Indholdsfortegnelse for Issue 1242 i MoneyWeek

“Do not target higher returns than markets seem likely to deliver – you will end up taking on too much risk to achieve them. Do not aim for a yield on your portfolio if the selection of good companies paying high yields is poor – you will end up compromising on quality. And do not adopt a deep-value approach when markets do not have plenty of stocks trading below book value. Different market conditions will suit different investment styles… you have to adapt. Looking at today’s market, I feel many passive investors are being driven to buy some wonderful companies at prices that do not represent fair value. The expensive Magnificent Seven stocks now dominate indices to such an extent that I fear for future returns… I don’t think I…

Manmohan Singh, the former Indian prime minister, who has died aged 92, “changed the course of his vast country and its billion people”, says Harry Phibbs on CapX. His key period, however, was as finance minister from 1991 to 1996, when the “quiet” former economics professor dumped the “socialist doctrines cherished” by Indian successive governments for more than 40 years and “launched a radical privatisation programme based on Thatcherism”, says The Times. This enabled him to reduce state borrowing, cut taxes and increase spending on infrastructure and social programmes. Foreign reserves rose to some $120bn. He effectively set in train reforms that “would create a global economic powerhouse”. When Sonia Gandhi won the election but declined to take office in 2004, she appointed Singh as India’s first Sikh prime minister…

Chancellor Rachel Reeves might have hoped for a better start to the year. When the markets reopened after the Christmas holidays on 2 January, the pound was the main focus, falling to a nine-month low against the dollar. The fall came as the latest data showed factory output in the UK falling at the fastest rate in 11 months, with S&P Global Market Intelligence, the data company that compiles the figures, blaming the government for the fall in sentiment. It got worse on Monday, the first proper trading day of the new year, with a survey by the British Chambers of Commerce reporting that business confidence had fallen to the lowest level since the Liz Truss Budget, and that a majority of companies were planning to push up prices over…

A bond yield is a measure of the return that an investor will receive on their capital. There are several different ways in which bond yields can be defined, depending on what you are trying to measure. The nominal yield (also called the coupon rate or coupon yield) is the annual interest rate set when the bond is issued. For most conventional bonds, this does not change (floating-rate bonds, where the interest resets periodically to reflect some reference rate, are an exception). Unless you are buying the bond at face value (eg, when it’s first issued), nominal yield doesn’t reflect any return you receive. But it can tell you something about the properties of the bond and how it may behave in different market conditions. The current yield (also known…

“When I was 16, I’d actually already started cycling competitively… I remember we got sat down for a careers meeting in year 11. And they said to me: ‘What do you want to do?’ And I said: ‘I want to be a professional cyclist.’ And someone said to me, ‘but that’s not a proper job’. And I [thought], hang on a minute. Because I was already getting paid.“ Olympic cycling champion Laura Kenny (pictured), quoted in the Big Issue “Money differs from an automobile or mistress in being equally important to those who have it and those who do not.” J.K. Galbraith, quoted on X “One of my greatest inspirations was Ronnie Barker. He gave me some of the best advice: ‘You are your own currency, spend it wisely.’” Actor…

snowdon.substack.com On Boxing Day 1947, George Orwell was in hospital and wrote to a friend to ask him to send him a Biro, says Christopher Snowdon. He enclosed £3 to cover the cost – which, at the time, was £2.15.0. That is the equivalent of £35 today, or a secretary’s weekly wage in 1946. Ballpoint pens were “new and trendy” when Orwell ordered his, and when New York’s Gimbels department store first offered one it sold for about £150 in today’s money. But the magic of mass production, accelerated by advertising, worked its wonders. The market was soon saturated with refillable ballpoint pens. The problem for the industry was that people were buying refills, but not new pens. The problem for consumers was that most of them were priced out…

Seven trusts – Keystone Positive Change, Baillie Gifford US Growth, Edinburgh Worldwide, Herald, Henderson Opportunities, European Smaller Companies, and CQS Natural Resources Growth & Income – have hit back against US activist Boaz Weinstein after he called on them to sack their boards and install his hedge fund Saba Capital as manager. CQS called Saba’s criticism of its returns “self-interested” and “misleading”. Keystone said Saba was “acting opportunistically, seeking to seize control of the board without a controlling shareholding”, and Herald argues “significant value could be lost for shareholders as a result of forced selling of parts of the portfolio”. All are urging investors to vote against Saba’s proposals next month.…

