Innehållsförteckning för 1168 från MoneyWeek

“Denial is a river in Egypt,” as a friend pointed out to me when I insisted, shortly before my birthday, that the ten years between 39 and 40 are the best of one’s life. Refusing to face facts is a particular danger for countries (see page 4) and investors, because it can prove very expensive. Plenty of analysts have been warning for months that the uptick in stockmarkets that began last October would go nowhere. But it is still going strong, and is likely to endure, says Max in his cover story on page 20. So it is time the naysayers threw in the towel and agreed that we are dealing with a bull market. He highlights the best investment trusts to sell or buy now. Discounts to net asset…

“There is no empirical evidence that shows 2% as the optimal long-run inflation target for a central bank… It… originated in New Zealand in the 1980s… Roger Ferguson Jr… of the [US] Federal Reserve observed… ’it came not from any academic study, but rather from an offhand comment during a television interview’. For reasons no one has intelligently articulated, other countries subsequently adopted it as their target… The Fed… has justified the 2% [target] based on [the idea that it anchors] inflation expectations… [yet] inflation expectations are typically at their lowest right before a surge in inflation occurs; they are at their highest levels just as inflation rolls over… they mimic the typical over-enthusiastic investor, piling in at the top of the market and panic selling near the bottom…[targeting inflation]…

A post-pandemic boom in pet pharmaceuticals has ebbed of late, says Anne Barloutaud in Investir. Shares in Côte d’Azur-based Virbac, the world’s sixth-biggest veterinary biopharmaceuticals group, have slipped by a quarter over the past year, while a cyberattack in June has also weighed on investors’ confidence. Yet on a long-term view the sector is attractive owing to growing global pet ownership. Virbac has historically outgrown the wider animal-health market and has further room to expand in many of its 100 global markets. On 11 times 2024 operating income, the shares are valued at a discount to their historical average of 15 and look inexpensive.…

Politics & economics On Monday, Italy “became the biggest European market to impose a windfall tax on banks”, joining a wave of governments seeking to “raise cash by targeting the profits of lenders that have been buoyed by rising interest rates”, says Owen Walker in the Financial Times. As governments face pressure to support citizens during a cost-of living crisis, “lenders enjoying bumper profits on the back of central-bank policy rate rises are seen as easy targets”. Italy’s 40% tax on net interest income follows similar moves in Spain, Hungary, the Czech Republic and Lithuania. The announcement by deputy prime minister Matteo Salvini led Italian bank shares to drop sharply, prompting a partial U-turn, say Sonia Sirletti and Chiara Remondini on Bloomberg. On Tuesday, the finance ministry said…

If you needed a spare light bulb, or a coffee cup or two, or any one of a hundred different household items, Wilko was the place to find it. Its shops were never especially inspiring, nor were there any very stylish designs, but they usually had what you needed, and it was always cheap. It now looks as if its stores will disappear. Over the past week, it has been warning it is close to going bust, with 400 shops and 12,000 jobs at risk. With the company fast running out of cash, it has been casting around for a saviour. So far none has emerged. It remains to be seen what happens over the next few days, but it looks as if Wilko may join the long list of…

A balanced fund is a fund that tries to deliver lower-risk, steadier returns by investing in two or more different asset classes. The standard example is a fund that invests in both stocks and bonds. Stocks are more volatile, but should provide higher long-term returns. Bonds usually provide a stable, fixed rate of return. When the economy is doing well, stocks should outperform bonds. During a slowdown or recession, bonds should hold up better, helping to offset losses from the stock portion of the portfolio. The exact split between stocks and bonds within a balanced fund will depend on how much priority the fund gives to growth and how much to stability and income. However, a split of 60% stocks to 40% bonds has historically been the default choice and…

