Indholdsfortegnelse for Issue 1254 i MoneyWeek

You can see why an exasperated Harry Truman called for a one-handed economist. In social sciences there are always alternative perspectives to consider and definitive answers are rare. That makes America’s threat of further tariffs this week (the measures were revealed after we went to press) all the more extraordinary: because if there’s one thing virtually all economists – from the most avid Austrian to the keenest Keynesian – agree on, it is that tariffs are a bad idea. “They raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity and increase global tensions,” as JPMorgan Asset Management’s chief global strategist David Kelly reminds us. “Other than that, they’re fine.” “Expect investors’ rotation from the overpriced US to underpriced Europe to endure” A return to the 1930s…

The promised “nuclear renaissance” might have a short half-life, says Alexandra White in the Financial Times. Uranium had been riding the coat-tails of AI, with projections that the technology will drive huge future growth in electricity demand. Microsoft is backing the restart of Three Mile Island. There has been much hype around “small modular reactors”, which are more flexible than existing nuclear power plants. The problem? They are prohibitively expensive, 50% pricier than “gas-fired power plants and those with carbon capture”. Uranium spot prices recently touched an 18-month low. Trading at about $65 per pound, they have fallen more than a third since a peak in early 2024. Energy-efficient Chinese AI models have cast doubt on the electricity bull case, says Jinjoo Lee in The Wall Street Journal. Meanwhile talk…

Shell’s new financial targets, unveiled last week, “had investors positively cooing”, says Ian King on Sky News. It plans to raise distributions to shareholders from between 30% and 40% of cash flow from operations to between 40% and 50%. It will also continue to “prioritise share buybacks while maintaining a 4% per annum progressive dividend policy”. This “largesse”, will be funded by the company “doing more with less”. Shell is raising its targets for cost savings and lowering capital spending slightly. Most controversially, it is “de-emphasising clean energy” by growing hydrocarbon production 1% a year by 2030 – although it has also said that it will do this with lower carbon intensity by producing more liquefied natural gas. Shell’s new strategy is clearly a “far cry from the grandiose, but…

Saudi Arabian budget airline Flynas is to float a 30% stake on Riyadh’s market, says Reuters. The initial public offering (IPO) will be only the third by a Gulf airline following the United Arab Emirates’ Air Arabia and Kuwait’s Jazeera Airways, and the first in almost 20 years. Flynas was launched as Nas Air in 2007. It serves more than 70 destinations with over 60 Airbus jets and is aiming for a fleet of 160 aircraft by 2030. Saudi Arabia is overhauling its economy to become less dependent on oil, with non-religious tourism now key. The carrier is backed by billionaire Prince Alwaleed Bin Talal, who was once Saudi Arabia’s best-known global investor.…

Some new carpets might have made a difference, or perhaps an updated stock range, some slicker-looking shops, and a fresh advertising campaign. Instead, the new owner of WH Smith, one of the oldest retailers on the British high street, have opted for one of the oldest tricks in the corporate playbook. It is changing the name. WH Smith will now be known as TG Jones. The trouble is that it’s hard to see that making much difference. WH Smith is selling off its 480 high street shops to Modella Capital, a retail investment firm, for £76m, and will focus purely on its travel unit, operating in airports and train stations around the world. That looks like a tacit admission that the only place to make money in Britain is from…

Asset allocation is the process of dividing your portfolio between different asset classes such as shares, bonds, property, cash and gold. Each of these asset classes should behave in different ways in different scenarios, and have different potential risks and returns. The aim of asset allocation is to blend these together in a way that produces a combined level of risk and return that best suits an investor’s needs. To take some extreme examples, a young investor saving for retirement a long way in the future and prioritising maximum growth above everything else might have 100% in shares, while a retiree who only cares about achieving a steady income might have 100% in bonds. More commonly, somebody who wants to achieve a combination of income and growth while also protecting…

