Innehållsförteckning för 1199 från MoneyWeek

MoneyWeek has a lot of time for Warren Buffett, but he has always been wrong about two things. Firstly, his longstanding fondness for Cherry Coke is mystifying (in 2017 an Chinese advertising campaign for the revolting drink featured his face on the cans). When we consider also his reported dislike of alcohol, it is a miracle he has lived so long. Secondly, he doesn’t like gold. In the late 1990s he complained that it “gets dug out of the ground… then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” The long gold bull market that began in the early 2000s, and shows no sign of slowing down,…

“Some stockmarket observers [have declared] that [US] stocks are in a bubble... just as they were [in] 2000... To be sure, valuations are extended... Current earnings multiples are over 23, well above the S&P 500 historical average of 16... But... valuations were considerably higher at the start of 2000 than they are today. The market CAPE [cyclically-adjusted price/earnings ratio] was at 44 in 2000, ten points higher than today... the most highly touted tech stocks of the time had a triple-digit p/e (price/earnings) multiple based on the trailing 12-month earnings. [By contrast] the average p/e of the Magnificent Seven today is 42... It was late 1996 when [Fed chair Alan] Greenspan [warned of] ‘irrational exuberance’. But the bubble didn’t deflate until early 2000... today’s market may... resemble... 1996 [more] than…

Shares in Vanquis Banking Group plunged by 50% to a record low this week. Investors in the specialist bank were spooked by a sharp rise in complaints from customers, mainly about credit cards, but also car loans, says Ben Martin in The Times. Vanquis argues that the “vast majority” of the complaints against it were not upheld, but it admits that the cost of handling the “flood of grievances” has forced it to issue a profit warning. It has also admitted that a revamp of the company will dent sales this year. This is just the latest setback that has seen the company’s market value shrink from £5bn, when it was a FTSE 100 member, to £159bn. The complaints about its subprime credit card business are especially serious because it…

Shares in US pharmaceutical giant AbbVie began to tread water early last year as its arthritis drug Humira, the most successful prescription medication in the history of the industry, came off patent, says WirtschaftsWoche. But now the shares look likely to resume their upward march. Two new treatments, one for psoriasis and one for rheumatism, could notch up joint sales of $16bn this year, more than Humira’s last annual tally. By 2027, the figure could be $27bn. AbbVie’s beauty division is growing at a similar clip thanks to botox, and the cancer arm has just made a promising acquisition. There are a total of 23 items in the pipeline. The stock also yields 3.5%.…

Politics & economics Russian president Vladimir Putin has issued a “crude warning” to the West that Russia is ready to use nuclear weapons if its sovereignty or independence is threatened, just days before a presidential election that is all but certain to give him another six years in power, says ABC News. The West, along with China, which has “given Russia an economic lifeline against Western sanctions” and offered “tacit backing” for the invasion, have previously warned Putin against using nuclear weapons, says Max Seddon in the Financial Times. In an interview with Russian state television released early Wednesday, Putin said that although he does not see a nuclear war “rushing up”, “more direct Western military intervention” could change things. The US, Germany and other European countries have “ruled out”…

US president Joe Biden’s State of the Union speech (see story, left), and the fact that he has now won a majority of delegates, has caused his odds to shorten over the last few days. With £7.2m matched on Betfair, he is at 1.17 (85.4%) to get the Democratic nomination, with former first lady Michelle Obama in second place at 24 (4.2%). In a similar way, the odds have also shortened to 2.86 (34.9) on Biden winning re-election in November, though his Republican challenger, Donald Trump, is still the favourite to emerge victorious at 2.1 (47.6%). Meanwhile, the betting on who Trump’s running mate will be remains relatively wide open. With £376,153 matched, South Dakota governor Kristi Noem is current favourite, though her odds are still at a relatively long…

We’ve had the Brics, the Fangs, and more recently the Magnificent Seven. Now Goldman Sachs has come up with a European equivalent. The “Granolas” comprises 11 of the best-performing businesses on this side of the Atlantic, and include major multinationals such as GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP and Sanofi. According to Goldman Sachs, between them they have generated returns of 65% over the last three years once dividends are included, which compares to the 64% returned by the Magnificent Seven leading US tech stocks over the same time period. If the past is any guide, expect to see a whole host of Granola funds and ETFs launched over the next few months as asset managers try to jump on the bandwagon, and retail investors…

