Indholdsfortegnelse for 1216 i MoneyWeek

So much for another French revolution. Instead, France has opted for evolution in slow motion. It’s gone the way of post-war Italy, with protracted negotiations to form unstable coalitions on the cards. There are now 16 groups across three blocs sitting in the National Assembly, the biggest of which is a leftist grouping with policies resembling Jeremy Corbyn’s (see page 9). Markets have remained relatively sanguine (see page 4) in the expectation that the more extreme policies will be ditched in coalition negotiations. Allianz’s chief economist Ludovic Subran told WirtschaftsWoche this week that we can expect a “technocratic centre-left government”. “We have yet to find a truly transformative application for generative AI” Short shelf-life Unlike our own, however, it may have trouble lasting a full term, while France’s chronic overspending…

“My cautious views lead to fewer new subscribers. I guess people want their bullish views to be reinforced… the best things to read are those that test your beliefs… If you are a bull, read bears. If you are a bear, read bulls. You only learn from what you don’t know and haven’t thought about… I successfully called the 2001-2002 and 2008-2009 credit crises because I looked for contrary evidence to the bullish consensus back then. Today market valuations are stretched by massive government stimulus and AI hype. Are those forces sustainable? Can [the US] keep printing $2trn annual deficits without negative consequences? Will trillions of dollars of AI spending generate a requisite return on capital? Can credit markets keep expanding with high interest rates? I question whether the answers…

One of Hollywood’s oldest companies, the entertainment giant Paramount Global, has agreed to merge with independent film studio Skydance Media, creating a group worth $28bn, says Peter Hoskins on the BBC. As part of the “complex” deal, Skydance will pay $2.4bn for National Amusements, owned by non-executive chair Shari Redstone. It holds just 10% of Paramount Group’s shares, but accounts for almost 80% of voting rights. It is the “end of an era” for the Redstone family, which “transformed a chain of drive-in cinemas into a vast media empire”. No wonder Redstone is throwing in the towel, says AJ Bell’s Russ Mould. The stock has fallen by 78% in five years, while rival Netflix has gained 85%. The problem was the Paramount’s “big gamble” on the streaming sector, with its…

The proportion of computers working with artificial intelligence (AI) is set to expand by a third by 2017, says WirtschaftsWoche. The AI “megatrend” is good news not only for the likes of Nvidia, but also for IT-services groups such as Munich’s Cancom. It is one of the biggest names in the business of installing and providing services (including consulting) relating to IT systems. In Germany, which comprises 66% of sales, the outlook is improving, while a recent takeover in Austria has buoyed performance there. Operational improvements could also ensure that sales reach €2bn this year, while net income could jump to €50bn. The balance sheet is solid and the yield of 3.2% appealing.…

Politics & economics Nigel Farage’s “upstart” Reform UK party won around 14% of the vote and now has five seats in parliament, including one for Farage at his eighth attempt, says Stefan Boscia in Politico. This “surge” is thought to have cost the Tories more than 100 MPs by splitting the right-wing vote. Reform also came second to Labour in more than 100 seats. In his victory speech, Farage made clear that his sights are set on the 2029 general election, saying, “This is just the first step of something that is going to stun all of you.” The question is, will Reform’s “explosive arrival in Westminster bring a fundamental realignment of British politics along the lines seen elsewhere for populist parties across the globe?”. The official Reform line…

Last week’s general election was generally good for this column as I’ve long tipped Labour getting the most seats as well as an overall majority. Also as tipped, the Tories got more than 100 seats and ended up with more MPs than Reform, which got less than 20% of the vote, and Labour got more seats than the SNP in Scotland. My suggestion not to take a position on the political spreads market was also proved correct, as the final result was very close to the final spreads. My record on individual seats was also good as Labour took Glasgow East, Glasgow North East, Glasgow North, Edinburgh North and Leith, as well as Kirkcaldy and Cowdenbeath, and Eltham and Chislehurst. They also held on in Hartlepool, Rochdale and Sheffield Hallam.…

unherd.com The election was a missed opportunity to face a grim reality, says Paul Collier: “beyond London and Edinburgh, the regional economies of Britain have accumulated deep structural problems” and are poorer than they should be due to low-productivity and a skills shortage. Large investments in new infrastructure and skills are needed – a mighty task that was botched by the Tories with their “levelling up” promises. A debate about how to rectify this failure should have been at the heart of the election campaign. Still, Keir Starmer deserves the benefit of the doubt. Like the rest of his team, he is “tough, focused and a team player”. Now he must deliver with a credible plan to improve the lives of regional voters. That will mean challenging the “failed ideology…