Until FSSA split from Stewart Investors nearly ten years ago, Pacific Assets Trust (LSE: PAC) and Scottish Oriental Smaller Companies Trust (LSE: SST) were managed under the same roof, with the former investing in larger companies in Asia, excluding Japan, and the latter in smaller companies. A decade later, it’s as if they never parted company. The performance of SST, with £500m of net assets, is ahead of Pacific Assets, with £410m – 65% versus 52% over five years, 41% versus 15% over three and 15% versus 10% over one. That’s thanks to the outperformance of smaller companies in Asia, which has been unusual in a global context. Relative to their own benchmark indices, SST is well ahead over one and three years and slightly ahead over five, while Pacific…

Why hasn’t AI taken the jobs yet? John Burn-Murdoch Financial Times “There is a paradox at the heart of generative artificial intelligence,” says John Burn-Murdoch. The latest large language models are “far more capable” than humans of “completing very challenging tasks”, producing essays, for instance, that could credibly be written by postgraduate students. So why is there so little evidence of AI causing major disruption to relevant sectors of the labour market? Building on work by the Brookings Institution and Open AI, analysing US employment data, I found no dip in the numbers of accounting clerks, insurance underwriters, travel agents and legal secretaries. Employment had fallen away sharply in two specific areas, however: writing and software development. This finding “meshes neatly” with a study by AI research firm METR, which…

high-capacity.com Western firms are now suffering the consequences of their “Faustian bargain” with China, says Kyle Chan. China has been following “a classic industrial policy playbook” used by East Asian countries such as Japan, South Korea and Taiwan. Foreign companies are drawn in by China’s vast market and low-cost manufacturing base and agree to help China develop its domestic industries. Over time, China pushes these firms to share more of their technology and use more Chinese suppliers. Foreign firms end up training a cohort of Chinese engineers and managers, who later help Chinese companies or launch start-ups. Time and again, what starts off as a useful partnership for foreign firms ends up with them helping to grow their most formidable competitors. Then, as the Chinese firms become more competitive, they…

● The state pension will soon be taxable, writes Ruth Jackson-Kirby. Next year millions of pensioners will be “just 15p short of the income tax threshold”, and by April 2027 the predicted full state pension will exceed the personal allowance by £315.50, says Johanna Noble in The Sunday Times. “This means that someone on the full state pension, with no other income, would have to hand back £63 in tax.” Thanks to the triple lock the state pension has had some “generous boosts” in recent years, making it an expensive element of the welfare system. It is impossible to predict how long the triple lock will last. “But until then pensioners will continue to see their state pensions rise because of it – and a bit of tax is a…

● Research and development (R&D) tax credits are worth thousands of pounds to companies engaging in a wide range of innovations. But the accountant Wellers suggests that just 6% of SMEs are currently claiming R&D tax credits, even though data from the Office for National Statistics suggests 36% of SMEs are engaged in some form of innovation. If you’re not sure whether your business qualifies, ask your accountant for guidance. ● Businesses exporting to new markets may unwittingly fall foul of international sanctions. Western governments have imposed sanctions on more than 40 countries worldwide and while some, such as those targeting Russia following its invasion of Ukraine, are well-known, awareness of others is lower. The European Commission has launched a “sanctions help desk” to provide more information, with free guidance…

It has been a mixed fortnight for my long positions, with two of the stocks appreciating slightly while the other two declined. Property developer Harworth rose from 166p to 172p, while payments firm Corpay increased from $347 to $348. However, food-packaging specialist Hilton Foods decreased from 839p to 824p and Domino’s Pizza Group slipped from 297p to 283p. Overall, my net loss diminished from £1,015 to £859, although this was due to the fact that the net losses from three closed positions are no longer included in the total. My five short positions did better: three out of the five moved in my favour. Trump Media & Technology, Donald Trump’s social-media business, continued its losing streak, slipping this time from $20.56 to $19.44. Telecoms firm Lumen Technologies slumped from $5.07…

George Foreman, the former boxing heavyweight world champion and American entrepreneur, and known by family, friends and fans alike as “Big George”, has died at the age of 76, says The Times. Born in Texas, Foreman (pictured) shot to fame as a boxing “titan” in the 1960s and 1970s, winning Olympic gold in 1968 and later becoming a two-time heavyweight champion, winning his second title at the age of 45 following a comeback ten years after he had retired. He won a total of 76 fights, knocking out 68 of his opponents, and lost just five times in his career – most famously to Muhammad Ali in the 1974 “Rumble in the Jungle”, a fight watched by an estimated one billion people worldwide. Indeed, Foreman, along with fellow heavyweights Ali…