“When I was playing cricket in the late 1990s and early 2000s I’d be asked to make a personal appearance or take part in a photo shoot. But I valued my time way more than money, so if I didn’t want to do it, I’d put a ridiculous price on it, like £20,000 for an hour. Most of the time the answer was no, but a few times they agreed.” International cricketer Adam Hollioake (pictured), in The Mail on Sunday “When your first novel comes too early, there is the problem of the second. Because then you’re absolutely at sea. When you’re young, people love you. They go, ‘Oh, do what you want. We’ll give you money.’ So of course you write cr*p… I wrote the cr*p book… And they…

bloomberg.com/opinion Of all the misleading economic statistics that get “bandied about for political purposes”, says Allison Schrager, my favourite is that most Americans couldn’t afford to cope with a $400 emergency expense. Last week, for example, vice-president Kamala Harris claimed that “the average American is a $400 unexpected expense away from bankruptcy”. But it’s completely untrue. The $400 figure comes from an annual Federal Reserve survey: asked whether they could meet a $400 emergency expense from cash, 63% of households, in 2022, said yes. But that doesn’t mean the remainder risk falling into bankruptcy. Most said they’d raise the money using a credit card or other borrowing. The actual proportion of Americans who say they’d struggle to raise the funds at all is just 13%. That’s not great, but “there…

Stocks related to artificial intelligence (AI) have been leading the market higher this year, with names such as Microsoft, Nvidia and Apple jumping between 33% and 218% year to date. These gains are reminiscent of the dotcom bubble in the late 1990s. I’m not entirely convinced we’re in a similar position, but we are certainly in a peculiar market. Nvidia, the big daddy of AI, is trading at 232 times trailing earnings. That’s some multiple to “grow into”. But one stock does not make a bubble. As analysts at ETF firm WisdomTree point out, a composite tech index that includes stocks from different sub-sectors is trading at below 30 times forecast earnings today, compared with 55 times in the 1990s. That’s not cheap, but it is not a bubble. Investment…

Let’s start with a health warning about this stock. It falls within the category of so-called “sin” stocks. It makes and markets products that many people dislike intensely. And it goes against the grain of modern medical opinion. We’re not here, though, to make moral judgements about portfolio selections. Our job is to highlight interesting investment opportunities, while leaving the decision-making up to you. So here goes. British American Tobacco, known as BAT (LSE: BATS), is a very cheap share. Yet as its name implies, the company’s main business is selling “combustible” (ie, conventional) cigarettes. And to be clear, “there is no safe level of tobacco consumption”, as Australia’s Department of Health puts it. “All tobacco contains nicotine and other toxic chemicals. Even if you don’t breathe in the smoke,…

Self-employed workers risk falling into several tax traps, says The Times. Take the unofficial 60% tax band. The tax-free personal allowance of £12,570 falls by £1 for every £2 of net income over £100,000. This tapering effectively adds a further 20% on top of the 40% higher-rate tax between £100,000 and £125,140, creating a marginal tax rate of 60% for earnings in this band. This is frankly bizarre given that earnings over £125,140 are taxed at the additional tax rate of 45%, but can be tricky to avoid for self-employed people who have incomes that vary from year to year. Those with several sources of income can also pay too much National Insurance (NI). There are four classes of NI contributions and somebody who has both employed and self-employed income…

Chancellor Jeremy Hunt believes reforms that would encourage occupational pension schemes to invest more in early-stage companies will benefit savers as well as driving vital investment in start-ups. The returns from private-equity and venture-capital investment could boost savers’ pension pots by as much as 12% by the time they retire, Hunt claims. Pension experts aren’t convinced, pointing to the additional risk that comes with investing in small businesses. Some start-ups deliver stellar returns while others are complete flops. Still, the long-term record of professionally managed funds offering diversified exposure to these businesses is impressive. One recent analysis of investment trusts focused on private equity found they had delivered growth in net asset value of 301% over the past ten years, compared with 187% and 76% respectively from the MSCI World…

2022 The Society’s Grüner Veltliner, Wine Box, Niederösterreich, Austria £27, 2.25 Litre Wine Box, thewinesociety.com First, the technology behind modern-day wine boxes is bang up to date, so you can expect these wines to last a couple of weeks in superb nick. Keep them in the fridge, and you can extend this further. Having said this, if you need six weeks to drink the equivalent of three bottles, you are probably reading the wrong wine column. Anyway, divide the three wine-box prices mentioned today by three, and you have the bottle cost, so none of them could be regarded as expensive. The renowned Weingut Stadt Krems makes my featured grüner, and it weighs in at a slender line 12.5% alcohol. It is serene, detailed, amazingly classy and pinpoint accurate with…

