Innehållsförteckning för 1175 från MoneyWeek

“Go big or go home.” When it comes to transport, we have gone huge, but still can’t get home. HS2, originally supposed to cost £30bn, has become a farce setting us back around £100bn (see page 14) and the line is unlikely ever to reach the north of England. Further north, in Scotland, there has been such an absurd faff over building two ferries over the past five years that more than £300m has now been spent on them. They have yet to begin their service to and from the Scottish islands. As Scottish Labour points out, India has just sent a rocket to the moon for around £61m. Burying bad news A good week, then, to bombard people with new ideas, or microwaved old ones, to deflect attention from…

“Japanese banks [are] some of the globe’s best investments in 2023… the share prices of [Mitsubishi UFJ Financial, Sumitomo Mitsui and Mizuho] have gained an average of 73% in a year, driven mainly by hope that the central bank will finally exit its ultra low interest-rate policy… Higher interest rates would benefit banks [through] higher returns on their deposits parked at the [central bank]… Higher rates [should] also allow banks wider spreads on loans [because] deposit rates will likely be stickier than lending rates… Japan’s three mega banks trade at an average of 0.85 times tangible book value… far from [US bank] JPMorgan’s 1.9 times tangible book… Japan’s growth prospects… don’t match those of the US… [but] the shift in Japan’s interest-rate regime, together with Tokyo’s push to make companies…

French banking giant BNP Paribas is flush with cash, says WirtschaftsWoche. It sold America’s Bank of the West before March’s mini-banking crisis, earning €3bn. That should ensure that the group achieves record net income of more than €11bn this year. BNP pays out half its earnings to shareholders, so high dividends and share buybacks are in the offing. The shares already yield 7%. Meanwhile, higher interest rates are boosting earnings, while its corporate and institutional banking division is posting solid growth. The wealth management arm is struggling, but new ventures, such as Nickel, whereby consumers can open an account quickly and easily at a convenience store, bode well.…

Politics & economics More than 28,000 of the 120,000 ethnic Armenians living in Nagorno-Karabakh, a breakaway region that is internationally recognised as part of Azerbaijan, have fled to Armenia after a “lightning military operation” that has “recast the contours of the post-Soviet South Caucasus”, says Felix Light on Reuters. Azerbaijan’s 24-hour offensive followed a nine-month blockade that deprived residents of food and vital medical supplies. An explosion at a fuel depot outside the regional capital on Monday, where people were gathering to fuel their cars for the journey to Armenia, has led to at least 68 deaths. The offensive marked the biggest “escalation” in the conflict since a “brief war” in 2020 saw Azerbaijan take back swathes of land captured by Armenian forces in the 1990s, says Ishaan Tharoor in…

HS2 is turning into a monumental white elephant. Originally planned to run from London to Birmingham, and then onto Manchester and Edinburgh, with a spur to Leeds, the new high-speed rail line was meant to make getting between the UK’s major cities far quicker, cut out the need for domestic flights, and help rebalance the economy between London and the regions. At the original estimate of £33bn for a line that went all the way to Scotland, and linked directly into the trains running to Europe, that would have been reasonable value for money. The cost has exploded since then. Even with the line running only to Manchester, the bill had risen to almost £80bn, and that was at 2019 prices. It is likely to be over £100bn if it…

Put simply, liquidity refers to how easy it is to buy or sell an asset without moving the price against you. For example, property – both residential and commercial – is an illiquid asset. It takes a long time to buy or sell, trading costs (from stamp duty to surveys) are high, you can never be quite sure of the price you’ll get (or pay) until the deal has closed, and if you want to sell in a hurry, you’ll have to cut your price to well below the theoretical “market value”. On the other hand, shares in big, listed companies (“blue chips”) on the FTSE 100, for example, are very liquid. They are also “fungible” – ie, one share is the same as another, whereas each property is unique…