2022 Fram, Grenache Gris, Citrusdal Mountains, South Africa £19.95, jeroboams.co.uk The recent Jeroboams wine tasting was a cracker. I have followed this elite London wine merchant for decades, and I think today’s portfolio represents a new peak of wine sleuthing talent! Among a host of new finds, I came across a duo from Fram that amazed me with their individuality and terrific value for money. I know very little grenache gris is planted in South Africa, so I was excited to taste my headline wine. I love the label, the branding and the image this wine projects. As I poured a tasting sample, it was immediately apparent that the dark glass bottle hid a secret. This was an orange wine and not a white one! Oops – I am not…

Billionaire Indian steel magnate Lakshmi Mittal (pictured) leaving the country because of the government’s tax raid on ultra-wealthy non-domiciled individuals is “embarrassing” for Labour “at a time when it is attempting to reassure investors that Britain is open for business”, says Alex Singleton in The Telegraph. Nom-doms avoid paying tax on foreign income and capital gains, but new rules come into force on 6 April. The changes were first proposed by former Tory chancellor Jeremy Hunt. Labour put forward stricter rules and removed a Tory exemption allowing non-doms to transfer money into offshore trusts to avoid inheritance tax. Economists warn the crackdown could lead to a £1bn loss by the end of the current parliament as wealthy foreigners leave. It seems the “rich have voted with their feet… abandoning the…

Next has joined Tesco, Marks & Spencer (M&S) and B&Q’s owner Kingfisher by achieving at least £1bn in yearly profits, becoming only the fourth UK retailer to do so, says Harry Wise in This is Money. Pre-tax profits climbed 10.1% to £1.01bn in the year to 26 January 2025 thanks to strong e-commerce sales. However, the firm urged investors “to keep a level head”, saying it would be “a big mistake to view the company differently just because it has passed any milestone... profits can go down as well as up”. Next’s low-key reaction to passing the £1bn mark is just what you’d expect from a business led by Simon Wolfson, who has a reputation for “under-promising and over-delivering”, says Alistair Osborne in The Times. Still, he’s confident enough to…

Five to buy Investors’ Chronicle AG BarrSoft-drink maker AG Barr’s full-year revenue rose thanks to the Rubicon and Irn-Bru brands, but the ready-to-drink alcoholic-beverage business struggled. Adjusted pre-tax profit beat analysts’ forecasts thanks to the winding down of its direct sales operation to focus on wholesale activities and the closure of an office in Leeds. AG Barr is to cull the Strathmore bottled water brand. Still, analysts expect earnings growth over the next three years, and at 14 times earnings, its shares are “good value”. 623p Morgan Advanced Materials The TelegraphMorgan Advanced Materials manufactures carbon and ceramic materials used in various industries, including healthcare and aerospace. Despite a decline in full-year revenue and tough trading conditions, the company’s long-term prospects are “upbeat” owing to expected interest-rate cuts. Profitability was bolstered…

● Investors will be unsettled by the departure of Primark’s CEO Paul Marchant, who has resigned after allegations of inappropriate behaviour, says Susannah Streeter of Hargreaves Lansdown. Primark generates around half of sales for its parent company, Associated British Foods, but the clothing retailer has delivered a “very mixed bag of results” lately. The chain has struggled with weak consumer sentiment and is losing market share in Britain, where like-for-like sales fell 6.4% during the crunch Christmas period. While its international performance has fared better, there could be uncertainty about the speed of its global expansion and revitalising revenue, given the cut in full-year guidance and the change of boss. ● “DIYers know the feeling: just when you’re admiring your new shelf, it falls off the wall,” says Alistair Osborne…