Dragons and sea monsters have long fascinated humanity, appearing in various guises across cultures. “In China, the dragon served as the emblem of emperors and remains a symbol of Chinese identity,” says Brian Boucher in an article for Sothebys. And it is possible, like the UFO hunters clutching photos (see left), that ancient civilisations thought they had the evidence to prove the monsters’ existence. The fossilised skeleton of a Pteranodon, which died in the Late Cretaceous, about 85 million years ago, is distinctly dragon-like. Named Horus after the Egyptian god of the sky, it recently appeared at Sotheby’s in New York, with a wingspan of 20 feet and sold for $3.9m (pictured above). Another specimen, this time a 190-million-year-old Plesiosaur named Nessie resembles the famous monster of Loch Ness in…

Wizz Air’s chief József Váradi (pictured) has been handed an extra two years to meet the targets that unlock a £100m bonus as part of his incentive package, says Leke Oso Alabi in the Financial Times. Váradi now has until 2028 to lift the Budapest-based airline’s London-listed share price above £120. He said the decision showed a “prevalence of capitalist spirits”, despite the motion inciting a major rebellion by shareholders. Almost 30% of the free float rejected the extension, which proxy advisers Institutional Shareholder Services had said was “not fully in line with UK good practice”. Still, Váradi has his work cut out. The shares currently trade at £23, down from £40 two years ago, due partly to Wizz Air’s failure to hedge against the rising price of oil. Good…

Traders betting on a tighter oil market this year have been repeatedly burned, says Grant Smith on Bloomberg. A few months ago, Brent crude threatened to plunge below $70 a barrel, prompting alarmed output cuts by Saudi Arabia and its allies in the Opec+ producers’ alliance. Those cuts now seem to be having the desired effect. Brent has rallied by 17% since mid-June to trade at $85 a barrel earlier this week. While it remains to be seen whether the price jump marks a “turning point that heralds a major price rally”, the bounce does at least suggest that oil prices have “found a floor”. This year’s output cuts have been mostly shouldered by Saudi Arabia, says Will Horner in The Wall Street Journal. It has been keener than others…

Never mind all the talk about out of control inequality, says Branko Milanovic in Foreign Affairs. Over the past few decades the world has been experiencing a “great convergence” as emerging economies catch up with the living standards of the rich world. Global inequality rose during the 19th and 20th centuries as industrialised nations pulled ahead. Yet this century has seen a “stunning decrease” as globalisation has lifted hundreds of millions out of poverty, says Felix Salmon in Axios. “The world is more equal now than at any point since about 1875.” While inequality between countries has plummeted, it “has ticked up slightly” within them since the 1990s, generating much domestic political discontent.…

India is enjoying a boom in initial public offerings (IPO) by small companies, says Bloomberg. A general recovery in investors’ confidence has sent major indices to new peaks, while poor recent performances by overhyped large flotations are also fuelling the boom. There have been 92 listings of companies offering shares worth a total of up to just $100m, more than on any other market this year. But investors appear to be tuning out the risk inherent in buying newly listed tiddlers. Smaller companies need only report earnings twice a year and are rarely tracked by brokerages. There have been some spectacular share-price collapses in the sector in recent years.…

Indianapolis Fat profits: It’s astonishing to watch Indiana-based pharmaceutical giant Eli Lilly growing its revenue at the rate of a tech start-up, says Robert Cyran on Breakingviews. The group’s top line “bulged” by 28% in the second quarter from a year earlier as it sold almost $1bn-worth of Mounjaro, its diabetes and weight-loss drug. Eli Lilly expects supplies to remain tight for the next few quarters despite plans to ramp up production. Danish rival Novo Nordisk also has cause to celebrate. Its weight-loss drug Wegovy has been shown to reduce strokes and heart attacks in 20% of overweight patients who have a history of heart disease but no diabetes – much higher than expected. That’s important, because insurers and governments typically won’t pay for weight loss, which is seen as…