Many investors will be glad to see the back of 2024. But there were some huge rises for those who were in the right stocks. Let’s see how the companies I picked last year have fared over the last 12 months. Four of the five stocks closed up, but one slumped. Overall, a 21% gain becomes 46% when stripping out the worst performer. That’s what I would call an “adjusted profit return”, which is exactly what management teams do when they get rid of the bad sections of their results and call it “adjusted profit”. Renold, UK-based manufacturer of industrial conveyer chains and other machine components, is no longer a holding of mine as it is trading below its 200-day exponential moving average (EMA) and appears to be on the…

The shipping container has been called one of the greatest inventions of the 20th century as it revolutionised global trade and cut the cost of trading, accelerating the pace of globalisation. The shipping container we are all used to seeing today was invented in 1956 by American entrepreneur Malcolm McLean. He saw that standardising the process of loading and unloading ships would make it easier to bring in mechanisation, speeding things up and cutting costs. He originally built a container with a length of 33ft and a height and width of eight feet. The impact was immediately apparent. It has been calculated that in 1956 manually loading a ship cost $5.68 per ton ($65.88 in today’s money). After the changes, the cost fell to around 19 cents. Today, the standard…

Savers who took lump-sum payments from their pension schemes ahead of the Budget amid anxiety about potential changes to the rules on the tax-free cash are stuck with their decisions, new guidance from HM Revenue & Customs warns. It is thought that thousands of savers took tax-free cash from their pension savings ahead of November’s Budget, amid speculation that the chancellor planned to limit or abolish the right to do so. In some cases, these savers were advised that they would be able to cancel the withdrawals if the Budget proved benign. But HMRC has now warned advisers that it considers such withdrawals irreversible. Financial services regulation normally gives people a 30-day cooling-off period when making significant savings or investment decisions, but in this case HMRC says such rules do…

2023 Paul Mas Réserve Blanc, Languedoc, France £9.99, reduced to £7.99 until 21 January, Waitrose It’s January and the sales are on. Times are tough, so I have decided to find you a rare bargain. It is the sort of deal that every supermarket seems to be peddling on every aisle, but this one is different. This hauntingly floral, silky-smooth, beautifully balanced white wine is ridiculously over-engineered for its temporary eight-quid price tag. It is sold in 286 stores and via Waitrose online, so you can easily track it down, too. Made from a brilliant blend of vermentino, marsanne and grenache blanc by the prodigiously talented Jean-Claude Mas, there is so much class and restraint here that it defies belief. The fruit notes stay on the pear juice, apple skin,…

Forex Forever The City of London and the Foreign Exchange Market since 1850 Ranald Michie OUP Oxford, £107.10 Ranald Michie, professor emeritus of financial history at Durham University, was one of the most respected historians of Britain’s financial markets, thanks to his histories of the London Stock Exchange, the City of London and the global securities market. Sadly, Michie passed away at the end of last year, but not before publishing his final book, Forex Forever – a look at how London’s foreign-exchange market grew into the global behemoth it is today, where it accounts for 38% of all global currency traded by volume. As Michie points out in the introduction, most foreign-currency transactions take place between banks, rather than through centralised exchanges. As a result, the foreign-exchange markets have…

The first Monday of the new year is known as “Divorce Day”, with solicitors seeing a surge in enquiries following Christmas – just don’t expect to split up until 2026, says Ali Hussain in The Sunday Times. Not all divorces will take as long as the eight-year epic separation between actors Angelina Jolie and Brad Pitt (pictured). But the time taken for Britons to split up has increased in recent years owing to the complexities of divvying up money, assets, property and debts. According to a survey by insurers Legal & General, one in six divorces over the last five years was delayed due to financial issues and delays are still happening despite the introduction of “no-fault” divorces in England and Wales in April 2022. “The general rule of thumb…