Private credit (also known as private debt) refers to loans that do not come through traditional bank lending or bonds that are traded on public markets. Under the narrowest definitions, it means only direct lending, in which an investor or small group of investors makes a loan directly to a company. However, broader definitions include leveraged loans – ie, loans that are arranged by banks but quickly syndicated (sold on) to a large pool of institutional investors. There are differences between direct lending and leveraged loans in terms of the risks, the type of covenants that a loan typically carries and the position that the investor will be in if anything goes wrong (a direct-lending investor is likely to have more influence than one of the many buyers of part…

“It’s not that I don’t like money – I’m an American, Americans like money. And it’s not that I don’t like things – I’m incredibly materialistic. But I just don’t feel this is something I could do. I can’t be me and do this stuff.” Author Fran Lebowitz (pictured) on declining lucrative offers to appear in fashion advertising campaigns, quoted in The Times “We probably sometimes listen a bit too much to central bankers… What we’ve proved in the last three years is that monetary policy is totally ineffective.” Archie Norman, chairman of Marks & Spencer, quoted on Bloomberg “Politics is the art of choosing between the disastrous and the unpalatable.” J.K. Galbraith, quoted in The Economist “Inflation is when you pay $15 for the $10 haircut you used to…

city-journal.org Marcus Aurelius, who once ruled the Roman Empire, may have been dead for more than 1,800 years, but he remains a “learned ghost at our decadent 21st-century feast”, says Darran Anderson. His Meditations, a collection of notes to himself on his Stoic worldview, continues to “exert a magnetic pull for the ambitious and the forlorn alike”, and is at heart about how to cope with adversity. It was written on active duty at a time of war and plague, in contested territories amid warring tribes, and yet still has much to say to those looking for help on how to cope with modern life. Aurelius did not seek his truths from other philosophers or books or lofty speculation, but from life itself. “And what Aurelius would really learn was…

Gaining direct exposure to the African digital-banking sector isn’t easy. The main options are MTN Group (Johannesburg: MTN) and Safaricom (Nairobi: SCOM). Both of these markets are fraught with liquidity and currency risk. Buying Safaricom’s partner in M-Pesa, Vodafone, is another option. However, its payment business is just a small part of a sprawling group being weighed down by its struggling European operations. Airtel Africa (LSE: AAF) has a London listing and is one of the purest plays on the market. Despite its rapid earnings growth, the stock is on a price/earnings (p/e) ratio of 6.8. It offers a dividend yield of 4.5%. Mastercard (NYSE: MA) and its peer Visa (NYSE: V) are two options investors could consider as ways to build exposure to the general growth of the global…

■ China’s “national team” of state-backed financial-services companies has invested Rmb410bn ($57bn) into local exchange-traded funds (ETFs) focused on equities this year, according to UBS. More than 75% of the inflows have gone into ETFs that track the CSI 300 index, says the Financial Times. Central Huijin Investment, which is part of China Investment Corporation, a $1.2trn sovereign wealth fund, has joined state-backed local asset managers and insurers in buying ETFs. The “national team” has played a crucial role in stabilising China’s $9.7trn stockmarket. The CSI 300 index climbed by more than 7% in February, and some observers are pencilling in further gains thanks to low valuations. Money managers have yet to pile in, which also bodes well. China’s regulator has pledged to help long-term capital enter the market, curb…

Chancellor Jeremy Hunt has revealed that the amount of child benefit many families receive will change from April. Child benefit is worth £24 a week for your first child, then £15.90 for each additional one. This will rise to £25.60 and £16.95 from April. However, if one person in your household earns more than £50,000, the amount of child benefit you are entitled to starts to shrink, tapering off to nothing if one of you earns more than £60,000. This will change in April when the amount you can earn before you start to lose the benefit will rise to £60,000 with it then tapering off to zero if you earn more than £80,000. The move doesn’t go as far as campaigners had hoped. The High Income Child Benefit Charge…