“In Big Tech we face a totalising power that in key respects disqualifies itself from being understood as capitalism, but rather as a wholly new form of governance by the few over the many… Somebody killed capitalism. We have something worse.” Yanis Varoufakis (pictured), far-left former Greek finance minister, quoted in The Guardian “The first lesson of economics is scarcity: there is never enough to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” US economist Thomas Sowell, quoted on the X social-media platform “He is paid 27 times more than I am. Something like that. It would be great if he was paid what I was paid. That would be fine.” BBC radio presenter Melvyn Bragg on Gary Lineker’s…

bbc.com/worklife The social networking and dating company Grindr gave its workers an ultimatum recently, says Alex Christian: get back into the office for at least two days a week or lose your job. Nearly half of the company’s workforce refused to comply. Grindr is not the only one. Twitter (now X) mandated a 40-hour work week in the office back in November of 2022. Big tech companies such as Amazon have also stiffened their rules. Zoom, which makes its living from enabling remote working, has also called its workers back into the office for at least two days a week. “As we brought product and engineering teams back together in the US, we were surprised how many issues were solved just by virtue of them being in the same room,”…

Kelso, the activist investment fund that listed in London last year, has made its second investment with a 3.2% stake in retailer The Works, says CityAM. The Works, which sells stationery, puzzles and books, has seen its stock price crumble nearly 80% over the past five years. Kelso says it wants to “restore the intrinsic valuation of the firm, which we believe is significantly higher than the current price”. The activist backs the company’s board, but argues that it should be buying back stock rather than paying a dividend and will vote against the dividend at next week’s annual general meeting. Shares in the The Works rose 9.5%. Kelso’s first investment is a 0.6% holding in e-commerce firm THG, which it is pushing to spin off its nutrition arm.…

Insurance market research group Consumer Intelligence estimates that the average car-insurance premium increased by nearly 50% in the year to June. While this has led to accusations of profiteering by insurers, in fact the opposite is true. Even though car-insurance premiums have risen to a record high, the industry suffered its worst underwriting performance in a decade last year as the cost of claims spiralled out of control. According to consultancy EY, the UK motor-insurance sector combined ratio, which displays claims and costs as a proportion of premiums, has hit 109.5%. Anything above 100% means the industry is making a loss on its underwriting. The consultancy believes that the industry will lose money in 2023, but could return to a positive underwriting position by 2024. A unique business Motor insurance…

● British Gas is being investigated over scare tactics in its latest advertising campaign. The energy giant sent marketing emails to customers “warning that their old meters urgently need replacing because they may catch fire”, says Ali Hussain in The Times. “When one panicked customer asked for details, he was told it was just a new advertising strategy to persuade customers to switch to smart energy meters and he need not worry.” The government requires energy suppliers to install a set number of smart meters every year or face a fine. But customers have the right to decline a smart meter. Many meters can last up to 40 years and the Department for Business and Trade, which includes the Office for Product Safety and Standards, has said it is unaware…

● When was the last time you checked on the performance of your pension plans, and the charges you are paying? Savers who don’t intervene when performance is poor or charges are too expensive may experience much larger costs than they realise. New research suggests that the average saver could add almost £100,000 to the value of their pension fund by shifting their savings to a provider offering more competitive performance and charges. But the Financial Conduct Authority warns that almost 80% of pension savers have never reviewed their plans. ● There’s good news and bad on pension scams. The positive story is that a ban on cold-calling appears to be working. The percentage of adults who have received a cold call related to pensions – often a prelude to…

Eldest son Lachlan (pictured), 52, will now take the helm as chairman of News Corp and CEO of Fox News as father Rupert steps back from day-to-day responsibilities (see story above). He was long seen as the natural heir, says Mike Wendling on the BBC, but that was thrown into doubt when Lachlan left the company after a feud in 2005, “determined never to return”. Rupert told reporters then that he hoped his son would one day “return to the family empire that was meant to be his birthright”, says Australia’s ABC News. And so it has proved. Lachlan went back to the business to help out in the wake of the phone-hacking scandal, and has now been annointed head of one of the world’s most powerful media empires, with…