“Lab-grown or natural?”, asks Stephanie Cain in The New York Times. “Chemically identical” to natural diamonds, lab-grown stones are between 60% and 80% cheaper than their mined counterparts. Lab stones have also benefited from ethical concerns, fuelled by popular misconceptions that “all natural diamonds” are conflict-linked “blood diamonds”. Above all, price is driving the shift. In the US the average engagement ring cost $5,500 last year. In 2024 more than half of US engagement rings used lab-grown diamonds, up from a mere 12% in 2019, says Jinjoo Lee in The Wall Street Journal. Advancing technology has seen lab-grown stone prices plunge 75% since the first quarter of 2020, and they are cannibalising demand for natural stones. Demand is also falling in China, where shoppers are instead piling into gold. Industry…

European gas storage is being depleted at the fastest pace in seven years as the cold snap fuels demand for heating, say Eamon Farhat and Priscila Azevedo Rocha on Bloomberg. The continent’s gas reserves are currently about 70% full, compared with 86% a year ago. Russian gas flows to Europe via Ukraine halted on New Year’s Day after a transit deal expired, says Doloresz Katanich for Euronews. That sent prices to €51/MWh, the highest since October 2023 – though still well below the summer 2022 peaks above €300/MWh. The Ukraine transit route previously accounted for 65% of gas consumption in Hungary and Slovakia. While there is no immediate shortage, restocking for next winter through LNG imports will be very expensive.…

● “The drinks industry has little to be merry about,” says Louise Lucas in the Financial Times. Abstinence is rising in the developed world. Higher levies and US tariffs on China threaten to disrupt cross-border trade. Now the US surgeon-general is called for tobacco-style warnings about alcohol and cancer. “This starts to smack of structural decline.” Up until now, an industry-wide share price slump “had all the hallmarks of a cyclical downturn”, caused by weak Chinese demand and “a natural slide from the Covid-inspired boost”. Diageo’s shares were off by a tenth last year, but that was “relatively unscathed” compared with French peers Pernod Ricard (down 30%) and Rémy Cointreau (down 40%). Tougher regulations could do serious damage. Distillers and brewers have tried to learn some lessons from tobacco firms…

Several of the Magnificent Seven group of US tech stocks could go from leading the US market to holding it back if their vast investments in artificial intelligence (AI) do not lead to higher profits, says Stephen Yiu, the manager of Blue Whale Growth. “A lot of people talk about the Magnificent Seven, and we are [backing US chipmaker] Nvidia. Outside of Nvidia, we are increasingly less positive on the [other] six. The capital intensity of these stocks is going up significantly because they are spending a lot on AI infrastructure.” For example, “Microsoft’s return on invested capital [is] likely to decline from here, given the significant investment made in AI infrastructure”, Yiu tells the Financial Times. So he has “aggressively” cut his position in the stock from 8% of…

timworstall.substack.com The Laffer Curve – the idea that tax cuts can pay for themselves as fewer people seek to avoid the higher rate – is out of fashion, says Tim Worstall. It’s an idea associated with the political right. But that doesn’t mean it isn’t true. All it’s saying is that people react to incentives, and this applies to taxation too. Each tax has a peak rate beyond which revenues will fall. It seems likely that the UK is at that peak for taxes upon income. We can see this at work and having an effect on the public finances in tobacco duties. Between 2021 and 2022 and 2023 and 2024, the amount of tobacco sold legally in Britain fell by 30% and, despite some of the biggest tax hikes…

■ Petershill Partners, a specialist investor that backs alternative asset managers (ie, the firms that run private-equity funds and hedge funds), was the top-performing investment trust in 2024, says The Times. The shares returned 71.3% last year, bouncing back from a weak run of performance since it listed in 2021. Amedeo Air Four Plus, which owns aircraft leased to Emirates and Thai Airways, came second with a 60% total return, followed by Seraphim Space Investment Trust with 58.1%. Regional Reit, a real estate investment trust that specialises in offices outside London, was the biggest loser, with a total return of -62.4%. ■ The £44m Jupiter Green and £136m Menhaden Resource Efficiency trusts have announced plans to wind down, with both giving up after a long struggle against persistent discounts, says…