Plans for new rules that would allow people to take their pension with them from one job to the next were confirmed in last week’s Budget – but no further progress has been announced. The government said last year that it would look into how to introduce a so-called “pot-for-life” system in the UK, with employees taking one pension plan with them from job to job, rather than having separate pensions for each role they’ve had. The idea could make saving much simpler for individuals, but is potentially complicated for employers to deal with. Chancellor Jeremy Hunt mentioned the measure in his speech, but the government has yet to publish firm details of how a pot-for-life system would work in practice, or unveil any kind of timeline for making such…

Christopher Nolan’s Oppenheimer, starring Cillian Murphy (pictured), extended its run of awards on Sunday when it bagged seven Oscars, including best picture. Oppenheimer, which generated almost $1bn at the box office, became the highest-grossing best-picture winner since 2003. Its success could herald a new era where big box-office draws – traditionally snubbed by the Academy Awards – are included in the prestigious best picture category to lure in bigger television audiences, says Thomas Buckley on Bloomberg. The best-picture winners from the last decade were made for less than $25m, while the highest-grossing of those films, Green Book in 2018, only made $320m. But viewing figures for the Oscars have been in serious decline in recent years. In the US, 18.7 million people tuned in for the ceremony last year, less…

It has been one year since the collapse of Silicon Valley Bank (SVB) initiated a mini-banking crisis that ultimately spelt the demise of several US regional banks and Switzerland’s Credit Suisse. The crisis was triggered by poor risk management at institutions that hadn’t prepared for a sharp rise in US interest rates. The March 2023 panic highlighted problems with regulation at mid-sized US institutions in an era when “depositors can drain their accounts with the click of a button”, says Rob Copeland in The New York Times. Bailouts of the kind seen in 2008 were avoided, with failed institutions wound up and auctioned off to competitors instead. Ironically, New York Community Bank (NYCB), which bought assets in Signature, one of the failed banks, has found itself at the centre of…

Global fertility rates have been falling since the 1970s, says Niall Ferguson on Bloomberg. Total fertility fell below the “replacement rate” of 2.1 live births per woman in the US and UK in the 1970s and in much of East Asia the following decade. The trend is not limited to rich countries: Iran has a slightly lower birth rate than America. Even India’s rate recently fell below two. Only in sub-Saharan Africa are birth rates still high, but these too are expected to plunge in the coming decades because of the same factors that caused the fall elsewhere – economic growth and women’s education. While the world population is still growing, humanity’s number looks on course to peak sometime in the 2060s or 2070s.…

Shares in broadcaster ITV jumped by 12% after CEO Carolyn McCall said she thinks the advertising market is rebounding from the worst recession since the financial crisis, says Alex Farber in The Times. Income over the first three months of 2024 is expected to have eclipsed the same period in both 2023 and 2019. The outlook could improve further, as the Euro 2024 football tournament, is expected to “very positive” for advertising revenue. The expansion in the sales of catalogues of old programmes and unscripted programming for streamers adds further revenue. The expected softening in the rate of decline for the traditional advertising market is clearly welcome, but the “critical new development” is the performance of streaming service ITVX, says Nils Pratley in The Guardian. McCall’s plans to “ramp up…

Social-media platform Reddit has opted to price its shares between $31 and $34 in its initial public offering (IPO) later this month. That share-price range implies an overall valuation of $6bn-$6.5bn, a far cry from the $10bn it secured at a fundraising on the private market in 2021, says The Wall Street Journal. Reddit has recognised “investors’ waning appetite for unprofitable companies” – in 2023 the group lost $90.8m – and is also facing a “choppy” market for flotations. Most shares are sold to institutional investors when a company lists, but Reddit is focusing on retail investors and loyal users of its message boards.…

● There is something “almost comically haphazard about the acquisition strategy of Frasers Group,” says Simon English in the Evening Standard. The retail giant was founded by Mike Ashley, who has handed control to his son-in-law, Michael Murray (pictured). In a “scatter-gun approach”, Murray recently bought Wiggle bikes for £10m and last year spent £52m on luxury retailer Matches Fashion, which has just fallen into administration. “It is to be hoped that Murray and Ashley keep playing retail roulette and land on a winning number once in a while,” as retailers “are counting on it.” ● It’s strange that Belgian car and home insurer Ageas didn’t “pounce sooner” on Direct Line, says Oliver Shah in The Sunday Times. Previous CEO Penny James “hit the skids” following a profit warning in…