● Rolls-Royce “looks to be firing on all cylinders again”, says Ben Marlow in The Telegraph. Just six months after new CEO Tufan Erginbilgic (pictured) called the engineering group a “burning platform” that had been “grossly mismanaged”, Rolls has reported strong results on the back of overseas orders. Firsthalf sales rose by a third to £6.9bn, while underlying operating profits grew fivefold to £673m. “Let’s hope ministers are paying attention.” Both Rolls and Britain have a lot riding on plans to develop small modular nuclear reactors (SMRs) for electricity generation. So why is the government wasting time on a contest to find a provider for the UK’s SMRs, rather than backing a national champion? Rolls has plenty of relevant experience – it powers UK’s nuclear submarines – and is using…

“We have never been this wrong for this long without seeing evidence to change our views,” said Jeff Currie, the long-standing – and often very bullish – face of commodities research at Goldman Sachs in June, when his forecast for stronger oil prices was questioned. One week later, that view changed anyway: Currie’s team slashed its year-end forecast for Brent crude from $95 a barrel to $86, citing rising supply from Russia, Iran and Venezuela. It was the latest example of how predictions of a new commodities supercycle have yet to pay off for Currie, who this week announced that he was retiring from Goldman after 27 years in which he became known for his willingness to issue bold forecasts. Back in the early 2000s, when he made his name,…

capx.co The UK’s Infrastructure and Projects Authority has officially rated HS2 as “unachievable”. That doesn’t mean it will be scrapped, or that it won’t still cost us billions, says James Ball. “It just means that years – decades probably – ahead of its launch we know it isn’t going to deliver what we need from it.” The point of HS2 was always capacity rather than speed, freeing up the west- and east-coast mainlines for more local and commuter services. The least important bit was the slightly faster journey time between London and Birmingham – now probably the only bit we’ll ever get. But don’t blame HS2 Ltd; blame politicians and Treasury mandarins. Their obsession with spending plans meant the project was constantly targeted for cuts that defeated the whole object.…

A year or two ago, there was much talk about “zombie” companies, kept alive by low interest rates, just muddling along without the cash flow to invest or generate growth. They were holding the economy back through low productivity so it would be better if they closed down, releasing staff, resources and premises for more useful deployment elsewhere. Since early 2021, interest rates have risen from almost zero to 5% and are set to rise further, but business insolvencies, though higher than a year ago, have failed to take off. It seems there were far fewer zombie companies than we thought. But there is one massive enterprise the zombie thesis fits perfectly: the British government. It used low interest rates to finance an extravagant spending spree both before and during…

Shares in Icahn Enterprises, the company controlled by billionaire activist investor Carl Icahn, fell by almost 30% last week after its quarterly dividend was halved, says The New York Times. Icahn’s firm has been under pressure since May, when short-seller Hindenburg Research suggested it could not sustain its current payout. Hindenburg claimed Icahn had adopted “Ponzi-like structures” by raising new capital from retail investors and paying dividends out of that rather than investment profits. Icahn called the claim “misleading and self-serving”, but admitted that ill-timed short bets on the wider market had hurt the firm’s returns. Icahn Enterprises will now “stick to our knitting” and focus more on activist campaigns, he said.…

● The number of families using potentially exempt transfers (PETs) to avoid inheritance tax has risen 48% in the past decade, according to HM Revenue & Customs (HMRC). PETs are gifts of unlimited value made during the individual’s lifetime that will be exempt from IHT as long as they survive for seven years after the transfer. Such gifts have become increasingly common as the number of families drawn into the IHT net has grown. There were 27,000 estates that paid IHT in the 2020-2021 tax year, up from 15,000 in 2009-2010, with the average bill rising to £214,000. ● NS&I has increased its interest rates again as the battle to attract savings heats up. The state-backed savings provider has boosted the rate on its Premium Bonds prize fund to 4.65%…

● Private pension savings could lose their exemption from inheritance tax (IHT) under new proposals from the government. Draft regulation published as part of a consultation exercise on how to abolish the lifetime allowance (LTA) on pension savings effectively abolishes the exemption, pension experts warn. That would hit thousands of families who since 2015 have been able to pass on unused pension savings to the next generation without the money counting towards the value of the estate for IHT planning purposes. However, ministers insist the draft regulation is not finalised, with other approaches under consideration. ● Pension annuity rates have now increased by almost 50% over the past two years, new data from Hargreaves Lansdown reveals. The adviser says that back in 2021, a 65-year-old with a £100,000 pension could…