■ Investment trusts consistently outperform similar open-ended “sister funds” from the same manager, with an average additional return of 5.3% on an underlying basis, according to Wealth Club, an investment service. These trusts, which have been around since 1868, offer opportunities to invest in private equity and infrastructure. Trusts have outperformed sister funds over the past ten years, with some delivering over 50 percentage points more in returns. This is thanks to their permanent capital structure, along with their ability to borrow money and invest in illiquid assets. While share prices’ discounts to net asset value (NAV) can affect returns, investors benefit when discounts close or when trusts rise to a premium to NAV. Open-ended funds may be less volatile, “but for the patient investor who can look through the…

● One early decision for Labour on pensions will be when to introduce new contribution rates. The last government legislated for two significant changes to the auto-enrolment system, through which employers enrol all staff in their occupational pension scheme. The system was extended to cover workers aged between 18 and 21, and the lower earnings limit for qualifying earnings was abolished. The changes mean more people are covered by auto-enrolment and that everyone’s minimum contribution will increase. But there has been no detail announced on when the changes will come into effect. ● With inflation now back at the Bank of England’s 2% target rate, pension experts are worried that the high cost of inflation-linked annuities may put many people off these products. Today, £100,000 of pension savings would buy…

After a lousy June the long-delayed summer seems finally to have arrived. But does good weather bode well for equity markets? A 2015 study by Pomona College, California, seemed to suggest as much. Between 1948 and 2013, the market performed better on days when New York was sunny than when it was cloudy. A more recent study by the University of South Australia found that highly volatile stocks do best during sunny weather and clear blue skies, but fall back when the weather changes. Nevertheless, while sunshine is good for returns it appears high temperatures can actually reduce them. In 2019 research by the University of California, Davis, the University of Otago and Victoria University of Wellington looked at extreme heat events and stock prices between 2003 and 2017. It…

“I was the first of my family to go to university,” Keir Starmer told the Leeds University alumni’s magazine in an “exclusive interview” in 2023. “My Dad worked in a factory, my Mum was a nurse.” That will not be news to anyone paying attention to the general election campaign just ended, where these words became the Labour leader’s mantra to the point of self-parody. But no matter how much attention you were paying, you would have been unlikely to gain any more insight into the character of the man who is now our prime minister than was vouchsafed to Leeds University alumni last year. Starmer grew up in rural Surrey, developed a passion for “social justice” while at university, and studied international human-rights law. He was an exceptional student,…

The end of rising interest rates, which has led to an increase in deal-making, means bigger bonuses for London’s investment bankers, says Kalyeena Makortoff in The Guardian. Capital market activity was “promising” in the first quarter, signalling a thaw in a two-year freeze, according to Dartmouth Partners, a banking-sector recruiter. Mid-tier associates’ bonus payouts fell by a fifth to an average of £80,065 last year, sending total pay down to £213,940 – 8.3% less than the previous year. Bonuses for some vice-presidents were slashed 22% to £135,000, reducing total average pay by 11.8% to £303,204. But providing they survived the earlier job cuts, bankers can look forward to a more rewarding spring bonus season. Moreover, the previous government’s decision to scrap the cap on bankers’ bonuses means that, over time,…

Investors have caught “uranium fever”, say Geoffrey Morgan and Jacob Lorinc on Bloomberg. The nuclear fuel suffered from a long period of neglect after the 2011 Fukushima disaster but prices have surged 233% in five years, “more than triple the gains in gold and copper”. A global drive for low-carbon fuels has fostered an atomic renaissance, while the war in Ukraine has forced Europe to shift away from Russian gas, with nuclear energy a big winner. There are 61 nuclear power plants being built worldwide; 90 are planned. The price jump has been so rapid that “one might confuse this mildly poisonous metal with a semi-precious one”, says Lex in the Financial Times. But the market top could already be in. Prices exceeded $100 per pound in late January but…