Going… An “extremely well-preserved”, almost complete fossilised skeleton of a Camptosaurus dinosaur (pictured) is heading for sale with French auction house Hotel Drouot in Paris on 20 October, to coincide with the 30th anniversary of the release of Steven Spielberg’s Jurassic Park. Named Barry, after the palaeontologist who found it in the 1990s, the dinosaur lived in the late Jurassic period, around 150 million years ago, and stood 2.1 metres tall and five metres long. The skull is 90% all there and the rest of the skeleton is 80% complete, according to Hotel Drouot. Barry is expected to fetch up to €1.2m. Gone… A pair of dress-circle tickets to a production of Our American Cousin at Ford’s Theatre in Washington, DC, staged on 14 April 1865, have sold with Massachusetts-based…

“Barbiemania” has taken hold in Russia, says Maria Sotnikova in The Sunday Times. Warner Bros, the owner of the screening rights to the Barbie film, withdrew from the country over the war in Ukraine. But a pirated version, released on 14 September, made an estimated RUB11.6bn (£120m) in its first weekend, topping the Russian box office despite calls for it to be banned by Putin’s cronies. Cinemas show Barbie as a “pre-session service” before another advertised film, so “officially”, audiences are not paying to see Barbie. But they are wearing pink on the streets, eating at “Barbie-style” restaurants and paying RUB500 (£4.25) to visit a “House of Barbie” at a Moscow shopping centre, with entertainers dressed as Barbie and Ken. Even US-owned Instagram turned pink despite being an “extremist resource”.…

2023 has been a poor year for British shares. The FTSE 100 index is almost flat, lagging other developed markets. The more domestically-focused FTSE 250 has fallen by 4% this year. A year on from Liz Truss’s mini-budget, British investors remain reluctant to bet on the London market. A note from Liberum Capital finds that “UK equity funds moved $13bn into US stocks in the year through June”, says Joe Easton on Bloomberg. That’s a sign that British investors “lack confidence” in their own economy. Ironically, US funds actually bought $21.8bn of British stocks in the same period. Foreign investors tend to focus on the best-known blue chips, which helps explain why the FTSE 250 has done especially poorly this year. “The UK equity market has been a laggard among…

Wheat prices surged last year in the wake of Russia’s invasion of Ukraine, which has led to problems shipping grain out of the Black Sea. Black Sea ports handle roughly 70% of the grain trade from Russia, the world’s top wheat exporter; Ukraine was the world’s fifth-biggest exporter of the cereal pre-invasion. The disruption has put pressure on major wheat importers such as Egypt. In recent months, investors’ nerves have been calmed by an “exceptionally strong” harvest in Russia, which has sent wheat futures prices down to a near three-year low, says Susannah Savage in the Financial Times. Prices have fallen by more than a fifth since July. The slump comes even as prices for other crops such as cocoa and coffee have hit “multi-year highs”.…

Saudi Arabia’s leading cargo handling group, Saudi Logistics Services, is about to go public, says Bloomberg. Its market share is 95%, and it is well placed to profit from the kingdom’s “ambition to become a global supply chain hub”. No wonder, then, that the group received orders for all the shares it offered early this week. The owners, Saudi Arabian Airlines and Tarabot Air Cargo Services, are set to raise 2.54bn riyals (£556m) from the sale. The price range values the company at up to 8.48bn riyals (£1.9bn). This initial public offering (IPO) follows that of oil driller ADES Holding, the biggest listing this year. The uptick in oil prices has buoyed overall confidence in the market.…

Billund Lego bottles it on bricks: “Toy giant Lego has scrapped plans to make its bricks from recycled bottles, in a blow to its efforts to cut carbon emissions,” says Noor Nanji on BBC News. In 2021, the Danish company said it had developed prototype toy bricks from recycled polyethylene terephthalate (PET) bottles, with some other chemicals added, and that it aimed to start manufacturing the bricks within two years. Lego now says using recycled PET didn’t reduce carbon emissions after all, due to the more energy-intensive production process involved. Many of the 4,400 different bricks Lego currently produces are made using acrylonitrile butadiene styrene (ABS), a virgin plastic made from crude oil. Lego maintained it was still “fully committed” to making bricks from sustainable materials. “It is yet another…

