Innehållsförteckning för 1207 från MoneyWeek

Ten years ago, a survey in a regional city in Austria caused a furore. The plurality of graduates at the local university, 30%, said they intended to spend their working lives being civil servants, as they wanted to prioritise their work-life balance. Those who pointed out that in the long term there could not be a work-life balance for civil servants without at least some work being done by the private sector in the first place were brusquely invited to relax and work a bit harder on their own work-life balances. I filed the episode away in my mind as a vignette of Europe’s risk-averse, statist mentality (there are no more Austrian economists in Austria), but I recalled it this week after I read that Nicolai Tangen, the CEO of…

“It is easy for investors to lose a fortune in the financial markets – and even easier for governments. In 2022, Japan spent more than $60bn of its foreign-exchange reserves defending the yen… And for what? Today the yen is weaker still… The yen has been falling… because of simple economic logic. The gap in interest rates between Japan and America is yawning… the Japanese government… says that volatility in the currency has been excessive, but its opaque criteria for selling reserves may well have made that problem worse… [Tokyo’s] urge to intervene is driven by… political calculation and national pride. A cheaper yen makes imports… of energy… more expensive, which is painful for voters. There is no doubting Japan’s firepower: at last count it had almost $1.3trn of foreign-exchange…

Medical-equipment maker Smith & Nephew (S&N) has been “rocked” by a shareholders’ revolt over proposals to hike its CEO’s pay to nearly £10m, says Jessica Clark for This Is Money. But while S&N received a “bloody nose”, with 43% of its investors voting against a pay increase branded “excessive” by city advisory group ISS, the proposal still passed. With US-based CEO Deepak Nath becoming the latest boss at a British firm to seek a higher salary in the face of significant opposition, there is clearly a big debate over executives’ compensation. While some argue that such “fat-cat” pay is too much, others contend that FTSE CEOs are “underpaid” compared with their US peers. Nath’s pay is clearly “absurd in the abstract”, says Nils Pratley in the Guardian. However, there’s “no…

The expansion of data centres, the spread of artificial intelligence and the creation of cryptocurrencies all require huge amounts of electricity, says WirtschaftsWoche. In the US much of it is generated from gas, while demand is on the rise from other sources too. The liquefied natural gas industry is expanding and Mexico’s overall need for gas could double by 2030. All this bodes well for America’s Kinder Morgan, which operates a network comprising 127,000 kilometres of pipelines and 139 terminals for gas, petrol and various other oil derivatives. It charges a fee for the use of its facilities. This year the bottom line looks set to grow to almost €3bn. The stock yields 6%.…

Politics & economics John Swinney has been sworn in as the seventh first minister of Scotland, following the resignation of Humza Yousaf last week. Cabinet posts are to be confirmed on Thursday, with a “significant role” promised for Kate Forbes, who announced she would not run for the leadership against him, says Neil Pooran in The Independent. One could argue that the return of a veteran who has “already served as leader, finance secretary, education secretary and deputy first minister proves that the SNP is in the grip of a tiny cabal” and that the “lack of a leadership contest prevented new ideas being aired”, says Dani Garavelli in The Guardian. Yet it feels as though, by electing Swinney, who has promised to focus on “bread-and-butter issues”, the SNP…

With the local elections in the United Kingdom now out of the way, Ladbrokes has turned its attention to the European parliamentary elections that are due to take place early next month. It is running no fewer than 24 markets, including one on the party that will get the most seats in 21 out of the 27 EU states. It is also offering a market on which political grouping will get the most seats, the number of seats that the European People’s Party will get, as well as who will end up being the president of the EU Commission. In most countries, it is already clear which party will end up coming out on top, so it’s no surprise that many of the favourites have extremely short odds. For example,…

It is the kind of mega-deal the City has not seen for years. The Australian-listed resources giant BHP offered £31bn for its UK listed rival, Anglo American. It was a complex offer that involved Anglo demerging assets before being bought out. Anglo has already rejected it, and its rising share price has taken its value to £36bn. It’s clear BHP is not going to succeed with its offer, and that a counter-bidder may well step in, or BHP be forced to pay more. Who else might bid? Glencore is one obvious rival suitor. Another would be Rio Tinto. Both the mining conglomerates would make obvious merger partners, and they would be reluctant to allow BHP to walk away with such a prize asset without trying to buy it themselves. It…