The UK stockmarket put in a mediocre performance during the last parliament, with the FTSE 100 gaining 9% and the FTSE 250 rising 6% since July 2019, shortly before Boris Johnson became prime minister. That contrasts with gains of 85% for America’s S&P 500 and 36% for France’s CAC 40 over the same period. But with Europe and the US in turbulent political waters, City commentators hope the UK could now emerge as a safe haven. “To quote a well-known campaign slogan from 1997: ‘Things can only get better’”, Michael Browne of asset manager Martin Currie tells The Guardian. While a rally in UK shares seems overdue, the City still has hurdles to clear before it can enjoy a renaissance (see page 15).…

After rejecting previous takeover offers from Carlsberg because they undervalued the company, soft-drinks maker Britvic has now agreed to an improved £3.3bn bid from the Danish brewer, say Jack Simpson and Jasper Jolly in the Guardian. Shareholders will receive £12.90 in cash for each Britvic share, plus a special dividend of 25p a share. The deal will also create a new enlarged group named Carlsberg Britvic. Carlsberg has said the acquisition would lead to yearly savings of about £100m over five years thanks to procurement- and supply chain-efficiencies. The “writing was on the wall” for Britvic as an independent entity when it emerged that Carlsberg had secured a waiver on a change of ownership clause associated with a bottling contract Britvic enjoys with PepsiCo, says AJ Bell’s Russ Mould. This…

MegazoneCloud, one of Asia’s biggest cloud and artificial-intelligence (AI) services companies, has selected banks to support an initial public offering (IPO) likely to value it at several billions of dollars, says Bloomberg. The date of the flotation has yet to be announced. The South Korean firm connects firms to top platforms such as Amazon Web Services. It also offers data analysis and generative AI services to 7,000 clients. Sales reached $1.2bn in 2023. South Korea has emerged as a key location for IPOs this year amid efforts to enhance corporate governance. Around $1.9bn South Korean IPOs have been priced this year, up 72% from last year.…

Milan has always been Italy’s financial centre, but it has never had much of a role on the global stage, and as Italy’s economy has stagnated over the last 20 years, even its domestic role has not amounted to very much. Over the last few months, however, there are signs that Milan’s reputation is starting to change. Last week, we learned that the private-equity firm Three Hills Capital Partners was backing plans to open a private-member’s club in Milan, modelled on London’s Soho House chain. Its aim is to provide a networking hub for all the finance professionals moving to the city. The hedge fund Capstone opened up an office in Milan in January, and Eisler Capital, Andera Partners, Arcmont Asset Management and Certares Management have all established a presence…

Asia must decouple from China Sonal Varma Nikkei Asia Tariffs on Chinese imports have so far been a “Western phenomenon”, says Sonal Varma. “This is about to change.” Chinese overcapacity, exacerbated by Western tariffs which have led additional supply to be redirected to markets closer to home, are “squeezing” domestic producers across Asia. This year, for instance, China has exported more electric vehicles to Asia than Europe. The trend, which “spans both low-tech and high tech” products, could “hollow out the region’s manufacturing”. To protect their domestic manufacturing sectors and jobs, “Asian policymakers cannot sit idle”. True, Asia has less bargaining power than the US because China is a “key destination” for certain exports and Asian countries are dependent on Chinese intermediate goods for trade, but that should be no…

bloomberg.com/opinion Investors in British stocks have reason to feel cheery, says Merryn Somerset Webb. Labour has won a “pretty hefty” majority, boding well for political stability. And the new government has been “dealt a perfectly reasonable hand” to play: the economy has emerged from recession and real disposable incomes are on the rise as inflation cools. Overall, there is no reason for GDP growth not to run at 1.5% in 2025 and 2026, as economist Sanjay Raja of Deutsche Bank points out. The trouble is, we have been in these relatively sunny spots before, and they all “came to a rather sticky end”. Investors were cheery when Tony Blair took power, but in the end the pattern in the markets followed that of all Labour governments since World War II.…

Private-equity funds have produced an annualised return of around 17% over the past decade, making the asset class one of the best-performing in the world, according to the Cambridge Associates Private Equity Index. However, according to research by the Financial Times blog Alphaville, based on data from Prequin, over the past 13 years private-equity funds have called $821bn more from their investors than they have returned. The figures are even worse over the past six years. Private-equity funds have taken in a staggering $1.6trn more than they have returned to investors during this period. Healthy returns For readers who don’t know the language of the private-equity world, private-equity funds will “call” on investors who have signed up to commit capital to a fund when they have found an investment they…