For years, Larry Fink, the chairman and chief executive of asset manager BlackRock, has been telling corporate America that it should be taking more action on climate change and making progress on other environmental, social and governance (ESG) goals, says Maureen Farrell in The New York Times. So when BlackRock announced last month that it is appointing Amin Nasser, the head of the world’s largest oil company, Saudi Aramco, to its board, Fink, 70, found himself in the midst of a political storm. But that’s nothing new. His championing of ESG has increasingly drawn political fire from the right, who see it as an attempt to impose liberal and “woke” values outside the political process, and from the left when he doesn’t go far enough. Earlier this year Fink said…

Last month, David Grusch, a former US intelligence official, testified before the House Oversight Subcommittee on National Security, in Washington, DC, that, yes, he is “absolutely” certain the US government is in possession of unidentified aerial phenomena (UAPs – or UFOs as most people know them). The G-men have been reverse engineering them for decades. In 2019, he led a government task force into the sightings, which was “[no] frivolous assignment”, says Jeffrey Kluger in Time. Military pilots have reported around 650 instances of UAPs defying “conventional aeronautical physics”. Of course, the US Department of Defence denied all of it. The evidence Grusch must either be mistaken (even he admits his evidence is based on hearsay), or he is lying, says David Kyle Johnson on the LSE blog. If it…

A downgrade in America’s credit rating is “absolutely merited” given Washington’s “wildly reckless overspending”, says Stephen Miran in the National Review. Last week credit-rating agency Fitch cut the US government’s credit rating one notch from AAA to AA+, citing “a high and growing general government debt burden, and the erosion of governance” after June’s standoff in Congress over the debt ceiling, which brought America close to default. Fitch is the second of the big three rating agencies to have cut the US rating from the AAA “gold standard”, says Rafael Nam on NPR. S&P Global took a similar step in 2011. Just nine countries retain an AAA rating from all three agencies. The public debt-to-GDP ratio in these nations averages 39%, compared with 112% in America. The market impact was…

Four to buy Central Asia Metals The Sunday Times This miner “does what it says on the tin”, excavating copper in Kazakhstan. It also produces zinc and lead in North Macedonia. The shares have fallen by 25% in 2023 owing to weak commodity prices, but that shouldn’t last given demand for copper driven by the decarbonisation agenda. The group has low production costs because it extracts copper from mining waste, while a debt-free balance sheet gives it the firepower to go on the acquisition trail. On a price/earnings (p/e) ratio of 6.2, the shares look “oversold”. 180p ITV Investors’ Chronicle ITV’s boss says the channel is enduring the worst advertising recession since 2009. Yet the company has other strings to its bow, including ITV studios, which creates and sells programmes…

Two weeks ago, the Nasdaq-100 changed overnight. The strong performance of a few stocks meant that they had grown into a very large share of the index: the top six – Alphabet, Amazon, Apple, Microsoft, Nvidia and Tesla – made up more than 50% of its value. Investors were complaining that this was overconcentrated. So Nasdaq announced a “special rebalance” that reduced the weighting of these six companies, slashing them back to around 40%. For anybody who (reasonably enough) assumed that a market cap-weighted index or fund simply holds all stocks in proportion to their size, this may have come as a bit of a shock. These companies dominate the index because they have been very successful and investors are very keen to hold them. Why are they being punished…

Time to end the great gadget con Camilla Cavendish Financial Times If Joseph Schumpeter walked into my kitchen, I’m sure he’d be demanding “creative destruction” to sweep away the “poor design, built-in obsolescence and sheer wastefulness of today’s appliances”, says Camilla Cavendish. According to the UN, we throw out 50 million tonnes of electrical waste each year. The worst gadgets are those which “sting us” on subsequent use, such as printers, which won’t work without expensive consumables. Printer ink can be more expensive than Champagne. What can consumers do? America’s “right to repair” movement, which has gone global, has “scored some notable successes”. John Deere will now allow farmers to fix their own tractors, having insisted that only it, or authorised dealers, could use the on-board diagnostic software. Apple has…

thecritic.co.uk In recent years a certain “liberal Germanophilia” has taken hold in Britain, says Samuel Rubinstein. The conviction that Germany is a more “serious” and “mature” nation – economically strong, politically stable, and with a “moral probity” that let it assume the role of “Europe’s conscience” during the 2015 migrant crisis – reached its apotheosis with John Kampfner’s 2020 book Why the Germans Do it Better: Notes from a Grown-Up Country. But the central thesis was always flawed, and in the past three years it has suffered two major blows. First, Russia’s invasion of Ukraine discredited Germany’s energy policy and vindicated long-standing US concerns over German reliance on Russian gas. Second, the growing success of the populist AfD (which recently won its first mayoral election and is riding high in…

