Indholdsfortegnelse for Issue 1287 i MoneyWeek

“All government leaders know what to do. They just don’t know how to get re-elected if they do it.” Jean-Claude Juncker, the former president of the European Commission, said little of note in his political career. But that comment, from 2007, still helps explain the mess much of Europe is in. In Britain, the Budget has unravelled even before delivery (see page 12) with the U-turn on tax hikes, and one of the most striking features of the past few months has been the U-turn on trimming welfare. The government shows no sign of getting spending and borrowing under control, preferring to placate backbenchers and voters. “Long-term political and economic cycles are inescapable. After the binge, the purge” The French are revolting The same applies across the channel, where the…

Swiss shares have jumped on news of a belated trade deal with the US. The Alpine nation was slapped with tariffs of 39% over the summer following a disastrous phone call between Swiss president Karin Keller-Sutter and her US counterpart. The US bought $63bn of pharmaceuticals, gold and other Swiss products last year and is the country’s biggest goods-export market. Humiliated, the Swiss took a different approach to mollify the US president, says Solveig Godeluck in Les Echos. A group of industrialists visited the Oval Office in November, presenting the president with a Rolex desk clock and a personalised, engraved gold bar. Tennis star Roger Federer was floated as a potential go-between. The efforts were rewarded with a tariff cut to 15%, the same level imposed on the EU, to…

The “Magnificent Seven” – chipmaker Nvidia, Microsoft, Apple, Google’s owner Alphabet, Amazon, Facebook’s owner Meta and Tesla – have collectively returned more than 1,000% since the start of 2019. That compares to a more modest gain of roughly 140% for the rest of the US bluechip sector over the same period. The technology giants have grown to occupy an outsized position on the S&P 500, where companies are weighted by market value: well over a third of the index now depends on just seven stocks. While the group’s recent performance is extreme, a few stocks often make the running in bull markets. Research shows that since 1926, just 4% of firms have driven all net wealth creation in US stocks in excess of the risk-free rate.…

HICL Infrastructure and The Renewables Infrastructure Group (TRIG), two of the UK’s biggest infrastructure funds, are to merge in an all-share,“blockbuster” £5.3bn deal, says City AM’s Simon Hunt. The news has produced “mixed reactions”. While TRIG’s shares rose by more than 5%, HICL’s fell by the same amount. There is particular controversy over the fact that TRIG shareholders will have the option of a partial cash exit of up to £250m in aggregate, representing 11% of TRIG’s share capital, but HICL’s investors are not entitled to a similar route. Overall, HICL shareholders are expected to hold 56% and TRIG shareholders 44% of the combined company. The fall in HICL’s share price is “entirely predictable”, says CG Asset Management. The merger is an “exceptionally poor transaction for HICL” . Given that…

Turkish reality-television mogul Acun Ilicali is preparing an initial public offering (IPO) of his broadcaster, says Bloomberg. TV8 TV Yayincilik, which adapts shows such as Survivor and MasterChef for Turkish audiences and also produces some of the country’s highest-grossing talent shows, plans to sell a 20.5% stake in the company. Half the proceeds raised from the listing will be used to pay debt, and the rest will be used for working capital. Ilicali, who also owns Hull City football club, launched the streaming service Exxen in 2021 and has expanded production into several countries. TV8 generated 894.5m lira (£16m) of net income from 8.27bn lira (£148.2m) in revenue for 2024.…

The Scottish government has announced plans to sell up to £1.5bn of its own debt over the next five years, the first time the country has issued its own bonds in more than three centuries. The “kilts”, as they will inevitably be known in a play on the British “gilts”, will help finance the devolved administration. The plans took a step forward last week when two of the major agencies, Moody’s and S&P, gave the planned issue an investment-grade rating. The Scottish National Party plans to press ahead, in part to give it more money to play with, but also, perhaps more importantly, to demonstrate that Scotland can flourish on its own and have credibility in the markets. The trouble is, it is not likely to work out that way.…

