Indholdsfortegnelse for 1200 i MoneyWeek

“Everything has changed; and yet nothing has changed.” Along with resolutions to invest in some hair dye, significant anniversaries always prompt comparisons with the circumstances surrounding previous milestones. Since MoneyWeek’s first edition 1,200 issues ago, in November 2000, the financial world has been through unprecedented upheaval. But it’s also a case of deja vu all over again: the technology bubble is back. Bulls are keen to highlight the differences between the dotcom era and today’s AI-induced buzz. This isn’t a case of hype about “monetising eyeballs”, ascribing absurd valuations to companies that never developed business models beyond attaching.com to their name. Tech stocks with profits These days, the firms spearheading the market advance actually have earnings. Quite a lot of earnings, in fact: Argonaut Capital’s Barry Norris points out that…

“Jeremy Hunt’s ‘British Isa’... The new £5,000 tax-free allowance [aims to allow] patriotic savers to buy into the growth of ‘the most promising UK businesses’... UK stockmarket performance has been so limp in recent years that UK-only share-buyers would have reaped barely a third of the returns earned by those who opted for global equity funds... Demand for British Isas is highly unlikely... to change that pattern by [generating] capital flows that might make the London Stock Exchange a more attractive home for high-growth, high-tech companies. Those objectives can only be achieved by a radical change of mindset among institutional investors and a slashing of listing red tape... Michael Summersgill... of the stockbrokers AJ Bell... called it ‘ill-conceived’... and no better than ‘a rounding error’ in terms of new investment…

The “once-juicy prospect” of a takeover of Direct Line is in doubt, says Emma Taggart in the Times. Direct Line’s board rejected a second takeover bid from Belgian rival Ageas last week, and the chances of getting a higher offer have also fallen after reports that a top-ten shareholder in Ageas was “trying to stop the takeover”. This “latest twist” comes at a time when Direct Line has been left as a “sitting duck” thanks to “a number of profit warnings” that have caused a slide in the share price in the past two years. It’s good news that Ageas’s takeover of Direct Line is in trouble, says Alex Brummer in the Daily Mail. The boards of UK companies need to show more “dogged determination in batting away opportunistic takeovers,…

Shares in French luxury giant LVMH slid by 25% last year, but since the release of 2023’s results, the stock has bounced, says Focus Money. The group managed to grow sales by 13% and maintain steady margins despite a volatile global and sectoral backdrop; being widely diversified geographically and in terms of the product range paid off. In the fourth quarter, for instance, the US business performed strongly, compensating for weakness in other regions. The trading environment for the sector, with Europe’s economy lacklustre and inflation sticky, remains difficult, but the market leader should prove resilient. LVMH has no debt and plenty of cash for acquisitions.…

Politics & economics Donald Trump’s lawyers have asked a New York court to put a $464m fine in a civil fraud case on hold after they were unable to secure the bond needed to postpone it, say Joe Miller and Joshua Chaffin in the Financial Times. Trump was found liable in January for fraudulently inflating the value of real-estate assets in loan applications. The New York attorney general, Letitia James, who brought the case, can collect $464m, with interest, unless Trump posts a bond for the full amount while he appeals. Appeal court judges will decide by 25 March whether the judgment can be paused. This would be the “best-case scenario” for Trump, who will be eager not to pay roughly 16% of what Trump’s biggest lender, Deutsche Bank,…

With Labour regularly enjoying leads of over 20% in the polls, it’s not surprising that the betting markets are predicting Labour will win the most seats at the next election. With £3.2m matched on Betfair, Labour is at 1.13 (88.4%) to be at least the largest party in Parliament; the Tories are out at 9.6 (10.4%). The odds on an outright Labour majority are a bit longer, at 1.19 (84%), but not by much. I can’t realistically think of a scenario where Labour doesn’t win both most seats and a majority. But what about the chances of a Conservative wipeout greater than 1997, when they won only 165 seats? With £13,909 matched, Betfair thinks that the most likely outcome is 100-149 seats, with odds of 2.8 (35.7%), followed by 50-99…