Wealth-based fintech is booming. The sheer range of products and providers is growing all the time. But you can clearly distinguish between different types of platforms, led by the big online “supermarket”-style platforms (Hargreaves Lansdown, or HL, AJ Bell and Interactive Investor, or II) offering a very broad range of wrappers and products. Digital managers Next, there are what used to be called the robo platforms, now known as digital wealth managers, which offer an increasing range of services, including pensions and share dealing. Last but not least, there are low-cost, no-frills online brokers. The top three still capture the lion’s share of online wealth, offering everything from Junior and Lifetime Isas to international share dealing and self-invested personal pension plans (Sipps). These top three still boast the widest range…

● If you’re currently filling in your self-assessment tax return ahead of the 31 January deadline, pay close attention to the section on pension savings. In particular, higher- and additional-rate taxpayers need to careful. Most pension providers (both of individual plans and workplace pensions) will automatically claim basic-rate income-tax relief on your behalf when you make a contribution, with the money added to your savings. However, to claim the difference between this amount and higher- or additional-rate relief, you will typically need to apply via the self-assessment tax return. ● Pension specialists are urging savers to go hunting for misplaced pensions cash amid concern about the ballooning value of pension benefits with which people have lost touch. Data published in recent months from the Pensions Policy Institute suggests this sum…

Christmas advent calendars do not typically result in “weeping children and furious parents”, says Emma Jacobs in the Financial Times. But that was just the reaction when Tony’s Chocolonely decided to leave an empty window where a chocolate should have been to “highlight inequality”. Owners of the Big Countdown calendar were “left gutted” when they opened door number ten only to find no chocolate and instead a QR code taking them to a website with a message about cocoa farmers being poorly treated, says the Daily Mail. Douglas Lamont, the Dutch chocolate company’s CEO, was unapologetic. Christmas is “not just an important season for chocolate sales”, but an opportunity for “messaging” too, he told the FT. “We’ve got a strong point of view on something really important: ending exploitation in…

Gambling Man The Wild Ride of Japan’s Masayoshi Son Lionel Barber Allen Lane, £30 With the possible exception of Elon Musk, no one epitomises the promise and hype of the bull market in technology stocks over the past 15 years more than Masayoshi Son. After making his fortune with investments in Yahoo and Alibaba, the venture capitalist has persuaded investors to give him seemingly endless supplies of cash, which he has fed into a wide range of technology companies. This has led to some spectacular successes, such as the chip company ARM, as well as some equally spectacular implosions, most notably in the case of WeWork. In Gambling Man: The Wild Ride of Japan’s Masayoshi Son, former Financial Times editor Lionel Barber seeks to lift the curtain of secrecy that…

This will be “a year of living dangerously”, says Katie Martin in the Financial Times. After two successive years of 20%-plus gains, the Wall Street boom could be living on “borrowed time”. Incoming US president Donald Trump might deliver US tax cuts, deregulation and a Ukraine peace deal, allowing stocks to “party like it’s 1996”, says Henry Neville of the Man hedge fund. Alternatively, his tariff policies could cause an inflationary surge that unleashes a 2022-style stock and bond rout. “Fireworks lie ahead in either case.” Echoes of the 1970s An inflationary comeback is an “underappreciated risk for 2025”, says Tom Stevenson in The Telegraph. There are “echoes of the late 1960s and early 1970s”, with central bankers crying victory over price rises before the job is done. What else…

After weeks of speculation, Canadian prime minister Justin Trudeau resigned this week after more than nine years in office. Parliament will be prorogued until 24 March, giving his Liberal Party ten weeks to choose a successor, forge a campaign and “face almost certain defeat in the House of Commons”, says The Economist. If that happens, an election, which must be held by October, will probably happen in May. The photogenic, easygoing Trudeau was the poster boy for progressive politics, says Thomas Klassen in The Conversation. During the first half of his leadership, he legalised marijuana and assisted dying, introduced dental and subsidised childcare, and “earned worldwide praise” for picking a “gender-balanced cabinet”. He also reduced child poverty and negotiated a renewed Nafta trade deal with Donald Trump. He then “squandered”…