The Goldilocks era of full employment, economic stability, and steady growth, is over, says Wei Li, the global chief investment strategist at BlackRock, the world’s largest asset manager. The pandemic ended the “Great Moderation” – a period of low macroeconomic and market uncertainty that had been a boon to investors. “It didn’t really matter if you had a 60/40 portfolio or a 40/60 portfolio,” Li told a summit organised by the Australian Financial Review. “As long as you were invested, you were able to really benefit from this Goldilocks environment.” Now we have shifted to what BlackRock dubs the “New Regime” era, in which central bankers will find it difficult to balance inflation and growth due to supply issues exasperated by conflict and geopolitical tensions. Investors should enjoy the current…

spectator.co.uk “In the end, it was the sports kit that persuaded us to pull the plug,” says Flora Watkins. A directive came down from the top that all pupils at our sons’ private school must get two training tops at a cost of £90. This on top of replacement uniforms (£200), two fees hikes, an extra £4,000 for “academic enrichment” and possibly a VAT bill from the incoming Labour government. Although we are well-off by most people’s standards, such price rises are becoming increasingly unaffordable for parents paying out of PAYE salaries or freelance income. Meanwhile, friends’ children at the local village state primary were flourishing in small classes, and what it “lacked in pricey uniforms and Astroturf pitches” it more than made up for with “forest school” and simple…

Infrastructure investment trusts are trading at some of the widest discounts to net asset value (NAV) in the investment-trust industry, having traded at a premium for much of the past decade. The discounts reflect both investors’ increasing caution towards trusts and uncertainty over valuations. Trusts that own illiquid assets are harder to value than those with liquid investments, such as equities. There are two ways these trusts can value assets. Valuers can look at recent comparable transactions or calculate asset values based on the investment’s long-term projected cash-flow generation. The subjective nature of both methods means that there is always some ambiguity around asset values of trusts with illiquid portfolios. The latter method, based on long-term cash-flow generation, is also influenced heavily by interest rates. This method uses a discount…

● “The UK’s gender investment gap has widened,” says Martha Muir in the Financial Times. Research by investment-advice website Boring Money has found that the gulf grew by £54bn last year. Men have a total of £1.01trn invested, compared with women’s £450bn. The figures exclude workplace pensions. Just 19% of women aged 25 to 44 were investors in January 2024, compared with 34% of men in the same age group. One key reason for the gender investment gap is that women reported having a much lower appetite for risk than men, making them more inclined to keep their assets in cash. ● “Two in three landlords in London have hiked rents to pay for their agent’s renewal fees,” says Robyn Hall on The Negotiator. Research by lettings platform Hello Neighbour…

● Are your pension benefits discretionary or guaranteed? If you’re in an occupational pension scheme, it’s important to understand the difference, because where current benefit arrangements are at the discretion of the plan provider (rather than being a contractual entitlement) it’s possible they could change. Thousands of staff at Boots have found this out the hard way. For many years, staff have been able to claim their full pensions at age 60. More recently, however, this has increased to 65, with many staff shocked to discover the benefit was always discretionary. ● Changes to the auto-enrolment pensions system have been delayed. Last year, the government promised to lower the minimum age at which savers qualify for the system – including mandatory contributions from their employers – from 22 to 18…

Nick Clegg, the former Liberal Democrat leader who led his party into a coalition government with the Tories in 2010, is a curious creature, says The Economist. He is both very successful (“he has his own dictionary entry”) and not that successful at all (“read it”). He charms many; irritates others. He was once, in the run-up to the election that made him deputy prime minister, the subject of a popular cult. Just a few short years later his political career ended with his party being all-but wiped out in the 2015 general election. But like his former boss David Cameron, who was similarly humiliated in the Brexit vote a year later and is now foreign secretary, Clegg bounced back. He went “from political has-been to one of the most…

2021 Dog Point Vineyard, Pinot Noir, Marlborough, New Zealand £30, thewinesociety.com It is human nature to seek out the newest, brightest, and shiniest releases, openings, launches, and premiers, and the wine business is no different. New brands pop up like mushrooms in our world, and while occasional wines impress and some even amaze, I find myself returning to the classics more often than not for enlightenment and excellence. I tasted the new Dog Point wines the other day, and this quartet is sublime. The 2023 sauvignon blanc (about £23) shows lemongrass, pink grapefruit and pumice stone freshness, and it is one of the finest I have ever tasted. The 2018 Section 94 (about £30), the single parcel sauvignon blanc that spends some time in old oak barrels and then is…