It has been a bumper few years for British private-equity firms, with a record level of deal-making. In 2021, the number of companies bought out by the major houses hit an all-time record of 803 for the UK, with a combined value of £46bn. Supermarket chain Morrisons was bought out by Clayton, Dubilier & Rice, as was construction giant John Laing, the telecoms firm Talk Talk, the security company G4S, and car-breakdown service provider the AA, along with plenty of others. With interest rates at record lows during the pandemic, and with British quoted companies cheap compared with other markets globally, private-equity firms snapped up assets wherever they could find them, and often competed with each other to drive up the price rather than let a business fall into the…

If you invest in open-ended funds or exchange-traded funds (ETFs), you’ll often see “Acc” or “Dist” in the fund’s name. Many funds will have more than one share class, with one labelled as Acc and one as Dist. These abbreviations stand for accumulating and distributing, and they refer to how the fund treats income that it receives, such as dividends from equities or interest from bonds. An accumulating share class reinvests the income back into the fund. A distributing one pays it out to investors. Accumulating and distributing shares in the same fund will typically be valued at very different prices, unless the fund is relatively new or the income that it receives is very small. This is because the price of the accumulating share class reflects all the income…

“Streaming destroyed the artist’s ability to make money, our ability to participate in capitalism. Being an artist, we’re always freelance, and very often blue-collar… Those Friends people [stars in the hit sitcom] are making $100m a year! I’m getting six-cent cheques! It’s not OK!” US actor and singer Billy Porter (pictured), quoted in The Guardian “Life is a business which does not cover the costs.” German philosopher Arthur Schopenhauer, quoted on UnHerd “If you think your boss is stupid, remember: you wouldn’t have a job if he was any smarter.” US mobster John Gotti, quoted in Country Living “I am really not interested in money, but it must be more than anyone else gets.” US-Greek soprano Maria Callas, quoted in The Guardian “My children ruined my career. I love them…

statsignificant.com At the peak, there was roughly one video rental store for every 9,000 people in the US, close to an average of one shop in every local jurisdiction, says Daniel Parris. They died out for a reason. Streaming subscriptions and digital rentals are cheaper than renting physical media from a shop. Such services are also more convenient and you can access more titles than you ever could from your local Blockbuster. But recently I began not only collecting DVDs – not so strange, we like to own our favourite things – but also renting them from my local video store. Why? Mainly for the social interaction. In our increasingly digitised world, we’re increasingly working from home, spending more and more time alone and staring at a screen. Rent your…

The US trading and investment app Robinhood has finally opened a platform in the UK after two aborted attempts in recent years, writes Kalpana Fitzpatrick. This marks the group’s first foray overseas. It arrives with a tarnished reputation, having become embroiled in the meme-stock mania over GameStop in 2021, when it was forced to suspend trading in the video-game retailer’s shares. It has also been accused of using game-like features to entice young investors into risky trades, while regulators have issued fines for system outages and misleading customers about trading costs. What are its prospects? The lure of access to commission-free trades and zero foreign-exchange charges for 6,000 US stocks, including the market-leading technology giants, could prove the perfect sweetener at a time when US equities are so popular. The…

If you’re running your small business as a sole trader or operating as a partnership, don’t forget that 5 April is the final day of the 2023-2024 tax year. Your self-assessment tax return for the year doesn’t have to be filed until 31 January 2025, but make sure all your record-keeping is up to date so that filing is straightforward when you get round to it. Keep track of all your invoices, receipts, bank statements and other relevant paperwork. For example, where you’re seeking to claim business allowances and tax reliefs, make sure you have the right documentation to support your claim. HM Revenue & Customs may not require you to produce the paperwork, but it will be entitled to ask for it. For firms set up as limited companies,…

One of the biggest recent turnaround stories on the stockmarket is Rolls-Royce Holdings (LSE: RR). Although it was struggling for several years before the pandemic, Covid-induced travel restrictions caused demand for the engines that were the mainstay of its business to collapse. Forced to issue a large chunk of new shares to stay afloat, the group saw its share price fall by 80% in the first nine months of 2020. While the stock rallied in 2021 on hopes that the end of travel restrictions would bolster demand, as late as last February it was still selling for less than half its pre-Covid level. However, since then the shares have been on a tear. They are now roughly 70% higher than they were in January 2020 and close to levels not…