A small number of British firms have achieved sustained profitable growth using a combination of organic growth and bolt-on acquisitions, which are then developed much further. Diploma (LSE: DPLM) is a good example. I first recommended Diploma in MoneyWeek in April 2019, when the shares stood at 1,550p. That article pointed out that the share price had risen two-and-a-half times from 608p in autumn 2015 and suggested that there was plenty of potential for further growth. This duly occurred: the recent share price is 4,140p, so the shares have risen almost threefold in just over five years, or nearly 22% per year with annual dividends on top of that. Diploma is a company in the FTSE 100 index with a market value of around £5.6bn and 2023 turnover of £1.2bn.…

Canadian industry is ideally placed to benefit from nearshoring, says Greg Eckel – a result of both the incentives and subsidies coming from the government, and its preferential access to the US market under the USMCA trade agreement. Eckel’s fund, Canadian General Investments (LSE: CGI), is an investment trust with three-quarters of its assets invested in Canadian firms, and the other quarter invested in North America. It has a concentrated portfolio of medium- and long-term investments, an ongoing charges figure (OCF, a measure of total costs) of 1.68%, and trades at a discount to its net assets of 23%. Canadian General Investment’s third-biggest holding is Canadian Pacific Kansas City (NYSE: CP). “Friendshoring” to Canada and Mexico will boost the amount of goods shipped in North America, says Eckel – good…

Will the new chancellor come for the generous inheritance tax (IHT) breaks on pension savings? Well, if Rachel Reeves decides this could be a useful money spinner, she can count on the support of the Institute for Fiscal Studies. The influential think tank last year called for changes to the “overly generous tax treatment of pension pots at death”, which could raise £1.9bn a year. It’s the anomalous treatment of pension savings that makes them vulnerable. Almost every other substantive asset in your estate – including money held in other tax-efficient shelters such as individual savings accounts (Isas) – is potentially subject to IHT when you die. Typically, your heirs will pay 40% on the value of assets above the IHT threshold of £325,000, although there is an extra allowance…

Finsbury Growth & Income Trust’s (FGT) strategy is based on the premise that one way to achieve competitive investment returns is to run a concentrated portfolio built around positions in world-class companies that offer access to long-lasting and money-making global investment themes. This strategy is not so unusual, although there is no doubt that FGT’s portfolio really is concentrated by most investors’ standards, with the top-ten holdings accounting for 75% of the whole. What is more unexpected is that FGT has a UK equity mandate, yet we claim it gives exposure to global growth themes via world-class companies. I say unexpected because many investors, both global and domestic, question whether many, or enough of such companies are actually listed on the London market. We think they do exist, and note…

It has been a poor fortnight for my long tips, with six of the eight declining, and only two going up. Investment and share-trading platform IG Group rose from 829p to 835p, while cruise-ship operator Royal Caribbean appreciated from $154 to $161. General Motors decelerated from $48.11 to $46.55, Rolls-Royce Holdings dipped from 471p to 463p and high-street clothing retailer Next slipped from 9,292p to 9,042p. US building-materials supplier Builders FirstSource fell from $142 to $135, Paypal declined from $67 to $59, and Hollywood Bowl slid from 315p to 307p. My long tips are now making overall profits of £720. My three short tips also put in a mixed performance, with two rising and the other falling. Air-taxi firm Joby Aviation gained altitude from $5.11 to $5.21. Axos Financial increased…

When Charles Darwin came across giant tortoises on the Galápagos Islands, he noted that “I was always amused when overtaking one of these great monsters, as it was quietly pacing along, to see how suddenly, the instant I passed, it would draw in its head and legs, and uttering a deep hiss fall to the ground with a heavy sound, as if struck dead”. Luckily for me, the giant tortoises on Desroches Island in the Seychelles were much friendlier, especially Big Pete, who happily posed with us as long as we stroked his carapace and long neck, which he extended in an attitude of bliss. Perhaps their friendliness is because the Aldabra giant tortoises on Desroches Island are a species unique to the Seychelles, but also because they are now…