One gets the feeling there will be plenty of significant events in 2025. The outlook for the “long bond” – the government bond that matures furthest in the future – won’t be top of mind. Yet it seems worth keeping an eye on the 30-year Treasury and 30-year gilt. In recent weeks, these yields have started to edge higher. A sustained move upwards would reinforce the sense that we are in a very different environment to anything we have experienced for at least two decades. In fact, UK bonds have already started to make headlines, largely because rising yields mean the government has very little headroom if it is going to stick to its self-imposed fiscal rules. We shouldn’t make the mistake of treating these rules as anything fundamental (if…

The City will cheer up in 2025 Chris HughesBloomberg The “rot in the UK stockmarket” continues, says Chris Hughes. Firms are still succumbing to takeovers by private-equity funds and foreign buyers, while the shortage of quality new listings persists. But 2025 could be the year that domestic corporate buyers start to compete with “buyout barons” for bargains. “The big picture remains depressingly familiar”: support from UK pension funds has “all but evaporated”, “London trades at a discount to New York when priced against expected earnings” and “trading volumes are thin”. Private-equity funds have “taken full advantage” and “weary investors have chosen to cash out”. Going forward, the cheapness of the UK makes it the “favoured pick” for some equity strategists. Britain is also relatively politically stable and resilient. Labour’s stated…

thecritic.co.uk When Covid hit in early 2020, the US Federal Reserve and Treasury worked together to boost the US economy, while then-president Donald Trump “backed stimulatory measures almost regardless of cost”, says Tim Congdon. In a mere five months to July, the quantity of money – on a broadly defined M3 measure – rose by 19%. In the year to June, money supply jumped by more than 25%, the highest since 1943. “As a monetary commentator of almost 50 years’ standing, I was astonished by these developments” and warned of the inflationary consequences. I knew they may not be immediate – leading monetarist economist Milton Friedman always warned of “long and variable lags” between a rise in the supply of money and inflation – but I expected double-digit inflation to…

The MoneyWeek investment trust portfolio was set up in 2012 with a simple principle: to help readers build a global, all-weather, set-and-forget set of investments. We chose six London-listed investment trusts covering various investment styles, assets and countries. We’ve made some changes to these trusts over the years, but the underlying approach has always remained the same. The six choices are currently Personal Assets (LSE: PNL), Mid Wynd (LSE: MWY), Scottish Mortgage (LSE: SMT), Caledonia (LSE: CLDN), Law Debenture (LSE: LWDB) and AVI Global (LSE: AGT). The portfolio returned 9.3% on an equal-weighted basis in 2024, compared with 11% for the FTSE All Share and 22.1% for the MSCI World index. Still, these figures only tell half the story. On an underlying basis, using net asset value (NAV) rather than…

If sorting out your finances is among your new year’s resolutions, there is one quick win that could benefit hundreds of thousands of people. There are just four months left to take advantage of more generous rules on topping up your national insurance (NI) contributions. Making modest payments now could give you a significant boost in retirement. The rules are that you need to make 35 full years’ NI contributions to claim the maximum state pension, currently worth £221.20 a week. But if you’re not on target to hit that figure, you can make voluntary contributions to get you there. Normally, you are only allowed to plug gaps in your NI record from the past six years, but special rules apply until 5 April that allow you to go all…

Our investment philosophy centres on a quality dividend-growth strategy. By focusing on high-quality stocks with sustainable and growing dividends, we aim to provide steady income and long-term capital growth. Rather than chasing high-yield stocks, which often underperform, we prioritise proven resilience. Every company we invest in must deliver sustainable dividends, supported by at least ten consecutive years of strong cash returns on investment. Additional quality screens, including balance-sheet strength, narrow down the criteria further. This disciplined process often leads us beyond traditional income sectors to firms combining steady growth with attractive dividend potential. Here are three examples. Publicis (Paris: PUB), a French advertising and media agency, is the third-largest player in its field after WPP and Omnicom. Through strategic acquisitions of Sapient, a business transformation consultancy, and Epsilon, a data…