●”Men in the City are dressing much more smartly than they were a year ago,” says Simon English in the Evening Standard. You can see that in restaurants and bars – and also in the latest update from high-street retailer Next, which also owns upmarket fashion chain Reiss. CEO Simon Wolfson pointed to the return of demand for traditional suits as one reason why the group’s full-year profit forecast has risen from £845m to £875m. These fashion cycles come and go: “During the dotcom boom there was briefly a trend for bankers to wear hoodies and trainers to look like their clients.” While not going that far, style became more casual again as a result of Covid. Now job cuts are coming and bankers look like they are dressing for…

Louis-Vincent Gave, co-founder, Gavekal “Property prices are falling. Large developers have fallen into dire straits. A big financial conglomerate has missed interest payments on products sold to investors,” says Louis-Vincent Gave of research firm Gavekal. Yet forecasts for the “unfolding implosion of the Chinese economy, with years of overbuilding, white-elephant projects and unproductive infrastructure spending finally coming home to roost” are at odds with other signals from the markets. “In most financial crises, the share price performance of banks starts signalling trouble months before a systemic crisis unfolds,” says Gave, writing in the Financial Times. Yet Chinese bank shares are rising. Similarly, Chinese government bonds have massively outperformed their US counterparts. These trends make it hard to describe conditions in China as an “emerging-market systemic financial crisis”. Then there’s equity…

bloomberg.com/opinion Over the past two years, at least five people in the UK have been killed by American XL bully dogs, says Tyler Cowen. Should they be banned? Some economic theories would suggest not. Bans should be very rare, they say, and it would be better for governments to impose so-called “Pigou taxes” on the right to own. Society does not, after all, insist on absolute safety in most other walks of life –many children die in swimming pools, but there is no call to ban them. This case is different. The dogs are “symbols of fear and aggression”, and they are “popular with criminal gangs”. There is therefore “value in getting rid of the symbol altogether”, and an outright ban would “probably make people feel more safe than a…

■ Fidelity has stopped investors from buying two more funds through its platform, seemingly due to its interpretation of the new consumer duty regulations, says Citywire. The firm has blocked consumers from buying the MIGO Opportunities investment trust and the Crux European Special Situations open-ended fund. While Fidelity does not give a reason for these decisions, Crux’s CEO Karen Zachary told Citywire that the restriction on her firm’s fund was apparently based on its performance. Other restrictions this year – including MIGO Opportunities, four other investment trusts and a number of open-ended funds that invest in trusts – are reportedly due to their ongoing charges exceeding an unofficial cap of 2.5%. “It’s hard to understand how restricting consumer choice like this could be seen as helpful to investors,” Annabel Brodie-Smith,…

One brand that has built up a large following with millennials in particular is Airbnb (Nasdaq: ABNB). It plays into both millennials’ interest in travel and their desire for a bargain, says Laidler. The website connects travellers with homeowners who are willing to rent out all or part of their property for a portion of the rent, and it has amassed a huge following. There have been complaints in some cities that the trend is reducing the amount of housing available for long-term rentals, but it still has huge potential for further growth. Revenue is still growing by more than 20% a year and the stock trades at 31.4 times 2024 earnings. Many huge fashion brands have struggled to win over a new generation of customers, but one that has…

A few years ago the London Stock Exchange launched a dedicated platform for bonds aimed at retail investors. Called the order book for retail bonds (ORB), it was supposed to mimic the success of similar markets in Europe by helping investors dip their toe into the bond market. Traditionally, bonds are traded in lots of £100,000, making it all but impossible for the average investor to buy a portfolio of their choosing. However, on the ORB market, the majority of issues can be traded in lots as low as £100. Double-digit returns The ORB has hardly taken the market by storm. After the initial flurry of trading, new issues dried up, although a few firms continue to use it. Financial services group International Personal Finance issued a retail bond late…