An original watercolour illustration created in 1997 for a children’s book that was soon to be published about a boy wizard became the most valuable item connected with Harry Potter, when it sold for $1.9m with Sotheby’s in New York, late last month. The artist, Thomas Taylor, was just 23 and working in a bookshop in Cambridge when he was selected by publisher Bloomsbury to come up with a cover illustration for Harry Potter and the Philosopher’s Stone. Taylor was sent a copy of the manuscript and, following author JK Rowling’s description, gave Harry Potter his trademark dark hair, round glasses and lightning bolt scar. It took him two days to complete, using concentrated watercolours on cold-pressed watercolour paper and outlined with black Karisma pencil. Unfortunately for Taylor, he didn’t…

“It could have been worse,” says John Authers on Bloomberg. French president Emmanuel Macron’s “reckless decision” to call early parliamentary elections has yielded a hung parliament and “an unconscionable mess” (see page 9). But that outcome was still better than pre-election predictions of a “constitutional crisis” and a far-right government that could imperil “the existence of the euro”. In the event, the new French parliament’s centre of gravity is only slightly to the left of “where Macron is now”, although building any kind of workable coalition out of the country’s divided parties looks unlikely. The big winner? The British pound. “It’s hard to get excited about the infant Labour government,” but given the chaos across the channel, the pound “looks a very good bet to outperform France and the eurozone”.…

Shares in pharmaceuticals group Indivior plunged by a third last week after the drugmaker slashed its profit guidance and revealed it would discontinue sales of Perseris , its schizophrenia drug, says This is Money. Indivior, based in the US, moved its primary listing to America last month, but continues to trade on the FTSE 250. It also warned that sales of its opioid addiction treatment Sublocade continue to be weak, due primarily to changes in the extent to which the drug is covered by the US medical system. The twin setbacks have created a “tornado” that has wrecked Indivior’s share price, says AJ Bell’s Russ Mould, especially since Perseris had been expected to achieve peak sales of $200m to $300m. However, Indivior is “no stranger to setbacks since being spun…

Five to buy Tate & Lyle The Times Tate & Lyle’s shares tumbled after it acquired ingredient supplier CP Kelco. But although the deal raises concerns about debt levels and integration, it should expand Tate’s product range. Meanwhile, Tate has transitioned away from being the “king of the sugar lumps” to focusing on specialised ingredients for healthier and tastier food and drinks. Tate’s price/earnings (p/e) ratio of 10.8 and 3.2% look attractive. 599p Segro The Telegraph Since 2017 Segro’s stock has generated a capital gain of 82%, outperforming the FTSE 100 index. The real-estate investment trust, which focuses on warehouses and industrial properties, has returned 114% over the past seven years, with an annualised rate of around 12%. Segro’s low valuation suggests further scope for capital growth, especially with expected…

Many Iranians boycotted the first round of the country’s presidential election, says The Guardian. But more turned out for the second round, leading to a victory for the more moderate candidate, Masoud Pezeshkian (pictured). His campaign focused on economic policy and corruption, and called for a “relaxation” of some of the more repressive elements of the regime. He also said he would “reach out to the West” in the hope of loosening sanctions. The powers of the president are “limited”, but Pezeshkian’s “unexpected triumph” is an unforeseen beacon of hope. Pezeshkian’s win was a sign of the level of public concern about the hard-line policies his opponent espoused, says The Wall Street Journal. But the fact that he was allowed to run at all indicates that the Iranian establishment considers…

● M&S’s hybrid video and in-person format for its annual shareholder meeting “worked”, says Nils Pratley in The Guardian. It was a stark contrast to last year’s digital-only event. Shareholders “have a right to buttonhole” the board once a year. But there must be a video component to interest private shareholders, who are crucial to reviving public markets. Not everybody lives in London. Attendance at annual meetings has been in decline, with most boardrooms making little effort, perhaps out of fear of protesters or because they deem small investors irrelevant. But M&S’s chair Archie Norman (pictured) is trying to stir up interest and “stand up for the small investor”. More shareholders should go to meetings, “whether virtually or in person, and more companies should make it worth their while”. ●…