The Gordon growth model is a simple but powerful way of valuing shares based on the dividends that the company is expected to pay in future. It gets its name from Myron Gordon, an economist who originally published the method in the 1950s, and is the most common and straightforward example of a class of valuation methods called dividend discount models. The theory behind these is that the value of a company is equal to the value of all the dividends that it will ever pay to investors, discounted back to their present value (so a dividend paid in five years’ time is worth less than a dividend paid tomorrow). To apply the Gordon growth model, you need an estimate for next year’s dividend per share (D), the long-run expected…

“If socialists understood economics, they wouldn’t be socialists.” Economist Friedrich von Hayek (1899-1992), quoted on social-media platform X “This is about getting myself a nest egg, so I can get a place in the sun because I have a problem with British weather. And if there’s a crisis, you can throw money at it. That’s the best thing about money. The next stage is to have enough not to have to fly commercial. I’m 6’4” and I find flying absolutely awful.” Actor John Cleese on agreeing to act in the stage version of sitcom Fawlty Towers, quoted in The Times “The PhD student is someone who forgoes current income in order to forgo future income.” US journalist Peter Greenberg, quoted on X “I think Rishi Sunak could fly over the…

economist.com Atomic Habits by James Clear has been on the bestseller lists for 277 weeks, says The Economist. The book is “both ludicrous and helpful” at the same time, arguing that small changes of routine are the way to go, whether your goal is to be productive or eat healthily. Comparing Clear’s offering with older self-help advice is revealing. Arnold Bennett’s How To Live on 24 Hours A Day of 1908, for example, covers much the same ground. Both authors “espouse the importance of discipline, ritual and habit in managing time more productively”. But where Clear is earnest and seeks to fill the spare moments of an already hectic day with yet more tasks, Bennett is relaxed and wry. “If you can get 1% better each day for one year…

Retail investors often overlook hedge funds, as these vehicles are not aimed at them. Hedge-fund managers are only allowed to market themselves to wealthy investors, with many demanding a minimum stake of at least £100,000. Hedge funds are not like the investment funds available to the everyday investor. They are lightly regulated and can invest in a wide range of assets. The most common fund used to be the long/short equity fund. Long/short funds buy the stocks they like best, the ones they think are going to go up, while shorting the ones they think are going to lose value: a hedged equity strategy. In theory, this strategy will lead to lower losses when the market is falling, underpinning smoother, higher returns in the long term. Wide diversification Long/short funds…

● Mortgage rates have reached their highest level of 2024, with 47 lenders raising rates on their fixed deals in the past fortnight. The average two-year fixed-rate mortgage is now 5.93% and the average five-year is 5.5%. “This is still... a lot higher than the sub-2% rates many borrowers would have fixed deals at – deals that are now coming to an end, meaning thousands are facing a huge jump in payments,” says George Nixon in The Sunday Times. Interest-rate cuts that had been expected soon seem likely to be postponed to later this year, and there may now be fewer reductions than initially anticipated. Banks and building societies are nudging up their rates to reflect the new outlook. ● “Libraries of things” are springing up around the country as…

● The big US technology companies – Google, Amazon, Facebook and so on – have delivered impressive returns for investors in recent years, but their performance has also been volatile. New research from PensionBee is therefore striking. It shows that roughly 10% of all defined-contribution pension fund money is invested in these tech giants. Defined-contribution schemes include all individual private pensions as well as most employer-run plans. If you’re saving this way, check your exposure to Big Tech and consider whether you’re happy with it. ● HSBC’s annual general meeting last week saw it face criticism from pensioners angry about the “clawback” feature that some face with its occupational pension scheme. The bank, like many other large employers in the UK, once included this feature as standard. Such schemes pay…