Many Parisians are less than thrilled to host the Olympic Games this summer, says Peter Conradi in The Sunday Times. Some are renting out their flats to the influx of tourists expected during the event rather than put up with the metro-fare hikes, expensive tickets, high temperatures, and a fan zone near residential areas. “JO-bashing” (for Jeux Olympiques) has become a sport. There is a more negative “social climate” in France now compared with when Paris “won” the Games in 2017. Foreign visitors are only set to make up to 15% of the 11 million people visiting Paris during the Olympic fortnight, with hotel occupancy rates not expected to exceed 80%, but prices could double to €500 a night. Still, there is hope. Some commentators believe the French tendency to…

US commercial property is “a slow-burning crisis”, says Jeanna Smialek in The New York Times. Los Angeles office towers are being sold for half their pre-Covid prices; in Chicago “graceful Art Deco buildings” in the city centre are recording occupancy rates of just 17% owing to remote working. About 44% of US office loans are now in negative equity, with the outstanding debt worth more than the property that backs them. Small and regional lenders, already weakened by last year’s banking crisis, are especially exposed. “The question is not whether big losses are coming,” but “whether they will prove to be a slow bleed or a panic-inducing wave.” It’s not just the banks that are exposed to tumbling commercial property values, say Natalie Wong and Patrick Clark on Bloomberg. In…

Reckitt Benckiser’s purchase of baby-milk maker Mead Johnson Nutrition in 2017 was an “absolute howler”, says Alistair Osborne in The Times. Mead’s value was written down by £8.5bn shortly afterwards, with much of the business then sold off. However, things got worse last Friday. An Illinois court ordered Reckitt to pay $60m in damages to a mother whose premature baby died after being given Mead’s Enfamil formula milk in intensive care. The news wiped 15% off the stock. Reckitt hopes to overturn the verdict, but the group “now has a US litigation overhang on its share price similar to the one GSK has suffered over the heartburn drug, Zantac”. Reckitt’s investors “have reason to fear further legal ramifications”, as the jury “awarded the plaintiff substantially more money than she requested”,…

Germany’s perfume-retailer Douglas, which has stores in 22 countries, has launched the biggest initial public offering (IPO) in Frankfurt since Porsche’s in 2022. It priced its €890m listing at €26 a share, the lower end of the range on offer; the implied valuation of the company is approximately €2.8bn. The company is owned by private-equity group CVC, which will maintain a stake, and the founding Kreke family. Douglas is not an attractive proposition, says WirtschaftsWoche. The money raised is needed to tackle the group’s massive debt pile of €3bn, a sum equivalent to 4.5 times operating profits. And if inflation makes a comeback, people will forego treats such as perfume.…

● Nationwide’s 16 million members should be given a vote on its “wild” £2.9bn takeover of Virgin Money, says Simon English in the Evening Standard. If the mutual has confidence in the deal, it should be easy to persuade members of its merits, but it is hiding behind the fact that “Nationwide has always grown by acquisition”. But its reputation for buying up “smaller, struggling building societies” to protect them from the greedy banking sector is at risk now that it is buying the bank formerly known as Northern Rock, which went bust in 2008. It is a “messy” company that also contains the former Yorkshire and Clydesdale banks. The merger will see Virgin Group net £400m, some of which must surely go to the taxpayer “by way of apology”.…

Investors who pulled more than £14bn from funds run by Richard Woolnough in recent years were right to do so, the veteran bond manager tells Citywire. Woolnough’s Optimal Income funds peaked at almost £24bn in July 2018, making it the largest fund in the UK retail market, but outflows soared as rates hit rock bottom. “Why buy a bond when it yields very little?” says Woolnough. “When bond yields were zero or negative, do you think clients should have had billions and billions of pounds in that asset class? I would argue no.” But conditions now offer a “far better starting point” for investors to return to bonds. Yields in the UK recently hit the highest since they’ve been in 1997, with gilts topping 5%, while inflation is coming down.…

literaryreview.co.uk In a previous work, Philip Stern showed that companies in the early modern era operated much like sovereign states within their colonial territories, says Barnaby Crowcroft. His latest, Empire, Incorporated, “messes with the political scientists even more” by showing how much of what we now see as the history of states was really the work of firms. It was not “Britain” as such that built the empire, but British companies and entrepreneurs. At the heart of it all was the joint-stock company, the “killer app” that “enabled the ascendency of the West”. Its great innovation was to open the “imperialism racket” to the middle classes – the firms were backed not only by adventurers, aristocrats and City of London financiers, but also local greengrocers and candlestick makers. Colonialism was…