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…

“It’s a monumental effort to get to a point where you’re earning any money.” Comedian Joe Wilkinson (pictured) on achieving success in his field, interviewed in The Sunday Times “The most successful people I know believe in themselves almost to the point of delusion.” Sam Altman, CEO of OpenAI, quoted in The Knowledge “People have to stop taking things they do not need – it is wrong and it is bankrupting our country.” Television property-show presenter Kirstie Allsopp in a spat with author Michael Rosen on X. Rosen was seeking to replace a Freedom Pass for free travel in London; Allsopp thinks the 79-year-old could well afford to pay for travel himself “I burned through a lot living large after Trainspotting took off… if I end up waiting tables in…

pluralistic.net “AI cannot do your job,” says Cory Doctorow, “but an AI salesman can convince your boss to fire you and replace you with an AI that cannot do your job… Nowhere is that more true than in customer service.” The best way for companies to cut customer-service costs is to make the service so terrible that people simply give up. Companies have outsourced customer service to overseas call centres for years with just that outcome in mind. Workers in those centres generally don’t have the authority to solve your problem, and are punished if they solve too many or pass too many callers up the chain of command. But they can take the blame for the problem. During Covid, firms switched to chatbots instead – often literally “computer says…

Smithson Investment Trust, the £1.6bn mid-cap and small-companies fund run by Fundsmith, will convert into an open-ended fund. The trust, which has traded on a persistent discount to NAV, has been under pressure from activist Saba Capital, which holds a 16% stake. Investors who decide not to roll over into a new Smithson Equity Fund will receive a cash exit at NAV, while Fundsmith will make a “significant cost contribution” to prevent shareholders being diluted by restructuring costs. Fundsmith founder Terry Smith said he agreed with Saba that a closed-end structure had not worked for Smithson and change was required. Elsewhere, Saba has unveiled new stakes of 5% in Vietnam Enterprise Investments and RTW Biotech Opportunities.…

How should we tackle our anaemic productivity growth? Two answers have emerged: “Build Something Now”, and “Innovate Faster”. Chris Clothier, fund manager at CG Asset Management, recently put the case for the former when he noted that Britain “ranks... last among the G7 for gross fixed-capital formation, at about 18% of GDP annually. The range for the rest of the G7 is 20%-25%”. Perhaps the most eloquent exponents of this school of thought are two Americans of the centre-left, Derek Thompson and Ezra Klein. Their book Abundance – very relevant to the UK – posits that the left in the US has championed excessive regulations and administrative burdens, which have severely hampered America’s ability to build essential things society needs, such as affordable housing, modern infrastructure and clean-energy systems. The…

The Budget U-turns keep coming, but it looks increasingly likely that the chancellor has salary-sacrifice arrangements in her sights. If you are using such an arrangement to make pension contributions, that could mean a costly tax hike for both you and your employer. In conventional occupational-pension schemes, your pension contributions are deducted from your pay each month and topped up by your employer. By contrast, in a salary-sacrifice arrangement, you agree to give up some of your pay; instead, your employer makes an equivalent payment into your pension. The advantage of this structure is that your pay before tax is reduced, meaning you pay less income tax and national insurance. Your employer also pays less employers’ national insurance. However, the chancellor is now thought to be planning to cap the…

“There are elements of irrationality through a moment like this,” Google CEO Sundar Pichai tells the BBC. Even Big Tech bosses are starting to express nervousness about the scale of spending on AI chips and data farms. In September, Meta boss Mark Zuckerberg quipped that “misspending a couple of hundred billion” was worth it in the race for AI dominance. His investors haven’t seen the funny side – Meta stock is down 23% since then. As MoneyWeek went to press, investors were waiting with bated breath for results from chip giant Nvidia. Earnings at the world’s most valuable listed company are a key barometer for the wider AI sector. Good results could power another leg of the rally. Investors have been taking some chips off the table. The S&P 500…

“LSEG’s boss David Schwimmer recently noted that a 25% UK allocation in defined-contribution schemes could inject up to £100bn into the domestic [equity] market… The idea seems patriotic… In reality, it would… risk weaker retirement outcomes… UK pension funds have relatively low exposure to domestic equities. But this simply reflects the UK’s global market share and the long-term trend towards diversification… The problem isn’t that investors have turned away from Britain out of disloyalty. It’s that the UK market hasn’t been growing fast enough to draw them in… If the chancellor genuinely wants to make the UK more attractive… she should start with the simplest reform of all and abolish stamp duty on UK share purchases [which] adds friction to every transaction and makes UK equities instantly less competitive versus…

Fashion group Burberry is showing “signs that its turnaround plan [is] bearing fruit”, says Kalyeena Makortoff in The Guardian. Comparable-store sales rose for the first time in two years, gaining 2% in the second quarter. Meanwhile, the adjusted operating profit for the six months to 30 September was £19m, a large jump from the £41m loss during the same period last year. Even though a £37m restructuring charge resulted in a £48m overall loss, this was still an improvement on the £80m deficit reported last year. The news is particularly heartening, as until recently Burberry had been one of the hardest hit in a broad luxury-market downturn, says Philip Stafford in the Financial Times. The company’s woes had been exacerbated by former CEO Jonathan Akeroyd’s decision “to increase prices dramatically”…