More than 2,000 members of the pension scheme at failed high-street retailer Wilko look likely to be dependent on the Pension Protection Fund (PPF) for their retirement benefits. The PPF, the state-backed lifeboat scheme for occupational pensions, is assessing Wilko’s plan; it is thought to be at least £16m short of the funds it needs to pay the pension promises previously made to staff. The good news for Wilko’s members is that the PPF will ensure they receive most of their expected retirement benefits – and all of them in many cases. The PPF was launched in 2005 after a series of corporate collapses that led to members of final-salary pension schemes losing their savings. It now manages the benefits of nearly 300,000 people. What people get from the PPF…

“Europe has a longstanding record of being at the forefront of innovation” Europe has a long-standing record of being at the forefront of new waves of innovation. One such example today is the transition towards clean energy. Given the significant restructuring of Europe’s energy mix, and the continued widespread focus on energy security across the continent, energy-efficient products and companies that enable electrification will present an exciting growth area for investors over the next few years. The European industrials sector is central to this growth, particularly electrical-equipment suppliers whose products and services are helping to upgrade the current ageing infrastructure in preparation for a more electrified future. The JPMorgan European Discovery Trust’s portfolio provides investors with access to many hidden gems tapping into this theme and enabling the transition to…

2020 Cherubino, Ovale, GinGin Chardonnay, Willows Vineyard, Wilyabrup, Margaret River, Western Australia £35, goedhuis.com Last Tuesday, I launched the 20th anniversary edition of my 100 Best Australian Wines 2023/2024 Report at Australia House in the presence of the high commissioner, the deputy high commissioner and a couple of hundred nearest and dearest of the Aussie and UK wine trade. This is the only time when all 100 wines are available to taste in the same place and yet I was most excited about announcing the recipient of my Winery of the Year award. With 11 Larry Cherubino wines, plus three more under the Robert Oatley label for whom Larry consults, it is absolutely no surprise that Mr Cherubino triumphed. I take my hat off to his dedication, perseverance, palate acumen…

Consumer price inflation reached 9.1% in the US in June last year, but that is nothing compared with how fast prices were rising during the last couple of years of World War I. Then, US prices were rising by around 17%. In 1918, the US Treasury introduced the $10,000 bill, and it remains the highest-ever denomination US banknote to have entered general circulation. (A $100,000 bill was created in 1934, featuring president Woodrow Wilson, but it was only ever intended for use by Federal Reserve Banks and not by the public.) Almost as surprising is how long it lasted – the $10,000 bill wasn’t withdrawn for lack of use until 1969. One such $10,000 note went up for sale with Texas-based Heritage Auctions earlier this month. Issued in 1934, during…

Are interest rates heading for a “Table Mountain” scenario? asks John Authers on Bloomberg. The analogy, offered by the Bank of England’s Huw Pill, is that interest rates will need to stay high and flat for some time in order to bring inflation under control, rather like the famous plateau at the summit of the mountain that towers over Cape Town in South Africa. Whatever happens, for central bankers the descent from high rates will be more dangerous than the climb up, as any mountaineer can tell you. The US Federal Reserve held interest rates at between 5.25% and 5.5% at its September meeting, but surprised markets by projecting that rates will need to stay high until well into next year. With annual US inflation down to 3.7%, investors had…

Four to buy Associated British Foods Shares This diversified fashion-to-foods business is heading for “significant earnings growth” as margins recover amid cooling inflation. Budget fashion chain Primark has been seizing market share as consumers feel the pinch and is opening new stores across the US and Europe. An improved UK sugar beet crop should help the foods division, while sales of branded products such as Twinings tea and Ovaltine continue to hold up well. On 11.5 times earnings and yielding just over 2%, the shares are great value. 2,063p BAE Systems The Telegraph This aerospace and defence giant’s shares are one of the few ways investors on the London stockmarket can hedge against geopolitical risk. The shares have been hoisted aloft by growing global military spending, rising by 60% over…

Last week, I wrote about the role of cash in the MoneyWeek exchange traded fund (ETF) portfolio and how the end of near-zero interest rates should make this less of a drag on returns. This week, we’ll look instead at the holding that seems most vulnerable to higher rates. Gold is a strange asset. It pays no interest or dividends. Since it needs to be stored and that costs money, you can even think of it as having a negative intrinsic yield: if the price stays stable, you lose more money the longer you hold it. Industrial use is low relative to the amount mined and irrelevant when it comes to driving the price. Gold’s investment role comes solely from its long history of being a store of wealth, as…