The UK rail sector appears to be a struggling, quasi-nationalised enterprise with no overall long-term strategy, while the outlook for the private operators running rail services is uncertain. As such, investors may, understandably, wish to avoid FirstGroup (LSE: FGP), one of the country’s largest public-transport operators. However, a quiet revolution is happening in the rail world, and FirstGroup is leading the charge. A messy market During the pandemic, the government effectively nationalised the bulk of England’s rail franchises (operations are devolved in Wales and Scotland). Under the changes, the government pays operators a management fee while all revenue is passed back to the Treasury. Any gap between operating costs and ticket revenue is filled with operating subsidies, currently in the region of £3bn a year. The government also owns four…

● Around £34m in donations left to Cancer Research UK in people’s wills seems to have become trapped in the worsening probate backlog, says Noah Eastwood in The Telegraph. Eastwood notes that “this means lifesaving research missed out on vital funding in 44 projects[the charity]... had planned to invest in this year”. Probate is a legal document that allows executors to distribute an estate. It is meant to take up to 16 weeks to be issued by the government, but delays owing to the pandemic and the implementation of new online systems have kept families and beneficiaries waiting for over a year. ● Isa interest rates have lagged standard savings accounts in the past, but that is not the case anymore. The top easy-access cash Isa rate this week is…

● Businesses claiming research and development (R&D) tax credits should expect to be challenged by HM Revenue & Customs as a crackdown on abuses of the scheme continues. Tax advisers warn that businesses are now being routinely denied R&D tax credits, or even asked to repay credits received in the past, following a tightening of the rules last year. Advisory firms specialising in helping companies claim the credits are also struggling with the tougher approach. ● Companies House is set to introduce new fees on most of its services on 1 May, in some cases imposing dramatic price rises for essential services. The cost to incorporate a company online, for example, will increase from £12 to £50, while confirmation statement filing fees will go up to £34 from £13. Check…

During the first nine months of the pandemic, more than half of companies in the FTSE 100 chose to cut, defer, or even cancel their payouts to shareholders in order to conserve cash. In the banking sector, UK regulators (as well as those in the EU) essentially banned companies from paying dividends, a restriction that lasted for more than a year. However, since then dividends seem to have come back into fashion. Of course, the big question is whether this is good for investors. Economic theory suggests that a firm’s decision to boost dividends should have no impact on overall share returns, as any money the shareholders receive will be balanced by the fact that a company has less money to pay down debt, put back into the business, or…

It’s been a “spectacular fall from grace” for Evergrande, the property giant at the heart of China’s ongoing property crisis, says Lionel Lim in Fortune. Founded in 1996, Evergrande grew as China’s economy boomed and more Chinese turned to real estate as an investment. Yet as the group acquired more and more property, including a football club in the Chinese Super League, it also acquired a staggering debt pile of $300bn. The business defaulted in 2021 and was ordered to liquidate by a Hong Kong court in January of this year, leaving creditors with pennies on $20bn of offshore bonds. Beijing’s latest indictment is that both Evergrande and its founder Hui Ka Yan (pictured) fraudulently inflated revenues by almost $80bn. The Chinese regulator will impose a $583m fine on Hengda…

2021 Rutherford Hill, Merlot, Napa Valley, California £50.99, handford.net; dvinecellars.com I have followed the wines from Rutherford Hill for many years. Always tasty, ripe and boisterous in the glass, these wines are accurate and evocative examples of what Napa Valley can do, and that’s about it. That was until I tasted the 2021 Merlot in the unusual surroundings of Abbey Road Studios. The Californians were in town, and this pungently fragrant historic studio’s natural funk did its best, but could not dampen the ardour of this spectacular wine. Rutherford Hill relaunched its operation in 2022 while this wine snoozed in barrels. While the labels have upgraded and the winery has been spruced up, hiring the especially talented winemaker Michael Coode was the most significant advancement. Michael poured this wine for…