“Energy security is top of mind for everyone around the world right now,” says Jeff Currie, the former global head of commodities research at Goldman Sachs who now works at private-equity group Carlyle. That means a “security premium” could be added to the price of metals such as aluminium, and copper trade tariffs mean that countries will have to pay more to shore up supply. “Volatility is going to explode across all [energy and metal] markets,” Currie tells Bloomberg. This is “going to lead to a higher average price… The volatility then discourages investment… Lower investment creates more volatility, and it just feeds off itself.” Previous commodity supercycles were created by strong demand and supply shortages, says Currie, who made a name as a commodities bull during the last great…

■ The board of Warehouse Reit says that it will back a 115p takeover bid from US private equity firm Blackstone, which values the property trust at £489m. The price, which is Blackstone’s fifth offer, is a premium of 40% to the pre-bid share price, but still a 9.8% discount to NAV. ■ The Renewables Infrastructure Group (TRIG) has U-turned on plans to pay manager InfraRed Capital a transaction fee on disposals and a performance fee in the event of a takeover. The proposals were criticised by analysts, who said that InfraRed should not need extra incentives to maximise returns for shareholders. A welcome change that will base management fees on a equal mix of NAV and market value, rather than just NAV, will go ahead. TRIG will also introduce…

“We’re nowhere near equal pay! Talking about it noisily doesn’t mean action has happened.” Actress Cate Blanchett (pictured) on the film industry, quoted in The Observer “A good name is to be chosen rather than great riches.” King Solomon, quoted in The Economist “When The X Factor gave you a record deal and a pot of money at the end, it was worth doing, whereas now shows just offer you exposure and they’re more about the judges.” James Arthur, who won The X Factor talent show in 2012, quoted in Metro “Money is like manure. It stinks when you pile it; it grows when you spread it.” Indian philanthropist J.R.D. Tata, quoted in India’s The Sunday Guardian (India) “Every great cause begins as a movement, becomes a business, and eventually degenerates…

spectator.co.uk Every year, upon the publication of the UN’s World Happiness Report, you see headlines about which country has the happiest citizens, says Yascha Mounk. This year, Finland once again took the prize. The US came in 24th out of 147 countries. The UK slipped down to 23rd. But the whole thing is “a scam”. The report is not based on any major research effort, and simply compiles answers to a single question asking comparatively small samples of people where they think they stand on a ladder that reaches from the depths of misery to the heights of joy. The self-reported answers to such questions do not tend to correlate well with other metrics, such as the prevalence of adverse mental-health conditions and suicide rates, for example. A recent paper…

Does your small business rely on credit cards to manage cash flow? If so, it is not alone. Research from price-comparison site Uswitch reveals that one in five small and medium-sized enterprises (SMEs) now use plastic in this way. That’s not necessarily a bad thing, as long as SMEs are keeping borrowing under control and getting the best possible deals on credit cards. Uswitch’s findings mirror a recent report from the British Business Bank. It said that while the proportion of SMEs taking on external finance last year rose sharply, from 36% to 46% of firms, much of this was driven by increased credit card use. By contrast, demand for bank loans declined in 2024. The good news is that most SMEs are careful with their credit cards; nine in…

Things are looking bright for Africa. The continent has one of the youngest populations in the world, and its people have also become increasingly adept at using technology. Smartphones play a role in a financial sector that is arguably more advanced than in many developed countries. No wonder, then, that the region’s technology industry is attracting attention. However, not all African tech firms are worth investing in. A case in point is Jumia Technologies AG (NYSE: JMIA). Jumia Technologies aims to become the biggest e-commerce platform for the region, providing a place where people can buy and sell goods, along with logistics and payment services. Initially this idea enjoyed some success. Founded in Nigeria in 2012 by several former employees of the management consultancy McKinsey, the company quickly expanded to…

The Aberdeen Equity Income Trust uses an index-agnostic approach, scouring the entire UK market to identify companies where change has not been fully recognised by investors. This strategy acknowledges that some of the best investment opportunities can arise from under-researched parts of the market, where valuation mispricings are most significant. As a result, the trust’s portfolio often looks very different from other investment vehicles offering access to UK equity income. As of its latest year end, 51% of the trust’s portfolio was invested in companies outside the FTSE 100 index. This approach provides access to the broadest range of income-generating investment ideas, including many stocks that offer attractive dividend yields and dividend growth. As their prospects are recognised by the wider market, they can be re-rated, supporting capital growth. With…