NHS and GPs hold back science Camilla CavendishFinancial Times In our competitive world, the UK must defend its leadership in life sciences, says Camilla Cavendish. Unfortunately, the shine is “starting to come off”. There are various problems, but a major issue is the NHS’s refusal to hand over GP records to the UK Biobank, the world’s most advanced genetic database. From 2006-2010, 500,000 recruits agreed to make their data available to researchers, yet Biobank remains unable to access the full medical history of 80% of them because GPs are refusing to hand over their records (hospitals have done so). CEO Rory Collins calls this missing data “a catastrophic obstacle to improving health provision” because, for so many conditions, from dementia to diabetes, only a small number are hospitalised and the…

project-syndicate.org Back in the 1870s, the US was in roughly the same place China is today, says Yuen Yuen Ang – a society newly emerged from rural toil yet on the brink of becoming a global superpower creates a poor underclass, a super-rich class of speculators, and a corrupt governing class. The public backlash against this “Gilded Age” gave rise to the economic and social reforms of the progressive era. The question is whether China can do the same. President Xi Jinping is certainly aware of the problems. His maiden speech to the Politburo in 2012 warned of the dangers of corruption. His “common prosperity” programme is supposed to address China’s high levels of inequality. Financial risks from mounting public and private debts are a threat to the system. Xi…

It’s now clear the UK economy is doing relatively well compared with Europe, rather than falling behind, as was previously thought. However, in stockmarket terms, Europe remains the leader. Over the past five years, the UK’s FTSE All Share index has returned 20% while the FTSE Europe ex-UK index has returned 40%. As a result, Europe ex-UK still accounts for around 12% of the MSCI All Countries World index, while the UK has sunk to just 3.5%. Europe has outperformed as its leading companies have prospered on the world stage. Novo Nordisk recently overtook LVMH as Europe’s largest company, thanks to a study showing that its slimming drug, Wegovy, had a major cardiovascular benefit. Novo Nordisk’s share price has tripled in three years, while LVMH’s stock has merely doubled. Meanwhile,…

The Bank of England’s decision to hold the base rate at 5.25% is good news for mortgage holders. “UK lenders are expected to launch another round of mortgage rate cuts… amid optimism home-loan costs have peaked,” says Zoe Wood in The Guardian. Mortgage rates have been dropping steadily since July as competition in the mortgage market has returned and the two-year swap rate – a key measure used by banks to calculate lending costs – has declined. Five-year, fixed-rate deals have dropped below 5% for the first time since June, with both Nationwide and NatWest reducing interest rates on their mortgage products in the past week. If you are due to remortgage in the next six months, now might be a good time to lock in these lower rates as…

Few pensioners will turn up their noses at an 8.5% increase in the value of the state pension. But this uplift, due to come into effect next April in line with this month’s inflation data, will cause some problems. Experts think around half a million older people who don’t currently pay income tax will begin doing so following the increase. The problem is that the state pension is now closing in on the value of the personal allowance, the amount of income an individual may earn or receive each year with no liability for income tax. This allowance was frozen at £12,570 in the 2021-2022 tax year, with no increase planned until 2028. From next April, the state pension will increase from £10,600 to £11,501. In other words, it will…

Many cabinets of curiosity – or kunstkammer, to give them their German name – were from the Renaissance onwards stuffed with objects weird and wonderful. European nobles would travel the world in search of odd-looking creatures pickled in jars, strange skulls and other knick-knacks bridging the scientific world with the fantastical. But for the Rothschilds, Europe’s pre-eminent banking dynasty, the ruling idea was that everything they acquired would only earn its place in the collection if it was the most beautiful and exquisite of its kind. On 12 October, auction house Christie’s in New York will be opening the cabinet doors to the kunstkammer belonging to the French branch of the Rothschilds, along with three other sales that week, starting on 3 October, dedicated to the family’s masterpieces and various…