Have China’s stocks turned a corner? asks Weilun Soon in The Wall Street Journal. The benchmark CSI 300 index has fallen for the past three years. During the rout, more than $6trn was wiped off stock values – equivalent to roughly double the value of the entire London market. But after an “awful January”, officials cracked down on short sellers, eased financial conditions and encouraged stock buying by state-linked funds. The CSI has bounced 12% since the February nadir. A “more positive turn” in the economic data has also helped sentiment, says Garfield Reynolds on Bloomberg. Industrial production rose 7% in the year to January and February, yet an “ailing property sector” remains the “market’s Achilles heel”. At least five property developers, including Evergrande, have been ordered to wind up…

Apple is contemplating integrating Google’s artificial intelligence (AI) model into the iPhone, a potential alliance that “would shape the future of the technology”, says Katie Prescott in The Times. A tie-up with the world’s leading smartphone maker would be a “boon” for Google, as Apple’s products are so popular. An alliance between the two companies would also help them “steal a march” on Microsoft. But Apple is also in talks with OpenAI, the maker of ChatGPT and Microsoft’s key partner, about a possible deal. Investors are likely to have mixed feelings about Apple’s latest move, says Samantha Murphy Kelly for CNN. On the one hand a partnership with Google “would catapult Apple into the growing AI arms race” at a time when Apple has largely been “left out of the…

Five to buy Ashtead Group Investors’ ChronicleThis US-focused construction-equipment rental group recently “stumbled” amid signs of faltering demand for construction as higher interest rates bite. But there is still plenty of federal money behind infrastructure projects and it would be unwise to bet against a “tightly run” business that has shown an “uncanny ability” to shrug off economic weakness. This “demand scare” looks like a buying opportunity. 5,090p Costain SharesShares in this infrastructure and engineering contractor are up by more than 25% in a year as business enters recovery mode. In September management declared a dividend for the first time since the pandemic and recent full-year results showed progress on margins and a strong pipeline of work already booked. “Strained public finances” do pose a medium-term risk, but the balance…

In the “latest step in a sweeping political crackdown” following pro-democracy protests in 2019, Hong Kong’s parliament has passed a “controversial national security law granting the government more power to quash dissent”, says Helen Davidson in The Guardian. The law, known as Article 23, makes “treason, insurrection and sabotage” crimes that come with life sentences, and raises the jail term for “sedition” from two years to up to ten in the case of collusion with a “foreign force”. The allowable periods of detention without charge will also be extended from 48 hours to two weeks. Critics argue that the law will “further erode the city’s rights and freedoms” and usher in a “new era of authoritarianism”. The ease with which the measure passed is “indicative of just how much has…

The past few years have been a weak spell for small-cap stocks almost everywhere, but the UK has suffered more than most. The MSCI UK Small Cap index has lost about 2.75% per year over three years, including reinvested dividends. The only major markets with a worse record are Hong Kong (for obvious reasons) and Germany, where mid-sized industry has been hard hit by energy prices – in contrast to the DAX large-cap benchmark that is setting new records. In fairness, a few others are not much better (France has lost 2.12% per year), but the UK stands out for the angst this is generating. Nowhere else is the chancellor trying to make a flagship policy out of underwhelming ideas for encouraging taxpayers to buy domestic stocks. The shrinking mid-market…