Mitsuko Tottori (pictured) began her career as a member of the cabin crew at a Japanese airline in 1985. The company she worked for then was later absorbed by Japan Airlines. Now, aged 59, she is the company’s president. The seeds of her success were sown more than a decade ago in the aftermath of the carrier’s bankruptcy, says Reuters. It was the country’s biggest ever corporate failure outside the financial sector, and led to “sweeping organisational changes”, led by “God of management” and ordained Buddhist monk, Kazuo Inamori, who turned the company around. Inamori, who died in 2022, was “disdainful of hierarchy and unquestioning obedience” and encouraged all his staff to “act as business leaders”. In a 2012 interview with the BBC, Inamori said Japan Airlines had been arrogant…

Looking back at my previous 971 MoneyWeek wine columns, I was shocked but not that surprised to discover that I have written up this white wine more than any other. Ignoring the price for a second, which makes it one of the finest value whites on Earth, the sheer class in the glass is staggering. Made from a blend of grenache blanc, clairette, picpoul and ugni blanc, and with no oak employed whatsoever, this is a pristinely clean and uplifting white wine with a flavour unlike any other I can think of. There are faint hints of stone fruit on the nose and gorgeous succulence on the mid-palate, but in reality, this is not a run-of-the-mill white Rhône, because there is tension and verve here in place of oiliness and…

Ten Years to Save the West: Lessons from the Only Conservative in the Room Liz Truss Biteback Publishing, £15.45 In 1965 the American historian Arthur Schlesinger Jr released a mammoth work on the Kennedy administration that ran to roughly a page for every day that JFK was president. Even had Liz Truss managed that level of detail, her memoir would have been little more than a pamphlet. Little surprise, then, that Ten Years to Save the West: Lessons from the Only Conservative in the Room combines an account of her 49-day stint in Downing Street with a look at her earlier political career, as well as her thoughts on British politics in general. Foiled by the deep state Truss’s basic argument is that her premiership, and her time as a…

The Co-op Live arena in Manchester has had to cancel or postpone a string of concerts since it was due to open on 23 April, owing to technical problems, say Dipesh Gadher and Hugo Daniel in The Times. The Co-op retail group, which paid £100m for the naming rights, has pressured Oak View Group, the venue’s operator, to reimburse fans for travel and hotel expenses. Oak View had previously only offered refunds on cancelled concerts or new tickets if a gig was rescheduled. Boy band Take That has already switched from the £365m venue – Britain’s biggest indoor arena – to local rival the AO Arena, while a concert that has sold out by US singer Olivia Rodrigo (pictured) has been rescheduled. A gig by US rapper A Boogie Wit…

While public debt in the rich world rockets (see page 4), developing countries responded to Covid with more “conventional” policies, says Peter Warburton in the Halkin Letter. Emerging markets (EMs) ran a tight fiscal ship and raised interest rates when inflation emerged, helping them to retain market confidence. The result? EM bonds have outperformed G7 government bonds by an impressive 38% in US dollar terms. Debt issued by the likes of China, Mexico and India pays a higher yield than that issued by developed economies because of the greater perceived risk of inflation or default. Yet that extra yield, or “spread”, over US Treasury bonds has fallen from an average of 4.6% five months ago to 3.4%, close to a post-Covid low, Sergey Goncharov of Vontobel Asset Management tells Barron’s.…

BP is to “push on” with buying back another $1.75bn of shares despite missing profit expectations for the first quarter, says Emma Powell in The Times. It reported profits of $2.7bn in the first three months of 2024, down by nearly 50% from the same period last year, and even lower than the £2.87m analysts had expected. BP has blamed the reduced profits on the ongoing fall in gas prices of the past two years, while profits have also been hit by lower refining margins across the industry, in addition to an outage at a major US refinery. Large dividends and buybacks mean shareholders “are unlikely to be too concerned” about the fall in profits, says AJ Bell’s Russ Mould. If it maintains this pace for the whole year, BP…