Is it possible to feel a connection to a destination through a luxury beach holiday? The question hadn’t crossed my mind before I arrived at the Shangri-La Le Touessrok resort on the island of Mauritius. I couldn’t wait to find out what lay in store at a resort that has long occupied a place on my bucket list of destinations to visit. Le Touessrok is a famous name in the world of luxury travel, having acquired an almost legendary status during its more than 45 years on the island. But it is not some mere fantasy. Le Touessrok embodies the best qualities of this upmarket brand – Shangri-La has become a byword for elegance and unparalleled service. So, my expectations were high. But with regards to how authentic it would…

“Rachel Reeves did nothing to change cash Isas in the Spring Statement. But prepare to have this quarrel all over again in the autumn because the Treasury is still considering a cap on cash within an individual’s £20,000-a-year allowance. Reeves is right to look at changes. The £20,000 allowance is generous by European standards. It is not unreasonable for the Treasury to ask if tax reliefs would do better work for everyone – savers included – if greater sums were directed at productive assets, such as UK equities. Such a reform would be in line with the original spirit of Isas and their 1980s predecessors. On their introduction in 1999, the Isa allowance was £7,000, of which only £3,000 could go into cash. It was only as late as 2014…

The share price of Aston Martin has bounced off an all-time low after “yet another fundraising to shore up the loss-making British sports-car maker”, says Robert Lea in The Times. Aston Martin received £125m after expenses from selling its stake in executive chairman Lawrence Stroll’s privately owned Aston Martin Racing Formula One team, plus £52.5m from new shares issued to Stroll and his friends in the Yew Tree Consortium, which now owns 33% of Aston Martin. Stroll argues that the move is an “elegant” way of “strengthening the balance sheet” as well as a means for him “to demonstrate my personal, emotional and financial commitment to the company”. The latest move is “strange” even by the standards of Aston Martin, says AJ Bell’s Russ Mould. Not only is it selling…

Stuttering US growth and a slower year for elections worldwide are hampering revenue at pollsters. That’s unfortunate, since the US is the biggest market for French market research group Ipsos, says Stanislas Feuillebois in Le Revenu. Yet there are reasons for optimism. Operating margins, at 13.1%, remained stable last year despite the headwinds, while adjusted net profit rose 7% to €244m. The 3.7% dividend yield is appealing, especially given a long record of uninterrupted payouts. And the long-term outlook for pollsters is bright as the world’s executives eagerly seek reliable insights into consumers’ psychology. On less than 10.5 times 2025 earnings, the shares seem inexpensive.…

“The likelihood of the US successfully brokering a Ukraine peace deal in the next few months has plummeted”, despite Donald Trump’s boast that he would end the war within 24 hours of taking office, say Arpan Rai and Alex Croft in The Independent. According to senior Washington sources, Trump had privately set a target of May to secure a ceasefire, but neither that nor a “lasting peace deal” seem imminent. After a fortnight of foot-dragging over the 30-day US-proposed ceasefire, Vladimir Putin suggested that Volodymyr Zelensky’s government should be replaced by a UN-approved “transitional” administration until a peace deal had been negotiated. Last week he also vowed to “finish” off Ukrainian troops, and on Monday it was reported that he was conscripting 160,000 men. Trump told NBC news at…

We aim to keep the MoneyWeek exchange-traded fund (ETF) portfolio simple and so we follow a rules-based approach to rebalancing that aims to minimise costs. We rebalance once a year around the start of the new tax year, with the idea that anybody paying into their individual savings account (Isa) can use the new year’s contributions to help rebalance their investments with fewer trades. And we only rebalance a position if it is more than 20% away from its target (ie, if a 10% position has risen above 12% or fallen below 8%), which again reduces unnecessary trading costs. This time we started with two positions that have done very well over the past couple of years and are far above the rebalancing threshold. One was US equities. Two weeks…