The Trading Game A Confession Gary Stevenson Allen Lane, £25 In the summer of 2007, just as what was then known as the “credit crunch” was beginning, I was working as one of a group of interns at Citigroup. Among this group one stood out both for his confidence and his instinctive grasp of markets. It was little surprise to me that, while I and many of my colleagues returned to our studies empty handed, he was offered a job for the following autumn and within a few years had become one of the top traders for the bank. Sixteen years on, Gary Stevenson, now an economist with a legion of fans on YouTube, has written a memoir, The Trading Game. The book traces Stevenson’s journey from the East End…

While most investors focus on booming US stocks, “there is an even more intense bull market under way in India”, says Ruchir Sharma in the Financial Times. Unlike America’s narrowly focused tech boom, India’s run has been a “broad-based classic”, with gains spread across sectors and company sizes. Where India does resemble the US is the key role played by domestic retail investors. Rising incomes are fostering an “equity culture” in the world’s most populous nation. The amount of money Indians hold in targeted investment plans has tripled this decade to nearly $110bn. While the US and UK equity markets suffer de-listings, in India the number of publicly listed firms has nearly quintupled in two decades. By one measure, the number of nationwide stock-trading accounts nearly tripled between 2019 and…

When Virgin, Tesco and other newcomers joined the banking sector, “it looked as if there was a new dawn”, says Alex Brummer in the Daily Mail. However, with Nationwide announcing last week that it would acquire Virgin Money for £2.9bn, on the heels of Barclays buying Tesco Bank, it seems these “challenger banks” are now “falling like ninepins”. This is a “great shame”. The services offered by the big four lenders are “deteriorating”, with branch closures leaving small businesses and individual customers “feeling isolated”. The only consolation is that as a mutual, Nationwide “should be a kinder and gentler owner than the alternatives”. You could argue that because Nationwide is a building society and “sits in the industry’s second tier”, it is “a different type of challenger”, says Nils Pratley…

Five to buy 1Spatial The Mail on Sunday The UK is an underappreciated technology “hot spot”, with a tech economy worth £800bn. Many of the Silicon Valley tech giants run UK operations and there is a thriving sector of smaller firms with specialist know-how. This Cambridge-based “geospatial data management” business “exemplifies the breed”. It works on the data used in “digital maps” that helps companies and governments to “understand where assets such as property, pipes and plant life are located”. The shares have climbed by 65% in five years, but as it continues to win customers there should “be more to come”. 62p e.l.f. Beauty The Telegraph This cosmetics group is one of America’s “most sensational” recent consumer success stories. The company tailors its offering to Generation Z, who love…

Portugal is set for “months or even years of political instability” after both the main parties fell well short of a majority in last weekend’s election”, says Joana Ramiro in The Guardian. The big story, though, was the “unprecedented” victory for the far-right Chega party, led by André Ventura (pictured), which gained 18% of the vote and quadrupled its parliamentarians from 12 to 48. The centre-right Social Democratic party, which narrowly came first, has ruled out any deals with Chega, but the question “is now how much strength is left in that cordon sanitaire” – it is hard to see how there can be a stable governing coalition that does not include the party. Indeed, Chega’s attempts to become part of Portugal’s new government seem to have been rebuffed for…

Last week, we saw that the small-cap effect was more inconsistent than many investors assume. Smaller stocks have beaten larger ones over decades, but they have oscillated between long spells of outperformance and underperformance. In recent years, they have seen a long streak of underperformance. That doesn’t mean that we should ignore small caps, but we should think about whether this is likely to persist and why. However, before getting that far, investors who want to track small-cap indexes need to consider what they are buying. We can see this most clearly in the US, where there is a choice of competing small-cap indexes. Look beyond the obvious in America The best-known US small-cap index – and the one with the most assets in UK-listed exchange traded funds (ETFs) –…