Etihad Airways, the Abu Dhabi-based carrier of the United Arab Emirates, has selected several investment banks to help it launch an initial public offering (IPO) that could raise up to $1bn, says Bloomberg. The Abu Dhabi investment fund ADQ, which owns the carrier, is targeting a listing at the end of this year. The flotation will create the first publicly traded major Gulf carrier and bolster the sheikhdom’s status as a transport hub. The sale of shares is also intended to boost the UAE’s stockmarket and help diversify the economy away from oil. Etihad recently expanded its fleet, but has struggled to close the gap with its regional rivals Dubai-based Emirates and Qatar Airways.…

● “The days when businesses queued up to join the public markets in the City… seem a long-distant memory,” says Jonathan Prynn in the Evening Standard. London’s global initial public offering (IPO) league table today makes “depressing reading,” with the capital dropping out of the top 20 for money raised so far in 2024. The market’s fortunes depend on Shein and Shell. If the Chinese retailer lists in London, it would be a “huge fillip that could open the floodgates” for other technology firms such as Zopa and Zilch to follow. But if Shein spurns London, and Shell acts on CEO Wael Sawan’s “obvious frustration with its London rating” and moves to New York, it would be a “shattering symbolic blow from which the City would find it hard to…

Berkshire Hathaway sees few good opportunities for investing the record $189bn that it currently holds in cash, says Warren Buffett, the billionaire investor who co-founded the sprawling conglomerate. “I don’t think anybody sitting at this table has any idea of how to use it effectively,” Buffett told the Berkshire annual general meeting last weekend. The group’s cash is mostly invested in short-term bonds, which are earning a relatively attractive yield thanks to the US Federal Reserve’s rate hikes – but Berkshire would keep holding cash even if rates fell. “We don’t use it now at 5.4%, but we wouldn’t use it if it was at 1%. Don’t tell the Federal Reserve that, we prefer it. We only swing at pitches we like.”” The preference for cash reflects the long-standing difficulty…

theconversation.com Businesses in the UK are “beaming with pride”, says Ibiyemi Omeihe, following the news that the country ranks as the fourth-largest exporter in the world in the UN’s Conference on Trade Development report. The UK jumped three places in 2022, surpassing France, the Netherlands and Japan. Post-Brexit, the UK has been “charting its own course in the international” sphere, breaking from established trade agreements and regulations, and trying to drive expansion in exports in response to global economic opportunities and challenges. The UK has “remained resilient”, negotiating new deals with old and new trading partners, and signing up to strategic partnerships such as the CPTPP, a free trade pact with 11 countries. The picture is mixed – the growth is mostly evident in the services sector, while the goods…

Activist investor Gatemore Capital Management has called for Paul Waterman to resign as CEO of Elementis, lambasting the chemicals company’s “self-inflicted management failures”, says This is Money. Gatemore, which owns 0.6% of Elementis, criticised the purchase of Mondo Minerals, which failed to deliver the promised synergies and added to debt, and highlighted Elementis’s declining earnings per share and operating margins. The stock has underperformed peers and the FTSE 250 index by 76% and 86% respectively since Waterman took over as CEO in 2016. Gatemore wants Elementis to replace him and conduct a strategic review to make the group more attractive to buyers and speed up its cost-savings programme.…

More than four million Britons are self-employed according to official statistics, but new research suggests almost half of them are not saving for retirement. A survey from CMC Invest reveals that 41% of self-employed workers are not paying into a pension, leaving them at risk of financial hardship later in life. Self-employed people often struggle to save for the future. For one thing, they don’t have access to an occupational pension scheme provided by an employer. They may have less predictable income than someone who receives a regular pay cheque. They may simply feel they’re not earning enough to put money aside that they can’t dip into if needed. The good news is that there are ways round these problems. Private pension plans are flexible, tax-efficient and affordable. Other tax-efficient…

The Liontrust Global Technology Fund invests in technology companies that create huge value for customers by driving down costs and prices and boosting productivity. When companies do this they create demand, develop products further and grow the overall market. This is a powerful driver of shareholders’ returns. Today we are right at the start of a major new innovation cycle driven by artificial intelligence (AI). We believe AI will prove to be one of the most deflationary innovations in history, taking costs out of businesses, improving productivity and fostering new innovations. There will be major winners and losers. Here are three companies we believe will win. “The best way for companies to combat cybercriminals’ AI is with AI” Making the most of software Enterprise-software company ServiceNow’s (NYSE: NOW) operational performance…