The scale of additional military spending planned across Europe over the coming years is set to deliver a windfall for the continent’s defence industry. According to research compiled by Goldman Sachs, defence spending by EU member states is expected to rise by 1.8% of GDP in 2024 to 2.4% by 2027, an extra €80bn a year. The UK has outlined a commitment to spend 2.5% of GDP by 2027, an extra £13.4bn a year, taking total annual spending to £80bn by 2027. The bulk of this will end up in the hands of the sector’s biggest players, the national champions and defence giants, such as BAE Systems, Rheinmetall, Leonardo, Safran and Thales, but a good chunk will also trickle down to the smaller players. One such business that could benefit…

File-storage firm Dropbox is facing pressure from an activist investor to remove a dual-class share structure that gives CEO and co-founder Dree Houston a voting super-majority, says The Wall Street Journal. Half Moon Capital, which has a $1.1m stake in the $8bn company, says the structure stops investors from holding management to account over “significant missteps”, including misplaced bets on an artificial-intelligence tool and the loss of market share to competitors. Dropbox’s paying user count barely grew in 2024, and it expects a decline this year. The company cut its workforce by 20% in October. Half Moon’s proposal would only be able to pass with backing from Houston, who has about a 77% voting stake because of his Class B shares, which have ten times the voting rights of Class…

stumblingandmumbling.typepad.com Basic economics says that individuals maximise utility subject to constraints, says Chris Dillow. But there’s an underappreciated caveat: we often don’t know what the constraints are. The role of entrepreneurs is not to maximise profits, but, as Friedrich Hayek and Israel Kirzner emphasised, to discover what the constraints are. Is the fact that a town centre has seven coffee shops a constraint on the eighth being profitable? ICI’s chemicals business struggled to make profits for years, which potential buyers saw as evidence of constraints on its ever doing so, but Jim Ratcliffe didn’t see it that way, bought it, and expanded it into the giant it is today. In politics, too, constraints are tested by those who push against them – consider Donald Trump. Conservatives once considered that the…

Parents will soon be able to pay the high-income child benefit charge (HICBC) through their payslips, saving them the hassle of filing a mandatory self-assessment tax return. From this summer employees liable for the HICBC will be able to report their family’s child benefit payments through a new digital service and opt to pay the charge directly through PAYE, without the need to register for self-assessment. A date has yet to be announced. The HICBC is a way of paying back child benefit if you or your partner are classed as higher earners. If you or your partner have an individual income that is over £60,000, you will need to pay the charge. Work out your “adjusted net income” to gauge if it is above the limit. This is your…

More than 900,000 small business owners, self-employed workers and landlords will have to get to grips with HM Revenue & Customs’ Making Tax Digital initiative over the next three years. Chancellor Rachel Reeves used last week’s Spring Statement to highlight existing compliance deadlines and to extend the scheme. It requires taxpayers to make digital submissions when filing returns for taxes such as income tax, corporation tax and VAT. To comply, you will need to have software authorised by HM Revenue & Customs; the programme also introduces more regular filing deadlines – quarterly income-tax returns rather than a single annual requirement, for example. Under existing plans, confirmed last week, self-employed workers and landlords earning more than £50,000 a year will need to comply with Making Tax Digital for their self-assessment income-tax…

The former prime minister Harold Wilson once said that a week was a long time in politics. Canadian politics has seen a rapid turnaround since the end of last year. Then the Liberals were trailing by huge margins in the opinion polls, with then prime minister Justin Trudeau deeply unpopular. However, as a consequence of Trudeau’s replacement by Mark Carney and the backlash to Trump’s tariffs, the Liberals are now leading in the polls, and far from being on track to lose office, look as though they may even increase their number of seats. This has been reflected in the betting markets, which are very different from late November, when I tipped the Conservatives at 1/9 (90%). With £226,749 matched on Betfair, the Liberals are now favourites at 1.63 (61.3%)…

The first 100 days of a new administration are said to be the most important. That is when the new team has the most momentum and enjoys most support. People expect change and want to see what happens. So, as that milestone approaches, at the end of April, it might not be too early to guess where we are heading. What we noticed in Donald Trump’s first time in the kitchen was that the basic menu didn’t change much. Everything when he left was about the same as when he arrived – only worse. The swamp was deeper. The debt was higher. The power of the federal government was greater. And the reach of politics was further. The simplest measure of the totality of it is probably the federal debt…