key index, has climbed by 27% to a 33-year high. The world’s third-largest economy is “basking in a post-pandemic glow”, says Vivek Shankar in The New York Times. Consumption is on the rise and tourists have returned. While inflation has wreaked havoc in other economies, in Japan price pressures mark a welcome break from decades of grinding deflation. Growth, which hit an annualised rate of 2.7% in the first quarter, is “surprisingly solid”. Local stocks have been helped by “ultra-low interest rates” at a time when most developed economies are opting for tighter money. The…

Things are looking up for the Russell 2000, says Charley Grant in The Wall Street Journal. The index of small and medium-sized US firms outperformed the blue-chip S&P 500 for most of June and has gained 3% in the past month alone. That marks a reversal after years of underperformance: the Russell 2000 is still 24% below its November 2021 record high, compared with a 7.5% drop for the S&P 500 over the same time period. The Russell 2000 has a large contingent of speculative stocks in areas such as biotechnology: “companies that haven’t turned a profit in the past year account for about a fifth of the index”. It is also more exposed to the domestic US economy than the big S&P multinationals, thanks to listings by restaurant chains…

Five to buy Ceres Power The Sunday Times This green power business licenses its technology to manufacturers in return for royalties. The shares soared in 2020 due to investors’ enthusiasm about green hydrogen, but have since fallen back amid delays in a “milestone” deal to licence its fuel-cell technology in China. Ceres still isn’t profitable, but the capital-light model will see revenue growth soar once deal royalties start rolling in. The robust long-term outlook for hydrogen should ultimately power up the share price. 313p DS Smith Interactive Investor Shares in this FTSE 100 packaging multinational have been hit by slowing post-pandemic demand for online shopping. Yet with the shares trading on less than eight times earnings, the sell-off looks to have gone too far. The shares carry a prospective dividend…

Many commentators are puzzled by the apparent paradox of a resilient economy and the ever-worsening outlook as inflation proves stubborn and interest-rate forecasts rise relentlessly. Why, also, is sterling rising steadily if the economy is in such dire straits? In Argentina, none of this would be a surprise. In the face of inflation, people spend their pesos quickly because they will get less for their money next week, month or year. That creates the impression of prosperity, until the money runs out. Inflation here may not be nearly as high but holding cash is extremely unattractive. It is possible to get an interest rate of 4% on an easy-access deposit account and over 5% by locking money up for a year but, with an inflation rate of 8.7% and a…

“At 19, I was on £8,000 a week. I didn’t need to be on that much money, because I didn’t really need money. I asked my mates what they were up to and they’d say: ‘We’re eating beans on toast on blow-up furniture,’ so I bought beans on toast and blow-up furniture. I was just doing what my mates were doing, but I put away loads of money in the bank.” Former professional footballer Peter Crouch (pictured), quoted in The Times “As you get older, you realise you don’t need another television or fridge freezer. I’ve got a wonderful home, a wonderful life, a wonderful partner. All we need is enough money to go on holiday twice a year.” Actor Christopher Biggins, quoted in The Mail on Sunday “When I…

spectator.co.uk In 1970, entry to the Glastonbury festival cost £1 and you were given free milk for the duration, says Esther Watson. Last weekend’s festival, which attracted more than a quarter of a million people from all over the world, would have set you back £335, and a pint of beer £7. Glasto was once the counter-culture – now it is the culture. The appeal used to be that of escape – freedom from the “judgement and stifling rules” that dictated everyday life. Now it’s all about conformity –an upper-middle-class social environment where free thinking has been replaced by “reheated Corbynism”. In the Left Field, ageing rocker Billy Bragg hosted events on climate change and the NHS, which could easily have been staged with just slightly different casts at the…

Activist investors have launched another attack on the parent company of Wagamama, says The Telegraph. Hong Kong-based hedge fund Oasis Management owns 14% of The Restaurant Group (TRG). It has called the decision to promote Mark Chambers to chief financial officer (CFO) “concerning”: he had worked with the group’s CEO, Andy Hornby, at other companies, and has not held a CFO role for ten years. It also took TRG only a few weeks to fill the role, prompting Oasis to question whether the company conducted a “robust and healthy process” to find the new CFO. Oasis voted against TRG’s pay policy at the annual general meeting last month, calling Hornby’s pay package “unpalatable” and “disproportionate”.…

● Retirees could be in line for another bumper increase in the state pension next year. Under the triple-lock guarantee, the state pension rises every year by inflation, average earnings growth, or 2.5%, whichever is highest. The increase is implemented in April based on inflation and wage data recorded in September of the previous year. This April, the state pension was uprated by 10.6%, and based on the Bank of England’s current inflation projections, it could rise by 7% next year. If the central bank’s inflation forecasts prove correct, the full state pension will rise from £10,600 a year to £11,342 a year in April 2024. ● The chancellor has agreed on a series of support measures with banks to help support homeowners who get into difficulty paying their mortgages.…

● Policymakers hoping to improve access to finance for small growing businesses in the UK should require pension schemes to invest in venture capital, according to the Tony Blair Institute. The think tank suggests amalgamating final-salary pension schemes into “superfunds”, which would then be required to invest a certain proportion of their assets in growth-stage businesses. However, critics worry that such a move would expose savers to too much risk, given the volatility and unpredictability of immature businesses. For individual savers, certainly, it would be prudent to allocate only a small portion of retirement savings to venture capital. ● New analysis suggests more than 500,000 pensioners have begun paying income tax this year owing to a combination of the 10.1% increase in state pensions that took effect in April and…

Our “future of finance” theme represents the intersection of finance, technology, and the infrastructure required for digital assets. It focuses on firms driving innovation and transformation in finance to create the digital economy of tomorrow. These companies are steadily building the infrastructure that may, someday, run and operate significant portions of the global financial system. They span several segments of the digital economy, including payment platforms, exchanges, cryptocurrency miners, asset managers, and blockchain technology. Digital-asset exchanges are evolving Looking beyond the regulatory backdrop, companies such as Coinbase (Nasdaq: COIN) continue to build and invest in new products and services. The very idea of an exchange is evolving, and Coinbase is at the heart of that transformation. Trading digital assets remains the key driver of revenues , comprising 74% of sales…

Aside from its evening sale (see left), Sotheby’s is also exploring the theme of portraiture in its loan exhibition “Portraits from Chatsworth”, which runs until 4 July. Chatsworth House, the seat of the Duke of Devonshire, is home to artworks spanning 4,000 years – works from ancient Egypt to more modern pieces. Among the latter on display at Sotheby’s is Woman in White Shirt (1958-1960) – a portrait of the late duchess Deborah Cavendish by her friend Lucien Freud. She would sit in Freud’s London studio over many months, for three hours at a time, while the artist worked “very slowly”, Cavendish once related. “Sometimes, when I arrived, he would say, ‘I had a wonderful night. I removed everything I did yesterday’.” Freud later regarded the painting as having…