I once presented a documentary for Italian television declaring that Jakob Fugger – Fugger the Rich – was the richest man in history. He was a German who made his fortune in the 16th century through gold and copper mines, lending money to kings and popes and, above all, selling absolution. By the time he died his net worth was equivalent to nearly 2.5% of European GDP, or half a trillion dollars in today’s money. But, according to the internet (and we all know the internet is never wrong) there was someone even richer: a Malian gentleman, Mansa Musa the Ninth, or King Musa IX. The BBC deems his wealth “indescribable”, placing him above the likes of Augustus Caesar, Andrew Carnegie, John D. Rockefeller, William The Conqueror and Colonel Gaddafi…

■ “Another day, another update from the comatose Home Reit board,” says Alistair Osborne in The Times. The beleaguered real estate investment trust has announced that two more of the community interest companies (CICs) that rent its properties to provide housing for the homeless have gone into voluntary liquidation. One of these CICs leased 152 properties and accounted for 11% of Home Reit’s rent; it was run or controlled by the same director as another CIC that was the Reit’s largest tenant “before it went bust in March, taking 12.5% of the rent roll with it”. Separately, Home Reit said it had sold 40 properties at a discount of more than 60% to what it paid for them, and also reported it had collected just 7% of the £8.7m rent…

National Savings and Investments (NS&I) Premium Bonds is one of the country’s most popular savings products, with millions of people having owned or currently holding Premium Bonds. They’re also popular as gifts, especially to young children from grandparents. If you’re like me, you might have forgotten you were ever given any, only to be surprised when a cheque for £25 turns up in the post. Luckily, Premium Bonds will always be valid until they are cashed in, so even if you think you may have some from decades ago, it’s worth trying to track them down. One way is to visit nsandi.com/forms and look for the “form to track down lost savings”. You can complete this form online or download and print a copy to complete by hand. If doing…

Britons returning from summer holidays abroad may be tempted by the thought of retiring to foreign climes. If so, you’ll need to think about how to manage your pension income once you’re living overseas. The good news is that your private pension – income from a personal or workplace scheme, say – can be paid to you wherever you choose to live. You will also be entitled to the same annual pension increases as you would get if you were still living in the UK. However, check what arrangements your pension provider offers for international retirees. Some providers will only make payments to a British bank account. That may be problematic if you decide to bank locally. You may need to maintain a bank account at home for this purpose,…

I struggle to get excited about equity investments in the current market environment. For every “pro” I can name a “con” as we walk the tightrope of monetary-policy tightening alongside slowing growth and inflation. Soft landings. No landing. Hard landings. They all have their arguments and many of them valid. One area where I can, however, see the risk/reward trade-off as skewed in your favour is in fixed income. Not often do we talk of equity-like returns within fixed-income markets, especially over the last decade of low yields induced by quantitative easing. But as we survey the fixed-income landscape we see high single-digit and low double-digit returns on offer in many segments of the market. Last year was a wake-up call to many multi-asset managers that duration cannot be ignored,…

Going… Director Martin Scorcese used two white Lamborghini Countachs in filming The Wolf of Wall Street (2013). One is driven home safely by stockbroker Jordan Belfort, played by Leonardo DiCaprio – at least in his imagination, following a drugs and alcohol binge. The other crashes. Scorcese refused to use a replica, so a real Countach, worth $700,000, was wrecked in the filming, says Rob Hull on This Is Money. The car that was spared (pictured) is heading for auction with RM Sotheby’s in New York on 8 December. It is a 1989 25th Anniversary model – one of 12 – with a V12 engine and a top speed of 183mph. It should fetch $1.5m-$2m. Gone… A white 2007 Koenigsegg CCGT GT1 Competition Coupé was sold by Bonhams at the Goodwood…