Six to buy National Grid Investors’ Chronicle National Grid increased its capital investment by 10% to £5.1bn in the first half of the year, thanks to progress on its strategic transmission projects in Britain. The utility is on track to deliver more than £11bn of annual investment. Underlying operating profits rose 12% to £2.29bn as operating costs were curbed, but net debt increased “modestly”. The group benefits from “hand-in-glove” political and regulatory arrangements, making the stock a “safe-haven option”. A 4% implied dividend yield bolsters the long-term bull case. 1,166p On the Beach The Times On the Beach’s shares fell recently following a profit warning triggered by budgetconscious holidaymakers delaying their bookings until the last minute. But the slide was “unjustifiably harsh”. Consumers are still prioritising travel and holiday bookings…

“If you’ve got enough money, the loss of a pet needn’t be an issue any more,” says Chris Stokel-Walker in The Standard. Pet cloning is now available to the super-rich. Former American football star Tom Brady has had his dog Lua, who died in 2023, cloned to create new pet Junie. Paris Hilton and Barbra Streisand have also recreated their pets. Cloning companies such as Colossal and ViaGen Pets charge around $50,000 to clone a dog or “cat-sized mammal”. Using Colossal’s technology “gave my family a second chance with a clone of our beloved dog,” says Brady, who has invested in the company. So far, the technology has been used to clone dogs, cats and horses but it could be applied to “almost any mammal”. That said, a 2022 survey…

Tokyo and Beijing are locked in a “deepening row” after Japan’s prime minister, Sanae Takaichi, suggested Japan could become militarily involved if China tried to invade Taiwan, says Justin McCurry in The Guardian. Japan’s postwar constitution forbids it from using military force, but the phrase she used – a “situation threatening Japan’s survival” – is a legal description introduced in 2015 which, if invoked, allows her to deploy the country’s forces. Calling her remarks “dangerously provocative”, China sailed coastguard ships through the Japaneseadministered Senkaku islands to signal its displeasure and warned travellers and students to avoid Japan. This prompted a sharp sell-off in Japanese stocks after a leading think tank said that a drop in tourists could carry a $14bn price tag, says Joe Leahy in the Financial Times.…

● ”Bid rumours are swirling” around advertising giant WPP, says Camilla Palladino in the Financial Times. Add together its stockmarket value of £3.3bn and its debt and you get to an enterprise value of £6.9bn. Yet WPP Media, the media-buying division, “is easily worth more than that”. WPP Media’s annual operating profit of between £750m and £1bn suggests it could be worth £8bn. So a buyer could offer a 35% premium on WPP’s share price, take on its debt and get its network of more than 90 advertising and PR agencies for free. Still, a private-equity buyer might struggle to peel WPP Media from the rest of the group “without turning it into pulp”. A“cleaner path” would be a bid just for WPP Media. New CEO Cindy Rose (pictured) should…

AI is no threat to active managers, says Richard Buxton, the veteran UK equities investor who retired in 2023 after 40 years at firms including Schroders and Jupiter. The technology is certainly powerful, he writes on Citywire. “AI can access, sort and synthesise pretty much everything that has already been written.” It can tap into company reports and accounts, investment research reports and earnings models. It will do this more neutrally than us. Analysts may shy away from putting “outlandish” numbers into a model, because they fear looking ridiculous, whereas “AI might find it easier to extrapolate big growth rates to come up with big numbers, unembarrassed”. AI will also be better at “scouring vast quantities of news in obscure journals to identify emerging trends”. Yet it has clear weaknesses.…

capx.co The British state is suffering from a “crisis of legitimacy”, says Andreas Wesemann. The foundations of the state are crumbling under the second law of thermodynamics and need an input of “fresh energy”. But voting in new people will not be enough. We need to “reimagine” the role and structure of the state. Firstly, clarify what the state is for. It should “do a few things well, rather than many things badly”. Those few things should include a world-class, lifelong education; an insurance-based health and social-care system; and a long-term investment programme to “generate retirement incomes from high-value scientific and technological businesses”. All these areas call for decentralisation and a reconfiguration of Parliament to make it more legitimate and representative, to include the use of “proactive referendums” to involve…