The Event-Driven Edge in Investing Six Special Situation Strategies to Outperform the Market Asif Suria Harriman House, £26.94 One of the big problems an investor faces when picking individual shares is the paradox of choice: the sheer number of companies on the market makes it hard to make a decision or be confident that your choice is the right one. Investors, then, especially those with a limited amount of time on their hands, would benefit from a strategy that helps them focus on that smaller fraction of stocks that look the most promising. One option is to use a filter or screen, one that sifts out only those stocks that have price momentum, say, or are growing rapidly, or offer good value. An alternative strategy is to look only…

Since the turn of the century, the world economy has endured three great shocks, says Ian Stewart for Reaction. First came the financial crisis, then the pandemic, and finally the energy crisis triggered by Russia’s invasion of Ukraine. We have avoided “depression-style” ruin because governments stepped in to shield households and businesses with “vast programmes of public assistance”. That has sent public debt spiralling. In the UK it has risen from 36% of GDP in 2007 to almost 100% today. Last year the government spent 3.9% of GDP on servicing debt, the highest level since the late 1940s. Excessive borrowing leaves the government exposed to mood swings in bond markets, as Liz Truss discovered during the 2022 gilt market “chaos”. Provisional figures from the Office for National Statistics show that…

Apple’s stock bounced by more than 7% after the company unveiled the biggest share buyback in corporate history, says Leah Montebello in This is Money. The decision to buy back $110bn worth of stock “lifted the mood on trading floors around the world” and means the group is now worth more than the whole FTSE 100. Returning cash to shareholders “puts Apple in line with its Silicon Valley rivals” Meta and Alphabet, which “have been trying to woo investors” with dividends and buybacks. Moreover, while overall sales fell, the second-quarter results still “surpassed the market’s modest expectations”, says Hargreaves Lansdown’s Guy Lawson-Johns, with CEO Tim Cook forecasting a return to growth this quarter. And the fact that the iPhone 15 and iPhone 15 Pro Max were the best-selling smartphones in…

Five to buy Chemring The Telegraph The market continues to undervalue defence contractor Chemring, which specialises in missile-defence systems. The company has a solid balance sheet, a sound competitive position, and long-term growth potential. The industry’s prospects have been transformed since Russia invaded Ukraine, with Nato members expected to increase military spending. Chemring’s order book has grown by over 50% in a year. 375p Thales Barron’s French defence group Thales, whose offerings range from aerospace to digital security, is flying under the radar, but that might not be the case for long. Thales is embedding AI products in its systems, making it “anything but a run-of-the-mill defence contractor.” Thales has booked 13 large orders, including a €2bn contract with the UK Ministry of Defence. It currently trades at a very…

The social-media app TikTok is “battling for its survival” in the US, say Sapna Maheshwari and David McCabe in The New York Times. The app’s owner, China-based ByteDance, is suing the federal government in an attempt to block legislation that would force it to sell TikTok or face a ban. ByteDance argues that the law violates the right to free speech by “effectively removing an app that millions of Americans use to share their views and communicate freely”. Supporters of the legislation say that the app is a “national security threat” as the Chinese government “could lean on ByteDance” to turn over sensitive data on TikToks’ users, “or use the app to spread propaganda”. That’s the pretext, but many prominent supporters of the ban, such as senator Mitt Romney (pictured),…

One striking feature of today’s markets is how much investors seem to dislike energy. The sector isn’t exactly languishing: the MSCI World Energy index has returned 25% per year over three years in sterling terms. Yet it still feels like a most reluctant bull market in which many buyers would rather not participate. It certainly doesn’t help that the heavy focus that many asset managers put on sounding green and sustainable left them completely on the wrong side of the market when oil roared back after the pandemic. But the general sense of discomfort around the sector goes deeper than that. Take the questions around Berkshire Hathaway’s energy business (see right) that have had plenty of coverage recently. I don’t have a view on how attractive the business is for…