Britain needs to man up Sam Ashworth-Hayes The Telegraph Britain’s “intrusive state” increasingly functions like an HR department, with its concerns about staff retention and instructions to “just be kind”, says Sam Ashworth-Hayes. Take the dramatic post-Covid rise in incapacity claims for mental-health conditions. Is Britain actually sicker, or are we just more willing to describe ourselves as mentally unwell and the state more willing to accept the claim unquestioningly? In this HR state, attempts to shift people into jobs are seen as unkind (even though they can boost mental health), so taxpayers continue to fund the jobless, public services decline and taxes rise. This HR culture is ubiquitous. Everyday interactions are increasingly governed by rules about what can be said, with the HR state intervening to protect and recompense…

newstatesman.com The lousy Wi-Fi connection on British trains is by design, says Daniel Susskind. A recent report for The Sunday Times revealed that poor connections on the British rail network are the result of a “deliberate policy” to ration Wi-Fi as the decade-old infrastructure falls into neglect. This does not trouble the government. Last spring, it contemplated cutting free Wi-Fi to save operators money. This is a false economy. At a time when the British economy is on its knees, it makes sense to seize “low-hanging fruit” that might fuel growth. Wi-Fi on British trains is an example. Taking the numbers used to make the case for HS2, the value of time lost on trains due to bad Wi-Fi could be £376m a year, amounting to a total benefit of…

The UK economy needs more workers. Even though net migration hit a record of 745,000 in 2022 and the number of people in employment has risen close to an all-time high, there are still nearly a million open roles. Economists and policymakers have spent countless hours trying to determine the root cause of this problem, and two main issues have been identified, both of which revolve around economic inactivity. The number of people entering retirement or leaving the workforce owing to long-term health difficulties has increased dramatically. The trend does not appear to be slowing. The Office for Budget Responsibility’s forecasts show that economic inactivity owing to ill health and old age could weigh heavily on economic growth over the next three decades. That is to say nothing of the…

Activist fund City Index Eleventh has become the top shareholder in Japan’s Aozora Bank after raising its stake to 8.9%, says Bloomberg. With short interest reaching 27.6% of the free float, the bank is the most shorted stock on Japan’s Nikkei 225 Stock Average. Bets against Aozora have increased since the bank rattled investors with an unexpected loss on its US commercial-property investments. The Tokyo-based fund, linked to prominent activist investor Yoshiaki Murakami, has been rapidly increasing its holding in the bank over the past few days; last week it disclosed a 5% stake. City Index said it may make important proposals to Aozora. The fund has managed to bolster other firms’ share prices with its focus on improving profitability.…

The purpose of every Budget should be immutable: to enhance, through spending and taxation, the productive potential of the UK economy. This increases the trend rate of economic growth, thereby making people better off and raising extra revenue for the government, which in turn finances lower taxes and/or higher spending. The result should be increased popularity for the governing party. The most pressing need is to encourage into work the 9.3 million people of working age (22% of the total number), a tally that has increased significantly since the pandemic despite widespread labour shortages. The stick for this strategy would be to freeze benefits of the 5.6 million claiming them for at least a year; the carrot would be to direct the consequent savings towards increasing the thresholds for tax…

Time is running short to make full use of your pension contribution allowance for the 2023-2024 tax year. This year’s limits are more generous than in previous years, but you only have until 5 April to take advantage. The annual allowance for pension contributions covers everything you pay into your pension plans over the course of the tax year, plus any contributions you receive from your employer and the value of basic-rate tax relief paid in by the government. For most people, this year’s cap is £60,000, or the value of their annual income if this figure is lower; that has increased from £40,000 in recent tax years. In defined-contribution pension schemes, such as personal and stakeholder pensions, as well as most employer-run plans, assessing where you stand on the…

Uranium’s resurgence has been undeniable. The price of the commodity surged by 89% in 2023 and early this year surpassed $100 per pound for the first time since 2007. This has coincided with a global renaissance in nuclear energy, fuelled by governments increasingly inclined to endorse nuclear power. Nuclear energy’s unique ability to support decarbonisation goals and mitigate the intermittency of renewable energy sources has propelled the sector forward. Moreover, the Russian invasion of Ukraine has acted as a catalyst, triggering the European energy crisis and highlighting the critical role of nuclear energy in providing energy security. Despite the resurgence in demand, global uranium-mine production falls significantly short of the requirements of the world’s reactors. The need for higher uranium prices to create an incentive for future production and bridge…