● Pacific Assets is to launch a strategic review following the unexpected closure of Stewart Investors, its current manager, and the transfer of all its mandates to FSSA Investment Managers. Rizi Mohanty and Martin Lau will take over running the trust from Douglas Ledingham and Jack Nelson. FSSA and Stewart are both owned by First Sentier, but were created by the split of what was First State Stewart into two firms in 2015 and operated independently. The £425m Asia trust said that it was “disappointed by the action taken by First Sentier”. ● Invesco Global Equity Income and the struggling Franklin Global have announced plans to merge, creating a trust worth almost £450m at current NAV. Invesco Global Equity Income has topped its category, with a NAV return of over…

• The Treasury has confirmed – albeit through off-the record briefings – that Rachel Reeves has no plans to cut the tax-free pension lump-sum limit in the Budget. That means the growing number of savers considering taking their lump sum to avoid being caught out by such a change can breathe more easily. Indeed, don’t make a withdrawal simply because you fear you may soon lose the right to do so – particularly since there may be knock-on impacts on your tax bill and future finances. • The UK’s state pension is the least generous in the G7, analysis from Fidelity International shows. Britons receive a state pension that is worth just 22% of the average worker’s earnings – compared with up to 76% in other countries. That said, the…

For a man who once kept a low profile, Jon Gray (pictured), Blackstone’s president and chief operating officer, is suddenly everywhere, says Dawn Lim on Bloomberg. He pops up in videos on LinkedIn, sharing his experiences while jogging and eating out in cities around the world. “TikTok-esque clips of a sweaty billionaire mixing travel musings with investment ideas and the occasional folksy platitude would once have seemed outrageous at a Wall Street firm built on exclusivity.” But Blackstone, “once a fortress of the world’s richest institutions”, is remaking itself under Gray into a “financial superstore for the dentist, lawyer and teacher next door”. His attempts to become a social-media influencer are part of his plan to “put a little bit of a human face to finance”. The aim is to…

2023 Siepi, Castello di Fonterutoli, Mazzei, Tuscany, Italy (£490, per six bottles, petershamcellar.com). I am fortunate to taste all the Tuscan big boys each year: Sassicaia, Masseto, Ornellaia, Tignanello and Solaia, and hosts of other seriously expensive creations which have one foot in the future and the other firmly in Tuscany’s heritage. Prices for the superstar wines start at around £165 and skyrocket to over £1,000 for celebrated vintages. Today, I present you with a wine that I have followed for over 30 years, and while it never disappoints, none of the previous vintages come close to touching the hem of this utterly seismic 2023 vintage release. The Mazzei family has been the custodian of the epic Fonterutoli Estate in Castellina in Chianti since 1435, and I urge you to…

Dear England Lessons in Leadership – Inspirational Wisdom from the Former England Football Manager Gareth SouthgateCentury, £25 Managing a football team has a lot in common with running a company, it turns out. As well as being the public face of their organisation, football managers have to meet the shifting expectations of supporters and pundits; corporate CEOs likewise have to deal with the whims of markets and investors. Football is also, of course, a major industry in its own right, with broadcasters and sponsors spending billions to associate themselves with the world’s most popular game. The implications of all this are bought out by Gareth Southgate, arguably the most successful manger the English team has had since Alf Ramsey. Away from the field, Southgate has distilled his wisdom for Harvard…

Doug McMillon, CEO of US retail giant Walmart, is to step down on 31 Jan, completing a 12-year run that “moved the company from a staid bricks-and-mortar retailer to a formidable challenger to Amazon”, says Jordyn Holman in The New York Times. During his time at the top, Walmart’s annual revenue rose to $681bn, thanks to the decision to buy e-commerce company Jet.com for $3.3bn in 2016 and the choice to “lean further into digital offerings like kerbside, in-store pick-up and home delivery” during Covid. This increased emphasis on digital activity has also enabled Walmart to use high-end goods “to attract more online and in-store shoppers who make more than $100,000 a year”. McMillon oversaw a near-$600bn increase in Walmart’s market value, says Stephen Gandel on Breakingviews. Moreover, when he…

Italian oil and gas group Eni has once again proved its resilience when oil prices are weak, says WirtschaftsWoche. In the third quarter it suffered a 14% decline in the oil price and a 6% depreciation in the euro-dollar exchange rate. But net profits came in at €1.25bn, a slight increase on the previous quarter and almost as much as in the third quarter of 2024. Production rose by 6% thanks to its lucrative fields in the United Arab Emirates, Congo and Libya, and should climb further due to a large joint venture with Malaysia’s energy giant Petronas, with whom Eni is hoping to become the top supplier of liquefied natural gas (LNG) to the Asian market. The stock also yields a juicy 6%.…