The decline of the fund manager Ben Wright The Telegraph Today’s fund managers are no longer “masters of the universe”, says Ben Wright. During the “golden age” of fund management in the 1990s and 2000s, when star fund managers such as Nicola Horlick became household names, Mercury Asset Management was looking after pension-fund assets for more than half of the firms in the FTSE 100. However, the death of defined-benefit pensions, the rise of cheap, index-tracking funds and firms’ shift towards private-market strategies alongside a range of accounting, tax and regulatory changes over the past 30 years have caused “turmoil” in the industry. Add a “dash of scandal”, such as Neil Woodford’s fall from grace, and you “have a toxic brew”. Aside from pensions, risk-averse Britons “tend to hoard their…

project-syndicate.org For more than a decade, some economists, mostly on the left, have rejected any idea of fiscal prudence as “austerity”, says Kenneth Rogoff. They argued that the potential benefits of using debt to finance government spending far outweigh any associated costs. Dissenting voices were often ridiculed. “The tide has turned.” Over the past two years, this type of “magical thinking” has collided with the “harsh realities” of high inflation and the return to normal long-term real interest rates. Advanced economies’ average debt-to-income ratio will rise to 120% of GDP by 2028, according to the IMF, and, as higher borrowing costs become the new normal, they will “gradually and credibly” have to “rebuild fiscal buffers and ensure the sustainability of their sovereign debt”. Developed countries rarely default on their domestic…

“Monster’s stock has returned almost 200,000% over the past 30 years” The Magnificent Seven group of technology stocks (Apple, Microsoft, Amazon, Nvidia, Meta Platforms, Tesla and Alphabet) have hogged the headlines in the past five years. But the performance of these firms pales in comparison to the best-performing stock of all time. This business doesn’t produce anything nearly as complex as the microchips or artificial intelligence (AI) tools the world’s tech giants have spent billions of dollars developing. It simply mixes sugar and water, creates a brand and sells the drink. The company is Monster Beverage (Nasdaq: MNST). Over the past 30 years, the stock has returned almost 200,000%, turning every $10,000 invested into nearly $20m. This is fascinating. An energy drink is made of sugar, water and caffeine; it…

■ European investors are increasingly putting their money into exchange-traded funds (ETFs) tracking the defence sector, says the Financial Times. The three available ETFs had net inflows of $189m by 22 April, putting them on track to match the record haul of $321m the three funds made in March. This increase in investment coincides with a rise in defence spending by European governments after Russia invaded Ukraine. The VanEck Defence Ucits ETF is the largest fund, with retail investors owning about 60% of it. Wealthy clients of private banks, family offices, and independent wealth managers are also keen on the industry. Pension funds have traditionally excluded defence stocks, but some are rethinking this stance. Tom Bailey from HANetf, the issuer of the second-largest defence ETF, the Future of Defence Ucits…

The sun is shining and summer is approaching, so have you thought about your holiday money yet? It pays to think ahead when it comes to buying currency. You have three main ways to pay when you’re abroad – cash, debit card or credit card. We’re going to look at the best options in each case. Let’s start with cash. Never buy it at the airport. Currency providers know that by the time you get to the airport you have no choice but to buy from them, and they charge you a fortune as a result. Research by Eurochange found that you’d pay around £169 more for €1,000 if you bought it at the airport. Time is money Your best option is to compare rates online and pre-order your currency…

Will the Conservatives really be able to abolish national insurance (NI), as the prime minister has suggested? That seems unlikely in the short term, irrespective of who wins the election – indeed, the NI system has actually got tougher in recent years. One central plank of the NI regime is the link between your contributions and your entitlement to a state pension. The money you pay in isn’t ring-fenced, but you will only get your state pension if your record is long enough. You need to make at least ten years’ contributions to get any state pension at all – and 35 years to qualify for the full amount. In 2016, this was increased from 30 years. Check your NI record online using the gov.uk website. This will enable you…