Mexico’s tricky trade triangle Editorial The Economist Trade data released last month showed that Mexico overtook China last year to become the top exporter to the US, says The Economist. This rise has the “whiff of a new world order for global trade”, as America’s efforts to decouple from China and increase “nearshoring” intensify, aided by USMCA, the updated free-trade agreement between the US, Mexico and Canada, in force since 2020. However, the “third side” of the trade triangle, between Mexico and China, is “creating tension”. The main concern is steel and aluminium, but electric vehicles are also a big issue. To circumvent USMCA’s “rules of origin”, Mexico is simply buying components rather than finished goods from China. There’s also been a sudden uptick in Chinese foreign direct investment in…

betonit.ai Sweden has had rent controls since 1917, with a pause between the first and second world wars, says Vanja Månborg. It also has excellent statistical data on population and housing. The lesson from the data is simple: rent controls don’t work. The first ever nationwide rent-control law, which prohibited “unreasonable” rent increases, was passed in 1917 by a socialist party worried that rents would soar as urbanisation continued apace yet residential construction was halted to divert resources to the war effort. The share of rental apartments as a proportion of all residential apartments began to decline at this point. This trend continued despite a post-war reconstruction boom. Rent controls have been tweaked in the years since up to the present day, but remain in place. The result is that…

It has been a long time since anyone from overseas tipped British shares. So when Brian Chingono of US investment firm Verdad recently wrote an article entitled “Rule, Britannia!”, it was time to take notice. Chingono says the UK “seems mired in 1970s-style stagnation”. He adds that “Brexit seems to have been a negative inflection point” for small firms’ valuations and corporate margin spreads, the difference between UK and European profit margins. He compares these for the three years up to 2020 with the three years after, which appears to support the argument of a modest fall in margins (from 11.8% to 10.5%) and a larger one on spreads (from 2.5% to 0.9%). Brexit may have been a factor, but there were others, such as differing consequences of Covid and…

More and more people are facing a knock on the door from the taxman after the death of a loved one. The threshold for when estates become liable for IHT has been frozen at £325,000 since 2009 and will remain so until at least 2028. If the threshold had increased annually with inflation since 2017 it would be worth an estimated £458,931 by 2028. Instead, that year the average family will pay an extra £53,000. There are steps you can take to reduce a future IHT bill long before you die. We can all pass on up to £325,000 to our beneficiaries without paying IHT. On top of this so-called nil-rate band you also get an allowance of £175,000 for passing on your main residence to your children or grandchildren.…

More small businesses with relatively low annual sales will soon be beyond the reach of the value-added tax (VAT) system. Chancellor Jeremy Hunt has announced the first increase in the VAT threshold, the level of sales at which businesses must charge VAT, for seven years. From 1 April, firms will not have to register for VAT unless their annual turnover over the previous 12 months has exceeded £90,000, up from £85,000 today. Such businesses can avoid the administrative burdens of the VAT system and will be able to keep prices lower for customers, since they don’t have to add the 20% VAT charge to their prices. However, even if your business is below the threshold, you still have the option of registering for VAT. Many small firms choose to do…

Cloud computing is a transformative force in the technology landscape. Cloud computing allows companies to access third-party technology, such as data centres and servers, in a cost-effective manner online. This paradigm shift eliminates the need for businesses to maintain their own hardware and software infrastructure. Instead, they seamlessly integrate digital clouds, reducing operational costs and enhancing efficiency. This sector’s anticipated annual expansion of 20% is driven, in part, by the growing demand for cloud services, mainly fuelled by the requirements of artificial intelligence (AI). While many investors are looking for AI exposure, cloud computing can be considered a way to access the “picks and shovels”, or key equipment and infrastructure providers, of this emerging technology. Enhancing corporate efficiency A frontrunner in cloud-computing platforms, ServiceNow (NYSE: NOW) focuses on optimising digital…

It has been another mixed fortnight for my nine long tips, with four rising and the other five declining. Computer-services firm Computacenter advanced from 2,923p to 2,930p. Moonpig, which sells greeting cards and gifts online, rose from 159p to 169p and US construction-supplier Builders FirstSource increased from 189p to 195p. Trading platform firm IG Group also went up, from 707p to 732p. However, kitchen-supplier Howden Joinery fell from 856p to 849p, carmaker General Motors went down from $40.93 to $40.82 and budget airline easyJet dipped from 550p to 528p. Recruiter SThree also declined – from 421p to 414p – while SSP, which operates food and drink concessions in airports and train stations, dropped from 217p to 214p. Overall, my long tips are now making total profits of £1,444, up from…