What’s going on? The nation has a newish leader, elected on a wave of muted enthusiasm – or at least a sense that he couldn’t be as bad as the last lot – but who has quickly proved a disappointment in office. His government is looking weaker by the day and he seems unable to tackle the deep-seated economic problems the country is facing. So yes, that’s Keir Starmer, of the British centre-left. It’s also Friedrich Merz, of the German centre-right. After just six months in power, Merz’s coalition is beset by infighting, policy deadlock and sliding poll ratings. His CDU/CSU bloc (the coalition’s biggest party) hasn’t slumped as dramatically as Labour. But its support has fallen to 25%, a historic low for the nation’s dominant party of government, and…

Speculating about what will be in this year’s Budget is fairly pointless, not least because the plans clearly change every few days. But the persistent chatter that the chancellor would like to coerce or persuade private investors to hold a minimum level of UK stocks in their individual savings accounts (Isas) is worth a brief thought. To declare my bias, I think this idea is daft and not just because of the headache of deciding what’s British enough. International miner Anglo American after it moves its headquarters to Canada? An investment trust with half its assets in Asia? An exchange traded fund that tracks the S&P 500? The Isa rules are already full of nonsense – we don’t need any more. The idea that Isa tax relief should be a…

Trump is no threat to democracy Zachary Karabell The Washington Post It is clear that Donald Trump and his family have personally profited from the presidency, says Zachary Karabell. The long list of examples, which ranges from cryptocurrency schemes to allegations of pardons in return for money, has led to charges that such corruption represents a threat to democracy. Does it really? As the Netflix series Death by Lightning reminds us, in the 1870s and 1880s directly profiting from political office was both commonplace and legal. A distinction was even drawn between honest and dishonest graft (the latter referring to bribery and extortion). In the 1870s, for instance, Chester Arthur, later to become president, was in charge of collecting taxes on foreign trade in and out of New York, duties…

project-syndicate.org In advanced economies, conversations about AI tend to turn immediately to concerns about excessive automation and job losses, says Michael Spence. But emerging economies have their eyes on the prize: academics, entrepreneurs and policymakers “seem convinced that the technology will help them solve thorny challenges”, from diversifying their economies away from dependence on natural resources to expanding access to critical services. AI development is largely taking place in China and the US, as they are the only countries that can afford all the necessary investment. But poorer countries, so long as the basics such as a reliable electricity supply are in place, can exploit the technology for their own ends. The possibilities are “virtually endless”. AI might, for example, improve credit assessment processes, making financial services available to previously…

Renewable-energy trusts were already struggling before the government decided to kneecap them at the end of October. In a major shock, it has launched a consultation on changing the inflation linkage on the subsidies they receive from the retail price index (RPI) to the consumer price index (CPI) in April 2026, three years sooner than expected. Even worse, the government has floated a second, complex option that would backdate the switch to 2002. This may have been thrown in mainly to make a April 2026 change sound like a concession, but if actually implemented could reduce the income received by generators by billions of pounds over the coming years. The market reacted accordingly and the sector as a whole lost about 5% of its market value on the day. Lack…

Good news and bad for people aged 50 or above. On the positive side, there’s a reasonable chance you’re going to live longer than you might think. The downside, however, is that this could leave you short of money later in life. Multiple studies have found that people routinely underestimate life expectancy. In the UK, the typical 50 year-old man today can expect to live to age 82; a 65-year-old man can expect to live to almost 84. Women’s life expectancies, on average, are a couple of years higher. However, a study published last month by the Centre for Retirement Research found that people tended to underestimate their chances of living to such ages. At age 55, the odds of living into your mid-eighties are close to 50%; but fewer…

Canada’s stocks have enjoyed a revival this year. The S&P/TSX Composite index has gained 25%, eclipsing America’s S&P 500, up just 16%. Canada has been one of 2025’s best-performing developed markets, an early sign that the post-globalisation era will reward a very different set of winners. With economies reshoring and supply chains shortening, the natural lottery of geography and geology has never mattered more. Few nations have hit the jackpot quite like Canada, which ranks among the world’s top-five energy producers and sits atop $1.7trn of natural-resource wealth from oil, gas and uranium to potash, gold and timber. Crucially, Canada pairs this abundance with political stability and alignment with the West, which is a rare combination in a world of rising authoritarianism. As Washington turns inward, Canada’s calmer politics, under…