“Since Covid I have made £365,000 through cameos and personalised videos. One day I will need carers. I want to be comfortable and I want them to be properly paid for. It is really because I want to make money though and they pay me to do it.” Actor Miriam Margolyes (pictured) on charging fans £135 for a personal video message on the Cameo platform, quoted in the Daily Mail “Margaret! They’re taxing non-doms, not condoms.” Confusion on the doorstep, as recounted by Labour candidate Karl Turner, quoted in The Mail on Sunday “You’re rich when you don’t have to worry about money. You’re wealthy when you don’t have to worry about time.” American writer David Perell, quoted on X “People who earn their living, rely on our [public] services and…

theconversation.com Why do politicians look so out of touch with ordinary people? “Because they are,” says Emma Otterski. Politicians tend to come from a narrow subsection of society and have higher status than those they represent. Status in turn affects our ability to empathise. We make assumptions about others’ psychological states based on cues we take from their behaviour. But the “folk psychology” we operate with varies across cultures and depending on status. People with higher status, on both the left and the right, are, for example, more likely to blame the individual than circumstantial factors for someone’s lack of success. People with low status give more attention to facial expressions, suggesting they have a greater instinct for trying to understand how others are thinking and feeling in order to…

Cevian Capital has acquired a 5% stake in knee-and-hip replacement manufacturer Smith+Nephew (S&N), says Bloomberg. The Swedish activist investor says that S&N “has not generated shareholder value for many years”, and there is “potential to create significant long-term value by improving” its operating performance. S&N’s shares, which have declined by 42% over the past five years, jumped by 7% on the news of Cevian’s holding. Cevian should push CEO Deepak Nath to take a bigger axe to the bloated cost base, says Breakingviews’ Aimee Donnellan. If Nath’s turnaround plan fails, then S&N should sell its sluggish orthopaedic unit to free up cash to invest in its wound care and sports injuries units.…

Experts think 2.5 million pensioners are already paying income tax on their state pension. In principle, you don’t pay any income tax until your income goes above the personal allowance, currently £12,570 and frozen for the next few years. Your state pension alone does not take you above that threshold, but is likely to do so by the 2028-2029 tax year, given expected increases. At that stage, some of the cash will be taxable for the first time. However, many people already receive a state pension that is more generous than the basic level of around £11,500. They may have extra entitlements under the old Additional State Pension scheme, for example. They may also be getting extra because of the transitional arrangements put in place when the state pension was…

Over the past 15 years the notion that a company exists to make money for its shareholders has often been cast aside. Many technology companies saw their share prices rocket even as they drowned in red ink. This was partly due to a genuine belief that the losses were necessary for them to grow enough to reach critical scale. However, near-zero interest rates also explain the trend; they meant that investors had little alternative but to be patient. However, with interest rates now back to normal levels, such companies are being battered. Chief among them is Ocado (LSE: OCDO). This company pioneered the idea of ordering your groceries online and having them delivered to your home. It is so closely associated with online food-shopping that it has almost achieved verb…

2015 Barca-Velha, Casa Ferreirinha, Douro, Portugal Approximately £600, hedonism.co.uk Every so often – well, to be precise, this is the 21st occasion in 72 years – a mind-blowing red wine is released in Portugal. It is no understatement to say that Barca-Velha is a legendary creation. The 2015 vintage will arrive in the UK a couple of days after this piece is published, so you are the first to hear about its greatness. I have been fortunate to taste a number of older Barca-Velha vintages, and they age more gracefully than most top-flight red Bordeaux. Only the other day, I tasted a 1982 that was fresh, supremely complex and mind-bendingly delicious. So, on the brink of the release of the 2015 vintage, I was fortunate to taste it with the…

Going… A collection of four drawings sketched by a young princess Victoria in the years leading up to her coronation in 1837 and just after were heading for auction this week with Roseberys Fine Art Auctioneers & Valuers in London. Three of the drawings depict figures riding a horse, drawn when she was 14, having received lessons from the English painter and illustrator Richard Westall from the age of eight. The fourth drawing is of a young woman wearing a sash and a crown, bearing a resemblance to Victoria and drawn just after she became queen. Together they were offered as one lot with other royal ephemera, including an invitation to the coronation of George IV, Victoria’s uncle, and valued at up to £2,500. Gone… Several dresses that had been worn…